<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 4, 1997
REGISTRATION NO. 33-_____________
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
AVIATION GROUP, INC.
(Name of small business issuer in its charter)
TEXAS 4581 75-2631373
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
LEE SANDERS, PRESIDENT
700 NORTH PEARL STREET AVIATION GROUP, INC.
SUITE 2170 700 NORTH PEARL STREET, SUITE 2170
DALLAS, TEXAS 75201 DALLAS, TEXAS 75201
(214) 922-8100 (214) 922-8100
(Address and telephone number of (Name, address and telephone number
principal executive offices) of agent for service)
Copies to:
DARYL B. ROBERTSON, ESQ. RICHARD F. DAHLSON, ESQ.
BRACEWELL & PATTERSON, L.L.P. JACKSON & WALKER, L.L.P.
500 NORTH AKARD ST., SUITE 4000 6000 NATIONSBANK PLAZA
DALLAS, TEXAS 75201 901 MAIN STREET, SUITE 6000
(214) 740-4000 DALLAS, TEXAS 75202
(214) 953-5800
Approximate date of commencement of proposed sale to the public:
IMMEDIATELY FOLLOWING THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
----------
(cover page continued)
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT (1) PRICE (1) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share 1,150,000 $ 9.00 $10,350,000 $ 3,136.36
- ----------------------------------------------------------------------------------------------------------------------------------
Common Stock issuable under Warrants 1,150,000 10.80(2) 12,420,000(2) 3,763.64
- ----------------------------------------------------------------------------------------------------------------------------------
Common Stock issuable under 115,000 10.80(2) 1,242,000(2) 376.36
Representative's Warrants
- ----------------------------------------------------------------------------------------------------------------------------------
Common Stock issuable under Underlying 115,000 10.80(2) 1,242,000(2) 376.36
Warrants
- ----------------------------------------------------------------------------------------------------------------------------------
Common Stock to be sold by Selling 280,000(3) 9.00 2,520,000 763.63
Shareholders 280,200(4) 9.00 2,521,800 764.18
35,714(5) 9.00 321,426 97.40
1,600,250(6) 9.00 14,402,250 4,364.32
- ----------------------------------------------------------------------------------------------------------------------------------
Redeemable Common Stock Purchase Warrants 1,150,000 0.10 115,000 34.85
- ----------------------------------------------------------------------------------------------------------------------------------
Representative's Warrants 115,000 0.001 115 0.03
- ----------------------------------------------------------------------------------------------------------------------------------
Underlying Warrants issuable under
Representative's Warrants 115,000 0.12 13,800 4.18
==================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
under Rule 457.
(2) Pursuant to Rule 457(g), based on the exercise price of warrants.
(3) Maximum number of shares issuable under outstanding warrants and to be
sold by Selling Shareholders.
(4) Maximum number of shares issuable upon conversion or exchange of
outstanding notes and to be sold by Selling Shareholders.
(5) Estimated maximum number of shares issuable upon full satisfaction of
Bridge Notes and to be sold by Selling Shareholders.
(6) Maximum number of outstanding shares to be sold by Selling
Shareholders.
--------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
===============================================================================
<PAGE> 3
PROSPECTUS SUPPLEMENT
(To Prospectus dated _______________, 1997)
SUBJECT TO COMPLETION, DATED MARCH 4, 1997
AVIATION GROUP, INC.
2,190,664 SHARES OF COMMON STOCK
This Prospectus Supplement relates to the offer and sale by certain
selling securityholders ("Selling Shareholders") named herein under "Selling
Shareholders" of up to (i) 1,600,250 shares of common stock, $.01 par value per
share ("Common Stock") of Aviation Group, Inc. (the "Company"), (ii) a maximum
of 280,000 shares of Common Stock that may be issued upon exercise of
outstanding warrants, (iii) a maximum of 274,710 shares of Common Stock that
may be issued upon conversion or exchange of outstanding convertible or
exchangeable notes, and (iv) a maximum of 35,704 shares of Common Stock that
may be issued upon repayment of outstanding notes.
The Company will receive no part of the proceeds of any sales by the
Selling Shareholders. All expenses of registration incurred in connection with
this offering are being borne by the Company, but all selling and other
expenses incurred by Selling Shareholders will be borne by the Selling
Shareholders. None of the shares of Common Stock have been registered prior to
the filing of the Registration Statement of which this Prospectus is a part.
The outstanding shares of Common Stock were originally issued by the Company in
private transactions. See "Selling Shareholders."
The Selling Shareholders may from time to time sell all or a portion
of their shares of Common Stock in the over-the-counter market or on any
national securities exchange or automated interdealer quotation system on which
the Common Stock may hereafter be listed or traded, in negotiated transactions
or otherwise, at prices then prevailing or related to the then current market
price or at negotiated prices. The shares of Common Stock may be sold directly
or through brokers or dealers or in a distribution by one or more underwriters
on a firm commitment or best efforts basis. See "Plan of Distribution." Each
Selling Shareholder and any agent or broker-dealer participating in the
distribution of the Securities may be deemed to be an "underwriter" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"). Any
commissions received by and any profit on the resale of the shares of Common
Stock may be deemed to be underwriting commissions or discounts under the
Securities Act.
Brokers or dealers effecting transactions in the shares of Common
Stock on behalf of the Selling Shareholders should confirm the registration
thereof under the securities laws of the states in which such transactions
occur or the existence of an exemption from registration.
The Company has filed applications for listing of trades of the Common
Stock through the Nasdaq Small Cap Market System ("NASDAQ") and the Pacific
Stock Exchange. No assurance can be given that the applications will be
approved. There is no current established trading market for the Common Stock.
SEE "RISK FACTORS" ON PAGE 4 OF THE ACCOMPANYING PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus Supplement is ______________, 1997.
<PAGE> 4
USE OF PROCEEDS
The Company will not receive any of the proceeds from sales of any of
the shares of Common Stock by the Selling Shareholders.
SELLING SHAREHOLDERS
This Prospectus Supplement relates to the offer and sale from time to
time (i) by stockholders of the Company of up to 1,600,250 outstanding shares
of Common Stock, (ii) by the holders of outstanding warrants of a maximum of
280,000 shares of Common Stock that may be issued upon the exercise of the
warrants owned by them, (iii) by the holders of outstanding convertible or
exchangeable notes of a maximum of 274,710 shares of Common Stock that may be
issued upon conversion or exchange of the notes owned by them, and (iv) by the
holders of certain notes of a maximum of 35,704 shares of Common Stock that may
be issued to them upon the repayment of the notes.
IDENTITY AND OWNERSHIP OF SELLING SHAREHOLDERS
The following table provides certain information with respect to the
Selling Shareholders, and the number of shares of Common Stock owned, offered
and to be owned after the offering by each Selling Stockholder.
<TABLE>
<CAPTION>
MAXIMUM NUMBER OF
SHARES OF COMMON STOCK SHARES OF COMMON STOCK TO BE OWNED
SELLING SHAREHOLDERS OWNED BEFORE OFFERING(1) TO BE SOLD IN THE OFFERING AFTER THE OFFERING
-------------------- ------------------------ --------------------------- ------------------
<S> <C> <C> <C>
The Sanders Companies, Inc.(2) 1,000,000 1,000,000 0
Paul Lubomirski(3) 44,250 44,250 0
James J. McNamara and
Margarita McNamara 10,000 10,000 0
Anthony DeCaprio 5,000 5,000 0
American & International
Investment, Ltd. 35,000 35,000 0
Charles R. Kemp 20,000 20,000 0
Kelly Kemp 15,000 15,000 0
George L. Riggs IRA 10,000 10,000 0
John L. Caldwell 20,000 20,000 0
Andrew J. Corbett 5,000 5,000 0
Harold W. Fullen 10,000 10,000 0
Conrad H. C. Everhard 5,000 5,000 0
Edward Gray 5,000 5,000 0
Alfons Murk 40,000 40,000 0
Samuel M. Sorkin 5,000 5,000 0
Eugene L. Crance 10,000 10,000 0
Jarred W. Stiemke 10,000 10,000 0
Jackson Chang 10,000 10,000 0
Chung-Ming Lin and
Li-Shiang Lin 10,000 10,000 0
</TABLE>
-2-
<PAGE> 5
<TABLE>
<CAPTION>
MAXIMUM NUMBER OF
SHARES OF COMMON STOCK SHARES OF COMMON STOCK TO BE OWNED
SELLING SHAREHOLDERS OWNED BEFORE OFFERING(1) TO BE SOLD IN THE OFFERING AFTER THE OFFERING
-------------------- ------------------------ --------------------------- ------------------
<S> <C> <C> <C>
Gerald D. Wollert
Revocable Living Trust dated 4/4/90 10,000 10,000 0
Patricia Ewing Hendrick 15,571 15,571 0
Gregory A. Despot 8,730 8,730 0
Charles E. Weed(4) 44,455 (4) 44,455 0
Judy L. Chidlow 6,661 6,661 0
John L. Chidlow 5,995 5,995 0
Jesswalt, Inc. 3,330 3,330 0
Frank Scott Moran 2,664 2,664 0
Anne S. Couch 2,664 2,664 0
3650 Investment Corporation, L.C. 1,332 1,332 0
May H. Chidlow 699 699 0
Richard L. Morgan(5) 100,000 (5) 100,000 0
Steven A. Soares 5,000 5,000 0
Mark Osgood 20,000 20,000 0
James P. Leaderer 50,000 50,000 0
Theodore C. Aalbersberg 10,000 10,000 0
Bertram S. Mullan 10,000 10,000 0
Thomas and Mary Ruthven 5,000 5,000 0
Robert Pierot 10,000 10,000 0
Abraham Garfinkel 5,000 5,000 0
Delaware Charter Guarantee &
Trust Company TTEE FBO:
Chester S. Kucinski IRA 30,000 30,000 0
Michael Abdenour 10,000 10,000 0
Grigori Tsoukanov 5,000 5,000 0
Douglas F. Johnston 30,000 30,000 0
Michael and Gail Goldey 5,000 5,000 0
George L. Riggs, III 5,000 5,000 0
</TABLE>
-3-
<PAGE> 6
<TABLE>
<CAPTION>
MAXIMUM NUMBER OF
SHARES OF COMMON STOCK SHARES OF COMMON STOCK TO BE OWNED
SELLING SHAREHOLDERS OWNED BEFORE OFFERING(1) TO BE SOLD IN THE OFFERING AFTER THE OFFERING
-------------------- ------------------------ --------------------------- ------------------
<S> <C> <C> <C>
Delaware Charter Guarantee &
Trust Company TTEE FBO:
Douglas F. Johnston IRA 10,000 10,000 0
Carl Eric Mayer 5,000 5,000 0
Raymond J. Wiacek 10,000 10,000 0
John B. Mauro 5,000 5,000 0
Paine Webber Incorporated, solely
as custodian of William E. Cassidy IRA 5,000 5,000 0
Paine Webber Incorporated, solely
as custodian of Reata L. Cassidy IRA 5,000 5,000 0
Eugene L. Crance 5,000 5,000 0
Paul Taboada 24,750 (6) 24,750 0
Steven Taub 10,000 (6) 10,000 0
Kurt Gray 4,000 (6) 4,000 0
Howard Vo 1,000 (6) 1,000 0
Thomas K. Lin 2,000 (6) 2,000 0
Eric Bashford 42,490 (6) 42,490 0
Robert A. Schneider 43,245 (6) 43,245 0
Lois Schulman 33,240 (6) 33,240 0
Shai Sasson 10,000 (6) 10,000 0
Sid Borenstein 27,275 (6) 27,275 0
Martha Plaza 2,000 (6) 2,000 0
Patricia Ewing Hendrick 21,625 (7) 21,625 0
Gregory A. Despot 67,681 (7) 67,681 0
Judy L. Chidlow 9,251 (7) 9,251 0
John H. Chidlow 36,103 (7) 36,103 0
Jesswalt, Inc. 4,625 (7) 4,625 0
Frank Scott Moran 3,700 (7) 3,700 0
Anne S. Couch 3,700 (7) 3,700 0
3650 Investment Corporation, L.C. 1,850 (7) 1,850 0
May H. Chidlow 971 (7) 971 0
</TABLE>
-4-
<PAGE> 7
<TABLE>
<CAPTION>
MAXIMUM NUMBER OF
SHARES OF COMMON STOCK SHARES OF COMMON STOCK TO BE OWNED
SELLING SHAREHOLDERS OWNED BEFORE OFFERING(1) TO BE SOLD IN THE OFFERING AFTER THE OFFERING
-------------------- ------------------------ --------------------------- ------------------
<S> <C> <C> <C>
Judd H. Chidlow 13,888 (7) 13,888 0
Louisiana Economic Development Corp. 80,710 (8) 80,710 0
Betsy B. Rouse 1,785 (9) 1,785 0
Patrick H. & Lee M. Miller 3,571 (9) 3,571 0
Edward J. Anderson 1,785 (9) 1,785 0
J. Robert Wyatt 3,571 (9) 3,571 0
Priscilla Goodwyn 1,785 (9) 1,785 0
Sagax Fund II, Ltd. 7,142 (9) 7,142 0
John H. & Maria Sultenfuss 1,785 (9) 1,785 0
John S. Lemak 1,785 (9) 1,785 0
Dorothy D. & Rush B. Winchester 1,785 (9) 1,785 0
Robert C. Kohler, III 1,785 (9) 1,785 0
Gary L. Covelli 1,785 (9) 1,785 0
Isabel Maxwell 1,785 (9) 1,785 0
Digital Data Networks, Inc. 1,785 (9) 1,785 0
J. R. Sheldon & Co., Inc. 1,785 (9) 1,785 0
Anthony DeCaprio 1,785 (9) 1,785 0
</TABLE>
- --------------
(1) Includes shares that may be purchased under outstanding warrants or
convertible or exchangeable notes.
(2) The Sanders Companies, Inc. is wholly owned by Lee Sanders, who has
served as the President and Chief Executive Officer of the Company
since its inception.
(3) Paul Lubomirski has served as Executive Vice President - Pride
Operations for the Company since March 1996.
(4) Charles Weed has served as a director of, and a consultant to, the
Company since March 1996 and receives a consulting fee of $3,000 per
month through February 1998. His shares include (i) 9,000 shares
purchasable, at $3.00 per share, pursuant to a Convertible Note (as
defined below) and (ii) 27,101 shares purchasable, at $4.50 per share,
pursuant to two Convertible Notes.
(5) Includes 80,000 shares purchasable, at $2.50 per share, upon the
exercise of the Morgan Warrants (as defined below). Mr. Morgan serves
as a director and consultant to the Company and receives a consulting
fee of $4,000 per month.
(6) Represents shares purchasable, at $1.00 per share, pursuant to the
Placement Warrants (as defined below).
(7) Represents shares purchasable, at $4.50 per share, pursuant to the
Convertible Notes.
(8) Represents shares purchasable, at $4.50 per share, pursuant to the
Exchangeable Note (as defined below).
(9) Represents shares issuable to the former holders of the Bridge Notes
(as defined below) upon payoff of the Bridge Notes, based on an
assumed initial public offering price for the Company's Common Stock
of $7.00 per share.
-5-
<PAGE> 8
DESCRIPTION OF TRANSACTIONS
Outstanding Common Stock. As of the date of this Prospectus
Supplement, the Company had issued and outstanding 1,600,250 shares of Common
Stock. In connection with the Company's organization, on December 20, 1995, the
Company issued 1,000,000 shares of Common Stock to The Sanders Companies, Inc.
in exchange for the transfer to the Company of all of the outstanding capital
stock of TriStar Airline Services, Inc. and TriStar Aircraft Services, Inc.
In a Regulation D offering completed in June 1996, the Company sold
500,000 shares of Common Stock, at $3.00 per share, to a total of 41 accredited
and non-accredited investors.
In connection with the Company's acquisition of Pride Aviation Group,
Inc. ("Pride") on March 1, 1996, the Company issued 100,250 shares of Common
Stock to certain of the former beneficial owners of Pride, including Paul
Lubomirski, who remained an executive officer of Pride and is considered one of
the key employees of the Company, and Charles Weed, who became a director of
and consultant to the Company.
Convertible Notes. In connection with its acquisition of Pride, the
Company issued $857,000 in aggregate principal amount of its five-year, 10%
Convertible Notes ("Convertible Notes") to certain of the former beneficial
owners of Pride, including Charles Weed. The Convertible Notes require the
Company to pay quarterly payments of interest at a rate of ten percent (10%)
per annum. Commencing April 1, 1998, the Convertible Notes also require equal
quarterly installments of principal in an amount necessary to fully amortize
the notes by March 1, 2001, when all remaining principal and accrued interest
will be due. Each of the Convertible Notes is convertible at the option of the
holder into shares of Common Stock at a price of $4.50 per share, except that
one Convertible Note held by Charles Weed is convertible at $3.00 per share.
The conversion rates are subject to adjustment in the event of any stock
dividend, split, combination or reclassification of the outstanding Common
Stock of the Company. The Convertible Notes require the Company to treat all
holders of the Convertible Notes as pari passu members of the same class. Each
of the Convertible Notes is secured by a pledge of the pro rata portion of
outstanding stock of Pride that was owned directly or beneficially by the
holder of the Convertible Note immediately prior to the Company's acquisition
of Pride. Approximately 90% of the outstanding stock in Pride is pledged by the
Company to secure the Convertible Notes, subject to the Company's prior pledge
of approximately 50% of the Pride stock to secure the Exchangeable Note. If the
Company fails to make a required payment of principal and interest after notice
of default, the holder of the Convertible Note may exercise any of its remedies
with respect to the pledged stock. As of the date of this Prospectus
Supplement, none of the Convertible Notes have been converted.
Exchangeable Note. At the time of its acquisition by the Company,
Pride owed certain debt to the Louisiana Economic Development Corporation (the
"LEDC"). To obtain the LEDC's consent to the Company's acquisition of Pride,
the Company granted to the LEDC the right to exchange the debt owed by Pride to
the LEDC. Pride issued a new promissory note (the "Exchangeable Note") in the
original principal amount of $408,000 that is exchangeable by the LEDC for
newly issued shares of the Company's Common Stock at a rate of $4.50 per share.
The Company also pledged approximately 50% of the outstanding stock in Pride to
secure the debt. As of February 1, 1997, the Exchangeable Note had a principal
balance of approximately $363,000 and was exchangeable for 80,710 shares of
Common Stock. The Exchangeable Note requires the payment by Pride of equal
monthly installments of principal and interest of $3,752. The LEDC has not
exercised its exchange right as of the date of this Prospectus Supplement.
Placement Warrants. On March 1, 1996, the Company issued warrants to
purchase an aggregate of 200,000 shares of Common Stock (the "Placement
Warrants") to RAS Securities Corp. ("RAS") upon the closings of the private
placement of 500,000 shares of Common Stock by the Company. RAS has
subsequently transferred these Placement Warrants to certain of its employees.
Each Placement Warrant entitles the holder to purchase one share of Common
Stock at a price of $1.00 per share, exercisable on or before February 28,
1999. As of the date of this Prospectus Supplement, none of the holders of the
Placement Warrants has exercised his or her Placement Warrants. The Placement
Warrants contain provisions that protect the holders against dilution by
adjustment of the exercise price and the number of shares of Common Stock
subject to the Placement Warrants in certain events, such as stock dividends
and distributions, stock splits, recapitalizations, mergers, or consolidations.
Holders of Placement Warrants do not possess any rights as stockholders of the
Company prior to exercise. Holders of Placement Warrants have been granted
certain registration rights.
Morgan Warrant. Effective June 30, 1996, the Company and Richard L.
Morgan, a consultant to the Company, entered into a Warrant Agreement (the
"Morgan Warrant") pursuant to which Mr. Morgan has the right to purchase 80,000
shares of Common Stock at a price of $2.50 per share. The Warrant Agreement
expires February 28, 1999. Mr. Morgan has not exercised any of his rights under
the Morgan Warrant as of the date of this Prospectus Supplement. The Morgan
Warrant contains provisions that protect Mr. Morgan against dilution by
adjustment of the exercise price and the number of shares of Common Stock
subject to the Morgan Warrant in certain events, such as stock dividends and
distributions, stock
-6-
<PAGE> 9
splits, recapitalizations, mergers or consolidations. The Morgan Warrant does
not grant any stockholder rights to the holder thereof prior to exercise. The
Morgan Warrant grants to Mr. Morgan certain registration rights.
Bridge Notes Shares. In February 1997, the Company completed a private
offering of $500,000 in aggregate principal amount of its 10% Bridge Notes (the
"Bridge Notes"). The Bridge Notes are due in full on June 30, 1998 or within
five days following the funding of the initial public offering by the Company
of its Common Stock. If the Company successfully completes an initial public
offering of its Common Stock by September 30, 1997, the terms of the Bridge
Notes require the Company to issue, as additional compensation to the holders
of the Bridge Notes, that number of shares of Common Stock which equals
$250,000 divided by the initial public offering price per share for the Common
Stock, at the time of repayment in full of the Bridge Notes. Assuming an
initial public offering price of $7.00 per share, the holders of the Bridge
Notes will be issued an aggregate of 35,704 shares of Common Stock.
TRANSFER RESTRICTIONS
The Sanders Companies, Inc. and Paul Lubomirski, who collectively own
a total of 1,044,250 shares of Common Stock, will sign lock-up agreements with
RAS Securities Corp., acting as representative of the Underwriters for the
Company's initial public offering of Common Stock (the "Representative"), as
described in the accompanying Prospectus. See "Description of
Securities--Shares Eligible for Future Sale." Under these lock-up agreements,
these Selling Shareholders will agree not to offer, sell, or otherwise dispose
of 90% of their shares of Common Stock (939,825 shares) that might otherwise be
eligible for sale for a period of 24 months after the date of this Prospectus
without the prior written consent of the Representative. These Selling
Shareholders, with respect to the remaining 10% of their shares of Common Stock
(104,425 shares), and all remaining holders of the Company's securities (owning
556,000 shares of Common Stock and outstanding warrants, options or convertible
or exchangeable notes exercisable for 590,710 shares of Common Stock) will
agree to lock-up periods of six months for all, and 12 months for 50%, of the
shares of Common Stock that they own or may acquire after the date of this
Prospectus. The terms of the Bridge Notes specify that the holders of the
Bridge Notes may not sell the 35,704 shares of Common Stock that they will
receive upon payment in full of the Bridge Notes for a period of one year
following the completion of the initial public offering, unless the
Representative consents to the sale. Upon the expiration of the lock-up
agreements, these shares will become eligible for sale pursuant to this
offering.
PLAN OF DISTRIBUTION
The Selling Shareholders may from time to time sell all or a portion
of their shares of Common Stock in the over-the-counter market or on any
national securities exchange or automated interdealer quotation system on which
the Common Stock may hereafter be listed or traded, in negotiated transactions
or otherwise, at prices then prevailing or related to the then current market
price or at negotiated prices. The shares of Common Stock may be sold directly
or through brokers or dealers or in a distribution by one or more underwriters
on a firm commitment or best efforts basis. The methods by which the shares of
Common Stock may be sold include (i) a block trade (which may involve crosses)
in which the broker or dealer engaged will attempt to sell the shares of Common
Stock as agent but may position and resell a portion of the block as principal
to facilitate the transaction, (ii) purchases by a broker or dealer as
principal and resales by such broker or dealer for its account pursuant to this
Prospectus Supplement and the accompanying Prospectus, (iii) ordinary brokerage
transactions and transactions in which the broker solicits purchasers or to or
through marketmakers, (iv) transactions in put or call options or other rights
(whether exchange-listed or otherwise) established after the effectiveness of
the Registration Statement of which this Prospectus is a part and (v) privately
negotiated transactions. In addition, any of the shares of Common Stock that
qualify for sale pursuant to Rule 144 may be sold in transactions complying
with such Rule, rather than pursuant to this Prospectus Supplement and the
accompanying Prospectus.
In the case of sales of the shares of Common Stock effected to or
through broker-dealers, such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the Selling Shareholders or
the purchasers of the shares of Common Stock sold by or through such
broker-dealers, or both. The Company has advised the Selling Shareholders that
the anti-manipulative Rules 10b-6 and 10b-7 under the Exchange Act may apply to
their sales in the market and has informed them of the need for delivery of
copies of this Prospectus Supplement and the accompanying Prospectus. The
Company is not aware as of the date of this Prospectus Supplement of any
agreements between any of the Selling Shareholders and any broker-dealers with
respect to the sale of the shares of Common Stock. The Selling Shareholders and
any broker-dealers or agents participating in the distribution of the
Securities may be deemed to be "underwriters" within the meaning of the
Securities Act and any commissions received by any such broker-dealers or
agents and profit on any resale of shares of Common Stock may be deemed to be
underwriting commissions under the Securities Act. The commissions received by
a broker-dealer or agent may be in excess of customary compensation. The
Company will receive no part of the proceeds from the sale of any of the shares
of Common Stock by the Selling Shareholders.
The Company will pay all costs and expenses incurred in connection
with the registration under the Securities Act of the shares of Common Stock
offered by the Selling Shareholders, including without limitation all
registration and filing fees, listing fees, printing expenses, fees and
disbursements of counsel and accountants for the Company. Each Selling
Shareholder will pay all brokerage fees and commissions, if any, incurred in
connection with the sale of the shares of
-7-
<PAGE> 10
Common Stock owned by the Selling Shareholder. In addition, the Company has
agreed to indemnify the Selling Shareholders, other than the Trust, against
certain liabilities, including liabilities under the Securities Act.
There is no assurance that any of the Selling Shareholders will sell
any or all of the shares of Common Stock offered by them.
LEGAL OPINIONS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Bracewell & Patterson, L.L.P., Dallas, Texas.
-8-
<PAGE> 11
SUBJECT TO COMPLETION, DATED MARCH 4, 1997
AVIATION GROUP, INC.
1,000,000 SHARES OF COMMON STOCK
AND
1,000,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
Aviation Group, Inc. (the "Company") is hereby offering 1,000,000 shares
of its common stock, par value $0.01 per share (the "Common Stock") and
redeemable warrants to purchase an additional 1,000,000 shares of Common Stock
(the "Warrants"). The Common Stock and the Warrants (collectively, the
"Securities") are being offered separately and not as units, and each are
separately transferable. It is currently estimated that the initial public
offering price will be between $7.00 and $9.00 per share of Common Stock and
$0.10 per Warrant. Each Warrant is immediately exercisable and entitles the
registered holder to purchase one share of Common Stock at an exercise price
equal to 120% of the initial public offering price and expires five years
following the date of this Prospectus. The outstanding Warrants may be
redeemed by the Company upon 30 days' written notice at $0.05 per Warrant,
provided that the closing bid quotations or sales prices of the Common Stock
have averaged at least 150% of the initial public offering price for a period
of any 15 consecutive trading days ending on the tenth day prior to the day on
which the Company gives notice. See "Description of Securities."
Prior to this offering (the "Offering"), there has not been any public
market for the Securities, and there can be no assurance that any such market
will develop or, if developed, that it will be sustained. The initial public
offering prices of the Securities shall be determined by negotiations between
the Company and RAS Securities Corp. as the representative (the
"Representative") of the participating underwriters (the "Underwriters"). See
"Underwriting." Application has been made for approval of the Common Stock and
Warrants for quotation on the Nasdaq Stock Market's SmallCap Market ("Nasdaq")
and for listing on the Pacific Stock Exchange (the "PSE"). The Securities will
not be listed for trading as units. In the event that the Common Stock or
Warrants are not accepted for quotation on Nasdaq or listing on the PSE, an
investor would likely find it difficult to dispose of the Common Stock or
Warrants or to obtain current quotations as to their value.
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK AS
WELL AS IMMEDIATE AND SUBSTANTIAL DILUTION. SEE "RISK FACTORS" AND "DILUTION,"
COMMENCING ON PAGES 7 AND 14, RESPECTIVELY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===============================================================================
Price to Underwriting Discounts Proceeds to
Public and Commissions (1) Company (2)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share ................... $ 8.00 $ 0.80 $ 7.20
- -------------------------------------------------------------------------------
Per Warrant ................. $ 0.10 $ 0.01 $ 0.09
- -------------------------------------------------------------------------------
Total(3) .................... $8,100,000 $810,000 $7,290,000
===============================================================================
</TABLE>
(1) Excludes a non-accountable expense allowance to the Representative equal
to 3.00% of the offering proceeds, including proceeds from over-
allotments, and 100,000 warrants (the "Representative's Warrants") to
purchase up to 100,000 shares of Common Stock and 100,000 warrants (the
"Underlying Warrants"). The Underlying Warrants will be substantially
identical to the Warrants offered to the public except that they will
not be subject to redemption nor exercisable for a period of one year
following the effective date of the Registration Statement (as
hereinafter defined) of which this Prospectus forms a part. The Company
has agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933 as amended, (the
"Securities Act"). See "Underwriting."
(2) Before deducting expenses of this offering payable by the Company
estimated at $540,000 including a non-accountable expense allowance of
$243,000.
(3) The Company has granted to the Underwriters the right to purchase,
within 45 days from the date of this Prospectus, up to 150,000
additional shares of Common Stock and 150,000 additional Warrants on the
terms set forth above solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to Public will be
$9,315,000, the total Underwriting Discounts and Commissions will be
$931,500, the total Proceeds to Company, before the expenses of this
offering, will be $8,383,500 and the Representative's Warrants will
increase to 115,000 shares of Common Stock and 115,000 Underlying
Warrants. See "Underwriting."
The Common Stock and Warrants are being sold by the Underwriters subject
to prior sale, when, as and if delivered to and accepted by the Underwriters,
and subject to the right to reject any order, in whole or in part, and subject
to certain other conditions. It is expected that delivery of the Common Stock
and Warrants will be made against payment therefor at the offices of RAS
Securities Corp., New York, New York, or through the facilities of the
Depositary Trust Company, on or about _______________ , 1997.
RAS SECURITIES CORP. FIRST LONDON SECURITIES CORPORATION
The date of this Prospectus is __________________, 1997.
<PAGE> 12
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE> 13
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (herein, together with all
amendments and exhibits, referred to as the "Registration Statement") under the
Securities Act with respect to the Securities being offered pursuant to this
Prospectus. This Prospectus does not contain all information set forth in the
Registration Statement and exhibits and schedules thereto, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. The Registration Statement may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 25049 and at the regional offices of the Commission
located at 500 West Madison Street, Chicago, Illinois 60661 and Seven World
Trade Center, Suite 1300, New York, New York 10048. Copies of such material
can be obtained at prescribed rates from the Public Reference Room of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 25049. The Commission
maintains a World Wide Web site (http://www.sec.gov) that contains reports,
proxy, and information statements and other information regarding registrants,
such as the Company, that file electronically with the Commission. Statements
contained in this Prospectus concerning the provisions of any documents are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
The Company will be subject to the informational requirements of the
Exchange Act and in accordance therewith will file reports, proxy statements
and other information with the Commission. Such reports, proxy statements and
other information can be inspected and copied at the public reference
facilities of the Commission described above. The Company intends to furnish
to its shareholders annual reports containing financial statements audited by
independent certified public accountants following the end of each fiscal year.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK OR THE WARRANTS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE OVER-THE-COUNTER
MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.
2
<PAGE> 14
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. Except as otherwise indicated, the information contained in
this Prospectus does not assume the exercise of the Warrants, the Underwriters'
over-allotment option, the Representative's Warrants or currently outstanding
options or warrants. This Prospectus assumes an initial price to public of
$8.00 per share. In addition to the other information in this Prospectus,
prospective investors should carefully consider the information set forth under
the heading "Risk Factors."
THE COMPANY
The mission of Aviation Group, Inc., a Texas corporation (the
"Company"), is to be a premier provider of services and products to airline
companies and other aviation firms. Although its primary market is the United
States, the Company ultimately aspires to compete in the global marketplace.
In addition to growth of its existing businesses, the Company seeks to grow via
the acquisition of other aviation service businesses that complement and
strengthen the Company's existing operations.
The Company was organized to consolidate the ownership of Tri-Star
Aircraft Services, Inc. ("TriStar Paint"), Tri-Star Airline Services, Inc.
("Airline Services") and Pride Aviation, Inc. ("Pride"). On December 20, 1995,
the Company acquired all the outstanding shares in TriStar Paint and Airline
Services in exchange for the issuance of 1,000,000 shares of Common Stock. On
March 1, 1996, in connection with the Company's acquisition of Pride, the
Company paid $486,000 cash and issued 10%, five-year Convertible Notes in the
aggregate principal amount of $857,000, and 100,250 shares of Common Stock.
The Company has three lines of business. The Overhaul & Service
Division, through TriStar Paint and Pride, provides painting and paint
stripping services for commercial and freight aircraft at their facilities
located in Dallas, Texas and New Iberia, Louisiana. Pride's primary customer
is United Airlines, Inc. TriStar Paint provides paint services on a plane-by-
plane bid basis to a variety of customers. The Company's Ground Handling &
Services Division, through Airline Services, provides aircraft ground handling
and light catering services to a variety of passenger and freight airlines at
various airports, including DFW International and San Francisco International,
located in the continental United States for customers such as United Parcel
Service, Southwest Airlines, United Airlines, Federal Express and Northwest
Airlines, among others. In July 1996, the Company began to operate a third
business segment, its FBO Operations & Airport Management Division. The
Company's first fixed-base-operation, located at Redbird Airport in Dallas,
Texas, provides fuel and light maintenance services to general aviation,
corporate and light freight aircraft customers. There are presently over 1,700
operators of fixed base operating stations ("FBO's") serving the United States.
The Company believes that acquiring or otherwise operating such businesses in
smaller, second-tier airports located near major urban areas across the United
States provides a significant growth opportunity.
The Company believes that airlines will increase the outsourcing of
their maintenance and service requirements to third party vendors in the
future. According to U.S. Department of Transportation statistics, the nine
major U.S. airlines expended 20% of their maintenance budgets with outsourcing
vendors in 1994. There are over 10,000 aviation maintenance and service
vendors worldwide. The Company believes that the aviation service industry is
highly fragmented. It also believes that its existing operations, enhanced by
additional growth and acquisitions of complementary businesses, will enable it
to provide quality customer service with financial, insurance, and other
operating economies-of-scale that major customers increasingly require. The
Company does not presently intend to operate as a commercial airline or as a
provider of major engine or airframe overhaul services.
The principal executive offices of the Company are located at 700 North
Pearl Street, Suite 2170, Dallas, Texas 75201, telephone number (214) 922-8100.
3
<PAGE> 15
THE OFFERING
Common Stock Offered .......... 1,000,000 shares
Warrants Offered .............. 1,000,000 Warrants
Common Stock Outstanding:
Before Offering (1) .. 1,600,250 shares
After Offering (1) .. 2,600,250 shares
Warrants Offered .............. 1,000,000 Warrants
Exercise Terms ....... Each Warrant entitles the holder to purchase
one share of Common Stock for 120% of the
initial public offering price.
Expiration Date ...... Five years from the date of this Prospectus.
Redemption ........... Subject to redemption at a price of $0.05
per Warrant upon 30 days written notice,
provided that the average closing bid
quotations or sales prices of the Common
Stock equal or exceed 150% of the initial
public offering price for 15 consecutive
trading days ending on the tenth day prior
to the date on which the Company gives
notice of redemption. See "Description of
Securities - Warrants."
Estimated Net Proceeds (2) .... $6,750,000
Use of Proceeds ............... Repayment of indebtedness, capital
expenditures for existing operations,
acquisition of other aviation service
companies, facilities improvements, working
capital and other corporate purposes.
Risk Factors .................. The Securities involve a high degree of risk
and immediate substantial dilution. See
"Risk Factors" and "Dilution."
Proposed Nasdaq Symbols:
Common Stock ............ AVGP
Warrants ................ AVGPW
Proposed Pacific Stock
Exchange Symbols:
Common Stock ............ AVG.P
Warrants ................ AVGP.W
- ---------------
(1) Excludes 150,000 shares of Common Stock reserved for the Company's 1997
Stock Option Plan or shares of Common Stock issuable upon the exercise
of (i) 1,000,000 Warrants offered hereby; (ii) the Representative's
Warrants and the Underlying Warrants; (iii) outstanding warrants to
purchase up to 280,000 shares of Common Stock; (iv) the Underwriters'
over-allotment option; and (v) outstanding promissory notes totaling
$1,247,000, as of December 31, 1996, that are convertible or
exchangeable for up to 280,200 shares of Common Stock.
(2) After deducting underwriting discounts and other expenses of this
offering, including the Representative's non-accountable expense
allowance, but excluding any exercise of the Underwriters' over-
allotment option.
4
<PAGE> 16
SUMMARY FINANCIAL INFORMATION
The summary financial information set forth below is derived from (i)
the combining financial statements of TriStar Paint and Airline Services for
the fiscal years ended September 30, 1994 and 1995 and the notes thereto and
(ii) the consolidated financial statements for the Company as of and for the
nine months ended June 30, 1996, and the notes thereto, and the six months
ended December 31, 1996 and 1995, contained elsewhere in the Prospectus. This
information should be read in conjunction with the "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The pro forma
financial information included herein is presented for informational purposes
only and may not reflect the Company's future results of operations and
financial position or what the results of operations and financial position of
the Company would have been had the Pride acquisition actually occurred as of
October 1, 1995.
<TABLE>
<CAPTION>
Pro Forma
Actual Nine Nine Months
Year Ended Year Ended Months Ended Ended Six Months Ended
September 30, September 30, June 30, June 30, December 31,
1994(1) 1995(1) 1996 1996(2) 1996 1995(1)
------------ ------------ ------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue ........................... $ 1,770,000 $ 2,533,000 $ 3,881,000 $ 6,755,000 $ 4,227,000 $ 927,000
Gross profit ...................... 678,000 1,116,000 1,043,000 1,800,000 1,231,000 272,000
General and administrative
and depreciation and
amortization expenses ........... 466,000 569,000 906,000 1,517,000 1,510,000 305,000
------------ ------------ ------------ ------------ ------------ ------------
Income (loss) from operations ..... 212,000 547,000 137,000 283,000 (279,000) (33,000)
Interest expense and other, net ... 13,000 17,000 69,000 141,000 66,000 13,000
------------ ------------ ------------ ------------ ------------ ------------
Income (loss) before income
taxes ........................... 199,000 530,000 68,000 142,000 (345,000) (46,000)
Provision (benefit) for income
taxes ........................... 61,000 188,000 34,000 70,000 (119,000) (16,000)
------------ ------------ ------------ ------------ ------------ ------------
Net income (loss) ................. $ 138,000 $ 342,000 $ 34,000 $ 72,000 $ (226,000) $ (30,000)
============ ============ ============ ============ ============ ============
Pro forma net income (loss) per
common and common equivalent
share (unaudited) (3) ........... $ 0.02 $ 0.05 $ (0.14)
============ ============ ============
Pro forma weighted average common
and common equivalent shares
outstanding (unaudited) (3) ..... 1,605,156 1,605,156 1,605,156
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
-------------------------------------------------
June 30, Pro Forma
1996 Actual(4) As Adjusted(5)
------------ ----------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit) ..................... $ (126,000) $ (621,000) $ 5,629,000
Total assets .................................. 4,524,000 4,571,000 10,598,000
Long-term debt, net of current portion ........ 1,350,000 1,329,000 1,329,000
Total liabilities ............................. 3,069,000 3,342,000 3,119,000
Shareholders' equity .......................... $1,455,000 $1,229,000 $ 7,979,000
</TABLE>
- ---------------
(1) Represents combined statements of operations for the Company's
predecessors, TriStar Paint and Airline Services.
(2) Represents the historical statement of operations for the nine months
ended June 30, 1996, as adjusted on a pro forma basis to give effect
to the acquisition of Pride as if it had occurred on October 1, 1995.
This statement of operation includes the unaudited statement of income
for Pride for the five months ended February 29, 1996, plus
adjustments for goodwill amortization and additional depreciation
expense and acquisition debt interest. See "Pro Forma Financial
Data."
5
<PAGE> 17
(3) See Note B "Summary of Significant Accounting Policies--Unaudited Pro
Forma Net Income (Loss) Per Common Share" in the Notes to Consolidated
Financial Statements for the Company for the period ended June 30,
1996.
(4) Excludes $500,000 in aggregate principal amount of 10% Bridge Notes
that were issued after December 31, 1996 and resulting cash proceeds.
See "Business--Financing."
(5) Adjusted to give effect to the sale by the Company of the 1,000,000
shares of Common Stock and the 1,000,000 Warrants offered hereby and
the application of the estimated net proceeds therefrom. See "Use of
Proceeds."
6
<PAGE> 18
RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should carefully consider the following risk factors in evaluating
the Company and its business before purchasing the Securities offered hereby.
DEPENDENCE ON ONE CUSTOMER
Pride's contract with United Airlines, Inc. ("United") to provide
aircraft stripping and painting services accounted for approximately 73% of the
Company's revenues for the six months ended December 31, 1996. The contract
with United expires in 1999, but is cancelable prior to that date by United
upon 90 days prior written notice. The Company is negotiating with United to
extend the contract for an additional five years, but there can be no assurance
that such extension can be obtained on reasonable terms. During the high
travel seasons of the summer months and the Thanksgiving and Christmas holiday
seasons, United curtails its aircraft deliveries to Pride. Although Pride
reduces its overhead to some extent during these periods, it experiences losses
during these periods. If United expands these curtailments, the Company's
results of operations may be materially adversely affected. Although Pride is
attempting to locate additional customers for these slack periods, there can be
no assurance that Pride will be able to obtain these customers. While the
Company's business strategy calls for it to broaden its customer base so that
it can become less dependent on United, any termination of the contract or
material curtailment of plane deliveries by United, including reductions as a
result of economic or competitive pressures on United, would adversely affect
the Company's business, financial conditions and results of operation. There
can be no assurance that United will continue to use Pride's stripping and
painting services.
GENERAL CUSTOMER RISKS RELATED TO THE AIRLINE INDUSTRY
The airline industry is significantly affected by general economic
conditions. Because a substantial portion of business and personal airline
travel is discretionary, the industry tends to experience adverse financial
results during general economic downturns. Economic and competitive conditions
since deregulation of the airline industry in 1978 have contributed to a number
of bankruptcies and liquidations among airlines. A worsening of current
economic conditions, or an extended period of recession nationally or
regionally, could have a material adverse effect on the Company's operations.
The Company will not have any control over these general economic conditions.
SEASONALITY
The Company's painting business is seasonal, which can adversely
affect the Company's results of operations from quarter to quarter. Typically,
customers will have fewer aircraft painted during the summer months and the
holiday season from approximately November 15 through January 1 of each year.
RISK OF FUTURE LOSSES FROM OPERATIONS
Tri-Star Paint and Airline Services, the Company's predecessors,
together earned net income of $138,000 and $342,000 for the fiscal years ended
September 30, 1994 and 1995, respectively. Pride experienced a net loss of
$80,000 in its fiscal year ended September 30, 1995. Although the Company
earned net income of $34,000 for the nine months ended June 30, 1996, the
Company experienced a net loss of $226,000 for the six months ended December
31, 1996. This loss was primarily due to seasonably slower paint operations.
There can be no assurance that the Company will be profitable or that the
Company's businesses will be successful in the future.
NO ASSURANCE OF SUCCESSFUL ACQUISITIONS
The Company intends to consider acquisitions of other companies that
could complement the Company's existing business, including acquisitions of
complementary service and product lines. There can be no assurance that
suitable acquisition candidates can be identified, or that, if identified,
adequate and acceptable financing sources will be available to the Company that
would enable it to consummate these transactions. The Company is currently
evaluating a number of acquisition opportunities and is at varying stages of
negotiation with respect to such acquisitions. No commitments or binding
agreements have been entered into to date and accordingly no assurance can be
given that any of the acquisitions currently being considered will be
consummated. There can be no assurance that the Company will be able to
integrate successfully any acquired companies or service or product lines into
its existing operations, which could increase the
7
<PAGE> 19
Company's operating expenses in the short-term and materially and adversely
affect the Company's results of operations. Moreover, any acquisition by the
Company may result in potentially dilutive issuances of equity securities, the
incurrence of additional debt, and amortization of expenses related to goodwill
and intangible assets, all of which could adversely affect the Company's
profitability. Acquisitions involve numerous risks, such as the diversion of
the attention of the Company's management from other business concerns, the
entrance of the Company into markets in which it has had no or only limited
experience, and the potential loss of key employees of the acquired company,
all of which could have a material adverse effect on the Company's business,
financial condition, and results of operations. See "Business--Acquisitions of
Complimentary Businesses."
DEPENDENCE ON ABILITY TO MANAGE GROWTH
The Company's ability to produce and market its services competitively
to the airline industry depends on its ability to implement and continually
expand its operational and financial systems, recruit sufficient qualified
employees and train, manage and motivate both current and new employees.
Failure to effectively manage the growth of the Company would have a material
adverse effect on the business of the Company.
ADDITIONAL FINANCING
There can be no assurance that the proceeds from this offering and cash
flow from operations will be sufficient to enable the Company to implement
fully its business strategies. As a result, the Company may need to raise
additional funds through equity or debt financings. No assurance can be given
that such additional financings will be available on terms acceptable to the
Company, if at all. Further, any such financings may result in further
dilution to the Company's stock and higher interest expense and may not be on
terms that are favorable to the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends, in large part, on the efforts
and abilities of its management team, including Lee Sanders, Paul Lubomirski
and Tony Ramsaroop. The loss of the services of any of these managers could
have a material adverse affect on the business of the Company. The Company has
employment agreements with Messrs. Sanders, Lubomirski and Ramsaroop. Mr.
Sanders currently holds 62.5% of the Company's outstanding Common Stock and
will own 38.5% of the Company's outstanding Common Stock immediately following
the offering. See "Principal Shareholders." The successful implementation of
the Company's business strategies depends on the hiring and retention of
additional management and other personnel. There can be no assurance that the
Company will be able to identify and attract additional qualified management
and other personnel when needed or that the Company will be successful in
retaining such additional management and personnel if added. Moreover, there
can be no assurance that the additional costs associated with the hiring of
additional personnel will not adversely affect the Company's results of
operations. See "Management." The Company is the beneficiary of a $1,000,000
key man life insurance policy on Mr. Sanders.
EMPLOYEE COSTS
Although the Company believes that it will operate with lower
personnel costs than many established airline service providers, principally
due to lower base salaries and greater flexibility in the utilization of
personnel, there can be no assurance that the Company will continue to realize
these advantages for any extended period of time. None of the Company's
employees are represented by a labor union. If unionization of the Company's
employees occurs, the Company's costs could materially increase.
CONTROL BY EXISTING SHAREHOLDERS
Upon the completion of this offering, the directors, officers, and
principal shareholders of the Company will beneficially own approximately 44.0%
of the Company's outstanding Common Stock. As a result, these persons will have
a significant influence on the affairs and management of the Company, as well
as on all matters requiring shareholder approval, including electing and
removing members of the Company's Board of Directors, causing the Company to
engage in transactions with affiliated entities, causing or restricting the
sale or merger of the Company, and changing the Company's dividend policy.
Such concentration of ownership and control could have the effect of delaying,
deferring, or preventing a
8
<PAGE> 20
change in control of the Company even when such a change of control would be in
the best interest of the Company's other shareholders. See "Management,"
"Principal Shareholders" and "Description of Securities."
FUTURE PARTNERSHIP OR JOINT VENTURE LIABILITIES
In the future, the Company or a subsidiary may form partnerships or
joint ventures as a financing vehicle or to develop and/or manage new business
opportunities, including the raising of funds for such businesses. As a
general partner or joint venturer, the Company may be exposed to liability with
respect to claims asserted against such partnerships or ventures against which
liability the partnership or venture may have insufficient assets or insurance.
This liability could have a materially adverse effect on the Company.
COMPETITION
The airline services industry is highly competitive. Each of the
Company's subsidiaries is in direct competition with other companies. Although
TriStar Paint also serves as a subcontractor to the owners of several heavy
maintenance facilities for aircraft, most of these heavy maintenance facilities
perform aircraft stripping and painting services as an adjunct to their
maintenance operations and, consequently, directly compete with the Company.
In ground handling and light catering services, the Company has numerous
competitors. At each major airport at which Airline Services provides such
services, there are numerous other companies providing similar services to
other airlines and compete directly with the Company. Because many of the
Company's competitors have greater resources than the Company, no guarantee or
assurance can be given that the Company will be able to compete successfully in
providing its services at a competitive but profitable price.
ENVIRONMENTAL REGULATION
The Company's operations are subject to a substantial amount of
government regulation. In particular, the Environmental Protection Agency
("EPA") and state and local regulatory authorities regulate, among other
things, emissions to air, discharges to water and the generation, use, storage,
transportation, treatment and disposal of the substances employed by the
Company in its aircraft stripping and painting operations. The Company's
facilities may require operating permits that are subject to revocation,
modification and renewal, violations of which may provide for substantial fines
and civil or criminal sanctions. The operation of any facility that handles
chemical substances entails risk of adverse environmental impact, including
exposure to such substances, and there can be no assurance that material costs
or liabilities will not be incurred to rectify any such damage. In addition,
potentially significant expenditures could be required in order to comply with
environmental, health and safety laws and regulations that may be adopted or
imposed in the future.
FAA CERTIFICATIONS
The Federal Aviation Administration (the "FAA") regulates most of the
Company's business operations. The Company's stripping and painting business
is dependent upon continued compliance with the requirements of the FAA and
maintenance of the FAA's certifications in favor of the Company's subsidiaries.
These certifications allow the Company's subsidiaries to perform their aircraft
stripping and repair services as well as other repair and maintenance services
at their facilities. Loss of any necessary FAA certifications could have a
material adverse effect on the Company's operations and financial condition.
ABSENCE OF PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock. There can be no assurance that an active trading market will develop
after completion of this offering or, if developed, that it will be sustained.
There can be no assurance that the market price of the Common Stock will not
decline below the initial offering price. The securities of many emerging
companies have experienced significant price and volume fluctuations that are,
at times, unrelated or disproportionate to the operating performance of such
companies. Such fluctuations may be the result of changes in conditions
affecting the economy in general, analysts' reports, general trends in the
industry, and other events or factors beyond the company's control. These
conditions may have a material adverse effect on the market price of the Common
Stock.
9
<PAGE> 21
ARBITRARY OFFERING PRICE
The public offering price of the Common Stock and Warrants has been
determined by negotiation between the Company and the Representative. Among
the factors considered in such negotiations were prevailing market conditions,
the history and prospects of the Company, the present state of the Company's
development, the industry in which it competes, an assessment of the Company's
management, the market price for securities of comparable companies at the time
of the offering, and other factors deemed relevant. See "Underwriting."
EFFECT OF PREFERRED STOCK ON RIGHTS OF COMMON STOCK
The Company's Articles of Incorporation authorize the Board of
Directors of the Company to issue "blank check" Preferred Stock, the relative
rights, powers, preferences, limitations, and restrictions of which may be
fixed or altered from time to time by the Board of Directors. Accordingly, the
Board of Directors is empowered, without shareholder approval, to issue
Preferred Stock with dividend, liquidation, conversion, voting, or other rights
that could adversely affect the voting power and other rights of the holders of
Common Stock. The Preferred Stock could be utilized, under certain
circumstances, as a method of discouraging, delaying, or preventing a change in
control of the Company that shareholders might consider to be in the Company's
best interests. Although the Company has no present intention of issuing any
shares of Preferred Stock, there can be no assurance that the Company will not
do so in the future. See "Description of Capital Stock--Preferred Stock."
NO DIVIDENDS
Since its capitalization, the Company has paid no dividends on its
Common Stock. The Company does not presently intend to pay any dividends on
its Common Stock. Dividend payments in the future may only be made out of
legally available funds, and, if the Company experiences substantial losses,
such funds may not be available. See "Dividend Policy".
EFFECT OF REPRESENTATIVE'S WARRANTS
The Company has agreed to sell for nominal consideration to the
Representative or its designee warrants (the "Representative's Warrants") to
purchase (i) 10% of the number of shares of Common Stock sold in this offering
and (ii) warrants to purchase 10% of the number of shares of Common Stock sold
in this offering (the "Underlying Warrants"). The terms and conditions of the
Underlying Warrants are identical to those of the Warrants offered hereby
except that the Underlying Warrants issuable upon the exercise of the
Representative's Warrants will not be redeemable by the Company and are not
exercisable until one year after the date of this Prospectus. The
Representative's Warrants will be exercisable for a period of four years
commencing one year after the date of this Prospectus at an exercise price of
120% of the initial public offering price. The Representative and its
designees will have the opportunity to profit from an increase in the price of
the Company's Common Stock during the term of the Representative's Warrants and
are likely to exercise them at a time when the Company, in all likelihood,
would be able to obtain additional capital by offering shares of its Common
Stock on terms more favorable to the Company than those provided by the
exercise of such warrants. In addition, the existence of such warrants may
adversely affect the terms on which the Company can obtain additional
financing. See "Description of Securities" and "Underwriting".
LISTING AND MAINTENANCE CRITERIA FOR SECURITIES; PENNY STOCK RULES
Application has been made for quotation of the Common Stock and
Warrants on the Nasdaq Stock Market's SmallCap Market ("Nasdaq") and for
listing on the Pacific Stock Exchange (the "PSE"). In the event that the
Common Stock or Warrants are not accepted for quotation on Nasdaq or for
listing on the PSE, an investor would likely find it difficult to dispose of
the Common Stock or Warrants or to obtain current quotations as to their value.
There can be no assurance that the Company in the future will meet the
requirements for continued listing on the Nasdaq or the PSE with respect to the
Common Stock or Warrants. If the Common Stock or the Warrants fail to maintain
such listings, the market value of the Common Stock and Warrant likely would
decline and purchasers in this offering likely would find it more difficult to
dispose of, or to obtain accurate quotations as to the market value of, the
Common Stock and Warrants.
In addition, if the Company fails to maintain a Nasdaq listing for its
securities, and no other exclusion from the definition of a "penny stock" under
the Securities Exchange Action of 1934, as amended (the "Exchange Act") is
available,
10
<PAGE> 22
then any broker engaging in a transaction in the Company's securities would be
required to provide any customer with a risk disclosure document, disclosure of
market quotations, if any, disclosure of the compensation of the broker-dealer
and its salesperson in the transaction, and monthly account statements showing
the market values of the Company's securities held in the customer's accounts.
The bid and offer quotation and compensation information must be provided prior
to effecting the transaction and must be contained on the customer's
confirmation. If brokers become subject to the "penny stock" rules when
engaging in transactions in the Securities, they would become less willing to
engage in such transactions, thereby making it more difficult for purchasers in
this offering to dispose of the Securities. See "Financial Statements."
DILUTION
Purchasers of the Securities will suffer immediate and significant
dilution in net tangible value of the Common Stock. The exercise of
outstanding warrants, options and convertible or exchangeable notes will also
have an additional dilutive effect on the interests of the purchasers of the
Securities. See "Dilution".
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock in the public
market following this offering or the prospect of such sales could adversely
affect the market price of the Common Stock. Upon completion of this offering,
the Company will have outstanding 2,600,250 shares of Common Stock. Of these
shares, the 1,000,000 shares of Common Stock being offered hereby are
immediately eligible for sale in the public market without restriction, except
for shares purchased at any time by any "affiliate" of the Company, as such
term is defined in Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"). Two officers of the Company owning a total of 1,044,250
shares of Common Stock will sign lock-up agreements under which such holders
will agree not to offer, sell, or otherwise dispose of 90% of their shares of
Common Stock (939,825 shares) that might otherwise be eligible for sale for a
period of 24 months after the date of this Prospectus without the prior written
consent of the Representative. These officers, with respect to the remaining
10% of their shares of Common Stock (104,425 shares), and all remaining holders
of the Company's securities (owning 556,000 shares of Common Stock and
outstanding warrants, options or convertible or exchangeable notes exercisable
for 596,200 shares of Common Stock) will agree with the Representative to lock-
up periods of six months for all, and 12 months for 50%, of the shares of
Common Stock that they own or may acquire after the date of this Prospectus.
The terms of the Bridge Notes provide that the shares of Common Stock to be
issued upon full payment of the Bridge Notes may not be sold by the holder for
one year after the closing of this Offering, unless the consent of the
Representative is obtained. Upon the expiration of the lock-up agreements,
these shares will become eligible for sale in the public market assuming the
shares continue to be registered for sale by the selling securityholders or, if
not registered, subject to the provisions of Rule 144.
NECESSITY TO MAINTAIN CURRENT PROSPECTUS
The shares of Common Stock issuable upon exercise of the Warrants and
the securities issuable upon exercise of the Representative's Warrants have
been registered with the Commission. The Company will be required, from time
to time, to file post-effective amendments to its registration statement in
order to maintain a current prospectus covering the issuance of such shares
upon exercise of the Warrants. The Company has undertaken to make such filings
and to use its best efforts to cause such post-effective amendments to become
effective. If for any reason a required post-effective amendment is not filed
or does not become effective or is not maintained, the holders of the Warrants
may be prevented from exercising their Warrants. See "Description of
Securities--Warrants."
STATE BLUE SKY REGISTRATION REQUIRED TO EXERCISE WARRANTS
Holders of the Warrants have the right to exercise the Warrants only
if the underlying shares of Common Stock are qualified, registered or exempt
from registration under applicable securities laws of the states in which the
various holders of the Warrants reside. The Company cannot issue shares of
Common Stock to holders of the Warrants in states where such shares are not
qualified, registered or exempt. The Company has undertaken, however, to
obtain a listing for the shares of Common Stock on the Pacific Stock Exchange
which provides an exemption from state securities law registration in many
states. See "Description of Securities--Warrants."
11
<PAGE> 23
CALLABLE WARRANTS AND IMPACT ON INVESTORS
The Warrants are subject to redemption by the Company in certain
circumstances. The Company's exercise of this right would force a holder of
the Warrants to exercise the Warrants and pay the exercise price at a time when
it may be disadvantageous for the holder to do so, to sell the Warrants at the
then current market price when the holder might otherwise wish to hold the
Warrants for possible additional appreciation, or to accept the redemption
price, which is likely to be substantially less than the market value of the
Warrants in the event of a call for redemption. Holders who do not exercise
their Warrants prior to redemption by the Company will forfeit their right to
purchase the shares of Common Stock underlying the Warrants. The foregoing
notwithstanding, the Company may not call the Warrants at any time that a
current registration statement under the Securities Act of 1933, as amended, is
not then in effect. Any redemption of the Warrants during the one-year period
commencing on the date of this Prospectus shall require the written consent of
the Representative. See "Description of Securities--Warrants."
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This prospectus contains forward-looking statements including
statements regarding, among other items, the Company's business strategies,
continued growth in the Company's markets, and anticipated trends in the
Company's business and the industry in which it operates. The words "believe",
"expect", "anticipate", "intends", "forecast", "project", and similar
expressions identify forward-looking statements. Such forward-looking
statements are based upon the Company's expectations and are subject to a
number of risks and uncertainties, many of which are beyond the Company's
control. Actual results could differ materially from such forward-looking
statements, as a result of the factors described under this "Risk Factors"
section and elsewhere herein, including among others, regulatory or economic
influences. In light of these risks and uncertainties, there can be no
assurance that any forward-looking information contained in this Prospectus
will in fact transpire or prove to be accurate. All subsequent written and
oral forward-looking statements attributable to the Company or persons acting
on its behalf are expressly qualified in their entirety by this section.
12
<PAGE> 24
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,000,000 shares
of Common Stock and the 1,000,000 Warrants offered hereby are estimated to be
$6,750,000, after deducting underwriting discounts and commissions and
estimated offering expenses. The Company anticipates that the net proceeds of
this offering will be used substantially as follows:
<TABLE>
<CAPTION>
Percent of
Application of Net Proceeds Dollar Amount Net Proceeds
--------------------------- ------------- ------------
<S> <C> <C>
Repay indebtedness (1) $ 750,000 11.1%
Acquisitions (2) 3,500,000 51.9%
Enhance existing products and services (3) 1,000,000 14.8%
Improve existing facilities (4) 250,000 3.7%
Purchase of capital equipment (5) 250,000 3.7%
General corporate purposes 1,000,000 14.8%
---------- -----
Total $6,750,000 100.0%
========== =====
</TABLE>
- ---------------
(1) The Company intends to use approximately $500,000 of the net proceeds
to repay certain subordinated promissory notes privately issued by the
Company in February 1997 (the "Bridge Notes") and approximately
$250,000 of the net proceeds to repay certain bank indebtedness. The
Bridge Notes are due in full on June 30, 1998 or earlier in certain
circumstances, including within five days following the closing of
this Offering. Subject to successful completion of this Offering, in
connection with the full payment of the Bridge Notes, the Company has
agreed to issue to the holders of the Bridge Notes that number of
shares of Common Stock equal to the quotient of $250,000 divided by
the initial public offering price. The Company used the proceeds from
the issuance of the Bridge Notes for general corporate purposes and to
fund the costs of this Offering. The bank indebtedness is composed of
(i) a term note maturing in September 1997 having a principal balance
of $13,000 as of December 31, 1996 and bearing interest at prime plus
2.25% and (ii) a revolving line of credit maturing in September 1997
having a principal balance of $223,000 as of December 31, 1996 and
bearing interest at prime plus 2%. This bank debt is secured by the
personal guaranty of Lee Sanders, the Company's Chief Executive
Officer, and a pledge of all of the stock, account receivables,
equipment and fixtures of TriStar Paint and Airline Services.
(2) A key element of the Company's strategy involves growth through
acquisitions of other companies, assets or product lines that would
complement or expand the Company's existing business. The Company
believes that acquisitions will enable it to leverage its fixed costs
of operations and further expand the products and services which it
can offer to its customers. The Company is currently evaluating a
number of acquisition opportunities and is at varying stages of
negotiation with respect to such acquisitions. No commitments or
binding agreements have been entered into as of the date of this
Prospectus and accordingly no assurance can be given that any of the
acquisitions currently being considered will be consummated.
(3) The Company intends to utilize approximately $1,000,000 of the
proceeds of this offering to fund anticipated internal growth in its
businesses, particularly the Ground Handling & Services Division.
Such funds will facilitate the entry into additional airports, the
hiring and training of additional support and operating personnel, and
the creation and implementation of formal national marketing and
customer service programs.
(4) These funds will be used primarily to improve and update existing
hangar facilities where the Company's Overhaul & Service Division
performs its paint services. Additionally, leasehold improvements
associated with expanded office and managerial space for the Ground
Handling & Services Division will also be funded with these proceeds.
(5) These funds will be utilized to purchase ground handling and other
support equipment for the Ground Handling & Services Division, along
with additional paint, scaffolding, environmental, and other support
equipment for the Overhaul & Services Division. Ongoing improvements
and additions to the Company's computerized accounting and management
systems will also be funded with these proceeds.
13
<PAGE> 25
Pending the uses described herein, the foregoing represent the
Company's present intentions with respect to the allocation of the proceeds of
this offering based upon its present plans and business conditions. However,
changed business conditions and various other factors could result in the
application of the proceeds of this offering in a manner other than as
described in this Prospectus. In this regard, although the Company is not
currently a party to any binding agreement or commitment with respect to any
prospective acquisition, the Company intends to use portions of the net
proceeds to finance acquisitions of complementary businesses, products or
technologies, or other assets, if attractive opportunities arise. See "Risk
Factors."
14
<PAGE> 26
DILUTION
Dilution is determined by subtracting net tangible book value per
share after the offering from the amount of cash paid by investors for the
shares of Common Stock. Net tangible book value per share represents the book
value of the Company's total tangible assets less total liabilities, divided by
the number of outstanding shares of Common Stock.
The net tangible book value of the Common Stock at December 31, 1996,
was approximately $288,000, or $0.18 per share. After giving effect to the
sale of the 1,000,000 shares of Common Stock offered hereby (at the assumed
initial public offering price of $8.00 per share, and after deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company) and the application of the net proceeds therefrom, and assuming
no other changes in the net tangible book value after December 31, 1996, the
Company's pro forma net tangible book value at December 31, 1996 would have
been approximately $7,038,000, or $2.71 per share. This represents an
immediate increase in pro forma net tangible book value of $2.53 per share to
existing shareholders and an immediate decrease in pro forma net tangible book
value to new investors of $5.29 per share. The following table illustrates the
per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share .................. $8.00
Net tangible book value per share at December 31, 1996 ....... $0.18
Increase per share attributable to new investors ............. 2 .53
Pro forma net tangible book value per share after this offering . 2.71
-----
Dilution per share to new investors .............................. $5.29
=====
Percentage dilution .............................................. 66.1%
=====
</TABLE>
The following table sets forth, as of December 31, 1996, the
differences between the existing shareholders, the investors in this offering
and holders of outstanding warrants or convertible or exchangeable notes with
respect to the total consideration paid or payable and the average price per
share paid or payable:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration (5) Average
------------------ ---------------------- Price
Number Percent Amount Percent Per Share
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders (1) ......... 1,631,500 51.1% $ 1,802,000 15.7% $1.13
New investors (2) ................. 1,000,000 31.3 8,000,000 69.9 8.00
Exercise of outstanding
warrants (3) .................. 280,000 8.8 400,000 3.5 1.43
Exercise of outstanding
convertible or exchangeable
notes (4) ..................... 280,200 8.8 1,247,000 10.9 4.45
----------- ----- ----------- ----- -----
Total ......................... 3,191,700 100.0% $11,449,000 100.0% $3.59
=========== ===== =========== ===== =====
</TABLE>
- --------------
(1) Includes 31,250 shares to be issued to holders of the Bridge Notes,
assuming an initial public offering price of $8.00 per share.
(2) Assumes that the Warrants offered hereby, the Representative's
Warrants and the Underlying Warrants are not exercised.
(3) Includes (i) 200,000 shares of Common Stock issuable upon exercise of
warrants at an exercise price of $1.00 per share and (ii) 80,000
shares of Common Stock issuable upon exercise of warrants at an
exercise price of $2.50 per share.
(4) Includes (i) 190,500 shares of Common Stock issuable upon conversion
of convertible notes having an aggregate principal balance of $857,000
at a conversion rate of $4.50 per share, (ii) 80,700 shares of Common
Stock issuable upon exchange of an exchangeable note having an
aggregate principal balance of $363,000 at an exchange rate
15
<PAGE> 27
of $4.50 per share and (iii) 9,000 shares of Common Stock issuable
upon conversion of a convertible note having an aggregate principal
balance of $27,000 at a conversion rate of $3.00 per share.
(5) These amounts reflect total consideration paid by securityholders and
do not reflect net amounts received by the Company.
DIVIDEND POLICY
The Company has never paid or declared any cash dividends on the
Common Stock and does not intend to pay cash dividends in the foreseeable
future. It is the current policy of the Company's Board of Directors to retain
any earnings to finance the operations of the Company's business.
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the
Company at December 31, 1996, and (ii) the pro forma capitalization of the
Company as adjusted to give effect to the sale of the 1,000,000 shares of
Common Stock and 1,000,000 Warrants offered hereby (assuming no exercise of the
Underwriter's over-allotment option) based on an assumed initial public
offering price of $8.00 per share and the application of the net proceeds
therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
December 31, 1996 (Unaudited)
-----------------------------
Pro Forma
Actual as Adjusted
----------- -----------
<S> <C> <C>
Short-term debt (line of credit and current portion of
long-term debt) ................................................... $ 440,000 $ 204,000
=========== ===========
Long-term debt, net of current portion ............................... $ 1,329,000 $ 1,329,000
----------- -----------
Shareholders' equity:
Preferred Stock, $0.01 par value; 5,000,000 shares authorized;
none issued and outstanding ..................................... -- --
Common Stock, $0.01 par value; 10,000,000 shares authorized;
1,600,250 issued and outstanding, actual; 2,600,250 issued
and outstanding, pro forma, as adjusted (1) ..................... 16,000 26,000
Additional paid-in capital ........................................ 1,701,000 8,441,000
Accumulated deficit ............................................... (488,000) (488,000)
----------- -----------
Total shareholders' equity ........................................... 1,229,000 7,979,000
----------- -----------
Total capitalization ................................................. $ 2,558,000 $ 9,308,000
=========== ===========
</TABLE>
- --------------
(1) Excludes 150,000 shares reserved for issuance under the Company's 1997
Stock Option Plan and shares of Common Stock issuable upon the
exercise of (i) the 1,000,000 Warrants offered hereby; (ii) the
Representative's Warrants and Underlying Warrants; (iii) outstanding
warrants to purchase up to 280,000 shares of Common Stock; (iv) the
Underwriters' over-allotment option; and (v) outstanding promissory
notes that are convertible or exchangeable for up to 280,200 shares of
Common Stock, as of December 31, 1996. See "Description of
Securities" and "Underwriting."
16
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company, through its three operating divisions, offers a broad
range of services to the aviation industry. The Company ultimately plans to
capture a larger market share of the services being outsourced by the airline
and corporate aircraft industry, including but not limited to, painting airline
and corporate aircraft, corrosion cleaning, ground handling services, light
catering, fueling, airport security and passenger service. The Company plans
to grow through mergers and acquisitions and internal growth.
On March 1, 1996, in connection with the Company's acquisition of
Pride, the Company paid $486,000 in cash and issued $857,000 in 10% five-year
Convertible Notes and 100,250 shares of Common Stock. Because the transaction
was accounted for as a purchase, the results of operations of Pride are
included in the accompanying financial statements beginning on the March 1,
1996 acquisition date. See "Pro Forma Financial Data" for summary pro forma
financial results assuming Pride was part of the Company's operations beginning
October 1, 1995. Management believes that the combination of the Company's
experienced management team with Pride, its existing customer base, its
reputation for quality, and its facilities capacity creates a company
recognized as a leader in stripping and painting aircraft.
SEASONALITY AND VARIABILITY OF RESULTS
The Company's Overhaul and Service Division experiences significant
seasonality and quarter-to-quarter variability in its stripping and painting
operations. The annual operating cycle generally reflects escalating strip and
paint revenues in the Company's third and fourth fiscal quarters and slower
sales in the Company's first and second fiscal quarters. The Company's
painting revenues are adversely affected during the airlines' peak traffic
seasons of the summer months and the November and December holidays. Currently,
a significant percentage of the Company's revenue is generated by the Overhaul
and Service Division. Management, therefore, is required to plan cash flow
accordingly.
RESULTS OF OPERATIONS
The following table sets forth a summary of changes in the major
categories, presented by division, of revenues, costs of goods sold and
operating expenses from each of the previous period's results. These
historical results are not necessarily indicative of results to be expected for
any future period.
<TABLE>
<CAPTION>
Six Months Ended
Nine Months Year December 31,
Ended Ended --------------------------
June 30, 1996 September 30, 1995 1996 1995
------------- ------------------ ----------- -----------
<S> <C> <C> <C> <C>
OVERHAUL & SERVICE DIVISION(1):
Net revenues $ 3,395,000 $ 1,766,000 $ 3,548,000 $ 630,000
Cost of revenue (2,479,000) (1,061,000) (2,524,000) (473,000)
Operating and other expenses(4) (622,000) (211,000) (1,097,000) (137,000)
Interest income 2,000 0 0 0
Interest expense (39,000) (20,000) (34,000) (16,000)
----------- ----------- ----------- -----------
Pre-tax income (loss) $ 257,000 $ 474,000 $ (107,000) $ 4,000
=========== =========== =========== ===========
GROUND HANDLING & SERVICES
DIVISION(2):
Net revenues $ 486,000 $ 767,000 $ 441,000 $ 297,000
Cost of revenue (359,000) (356,000) (237,000) (182,000)
Operating and other expenses (141,000) (152,000) (132,000) (75,000)
Interest income 0 0 0 0
Interest expense (1,000) 0 0 0
----------- ----------- ----------- -----------
Pre-tax income (loss) $ (15,000) $ 259,000 $ 72,000 $ 40,000
=========== =========== =========== ===========
</TABLE>
17
<PAGE> 29
<TABLE>
<CAPTION> Six Months Ended
Nine Months Year December 31,
Ended Ended ---------------------------
June 30, 1996 September 30, 1995 1996 1995
------------- ------------------ ---------- --------------
<S> <C> <C> <C> <C>
FBO OPERATIONS & AIRPORT
MANAGEMENT(3):
Net revenues See (3) below See (3) below $ 238,000 See (3)
Cost of revenue (235,000) below
Operating and other expenses (78,000)
Interest income 0
Interest expense (loss) 0
----------
Pre-tax income (loss) $ (75,000)
==========
AVIATION GROUP - CORPORATE
OVERHEAD(5):
Operating and other expenses $ (143,000) $ (203,000) $ (195,000) $(90,000)
Interest expense (31,000) 0 (40,000) 0
----------- ----------- ---------- --------
Pre-tax income (loss) $ (174,000) $ (203,000) $ (235,000) $(90,000)
=========== =========== ========== ========
TOTAL COMPANY:
Net revenues $ 3,881,000 $ 2,533,000 $4,227,000 $927,000
Cost of revenue (2,838,000) (1,417,000) (2,996,000) (655,000)
Operating and other expenses (906,000) (566,000) (1,502,000) (302,000)
Interest income 2,000 0 0 0
Interest expense (71,000) (20,000) $ (74,000) (16,000)
----------- ----------- ---------- --------
Pre-tax income (loss) $ 68,000 $ 530,000 $ (345,000) $(46,000)
=========== =========== ========== ========
</TABLE>
- --------------
(1) Overhaul & Service Division includes the operating results of TriStar
Paint only for the year ended September 30, 1995, and the six months
ended December 31, 1995. The Company's acquisition of Pride occurred
on March 1, 1996. Accordingly, both TriStar Paint and Pride operating
results are included for the nine months ended June 30, 1996
(including Pride operating results from March 1, 1996 through June 30,
1996), and the six months ended December 31, 1996.
(2) Ground Handling & Services Division represent the operating results
for all periods summarized of Airline Services, the Company's sole
existing subsidiary in this division.
(3) The Company's FBO Operations & Airport Management division was started
and began operations in July 1996. Accordingly, operating results for
this division are included herein for the six months ended December
31, 1996 only.
(4) Includes goodwill and other related amortization expenses of $85,000
and $118,000 associated with the acquisition of Pride for the nine
months ended June 30, 1996 and the six months ended December 31, 1996,
respectively.
(5) Includes operating expenses of the executive officers of the Company
and other indirect expenses not directly attributable to the
operations of the divisions.
Overhaul & Service Division
Net revenues consist primarily of gross revenues from stripping and
painting and other aircraft coating services to major passenger and freight
airlines and corporate aircraft. The Company also contracts with various heavy
maintenance bases throughout the United States to provide corrosion prevention
programs and light maintenance for aircraft undergoing heavy maintenance work
at these bases. Costs of revenues consist largely of direct and indirect
labor, direct material and supplies, insurance and other indirect costs
applicable to the completion of each contract. Operating expenses consist of
18
<PAGE> 30
all general and administrative and operating costs not included in costs of
sales, including but not limited to facilities rent, indirect labor and other
overhaul costs.
This division of the Company has two locations, one at Acadiana
Regional Airport in New Iberia, Louisiana (Pride) and a second facility at
Redbird Airport in Dallas, Texas (TriStar Paint).
Ground Handling & Service Division
Net revenues consist primarily of gross revenues from a variety of
support services including aircraft interior cleaning, exterior washes,
lavatory and water services and light catering. Costs of revenues consist
largely of direct and indirect labor, direct material and supplies, and other
indirect costs. Operating expenses consist of all general and administrative
and operating costs not included in costs of sales.
Airline Services has had operations at Dallas-Fort Worth International
Airport since 1990, Dallas Love Field airport since 1986, San Francisco
International Airport since 1995 and Gulfport Biloxi Regional Airport since
1994. Additionally, the Company intends to begin operations in Los Angeles
International Airport ("LAX") in April 1997.
FBO Operations & Airport Management
The Company commenced its FBO operations in July 1996, upon the
commencement of business at its initial FBO site located at Redbird Airport in
Dallas, Texas. This division generates revenues from the sale of aviation fuel
and other services provided to general aviation customers located at the
Redbird Airport facility. Costs associated with this activity include
primarily fuel, facility rent, and direct labor.
Aviation Group - Corporate Overhead
Operating expenses consist of all general and administrative and
operating costs to provide management to the Company's divisions and to seek
acquisition targets, not directly attributable to the divisions' operations.
SIX MONTHS ENDED DECEMBER 31, 1996 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1995
The Company's net revenue increased by $3,300,000, or 356%, for the
six months ended December 31, 1996 compared to the six months ended December
31, 1995. This increase in revenue resulted primarily from the acquisition of
Pride, which contributed net revenue totaling $3,294,000 for 1996 compared to
$0 for 1995.
Revenues from the Ground Handling & Services Division increased 49% to
$441,000 from $296,000 for the comparable six months periods ended December 31,
1996 and 1995. This increase is attributable to increases in business with
existing customers and the addition of additional customers at the airports
served by the Company. No growth during these periods resulted from the
addition of new airport locations.
In July 1996, the Company began its FBO Operations with the opening of
its initial location at the Redbird Airport in Dallas, Texas. This facility
generates its revenues from the sale of aviation fuel and other general
services provided to general aviation customers based at, and flying into, the
Redbird Airport. Since inception, the Company has adjusted its fuel sales
prices to reflect increases and decreases of fuel prices, which represents its
largest operating cost. Competitive factors could, however, limit the
Company's ability to pass on significant fuel price increases, should such
increases occur. This operation continues in the start-up phase, incurring
costs implemented in anticipation of future internal and external growth. Such
expenditures should dissipate in the future.
The Company's costs of sales increased by $2,341,000 to $2,996,000 for
the six months ended December 31, 1996 from $655,000 for the six months ended
December 31, 1995. This increase in costs of sales resulted primarily from the
acquisition of Pride.
The Company's operating expenses increased by $1,200,000 from
$1,502,000 for the six months ended December 31, 1996 compared to $302,000 for
the six months ended December 31, 1995. This increase in operating expenses
resulted primarily from the acquisition of Pride and management's merger and
acquisition search program. The
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<PAGE> 31
Company has postured itself with management, consultants, and systems to expand
internally and through acquisitions. The operating expenses generated by these
efforts are reflected in Corporate Overhead.
The Company's interest expense has increased primarily from the
acquisition of Pride. For the six months ended December 31, 1996, interest
expense increased by $58,000 from debt assumed from Pride and from convertible
notes executed to acquire the Pride stock.
NINE MONTH PERIOD ENDED JUNE 30, 1996 COMPARED TO THE FISCAL YEAR ENDED
SEPTEMBER 30, 1995
The Company changed its fiscal year end from September 30 to June 30
during 1996.
The Company purchased the stock of Pride on March 1, 1996, in a
transaction accounted for as a purchase. The results of operations of Pride
are included in the accompanying financial statements beginning March 1, 1996,
and accordingly, include only four months of operations for the Company's nine
month period ended June 30, 1996. Therefore, when comparing fiscal years 1996
and 1995, the financial information includes different operating entities.
The Company's net revenue increased by $1,348,000, or 153%, for the
nine months ended June 30, 1996 compared to the year ended September 30, 1995.
This increase in revenue resulted primarily from the acquisition of Pride,
which contributed net revenue totaling $2,520,000 for 1996 compared to $0 for
1995.
Revenues from Ground Handling for the nine month period ending June
30, 1996 are comparable on a pro-rated basis to the twelve month period ending
September 30, 1995. Gross margins decreased during the period, however, to 26%
in fiscal 1996 from 53% in fiscal 1995. This decrease is attributable to the
loss of a significant charter airline customer during the period whose contract
generated significant gross profits for Airline Services during the fiscal 1995
year. No revenue or operating cost changes during these periods were the
result of adding new airport locations.
The Company's costs of revenues increased by $1,421,000, to $2,838,000
for the nine months ended June 30, 1996 from $1,417,000 for the year ended
September 30, 1995. This increase in costs of revenues resulted primarily from
the acquisition of Pride. Cost of revenues also increased as a percentage,
relative to net revenue, to 73%, for the fiscal year ended June 30, 1996 from
56% for the fiscal year ended September 30, 1995. Pride, which has a multi-
year paint contract with United Airlines, earns lower gross margins that
TriStar Paint, which performs its services on a higher-margin, less predictable
basis.
The Company's operating expenses increased by $340,000 to $906,000 for
the nine months ended June 30, 1996 from $566,000 for the year ended September
30, 1995. This increase in operating expenses resulted primarily from the
acquisition of Pride. The operating expenses generated by Aviation Group are
largely reflective of its acquisition efforts.
The Company's interest expense has increased primarily from the
acquisition of Pride. Interest expense increased by $51,000 from debt assumed
from Pride and from convertible notes executed to acquire the Pride stock.
FINANCIAL CONDITION AND LIQUIDITY
Prior to January 1996, the Company financed its operations and capital
expenditures from a combination of cash generated from operations, bank loans,
leases and invested capital from the sole shareholder. In January 1996, the
Company commenced a private placement, generating net proceeds approximating
$1.2 million, to acquire the stock of Pride and for general working capital
purposes.
Exclusive of the Pride acquisition, the Company made capital
expenditures during the fiscal nine months ended June 30, 1996 and six months
ended December 31, 1996 of $12,000 and $248,000, respectively. The majority of
capital expenditures incurred during the aforementioned periods relate to
equipment purchases to enhance the existing operating facilities and
computerized systems.
As part of its growth strategy, the Company intends to pursue
acquisitions of related aviation businesses. Management believes financing
for such acquisitions will be provided from operations, bank financing and
through additional security offerings. The Company is currently evaluating a
number of acquisition opportunities and is at varying
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<PAGE> 32
stages of negotiation with respect to such acquisitions. No commitments or
binding agreements have been entered into to date and accordingly no assurance
can be given that any of the acquisitions currently being considered will be
consummated.
In February 1997, the Company completed a private offering of $500,000
of its 10% Bridge Note. The proceeds of this offering were used to fund the
costs of the Company's initial public offering, and for general working capital
and operating purposes.
The Company intends to raise net proceeds from this offering
approximating $6.8 million. The proceeds will be used to repay the 10% Bridge
Notes, certain bank indebtedness, capital expenditures for existing operations,
facilities improvements, acquisition of other aviation services companies and
general working capital for operations and other corporate purposes. The
Company's capital structure will be improved significantly as a result of
completing this offering. See "Use of Proceeds" and "Capitalization".
Pursuant to the existing United Airlines contract, the Company has a
commitment for a total of $18 million of scheduled aircraft painting and
stripping work through 1999. This commitment is subject to the risks outlined
in "Risk Factors--Dependence on One Customer."
The Company believes that funds available under its existing credit
line, bank financing, together with cash generated from operations will be
adequate for its anticipated cash needs for, at a minimum, the upcoming fiscal
year ended. Management feels the proceeds from the offering will allow it to
experience accelerated growth both internally and through well planned
acquisitions of aviation services companies.
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<PAGE> 33
PRO FORMA FINANCIAL DATA
The unaudited pro forma condensed consolidated statement of income for
the Company set forth below for the nine months ended June 30, 1996 has been
derived from the Company's historical consolidated statement of income for the
nine months ended June 30, 1996 and from the unaudited statement of income for
Pride for the five months ended February 29, 1996, and gives effect to the
acquisition of Pride as if it had occurred on October 1, 1995.
The pro forma financial data is provided for comparative purposes only
and does not purport to be indicative of the results which actually would have
been obtained if the Pride acquisition had been effected on October 1, 1995 or
the results that may be obtained in the future. The information provided in
the pro forma financial data is qualified in its entirety by, and should be
read in conjunction with, the audited and unaudited consolidated financial
statements for the Company and related notes thereto.
<TABLE>
<CAPTION>
Pride Aviation
Operations
Nine Months Five Months Nine Months
Ended Ended Ended
June 30, 1996 February 29, June 30, 1996
Actual 1996 Adjustments Proforma
------------- ------------ ----------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenue $3,881,000 $2,874,000 $6,755,000
Cost of revenue 2,838,000 2,117,000 4,955,000
---------- ---------- ----------
Gross profit 1,043,000 757,000 1,800,000
---------- ---------- ----------
General and administrative expenses 752,000 466,000 1,218,000
Depreciation and amortization 154,000 60,000 $ 85,000 (1) 299,000
---------- ---------- --------- ----------
906,000 526,000 85,000 1,517,000
---------- ---------- --------- ----------
Income from operations 137,000 231,000 (85,000) 283,000
---------- ---------- --------- ----------
Other income (expenses)
Interest income 2,000 -- -- 2,000
Interest expense (71,000) (58,000) (36,000) (2) (165,000)
Other, net -- 22,000 -- 22,000
---------- ---------- --------- ----------
(69,000) (36,000) (36,000) (141,000)
---------- ---------- --------- ----------
Income before provision for income taxes 68,000 195,000 (121,000) 142,000
Provision for income taxes (34,000) -- (36,000) (70,000)
---------- ---------- --------- ----------
Net income $ 34,000 $ 195,000 $(157,000) $ 72,000
========== ========== ========= ==========
Pro forma net income (loss) per
common and common equivalent
share (unaudited) 0.02 0.05
========== ==========
Pro forma weighted average common
and common equivalent shares
outstanding (unaudited) 1,605,156 1,605,156
========== ==========
</TABLE>
- --------------
(1) Represents additional amortization of goodwill and depreciation
expense from the Pride acquisition.
(2) Represents additional interest on convertible notes issued in
connection with the Pride acquisition.
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<PAGE> 34
BUSINESS
GENERAL
The mission of Aviation Group, Inc., a Texas corporation (the
"Company"), is to be a premier provider of services and products to airline
companies and other aviation firms. Although its primary market is the United
States, the Company ultimately aspires to compete in the global marketplace.
In addition to growth of its existing businesses, the Company seeks to grow via
the acquisition of other aviation service businesses that complement and
strengthen the Company's existing operations.
The Company was organized in December 1995 to consolidate the
ownership of Tri-Star Aircraft Services, Inc. ("TriStar Paint"), Tri-Star
Airline Services, Inc. ("Airline Services") and Pride Aviation, Inc. ("Pride").
At that time, the Company acquired 99% of the outstanding shares in TriStar
Paint and Airline Services in exchange for the issuance of 1,000,000 shares of
Common Stock. On March 1, 1996, in connection with the Company's acquisition
of Pride, the Company paid $486,000 cash and issued 10%, five-year Convertible
Notes in the aggregate principal amount of $857,000 and 100,250 shares of
Common Stock.
The Company has three lines of business. The Overhaul & Service
Division, through TriStar Paint and Pride, provides painting and paint
stripping services for commercial and freight aircraft at their facilities
located in Dallas, Texas and New Iberia, Louisiana. Pride's primary customer
is United Airlines, Inc. TriStar Paint provides paint services on a
plane-by-plane bid basis to a variety of customers. The Company's Ground
Handling & Services Division, through Airline Services, provides aircraft
ground handling and light catering services to a variety of passenger and
freight airlines at various airports, including DFW International and San
Francisco International, located in the continental United States for customers
such as United Parcel Service, Southwest Airlines, United Airlines, Federal
Express and Northwest Airlines, among others. In July 1996, the Company began
to operate a third business segment, its FBO Operations & Airport Management
Division. The Company's first fixed-base-operation, located at Redbird Airport
in Dallas, Texas, provides fuel and light maintenance services to general
aviation, corporate and light freight aircraft customers. There are presently
over 1,700 operators of fixed base operating stations ("FBO's") serving the
United States. The Company believes that acquiring or otherwise operating such
businesses in smaller, second-tier airports located near major urban areas
across the United States provides a significant growth opportunity.
The Company believes that airlines will increase the outsourcing of
their maintenance and service requirements to third party vendors in the
future. According to U.S. Department of Transportation statistics, the nine
major U.S. airlines expended 20% of their maintenance budget with outsourcing
vendors in 1994. There are over 10,000 maintenance and service vendors
worldwide in the aviation industry. The Company believes that the aviation
service industry is highly fragmented. It also believes that its existing
operations, enhanced by additional growth and acquisitions of complementary
businesses, will enable it to provide quality customer service with financial,
insurance, and other operating economies-of-scale that major customers
increasingly require. The Company does not presently intend to operate as a
commercial airline or as a provider of major engine or airframe overhaul
services.
The principal executive offices of the Company are located at 700
North Pearl Street, Suite 2170, Dallas, Texas 75201, telephone number (214)
922-8100.
INDUSTRY OVERVIEW
The airline industry is currently experiencing revenue growth along
with increased profitability. Several new airlines have commenced operation in
this expanding market. These airlines constitute potential customers for the
Company's services. Because of the high internal overheads and unionization of
airline labor forces, many airlines have found that it is more cost efficient
to engage independent contractors to perform maintenance, painting and ground
handling services. According to U.S. Department of Transportation statistics,
the nine major U.S. airlines expended 20% of their maintenance budget with
outsourcing vendors in 1994. Management expects the trend toward outsourcing
these services to continue in the airline industry.
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<PAGE> 35
The Company believes that the aviation service industry is highly
fragmented. There are presently over 1,700 operators of fixed base operating
stations ("FBO's") serving the United States. There are over 10,000 maintenance
and service vendors worldwide in the aviation industry.
OVERHAUL & SERVICE DIVISION
The Overhaul & Service Division, which includes Pride and TriStar
Paint, provides painting, paint stripping, and other aircraft coating services
to major passenger and freight airlines. The Company paints few corporate
aircraft and at present has no military aircraft contracts. This division's
operations include aircraft stripping and painting services, light aircraft
maintenance, and corrosion preventive cleaning programs.
The Company utilizes electrostatic paint equipment in its aircraft
painting activities and is a leader in the development of both high solids
paint and non-methylene chloride stripping technology. Pride conducted a high
solids paint test program for Continental Airlines in February 1992 with most
major aviation paint manufacturers participating. Since 1993, most of the
Company's painting has been performed with high solids compliant coatings.
Beginning in late 1993, most stripping performed for major airlines by
the Company was with compliant non-methylene chloride material. Testing of a
non-acid stripper is ongoing for United Airlines for use on its aircraft.
Currently, the Company is capable of providing stripping and painting services
for most narrow-bodied aircraft in its Dallas, Texas facilities, including, but
not limited to, Boeing 727s, Boeing 737s and McDonnell Douglas DC-9s and
MD-80s. The three New Iberia, Louisiana hangar facilities are capable of
housing all aircraft except Boeing 747s.
Pride. Pride was incorporated in the State of Oklahoma in 1990. The
administrative offices along with its aircraft painting facilities are located
in New Iberia, Louisiana. In September 1990, Pride obtained its first
certificate from the Federal Aviation Administration ("FAA") to operate an
approved repair station at its facilities in New Iberia, Louisiana. Since that
time, the certificate has been expanded to permit Pride to conduct certain FAA
classes of inspections and light maintenance for a variety of jet aircraft.
Pride is also certified to perform structural repairs on certain equipment in a
variety of jet aircraft. Pride's painting facilities located in New Iberia,
Louisiana can house all narrow-bodied jets. Of a total of three hangars, one
hangar has been built to accommodate wide-bodied jets such as the Boeing 767
and McDonnell Douglas DC-10 aircraft.
The Company's primary customer, United Airlines, Inc. ("United"),
accounts for approximately 87% of the Overhaul & Service Division revenues for
the six months ended December 31, 1996. In 1994, Pride entered into a
five-year Services Agreement (the "Services Agreement") with United which has
been amended several times and currently will expire in 1999 but is cancellable
prior to that date by United upon 90 days written notice. Under the Services
Agreement, Pride provides paint stripping and painting services for jet
aircraft owned or operated by United. United provides the specifications,
designs, stencils, decals and marks for the painting. The Services Agreement
contains a warranty by Pride to United that its services meet United's
specifications and are free from defects in workmanship. Pride must reimburse
United for costs of repair and certain expenses in connection with this
warranty. Pride must perform its services for United at its New Iberia,
Louisiana facilities. United schedules the jet aircraft to be painted by Pride
each calendar year by December 31 of the prior year. In addition to painting,
upon request from United, Pride will repair parts and components identified by
Pride as needing repair.
The Services Agreement contains fixed prices for each type of aircraft
painted by Pride. The prices are adjusted annually based on the Consumer Price
Index. The Services Agreement currently provides that Pride will paint Boeing
727, Boeing 737, Boeing 757, Boeing 767 and McDonnell Douglas DC-10 aircraft.
A total of 588 aircraft are scheduled to be painted under the Services
Agreement. Through December 31, 1996, Pride has completed 215 of the aircraft.
TriStar Paint. TriStar Paint's business began in March 1990, and
TriStar Paint was incorporated in the State of Texas during 1994. The Company
acquired all of the stock in TriStar Paint in December 1995. TriStar Paint is
in the business of providing stripping and painting services for airlines,
aircraft lessors, and aircraft brokers. TriStar Paint's painting facilities
located at Redbird Airport in Dallas, Texas can house most narrow-bodied jets
including, but not limited to, Boeing 727s and 737s and McDonnell Douglas DC-9s
and MD 80s.
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<PAGE> 36
TriStar Paint received its initial certificate from the FAA to operate
an approved repair station in February 1995. The certificate was subsequently
expanded to permit TriStar Paint to provide stripping and painting services to
a variety of aircraft and to provide certain FAA classes of inspections and
light maintenance on two types of aircraft.
TriStar Paint provides its painting and other services on a
plane-by-plane basis to its customers, versus Pride's long-term contract
arrangement with United. The Company believes that this arrangement gives it
flexibility to meet customer needs. TriStar Paint has provided stripping and
painting services, on a plane-by-plane bid basis, to Dee Howard Company,
Southwest Airlines, Northwest Airlines, TransWorld Airlines, Emery Air Freight,
Roadway Global Air and Zantop International Airlines. In addition, Dee Howard
Company and Zantop International Airlines provide heavy maintenance services to
airline companies, and TriStar Paint acts as a subcontractor in providing its
services to these customers.
TriStar Paint is also capable and qualified to perform certain
structural cleaning and anticorrosive maintenance programs, which involve
cleaning inside the skin of the aircraft. Years of particle accumulation are
removed and a preventative spray is applied to reduce the amount of future
corrosion and particle accumulation. Such services have historically been
provided on a subcontract basis to airline customers of major maintenance
facilities.
TriStar Paint bids against its competitors in providing painting and
cleaning services to its maintenance and airline customers. In addition to
providing stripping and painting services at its Redbird Airport facilities,
TriStar Paint will send its equipment and personnel to provide onsite services
at the facilities of maintenance companies. These subcontract services have
been provided at airport facilities in San Antonio, Texas, Macon, Georgia and
Alexandria, Louisiana.
GROUND HANDLING & SERVICE DIVISION
Airline Services. Through Airline Services, the Company engages in
the cleaning, handling, and light catering of aircraft in various airports
located within the continental United States. Airline Services' predecessor
operations began in December 1986. It was incorporated in the State of Texas
in August 1994. The Company acquired all of the stock of Airline Services in
December 1995.
Airline Services provides its customers with a variety of support
services including aircraft interior cleaning, exterior washes, lavatory/water
services, and light catering. Airline Services presently operates at the
following airports: Dallas-Fort Worth International, Dallas Love Field, San
Francisco International, Kansas City International, and Gulfport-Biloxi
Regional. The Company intends to begin operations in Los Angeles International
Airport in April 1997. Airline Services currently provides some or all of
these services at different locations for United Airlines, United Parcel
Service, Sunjet, Aviation Services International, Inc. on behalf of Allegro
Airlines, World Technology Services, Reno Air, Sun Country Airlines, Northwest
Airlines, Federal Express and other customers.
Interior cleaning is performed between flights at the airport. This
involves cleaning the inside of the cockpit, cabin and galleys, servicing the
lavatories, fresh water facilities and stocking the aircraft with magazines,
air sickness bags and emergency cards. All pricing for this service is based on
airline specifications. Exterior cleaning involves cleaning the exterior of
the aircraft during nighttime layovers. Typically, an aircraft's exterior will
be cleaned once during a two or three week cycle. Airline Services uses
specially designed equipment and pressure sprayers to clean the exteriors of
the aircraft. Similar to interior cleaning, all pricing for this service is
based on airline specifications. Airline Services presently has light catering
operations in Gulfport, Mississippi. Light catering consists of stocking soft
drinks, peanuts, pretzels, coffee, tea, beer, wine, liquor, cold sandwiches and
serving supplies on the aircraft. Pricing will depend on the type and quantity
of the products supplied.
General. The Company believes that its flexible workforce provides
customers with a quality, price competitive outsourcing service. The Company
obtains its contracts with its customers generally by competitive bid. The
Ground Handling & Service Division actively pursues new customers and
additional work from existing customers at those airports where it already has
a presence. In addition, the Company pursues work opportunities at other
airports, and with other airline customers, as such opportunities arise.
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<PAGE> 37
FBO & AIRPORT MANAGEMENT DIVISION
In July 1996, the Company began to operate a third business segment,
its FBO & Airport Management Division. The Company's first fixed-base
operation, located at Redbird Airport in Dallas, Texas, provides fuel and light
maintenance services to general aviation and corporate aircraft at this
location.
The Company believes that this division, which serves corporate and
other general aviation customers, may offset its current dependence on major
airlines for its painting, ground handling, and other services. The Company's
fixed base operation in Dallas, Texas is located at a general service airport
located within a ten minute drive of the Dallas, Texas central business
district. There are over 500 acres of land adjacent to this airport for
aviation, industrial, and distribution development, and the Company believes
that, as such development progresses, its Redbird FBO operation will benefit
from this growth by gaining additional aviation fuel and light service
customers.
The Company believes that there are significant opportunities for
growth, internally and via acquisition, in the FBO & Airport Management
Division. The Company recently hired additional management and executive
personnel with specific expertise in the FBO management and acquisition
business to assist it in the execution of its business strategy in this
division.
ACQUISITIONS OF COMPLEMENTARY BUSINESSES
A key element of the Company's strategy involves growth through
acquisitions of other companies, assets or product or service lines that would
complement or expand the Company's existing businesses. There are over 10,000
maintenance and service vendors worldwide in the aviation industry, and the
Company believes that the aviation service industry is highly fragmented. The
Company believes that acquisitions will enable it to leverage its fixed costs
of operations and further expand the products and services which it can offer
to its customers. The Company is currently evaluating a number of acquisition
opportunities and is at varying stages of negotiation with respect to such
acquisitions. No commitments or binding agreements have been entered into to
date and accordingly no assurance can be given that any of the acquisitions
currently being considered will be consummated.
FACILITIES
Dallas Facilities. TriStar Paint leases an aircraft maintenance
hangar at Redbird Airport in Dallas, Texas at an annual rental rate of $42,000.
This single bay, narrow body hangar measures 160 feet by 140 feet and allows a
tail clearance of 38 feet. It has additional office space.
The Company's Redbird FBO facility consists of approximately 4,000
square feet of space for pilots and other customers and adjacent ramp space for
the temporary parking and fueling of aircraft by Company personnel. The
facility is presently under lease for $32,000 per year on a 15-year lease.
The Redbird Airport has two runways, one approximately 6,450 feet by
150 feet and the other 3,800 feet by 150 feet. The long runway is load rated
for narrow body, military and commercial aircraft. Normal hours of operation
are 8:00 a.m. to 7:00 p.m., seven days a week.
New Iberia Facilities. Pride leases from the Iberia Parish Airport
Authority (the "Authority") four aircraft hangars and office space at Acadiana
Regional Airport in New Iberia, Louisiana. The Acadiana Regional Airport has a
200 foot by 8002 foot runway, load rated for all military and commercial
aircraft. Normal hours of operation for the tower are from 7:00 a.m. to 9:00
p.m., seven days a week, with call out service available from 9:00 p.m. to 7:00
a.m.
Pride leases aircraft maintenance Hangar 88 together with adjoining
corporate offices for an annual rental of $100,000. The initial term of this
lease expires on August 1, 2000. These facilities were constructed prior to
1960. This lease also covers a 3.369 acre automobile parking area. Hangar 88
is 160 feet wide by 185 feet deep with 40 foot hangar doors on both the east
and west side. A taxiway leading to both sides of the hangar allows this
building to house two narrow body aircraft at one time.
On land adjacent to the Hangar 88 complex, construction of a new
aircraft maintenance Hangar 88-C was completed in 1995 using $2,900,000 of bond
funds provided by the State of Louisiana. It is 185 feet wide by 223 feet
deep,
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<PAGE> 38
with 40 foot hangar doors and a tail door which is an additional 20 feet in
height, and is capable of housing wide-bodied McDonnell Douglas DC-10 aircraft.
Hangar 88-C is leased by Pride for an initial term expiring October 1, 2033 at
an annual rental of $158,000. The Hangar 88 and 88-C complex constitute
Pride's major facilities at the Acadiana Regional Airport.
Pride also leases a smaller aircraft maintenance hangar for an annual
rental of $60,000. The initial term of the lease expires on February 1, 2001.
This hangar is used by Pride to paint Boeing 737 aircraft, which may be
completely enclosed within the hangar while being painted.
Finally, Pride leases another small aircraft maintenance hangar for
annual rental of $19,000. The initial term of this lease expires on February
1, 2003. Pride uses this hangar for painting of commuter airplanes and other
small aircraft.
Each of the four leases allows the Authority and Pride to agree to
extensions and requires rental escalations of 10% every five years. The leases
also require Pride to pay fuel fees of 16% of Pride's cost for aircraft fuel
and lubricating oils. Pride is usually able to charge these fuel fees to its
customers.
Pride has commenced discussions with the Authority for purposes of
obtaining funds from the State of Louisiana to build a larger hangar for the
housing and maintenance of Boeing 747 aircraft. The Iberia Parish is
interested in expanding the current facilities at the airport to create
additional employment in the Parish. There are numerous site locations
available on the airport grounds for future expansion. The State of Louisiana
has appropriated $2.7 million to pay part of the cost of construction of a
hangar at Acadiana Regional Airport if Company management elects to proceed
with this project.
Dallas Office Space. The Company also occupies 3,500 square feet of
office space at 700 North Pearl Street, Suite 2170, Dallas, Texas, on a
month-to-month basis.
ADVERTISING AND MARKETING
To date, the Company has generated most of its revenues from direct
sales and customer referrals. In the future, the Company also intends to
utilize direct mailings, direct sales contacts and trade journal advertisements
as a secondary source of advertising and public relations. Notwithstanding the
highly competitive nature of the industry, management of the Company believes
that additional customers may be obtained by the Company.
CUSTOMERS
TriStar Paint and Pride provide stripping and painting services to
major carriers in the airline industry. Pride's past and current customers
include United Airlines, Continental Airlines, Northwest Airlines and Piedmont
Airlines. TriStar Paint's past and current customers include Express One,
Roadway Global Air, Southwest Airlines and TransWorld Airlines. For the nine
months ended December 31, 1996, United accounted for approximately 73% of the
total revenues of the Company.
The Company has also performed stripping and painting services and
corrosion preventive cleaning programs as a subcontractor in major heavy
maintenance facilities at several locations in the United States. Customers
include Dee Howard Company in San Antonio, Texas, and Zantop International
Airlines, Inc. in Macon, Georgia.
Airline Services performs ground handling services and light catering
at several airports in the United States. Its primary customers consist of
United Airlines, Emery Air Freight, Sunjet, Northwest Airlines, Allegro
Airlines, Airborne Express, Southwest Airlines, UPS, Federal Express and
Aviation Service International, Inc. For the six months ended December 31,
1996, the ground handling services and light catering accounted for
approximately 10.5% of the total revenues of the Company.
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<PAGE> 39
REGULATION
Environmental Regulation. The Resource Conservation and Recovery Act
of 1976, as amended ("RCRA"), is a federal statute providing a comprehensive
program for regulating the generation, treatment, storage and disposal of
hazardous waste. Federal regulations adopted by the United States Environmental
Protection Agency ("EPA") pursuant to RCRA govern waste handling activities
involving substances that are either listed as hazardous or have certain
specified hazardous characteristics (e.g., corrosive, ignitable). Under RCRA,
liability and stringent operating requirements are imposed on businesses that
generate hazardous waste.
Federal and state environmental laws include statutes intended to
allocate the cost of remedying past contamination among specifically identified
parties. The Comprehensive Environmental Response, Compensation and Liability
Act as amended ("CERCLA" or "Superfund"), 42 U.S.C. 9601 et. seq., imposes
strict and joint and several liability upon owners or operators of facilities
at, from, or to which a release of hazardous substances has occurred, upon
parties who generated hazardous substances that were released at such
facilities, and upon parties who arranged for the transportation or disposal of
hazardous substances to applicable facilities.
The day-to-day operations of the Company are also subject to
regulation under the Clean Air Act, as amended ("CAA"). In particular, the EPA
and state agencies have promulgated, or are required to promulgate, regulations
which affect or will affect the operations of the Company. These regulations
include New Source Performance Standards ("NSPS") and National Emission
Standards for Hazardous Air Pollutants ("NESHAPs"). NSPS and NESHAP rules may
require additional controls on emissions of certain listed hazardous air
pollutants ("HAPs"). The CAA identifies chemicals that the Company uses and/or
processes, such as methylene chloride, phenol and methyl ethyl ketone, as HAPs
for purposes of regulation. The CAA may also require the Company to maintain
operating permits for its facilities' air emissions. Last, the EPA has
announced plans to impose more stringent standards for ozone and particulate
matter. Regulations promulgated to achieve these standards may require
additional controls on emissions of particulate matter and volatile organic
compounds.
The Company must comply with RCRA, CERCLA, CAA and other federal,
state and local environmental protection laws, and the regulations promulgated
thereunder, in its operations and facilities. These laws and regulations are
particularly applicable to the paints and paint stripping chemicals and
solvents used by the Company in its operations. The Company could be held
liable as a current or former operator for releases of hazardous substances at
its facilities. The Company could also incur liability for cleanup costs at
off-site facilities to which the Company shipped hazardous substances for
treatment, handling, storage, or disposal. However, the Company believes that
its hazardous waste management practices have been and continue to be in
compliance with all applicable environmental laws and regulations which
minimizes the potential for releases of hazardous substances at these
facilities. Management of the Company believes that the Company's operations
and facilities are in material compliance with all federal, state and local
environmental laws and regulations and that the Company's hazardous waste
management practices minimize the potential for release of hazardous substances
into the environment. The Company has not experienced any significant
environmental regulatory problems in the past, and to date, the Company has not
been subject to any significant fines, penalties or other liabilities under
these laws and regulations. However, no assurance can be given that such laws,
regulations or interpretations thereof will not necessitate significant
expenditures by the Company or otherwise have a material adverse impact on the
Company's operations or financial condition in the future.
Aviation Regulation. The FAA regulates all aspects of the airline and
aircraft industries. The Company's subsidiaries have certifications from the
FAA to operate aircraft repair stations. Such certifications are limited as to
the kinds of repair and maintenance activities that may be performed by the
Company's subsidiaries at their certified facilities. The FAA regularly
inspects these facilities for compliance with FAA regulations and guidelines.
Failure to comply with FAA regulations and guidelines could result in a loss of
certification. A loss of certification for a particular facility would prevent
that facility from performing any aircraft repair or maintenance operations.
The Company believes that its subsidiaries are in compliance in all material
respects with the FAA's regulations and guidelines. Nevertheless, no assurance
can be given that such regulations and guidelines or any FAA enforcement
actions may not have a material adverse effect on the Company's operations and
financial condition in the future.
28
<PAGE> 40
EMPLOYEES
Pride generally employs between 160 and 200 employees. Airline
Services and TriStar Paint have an aggregate of approximately 60 employees.
Management believes its employee relations to be excellent. No employees are
covered by collective bargaining agreements. The Company anticipates that it
will hire additional employees in the next 12 months as revenues permit and as
its operations expand.
TRAINING
The Company provides formal classroom training to its employees with
respect to the safe handling of hazardous substances, occupational safety and
health, aircraft maintenance procedures and other safety and operational
procedures that are fundamental to its operations. On-the-job training is also
emphasized to ensure that classroom knowledge is transformed to operational
skills. Much of the Company's training program is mandated by the FAA and
OSHA.
INSURANCE
The Company carries $200,000,000 of insurance for general aviation
liability and $50,000,000 of hangarkeeper insurance, as required by its
customers, and customary coverage for other business insurance. While the
Company believes its insurance is adequate, there can be no assurance that such
coverage will fully protect it against all losses which it might sustain.
Moreover, the Company's insurance for aircraft liability carries a deductible
requiring the Company to pay $25,000 of any loss or damage. The Company is the
beneficiary of a $1,000,000 key man life insurance policy on Mr. Sanders.
FINANCING
On March 1, 1996, in connection with the acquisition of Pride, the
Company issued $857,000 in aggregate principal amount of five year, 10%
Convertible Notes to the beneficial owners of Pride. The notes require
quarterly payments of interest and, commencing April 1, 1998, equal quarterly
installments of principal sufficient to amortize the balance of each note by
March 1, 2001. Holders of the notes may elect at any time to convert the notes
into shares of the Company's Common Stock at a conversion price of $4.50 per
share, subject to adjustment upon certain events. The cash portion of the
consideration paid for Pride was financed through the net proceeds from the
Company's sale of 500,000 shares of its Common Stock at $3.00 per share in a
Regulation D private offering. See "Description of Securities--Shares Eligible
for Future Sale."
At the time of its acquisition by the Company, Pride owed to the
Louisiana Economic Development Corporation (the "LEDC") approximately $508,000.
To obtain the LEDC's consent to the Company's acquisition of Pride, Pride
prepaid $100,000 of the debt using an advance from the net proceeds of the
private offering of the Company's Common Stock. The Company granted to the
LEDC the right to exchange the debt for newly issued shares of the Company's
Common Stock at a rate of $4.50 per share and a security interest in 50.15% of
the outstanding shares of Pride's stock to secure the debt. The remaining
balance of the debt to the LEDC is payable by Pride in equal monthly
installments of $3,800.
The Company's subsidiaries, TriStar Paint and Airline Services, are
guarantors of a $250,000 revolving line of credit owed to Compass Bank (the
"SBA Debt") by The Sanders Companies, Inc. ("Sanders Companies"), the Company's
controlling stockholder. The SBA Debt existed prior to the Company's
organization in December 1995. As of December 31, 1996, a total of $223,000
was owed on the SBA Debt. Repayment of 75% of the SBA Debt is guaranteed by
the Small Business Administration (the "SBA"). At December 31, 1996, all of
the loan proceeds from the SBA Debt had been used for the benefit of the
Company's subsidiaries. The SBA Debt is secured by a pledge of all of the
outstanding stock of The Sanders Companies, Inc., TriStar Paint and Airline
Services and the personal guaranty of Lee Sanders, the Company's President.
Upon consummation of this Offering, the Company will apply the proceeds from
the Offering to payoff the SBA Debt to the extent the proceeds of the SBA Debt
were used by the Company's subsidiaries. It is expected that the guaranties by
TriStar Paint, Airline Services and Mr. Sanders and the pledge of the Company's
stock in TriStar Paint and Airline Services will be released and that any
remaining balance of the SBA Debt will be refinanced by Sanders Companies.
In February 1997, the Company sold $500,000 in aggregate principal
amount of its 10% Bridge Notes. The Bridge Notes are unsecured, bear interest
at the rate of 10% per annum payable quarterly beginning December 31, 1997 and
are subordinated in right of payment to all existing indebtedness of the
Company, including trade debt. The Company used the
29
<PAGE> 41
proceeds from the issuance of the Bridge Notes for general corporate purposes
and to fund the costs of this Offering. The Bridge Notes are due in full on
June 30, 1998 or earlier in certain circumstances, including within five days
following the closing of this Offering. In connection with the full payment of
the Bridge Notes after this Offering, the Company has agreed to issue to the
holders of the Bridge Notes that number of shares of Common Stock equal to the
quotient of $250,000 divided by the initial public offering price.
The Company's hangar facilities are primarily financed on long term
operating leases. The material leases are described above under "Facilities."
LEGAL PROCEEDINGS
The Company is not involved in any material pending legal proceeding
other than ordinary routine litigation considered to be incidental to its
business.
30
<PAGE> 42
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The names, current ages and positions of the executive officers and
directors of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Lee Sanders 36 President, Chief Executive Officer and
Director
Paul Lubomirski 42 President of Pride
Victor Doyle 52 Vice President - Overhaul & Service
Division
Tony Ramsaroop 32 Vice President - Ground Handling &
Services Division
Wallace Congdon 71 Vice President - FBO & Airport
Management Division
Gary Cooper 42 Vice President, Chief Financial Officer
and Treasurer
Charles E. Weed 65 Director
Gordon Whitener 33 Director
Richard Morgan 39 Director
</TABLE>
Directors are elected to hold office until the next annual meeting of
shareholders or until their successors are duly elected and qualified. The
Board of Directors has approved a classification of directors into three
classes pursuant to which the directors would serve for staggered three-year
terms. A special meeting of the Company's shareholders has been called for
late February 1997 to consider approval of the classification. If approved by
the Company's shareholders, the terms of office of Messrs. Morgan, Weed,
Whitener and Sanders as directors would expire at the annual meetings of
shareholders to be held in 1999, 1997, 1998 and 1999, respectively. The
classification of directors may have the effect of delaying, deferring or
preventing a change in control of the Company. Under its agreements with the
Company, the Representative has a right to designate a director to serve on the
Board. Officers serve at the discretion of the Board of Directors. Except for
Mr. Weed and Mr. Whitener, the positions listed above are the principal
occupations for each named individual.
BUSINESS HISTORIES
Lee Sanders has served as the founder, Chief Executive Officer,
President and principal owner of the Company and its predecessors for more
than five years. As a result of his service for the Company and its
predecessors, Mr. Sanders has experience in managing businesses that provide
aircraft painting, aircraft interior modification and airline ground handling
services. He also brings a marketing background from his experiences in
starting and operating private businesses. Mr. Sanders is responsible for
overseeing the Company's marketing efforts, customer relations, production,
finance, acquisitions and overall planning and operations. Mr. Sanders is a
graduate of the University of Tennessee, with a Bachelor of Science in Business
Administration.
Paul Lubomirski was appointed as President of Pride in March 1996 and
has over 20 years of experience with industrial and marine paint applications
and has extensive knowledge of paint systems and electrostatic application
equipment. He has served as an officer and employee of Pride since its
incorporation in 1990. Mr. Lubomirski also brings a solid administrative
background from years of experience in operating private businesses and
organizing and conducting many training seminars. Mr. Lubomirski attended the
University of Hawaii where he majored in mechanical engineering. He directs
the stripping and painting operations of the Company. He has primary
responsibility for the Company's facilities and training programs applicable to
the strip and paint operations.
Victor Doyle was appointed as Vice President of the Company in
December 1996 and has worked in various technical and managerial positions
within the aviation maintenance industry since 1966. He is a trained aviation
mechanic, is FAA licensed in numerous mechanical and inspection specialties,
and has significant expertise in maintenance planning and production. He
attended Parks College, in St. Louis, Missouri, and has previous work
experience with Braniff Airways and Orion Air, Inc. From 1988 to 1992, he was
employed as Regional Maintenance Director for United Parcel Service. From 1992
to 1994, he was a regional Director of Maintenance for Lockheed Aeromod Center,
Inc. in Greenville, South Carolina. From 1994 until joining the Company in
1996, he was the Director of Marketing and Customer Service for Dalfort
Aviation, a private commercial aircraft overhaul and maintenance company
located in Dallas, Texas.
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<PAGE> 43
Tony Ramsaroop was appointed as Vice President of the Company in March
1996 and has extensive experience in the aviation industry including
technician, flight crew, inspector, flight instructor and airline station
manager. Mr. Ramsaroop has held management positions with the Company and its
predecessors since 1988. Previously, he was a flight engineer, aircraft
mechanic and Quality Assurance Supervisor with the United States Navy. He
directs the operations of the Company in ground handling and catering services.
He has primary responsibility for the Company's facilities and training
programs applicable to airline ground services and catering operations. He is
a graduate of LeTourneau University.
Wallace Congdon was appointed as Vice President of the Company in
February 1997 and has over forty-five years experience in the general aviation
industry, primarily in the management of fixed base operations ("FBO's") across
the United States for various employers. He has specific management knowledge
in the areas of fuel, light aircraft maintenance, airport facilities management
and leasing, aircraft sales, and other FBO-related functions. From 1988 to
1993, he held various senior management positions within Aero Services
International, Inc., a major owner and operator of FBO's and corporate jet
aircraft. Since 1993 and prior to joining the Company in 1996 to develop and
implement its FBO & Airport Management Division, he performed aviation and FBO
management consulting services for a variety of clients. Prior employers and
senior management positions include Hughes Aviation Services, the Ohio Aviation
Company, TigerAir, Inc., Aviall, Inc. and Western Skyways. He is a veteran of
the United States Navy, and has an undergraduate degree from Le Tourneau
University.
Richard Morgan was appointed as a director of the Company on February
26, 1997. Mr. Morgan is self employed, and has conducted business consulting,
strategic planning, and corporate finance services individually and in
conjunction with others for various corporate clients since 1984. Mr. Morgan
was additionally Chief Financial Officer of Search Capital Group, Inc.
("Search") from August 1985 through December 1994, when he voluntarily
resigned. After Mr. Morgan's departure, eight Search subsidiaries conducting
business in the sub-prime, used-automobile finance business filed for
protection under Chapter 11 of the Federal Bankruptcy Code in August 1995. Mr.
Morgan holds a graduate degree in business from Vanderbilt University.
Gary Cooper was appointed Treasurer and Vice President of the Company
on February 12, 1997. For the past five years, Mr. Cooper has owned and
operated his own public accounting firm in Dallas, Texas, and has additionally
taught various accounting and financial courses for certified public
accountants' continuing education programs. Additionally, Mr. Cooper has
served in financial management positions in various public companies prior to
1991. Mr. Cooper is a Certified Public Accountant in the State of Texas, and
holds a degree in accounting from Middle Tennessee State University.
Charles E. Weed was elected a director of the Company in December 1996
and served as the President of Sunbelt Business Capital Incorporated
("Sunbelt") from August 1992 to February 1996. Mr. Weed is engaged in the
business of making private investments individually. Prior to August 1984, Mr.
Weed was Chairman and Chief Executive Officer of Michigan General, a large
industrial conglomerate. Between August 1984 and August 1992, he was retired
and engaged in making private investments.
Gordon Whitener was elected a director of the Company in December 1996
and has been President and Chief Executive Officer of Interface Americas of
LaGrange, Georgia, a subsidiary of Interface Inc. and one of America's largest
manufacturer's of commercial carpet since 1994. He is additionally a member of
Interface Inc.'s board of directors. From 1992 to 1994, Mr. Whitener held
various senior marketing and sales positions in the commercial carpet
manufacturing industry with companies including Interface and Collins & Aikman.
Mr. Whitener is a graduate of the University of Tennessee.
No family relationships exist among the directors or executive
officers of the Company. None of the directors serve as members of the Board
of Directors of another company which is subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
BOARD COMMITTEES
The Compensation Committee consists solely of Mr. Whitener. The
Compensation Committee recommends compensation for officers other than the
President, administers incentive compensation and benefit plans, including the
Company's 1997 Stock Option Plan, and recommends policies relating to such
plans.
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<PAGE> 44
The Audit Committee currently consists of Messrs. Weed, Sanders and
Whitener. The Audit Committee will meet periodically with management and the
Company's independent auditors and will review the results and scope of the
audit and other services provided by the Company's independent auditors, the
Company's accounting procedures, and the adequacy of the Company's internal
controls.
DIRECTORS' COMPENSATION
Directors are reimbursed for certain expenses in connection with
attendance at board and committee meetings.
EXECUTIVE COMPENSATION
The following table sets forth information, for the nine-month
transition period ended June 30, 1996 for the Company and the fiscal years
ended September 30, 1994 and 1995 for the Company's predecessors, TriStar Paint
and Airline Services, regarding the compensation of the Chief Executive Officer
of the Company and its predecessors. No executive officers of the Company or
its predecessors had compensation in excess of $100,000 for the periods
indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
---------------------
Other Annual
Name and Principal Position Year Salary Compensation
- --------------------------- ---- ------ ------------
<S> <C> <C> <C>
Lee Sanders, President and 1996 (1) $73,847 $9,283 (2)
Chief Executive Officer 1995 (3) 80,000
1994 (3) 60,000
</TABLE>
- --------------
(1) The compensation shown for 1996 represents compensation for the
nine-month transition period ended June 30, 1996.
(2) Represents aggregate annual lease payments and insurance costs for an
automobile.
(3) Compensation paid by the Company's predecessors.
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company engages Charles Weed as a consultant pursuant to a
consulting agreement between Mr. Weed and the Company which expires in February
1998. The Company pays Mr. Weed a fee of $4,100 per month.
The Company has an employment agreement with each of Paul Lubomirski
and Tony Ramsaroop, which expire in 1999 and 2000, respectively. Mr.
Lubomirski is paid an annual salary of $90,000, and Mr. Ramsaroop is paid an
annual salary of $60,000 until completion of this Offering when his salary will
increase to $70,000. Each employment agreement contains a non-competition
agreement for a period of three years after any expiration or termination of
the agreement. Mr. Lubomirski and Mr. Ramsaroop are entitled to additional
benefits, including disability insurance, life insurance, and health and dental
insurance. Mr. Ramsaroop is eligible for additional bonuses as may be
determined by the Board of Directors. Mr. Lubomirski's employment agreement
specifies a formula for bonus payments that varies between 10% and 70% of his
annual salary if Pride's net profit for any fiscal year exceeds $600,000 during
the term of his agreement. The bonus will be 20%, 40% and 70% of his annual
salary if the net profit exceeds $700,000, $800,000 or $900,000, respectively
for a fiscal year.
The Company entered into an employment agreement with Lee Sanders in
March 1996, which expires on March 1, 1999. The employment agreement requires
the Company to pay Mr. Sanders an annual salary of $144,000. Mr. Sanders is
eligible for a bonus to be determined in the sole discretion of the Board based
on merit, the Company's financial performance and other relevant criteria. The
employment agreement contains a non-competition agreement for three years after
any expiration or termination of the agreement. Mr. Sanders is entitled to
additional benefits, including disability insurance, life insurance, and health
and dental insurance. If the Company terminates Mr. Sanders' employment at any
time or if Mr. Sanders terminates his employment within one year after a change
in ownership or control of the Company, the Company is required to pay him
severance pay equal to the unpaid salary for the remainder of the term of the
agreement plus
33
<PAGE> 45
the total salary and bonus compensation paid to him during the year period
preceding the termination. A change in ownership or control of the Company
includes appointment of any person other than Mr. Sanders as President or Chief
Executive Officer or the removal of him from either of such positions, any
change in a majority of the Board members not approved by him, any transfer or
issuance of shares representing more than 25% of the beneficial ownership of
the Company if not approved in advance by Mr. Sanders, any material change in
his authority or duties and any breach by the Company of the employment
agreement not remedied within ten days after notice from him.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Texas Business Corporation Act (the "Corporation Act") permits the
indemnification of directors, employees, officers and agents of Texas
corporations. The Company's Articles of Incorporation and Bylaws provide that
the Company shall indemnify its directors and officers to the fullest extent
permitted by the Corporation Act. Insofar as indemnification for liabilities
arising under the Act may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that, in the opinion of the Commission, such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
EMPLOYEE STOCK OPTION PLAN
The Company's 1997 Stock Option Plan (the "Employee Option Plan") was
adopted by the Board of Directors and the Company's shareholders in February
1997. The purpose of the Employee Option Plan is to provide increased
incentives to key employees and directors of the Company to render services and
exert maximum effort for the business success of the Company. Pursuant to the
Employee Option Plan, the Company may grant incentive and nonstatutory
(nonqualified) stock options to key employees and directors of the Company. A
total of 150,000 shares of Common Stock have been reserved for issuance under
the Employee Option Plan.
The Board or the Compensation Committee has the authority to select
the key employees and directors of the Company to whom stock options are
granted (provided that incentive stock options only be granted to employees of
the Company). Subject to the limitations set forth in the Employee Option
Plan, the Board or the Compensation Committee has the authority to designate
the number of shares to be covered by each option, determine whether an option
is to be an incentive stock option or a nonstatutory option, establish vesting
schedules, specify the type of consideration to be paid to the Company upon
exercise and, subject to certain restrictions, specify other terms of the
options.
The maximum term of options granted under the Employee Option Plan is
ten years. The aggregate fair market value of the stock with respect to which
incentive stock options are first exercisable in any calendar year may not
exceed $100,000 per incidence. Options granted under the Employee Option Plan
are nontransferable and generally expire within three months after the
termination of an optionee's service to the Company. In general, if an
optionee is disabled, dies or retires from his or her service to the Company,
such option may be exercised up to three months following such disability or
death unless the board or Compensation committee determine to allow a longer
period for exercise.
The exercise price of incentive stock options must not be less than
the fair market value of the Common Stock on the date of grant. The exercise
price of incentive stock options granted to any person who at the time of grant
owns stock possessing more than 10% of the total combined voting power of all
classes of stock must be at least 110% of the fair market value of such stock
on the date of grant, and the term of those options cannot exceed five years.
On February 12, 1997, pursuant to the Employee Option Plan, the Board
authorized the grant of 15,000 options to Tony Ramsaroop, 10,000 options to
Gary Cooper, and 1,000 options to Paul Lubomirski. These options are incentive
stock options exercisable at the initial public offering price. The Board also
authorized the grant to Gordon Whitener of 10,000 non-statutory stock options
exercisable at $4.50 per share of Common Stock.
OPTION GRANTS
The Company did not grant stock options or stock appreciation rights
during the nine months ended June 30, 1996.
See "--Employee Stock Option Plan" for information regarding option
grants made as of February 12, 1997 to certain of the Company's executive
officers.
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<PAGE> 46
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective March 1, 1996, in connection with the Company's acquisition
of Pride, the Company entered into a consulting agreement with Charles Weed, a
director of the Company. The Company is obligated to pay Mr. Weed a consulting
fee of $4,100 per month until February 1998. As one of the Sunbelt
shareholders, Mr. Weed was issued a 10% Convertible Note in the principal
amount of $52,000 in connection with the Company's acquisition of Pride. He
subsequently purchased an additional $70,000 of the Company's 10% Convertible
Notes from another holder. As of December 31, 1996, Mr. Weed held convertible
notes totaling $122,000 in principal amount. Mr. Weed is also a member and
manager of Sunbelt Business Capital, L.L.C. ("Sunbelt L.L.C."). In connection
with the Pride acquisition, Sunbelt spun off to its shareholders certain of its
assets, including debt in the approximate amount of $323,000 owed by Pride.
The Company issued 56,000 shares to these shareholders (including 8,354 shares
to Mr. Weed) in exchange for the cancellation of $168,000 of debt. The
remainder of this debt was contributed by these shareholders to Sunbelt L.L.C.
Pride delivered a new promissory note dated March 1, 1996 to evidence this debt
in the approximate amount of $155,000 to Sunbelt L.L.C. The note requires
payments of 27 equal monthly installments of $6,400. Effective March 1, 1996,
the Company also issued to Mr. Weed a convertible note in the principal amount
of $27,000 in exchange for unpaid consulting fees owed to him by Pride. This
note has terms similar to the Company's 10% Convertible Notes except that it is
convertible at $3.00 (in lieu of $4.50) per share.
Prior to the Company's organization, Lee Sanders, through his wholly
owned subsidiary, The Sanders Companies, Inc. (the "Sanders Companies"), owned
all of the outstanding capital stock of Airline Services and TriStar Paint.
Mr. Sanders is the President and Chief Executive Officer of the Company. Prior
to August 31, 1995, the Sanders Companies was the owner of the property and
equipment reflected on the combining financial statements for these entities
and charged each of these wholly-owned subsidiaries lease rent for the use of
such assets. In 1995, these assets were transferred from the Sanders Companies
at net book value, along with associated debt, to either Airline Services or
TriStar Paint, as appropriate. Lease rent charged by the Sanders Companies to
TriStar Paint and Airline Services for the year ended September 30, 1995
totaled $12,000.
As of September 30, 1995, TriStar Paint had advanced funds to the
Sanders Companies in an amount totaling $165,000. These advances resulted from
Airline Services and TriStar Paint immediately transferring to the Sanders
Companies any payments received from their customers. Each of the subsidiaries
of the Sanders Companies, including TriStar Paint and Airline Services,
maintained zero balance bank accounts. As disbursements would clear each
subsidiary's bank account, cash would immediately be transferred from the bank
account of the Sanders Companies.
On September 30, 1995, TriStar Paint and Airline Services had
inter-company receivable balances from the Sanders Companies totaling $258,000
and $364,000, respectively. Effective on September 30, 1995, these companies
declared a dividend of these receivable balances to the Sanders Companies.
These balances resulted from transactions executed and recorded between the
Sanders Companies and its wholly-owned subsidiaries, Airline Services and
TriStar Paint, from the sharing of administrative expenses and advances to and
from each of the separate corporations.
Prior to March 1, 1996, the Sanders Companies provided services and
allocated certain general and administrative expenses to the various companies
operating under its control, including the Company, TriStar Paint and Airline
Services. Such charges were allocated to the members of the control group
based upon the level of management and supervision time required, services
provided and certain other factors. Management of the Company believes that
such allocations are reasonable. These general and administrative expenses
totaled $77,000 for the nine months ended June 30, 1996. For the year ended
September 30, 1995, these general and administrative expenses allocated to
TriStar Paint and Airline Services totaled $157,000.
35
<PAGE> 47
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of March 1, 1997 by (i)
each person who is known by the Company to be the beneficial owner of more than
5% of the Common Stock, (ii) each of the Company's directors, (iii) the
executive officer named in the Compensation Table, and (iv) all directors and
executive officers of the Company as a group. Except as otherwise indicated,
the Company believes that the beneficial owners of the Common Stock listed
below, based on information furnished by such owners, have sole investment and
voting power with respect to such shares, subject to community property laws
where applicable.
<TABLE>
<CAPTION>
Percent of Total (2)
Name and Address Number of Shares --------------------------------
of Beneficial Owner Beneficially Owned (1) Before Offering After Offering
- ------------------- ---------------------- --------------- --------------
<S> <C> <C> <C>
Lee Sanders 1,000,000 (3) 62.5% 38.5%
700 North Pearl Street
Suite 2170
Dallas, Texas 75201
Richard Morgan 100,000 (4) 6.0 3.7
700 North Pearl Street
Suite 2170
Dallas, Texas 75201
Paul Lubomirski 44,250 2.8 1.7
Charles E. Weed 44,455 (5) 2.7 1.7
Gordon Whitener 10,000 (6) * *
All executive officers and
directors as a group
(9 persons) 1,198,705 69.4 44.0
</TABLE>
- ---------------
* Less than 1%
(1) A person is deemed to be the beneficial owner of securities that can
be acquired within 60 days from the date set forth above through the
exercise of any option, warrant or convertible or exchangeable note.
(2) In calculating percentage ownership, all shares of Common Stock that
the named shareholder has the right to acquire upon exercise of any
option, warrant or convertible or exchangeable note are deemed to be
outstanding for the purpose of computing the percentage of Common
Stock owned by the shareholder, but are not deemed outstanding for the
purpose of computing the percentage of Common Stock owned by any other
shareholders. Percentages of shares beneficially owned are based upon
1,600,250 shares outstanding before this offering. Accordingly,
shares and percentages beneficially owned after the offering are based
on 2,600,250 shares.
(3) Represents shares owned of record by The Sanders Companies, Inc., a
corporation wholly owned by Mr. Sanders.
(4) Includes 80,000 shares purchasable at $2.50 per share pursuant to a
warrant expiring February 28, 1999.
(5) Includes 27,101 shares issuable, at $4.50 per share, upon the
conversion of convertible notes in the total principal amount of
$121,000 and 9,000 shares issuable, at $3.00 per share, upon the
conversion of a convertible note in the principal amount of $27,000.
(6) Represents shares purchasable, at $4.50 per share, under non-statutory
options expiring in 2004 granted under the Company's 1997 Stock Option
Plan.
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<PAGE> 48
DESCRIPTION OF SECURITIES
The Company is a Texas corporation and its affairs are governed by its
Articles of Incorporation ("Articles of Incorporation"), its Bylaws ("Bylaws")
and by the Texas Business Corporation Act. The following description of the
Company's capital stock is qualified in all respects by reference to the
Articles of Incorporation and Bylaws, which have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part.
The authorized capital stock of the Company consists of 10,000,000
shares of Common Stock, $0.01 par value, and 5,000,000 shares of preferred
stock, $0.01 par value ("Preferred Stock"). The Common Stock and Warrants
offered hereby may only be purchased together in this offering on the basis of
one share of Common Stock and one Warrant. The Common Stock and Warrants will
be immediately separable and will not be listed for trading as units.
COMMON STOCK
As of February 24, 1997, the Company had 49 holders of its Common
Stock. The holders of outstanding shares of Common Stock are entitled to
receive dividends out of assets legally available thereof at such times and in
such amounts as the Board of Directors may, from time to time, determine,
subject to any preferences which may be granted to the holders of Preferred
Stock. Holders of Common Stock are entitled to one vote per share on all
matters on which the holders of Common Stock are entitled to vote. The Common
Stock is not entitled to preemptive rights and is not subject to redemption or
conversion. Upon liquidation, dissolution, or winding-up of the Company, the
assets (if any) legally available for distribution to shareholders are
distributable ratably among the holders of the Common Stock after payment of
all debt and liabilities of the Company and the liquidation preference of any
outstanding class or series of Preferred Stock. All outstanding shares of
Common Stock are, and the shares of Common Stock to be issued pursuant to this
offering will be, when issued and delivered, validly issued, fully paid, and
nonassessable. The rights, preferences, and privileges of holders of Common
Stock will be subject to the preferential rights of any outstanding class or
series of Preferred Stock that the Company may issue in the future.
WARRANTS
In connection with this offering, the Company will issue 1,000,000
Warrants. The Warrants are subject to the terms and conditions of a Warrant
Agreement (the "Warrant Agreement") between the Company and the Company's
transfer agent, as Warrant Agent. The following description of the Warrants is
qualified in all respects by the Warrant Agreement, which is filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
The shares of Common Stock underlying the Warrants, when issued upon exercise
thereof and payment of the purchase price, will be fully paid and
nonassessable.
Each Warrant entitles the holder to purchase one share of Common Stock
at any time during the five years following the date of this Prospectus for
120% of the initial public offering price, subject to adjustment in certain
circumstances, unless earlier redeemed, at which time the Warrants will expire.
The Warrants are redeemable in whole and not in part by the Company upon 30
days' notice at a price of $0.05 per Warrant, provided that the closing bid
quotations or sale prices of the Common Stock have averaged at least 150% of
the initial public offering price for a period of any 15 consecutive trading
days ending on the tenth day prior to the day on which the Company mails the
notice of redemption to the Warrant holders. In the event the Company gives
notice of its intention to redeem the Warrants, a holder would be forced to
either exercise his Warrant within 30 days of the notice of redemption or
accept the redemption price. The holders of the Warrants will have exercise
rights until the close of business on the date fixed for the redemption
thereof. The number and kind of securities or other property for which the
Warrants are exercisable are subject to adjustment upon the occurrence of
certain events, including mergers, reorganizations, stock dividends, stock
splits, and recapitalizations. Holders of Warrants have no voting, dividend, or
other rights as shareholders of the Company with respect to the shares
underlying the Warrants, unless and until the Warrants are exercised.
The Warrants may be exercised by filling out and signing the
appropriate form on the Warrants and mailing or delivering the Warrants to the
Warrant Agent in time to reach the Warrant Agent by the expiration date,
accompanied by payment in full of the exercise price for the Warrants being
exercised in United States funds (in cash or by check or bank draft payable to
the order of the Company). Common Stock certificates will be issued as soon as
practicable after exercise and payment of the exercise price as described
above.
37
<PAGE> 49
The shares of Common Stock issuable upon exercise of the Warrants and
the securities issuable upon exercise of the Representative's Warrants have
been registered with the Commission. The Company will be required, from time
to time, to file post-effective amendments to its registration statement in
order to maintain a current prospectus covering the issuance of such shares
upon exercise of the Warrants. The Company has undertaken to make such filings
and to use its best efforts to cause such post-effective amendments to become
effective. If for any reason a required post-effective amendment is not filed
or does not become effective or is not maintained, the holders of the Warrants
may be prevented from exercising their Warrants.
Holders of the Warrants have the right to exercise the Warrants only
if the underlying shares of Common Stock are qualified, registered or exempt
from registration under applicable securities laws of the states in which the
various holders of the Warrants reside. The Company cannot issue shares of
Common Stock to holders of the Warrants in states where such shares are not
qualified, registered or exempt. The Company has undertaken, however, to
obtain a listing for the shares of Common Stock on Nasdaq and the Pacific Stock
Exchange, which provides an exemption from state securities law registration in
many states.
The Warrants are subject to redemption by the Company in certain
circumstances. The Company's exercise of this right would force a holder of
the Warrants to exercise the Warrants and pay the exercise price at a time when
it may be disadvantageous for the holder to do so, to sell the Warrants at the
then current market price when the holder might otherwise wish to hold the
Warrants for possible additional appreciation, or to accept the redemption
price, which is likely to be substantially less than the market value of the
Warrants in the event of a call for redemption. Holders who do not exercise
their Warrants prior to redemption by the Company will forfeit their right to
purchase the shares of Common Stock underlying the Warrants. The foregoing
notwithstanding, the Company may not call the Warrants at any time that a
current registration statement under the Securities Act of 1933, as amended, is
not then in effect. Any redemption of the Warrants during the one-year period
commencing on the date of this Prospectus shall require the written consent of
the Representative.
REPRESENTATIVE'S WARRANTS
The Company has agreed, upon completion of this offering, to sell to
the Representative for $0.001 per Warrant, the Representative's Warrants to
purchase (i) 10% of the number of shares of Common Stock sold in this offering
(including the Underwriters' over-allotment option) and (ii) Underlying
Warrants to purchase the same number of shares of Common Stock. The
Representative's Warrants will be exercisable for a period of four years
commencing one year after the date of this Prospectus. In addition, the Company
will provide certain demand and piggyback registration rights in connection
with the Representative's Warrants. See "Underwriting."
EXISTING WARRANTS AND OPTIONS
Placement Warrants. On March 1, 1996, the Company issued warrants to
purchase an aggregate of 200,000 shares of Common Stock (the "Placement
Warrants") to RAS Securities Corp. ("RAS") upon the closings of the private
placement of 500,000 shares of Common Stock by the Company. RAS has
subsequently transferred these Placement Warrants to certain of its employees.
Each Placement Warrant entitles the holder to purchase one share of Common
Stock at a price of $1.00 per share, exercisable on or before February 28,
1999. As of the date of this Prospectus, none of the holders of the Placement
Warrants has exercised his Placement Warrants. The Placement Warrants contain
provisions that protect the holders against dilution by adjustment of the
exercise price and the number of shares of Common Stock subject to the
Placement Warrants in certain events, such as stock dividends and
distributions, stock splits, recapitalizations, mergers, or consolidations.
Holders of Placement Warrants do not possess any rights as shareholders of the
Company prior to exercise. Holders of Placement Warrants have been granted
certain registration rights. See "Shares Eligible For Future Sale--
Registration Rights."
Morgan Warrant. Effective June 30, 1996, the Company and Richard L.
Morgan entered into a Warrant Agreement (the "Morgan Warrant") pursuant to
which Mr. Morgan has the right to purchase 80,000 shares of Common Stock at a
price of $2.50 per share. The Warrant Agreement expires February 28, 1999.
Mr. Morgan has not exercised any of his rights under the Morgan Warrant as of
the date of this prospectus. The Morgan Warrant contains provisions that
protect Mr. Morgan against dilution by adjustment of the exercise price and the
number of shares of Common Stock subject to the Morgan Warrant in certain
events, such as stock dividends and distributions, stock splits,
recapitalizations, mergers
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<PAGE> 50
or consolidations. The Morgan Warrant does not grant any shareholder rights to
the holder thereof prior to exercise. The Morgan Warrant grants to Mr. Morgan
certain registration rights. See "Shares Eligible for Future
Sale--Registration Rights."
Employee Stock Options. See "Management--Employee Stock Option Plan"
for a description of outstanding options granted under the 1997 Stock Option
Plan.
PREFERRED STOCK
The Board of Directors may, without further action of the shareholders
of the Company, issue shares of Preferred Stock in one or more series and fix
or alter the rights or preferences thereof, including the voting rights,
redemption provisions (including sinking fund provisions), dividend rights,
dividend rates, liquidation preferences, conversion rights, and any other
rights, preferences, privileges, and restrictions of any wholly unissued series
of Preferred Stock. The rights of holders of Common Stock will be subject to,
and may be adversely affected by, the rights of holders of any Preferred Stock
that may be issued in the future. No shares of Preferred Stock are outstanding,
and the Company has no present plans to issue any such shares. The issuance of
shares of Preferred Stock could adversely affect the voting power of holders of
Common Stock and could have the effect of delaying, deferring, or preventing a
change in control of the Company or other corporate action.
DEBT SECURITIES
In connection with the acquisition of Pride on March 1, 1996, the
Company issued $857,000 in aggregate principal amount of its five-year, 10%
Convertible Notes ("Convertible Notes") to the former shareholders of Pride as
a portion of the acquisition price payable to them for their shares in Pride.
The Convertible Notes require the Company to pay quarterly payments of interest
at a rate of ten percent (10%) per annum. Commencing April 1, 1998, the
Convertible Notes also require equal quarterly installments of principal in an
amount necessary to fully amortize the notes by March 1, 2001, when all
remaining principal and accrued interest will be due. Each of the Convertible
Notes is convertible at the option of the holder into shares of Common Stock at
a price of $4.50 per share. This conversion rate is subject to adjustment in
the event of any stock dividend, split, combination or reclassification of the
outstanding Common Stock of the Company. The Convertible Notes require the
Company to treat all holders of the Convertible Notes as pari passu members of
the same class. Each of the Convertible Notes is secured by a pledge of the
pro rata portion of outstanding stock of Pride that was owned directly or
beneficially by the holder of the Convertible Note immediately prior to the
Company's acquisition of Pride. All of the Company's stock in Pride is pledged
to secure the Convertible Notes, subject to the Company's prior pledge of
approximately 50% of the Pride stock to secure certain of Pride's debt. If the
Company fails to make a required payment of principal and interest within ten
(10) days after written notice of default is received, the holder of the
Convertible Note may exercise any of its remedies with respect to the pledged
stock.
In February 1997, the Company sold $500,000 in aggregate principal
amount of its 10% Bridge Notes. The Bridge Notes are unsecured and bear
interest at the rate of 10% per annum payable quarterly beginning December 31,
1997. The Company used the proceeds from the issuance of the Bridge Notes for
general corporate purposes and to fund the costs of this Offering. The Bridge
Notes are due in full on June 30, 1998 or earlier in certain circumstances,
including within five days following the closing of this Offering. Subject to
the closing of this Offering, upon the full payment of the Bridge Notes, the
Company has agreed to issue to the holders of the Bridge Notes that number of
shares of Common Stock equal to the quotient of $250,000 divided by the initial
public offering price.
CERTAIN ARTICLES OF INCORPORATION PROVISIONS
The Articles of Incorporation provides that the Company's directors
will not be personally liable for monetary damages to the Company or its
shareholders for an act or omission in the director's capacity as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the Company or its shareholders, (ii) for acts or omissions not in good faith
or which involved intentional misconduct or a knowing violation of law, (iii)
for any transaction from which the director derived any improper personal
benefit, (iv) for acts or omissions for which the liability of a director is
expressly provided by statute or (v) an act related to an unlawful stock
repurchase or payment of a dividend. This provision in the Articles of
Incorporation does not eliminate the duty of care, and in appropriate
circumstances equitable remedies such as an injunction or other forms of
nonmonetary relief would remain available under Texas law. This provision also
does not affect a director's responsibilities under any other laws, such as the
federal securities laws or state or federal environmental laws.
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<PAGE> 51
TRANSFER AGENT, REGISTRAR AND WARRANT AGENT
Prior to the completion of this offering, the Company intends to
engage Continental Stock Transfer and Trust Company, New York, New York, to
serve as the stock transfer agent and registrar for the Common Stock. The
Company currently serves as its own stock transfer agent and registrar.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have 2,600,250
shares of Common Stock outstanding, excluding any exercise of currently
outstanding warrants and convertible or exchangeable notes. The 1,000,000
shares of Common Stock to be sold in this offering will be freely transferable
without restriction or further registration under the Securities Act, except
that any shares purchased by affiliates of the Company will be subject to the
limitations of Rule 144 under the Securities Act. In addition, the 1,000,000
Warrants to be sold in this offering will be freely transferable without
restriction or further registration under the Securities Act, except that any
Warrants purchased by affiliates of the Company will be subject to the
limitations of Rule 144 under the Securities Act. All of the Company's
outstanding shares of Common Stock, warrants, options and convertible or
exchangeable notes are "restricted securities" as that term is defined in Rule
144 under the Securities Act.
In general, under Rule 144 as currently in effect, a minimum of two
years must elapse between the later of the date of the acquisition of
restricted securities from the issuer or its affiliates and a resale of the
securities under Rule 144. If the two-year test is met, a person (or persons
whose shares are aggregated), including persons who may be deemed "affiliates"
of the Company, would be entitled to sell within any three-month period a
number of securities that does not exceed the greater of 1% of the number of
shares of Common Stock then outstanding or the average weekly trading volume of
the Common Stock during the four calendar weeks preceding the date an order to
sell is placed with respect to such sale. Sales under Rule 144 are also
subject to certain manner of sale provisions and notice requirements, and to
the availability of current public information about the Company. In addition,
a person who is not deemed to have been an affiliate of the Company at any time
during the 90 days preceding a sale, and who has beneficially owned the
securities proposed to be sold for at least three years, would be entitled to
sell such securities under Rule 144(k) without regard to the requirements
described above. None of the Company's outstanding shares of Common Stock,
warrants, options and convertible or exchangeable notes will be eligible for
sale under Rule 144 upon completion of this Offering as a result of the
required two-year holding period. In February 1997, the Commission amended
Rule 144 to shorten the two-year and three-year periods to one year and two
years, respectively. This amendment is expected to be effective in April or
May 1997. Accordingly, all of the Company's outstanding shares of Common Stock
(except for shares issued upon payoff of the 10% Bridge Notes), warrants and
convertible or exchangeable notes will be eligible for sale under Rule 144 upon
completion of this Offering, or shortly thereafter, as a result of the new
one-year holding period.
Two officers of the Company owning a total of 1,044,250 shares of
Common Stock will sign lock-up agreements under which such holders will agree
not to offer, sell, or otherwise dispose of 90% of their shares of Common Stock
(939,825 shares) that might otherwise be eligible for sale for a period of 24
months after the date of this Prospectus without the prior written consent of
the Representative. These officers, with respect to the remaining 10% of their
shares of Common Stock (104,425 shares), and all remaining holders of the
Company's securities (owning 556,000 shares of Common Stock and outstanding
warrants, options or convertible or exchangeable notes exercisable for 596,200
shares of Common Stock) will agree with the Representative to lock-up periods
of six months for all, and 12 months for 50%, of the shares of Common Stock
that they own or may acquire after the date of this Prospectus. The terms of
the Bridge Notes provide that the shares of Common Stock to be issued upon full
payment of the Bridge Notes may not be sold by the holder for one year after
the closing of this Offering, unless the consent of the Representative is
obtained. Upon the expiration of the lock-up agreements, these shares will
become eligible for sale in the public market assuming the shares continue to
be registered for sale by the selling securityholders or, if not registered,
subject to the provisions of Rule 144.
In connection with this offering, the Company has registered all of
the Company's outstanding shares of Common Stock and all shares of Common Stock
issuable upon exercise of outstanding warrants, upon conversion or exchange of
outstanding convertible or exchangeable notes or upon payoff of the Bridge
Notes. The selling shareholders, their plan of distribution and other required
disclosures are set forth in a supplement to this Prospectus. So long as the
Company maintains the effectiveness of this registration and the selling
shareholders comply with prospectus delivery and other
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<PAGE> 52
requirements for the public sale of registered securities, the selling
shareholders may resell their shares without restrictions, except for any
applicable lock-up agreement.
Prior to this offering, there has been no public market for the Common
Stock or Warrants. The Company can make no predictions as to the effect, if
any, that sales of shares of Common Stock or Warrants or the availability of
Common Stock or Warrants for sale will have on the market price prevailing from
time to time. Nevertheless, sales of substantial amounts of the Common Stock
or Warrants in the public market could adversely affect the market price of the
Common Stock or Warrants and could impair the Company's future ability to raise
capital through an offering of its equity securities.
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<PAGE> 53
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representative, RAS Securities Corp.,
have severally agreed to purchase from the Company the following respective
numbers of shares of Common Stock and Warrants at the public offering price,
less the underwriting discounts and commissions, set forth on the cover page of
this Prospectus.
<TABLE>
<CAPTION>
Number of Shares
of Common Stock Number of Warrants
Underwriter to be Purchased to be Purchased
- ----------- ---------------- ------------------
<S> <C> <C>
RAS Securities Corp.....................
First London Securities Corporation ...
Total .......................... 1,000,000 1,000,000
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all Securities offered hereby if any are purchased.
The Company has been advised by the Underwriters that the Underwriters
propose to offer the Securities to the public at the public offering price set
forth on the cover page of this Prospectus, and to certain dealers at such
price less a concession not in excess of $_______ per share of Common Stock and
$________ per Warrant. After the initial public offering, the public offering
price, concessions, and other selling terms may be changed by the
Representative.
The Company has agreed to pay underwriting discounts and commissions
in the aggregate of 10% of the initial public offering price of the Securities
offered hereby. The Company also has agreed to reimburse the Representative's
expenses on a non-accountable basis in the amount of 3% of the gross proceeds
received from the sale of the Securities, including the over-allotment option.
Any such expenses in excess of the expense allowance will be borne by the
Underwriters. The Company has also agreed to pay to the Representative a
commission of 6% of the exercise price of any Warrants which are exercised in
the future pursuant to a solicitation by the Representative, subject to certain
conditions.
The Company has granted to the Underwriters an option, exercisable not
later than 45 days after the date of this Prospectus, to purchase (i) up to
150,000 additional shares of Common Stock and (ii) 150,000 additional Warrants
at the public offering price, less the underwriting discounts and commissions
set forth on the cover page of this Prospectus. The Underwriters may exercise
such option only to cover over-allotments, if any. To the extent that the
Underwriters exercise such option, each of the Underwriters will have a firm
commitment to purchase approximately the same percentage thereof that the
number of Securities to be purchased by it shown in the above table bears to
1,000,000, unless the Underwriters agree otherwise in writing, and the Company
will be obligated, pursuant to the option, to sell such Securities to the
Underwriters. If purchased, the Underwriters will offer for sale such
additional shares of Common Stock and Warrants on the same terms as those on
which the 1,000,000 shares of Common Stock and 1,000,000 Warrants are being
offered.
The Company has agreed, upon completion of this offering, to sell to
the Representative or its designees, for $0.001 per warrant, Representative's
Warrants to purchase (i) 10% of the number of shares of Common Stock sold in
this offering (including the over-allotment option) and (ii) Underlying
Warrants to purchase the same number of shares of Common Stock. The terms and
conditions of the Underlying Warrants are identical to those of the Warrants
offered hereby except that the Underlying Warrants included in the
Representative's Warrants will not be subject to redemption by the Company and
are not exercisable until one year after the date of this Prospectus. The
Representative's Warrants will be exercisable for a four-year term, commencing
one year after the date of this Prospectus, at an exercise price equal to 120%
of the initial public offering price of the Securities offered hereby. The
Representative's Warrants will be restricted from sale, transfer, assignment,
or hypothecation except to the Underwriters and persons who are officers or
partners of the Underwriters. The number of shares of Common Stock and
Underlying Warrants covered by the Representative's Warrants and the exercise
price are subject to adjustment upon certain events to prevent dilution.
The Representative's Warrants will give the holders an opportunity to
profit from a rise in the market price of the Common Stock to the extent that
the market price exceeds the exercise price of the Representative's Warrants.
Any profit
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<PAGE> 54
realized by the Underwriters upon the sale of the Representative's Warrants or
the securities issuable thereunder may be deemed to be additional underwriting
compensation. If the Representative's Warrants are exercised, the interest of
the Company's shareholders will be diluted. It may be more difficult for the
Company to raise additional capital while the Representative's Warrants are
outstanding, and the holders of the Representative's Warrants may be expected
to exercise them when the Company, in all likelihood, would be able to obtain
needed additional capital by a new offering of securities on terms more
favorable than those provided for by the Representative's Warrants.
The Company has granted to the holders of the Representative's
Warrants and the underlying securities certain rights with respect to
registration under the Securities Act of the securities underlying the
Representative's Warrants. For a period of four years commencing one year
following the date of this Prospectus, either the Representative or the holders
of not less than a majority of the Common Stock issued or issuable upon
exercise of the Representative's Warrants may require the Company to effect one
registration under the Securities Act with respect to the Common Stock
underlying the Representative's Warrants and the Underlying Warrants, and the
Company is required to use its best efforts to effect such registration. In
addition, subject to certain limitations, in the event the Company proposes to
register any of its securities under the Securities Act during the four-year
period commencing one year after the effective date of the Registration
Statement of which this Prospectus forms a part, the holders of the
Representative's Warrants and the underlying Common Stock are entitled to
notice of such registration and may elect to include the Common Stock
underlying the Representative's Warrants held by them in such registration.
The Company's out-of-pocket expenses associated with any registration initiated
upon the request of the Representative or the holders of the Common Stock
issued or issuable upon exercise of the Representative's Warrants will be
reimbursed by the holders whose shares are included in such registration. The
registration of securities pursuant to the registration rights applicable to
the Representative's Warrants may impede future financing.
Two officers of the Company owning a total of 1,044,250 shares of
Common Stock will sign lock-up agreements under which such holders will agree
not to offer, sell, or otherwise dispose of 90% of their shares of Common Stock
(939,825 shares) that might otherwise be eligible for sale for a period of 24
months after the date of this Prospectus without the prior written consent of
the Representative. These officers, with respect to the remaining 10% of their
shares of Common Stock (104,425 shares), and all remaining holders of the
Company's securities (owning 556,000 shares of Common Stock and outstanding
warrants, options or convertible or exchangeable notes exercisable for 596,200
shares of Common Stock) will agree with the Representative to lock-up periods
of six months for all, and 12 months for 50%, of the shares of Common Stock
that they own or may acquire after the date of this Prospectus. The terms of
the Bridge Notes provide that the shares of Common Stock to be issued upon full
payment of the Bridge Notes may not be sold by the holder for one year after
the closing of this Offering, unless the consent of the Representative is
obtained. Upon the expiration of the lock-up agreements, these shares will
become eligible for sale in the public market assuming the shares continue to
be registered for sale by the selling securityholders or, if not registered,
subject to the provisions of Rule 144.
Pursuant to the Underwriting Agreement, for a period of five years
from the effective date of the Registration Statement of which this Prospectus
forms a part, the Representative has the right to designate a person to serve
on or as a non-voting advisor to the Board of Directors of the Company, subject
to approval by the Board.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters and the Company against certain civil liabilities, including
liabilities under the Securities Act. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers, and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission ("Commission") such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
The Representative has advised the Company that the Underwriters do
not intend to confirm sales to any account over which they exercise
discretionary authority.
Prior to this offering, there has been no public market for the
Company's Common Stock or the Warrants. The initial public offering price for
the Securities has been determined by negotiations between the Company and the
Representative. Among the factors considered in such negotiations were
prevailing market conditions, the history and prospects of the Company, the
present state of the Company's development, the industry in which it competes,
an assessment of the Company's management, the market price for securities of
comparable companies at the time of the offering, and other factors deemed
relevant.
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<PAGE> 55
LEGAL OPINIONS
The validity of the issuance of the Common Stock and Warrants offered
hereby will be passed upon for the Company by Bracewell & Patterson, L.L.P.,
Dallas, Texas. Certain legal matters in connection with the issuance of the
Common Stock and Warrants offered hereby will be passed upon for the
Underwriters by Jackson & Walker, L.L.P., Dallas, Texas.
EXPERTS
The consolidated financial statements of Aviation Group, Inc. and
subsidiaries and the financial statements of Pride Aviation, Inc., included in
this prospectus and elsewhere in the registration statement, to the extent and
for the periods indicated in their reports, have been audited by Arsement, Redd
& Morella, L.L.C., independent public accountants, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
The combined financial statements of Tri-Star Aircraft Services, Inc.
and Tri-Star Airline Services, Inc. (Predecessor) for the year ended September
30, 1995, have been included herein and in the registration statement, in
reliance upon the report of James Smith & Company, a Professional Corporation,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
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<PAGE> 56
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF AVIATION GROUP, INC. AND SUBSIDIARIES
Independent Auditors' Report dated October 7, 1996
by Arsement, Redd & Morella, L.L.C. A-1
Independent Auditor's Report dated December 22,
1995 by James Smith & Company A-2
Consolidated balance sheets as of June 30, 1996
and December 31, 1996 (unaudited) A-3
Consolidated statements of operations for the nine months ended
June 30, 1996, for the year ended September 30,
1995 (Predecessor) and for the six month periods
ended December 31, 1995 and 1996 (unaudited) A-4
Consolidated statements of changes in shareholders' equity
for the nine months ended June 30, 1996, for the
year ended September 30, 1995 (Predecessor)
and for the six month period ended December 31,
1996 (unaudited) A-5
Consolidated statements of cash flows for the nine months
ended June 30, 1996, for the year ended September 30,
1995 (Predecessor) and for the six month periods
ended December 31, 1995 and 1996 (unaudited) A-6
Notes to consolidated financial statements A-7
FINANCIAL STATEMENTS OF PRIDE AVIATION, INC.
Independent Auditors' Report dated October 7,
1996 by Arsement, Redd & Morella, L.L.C. P-1
Balance sheet as of September 30, 1995 P-2
Statements of operations for the year ended
September 30, 1995 and five months
ended February 29, 1996 P-3
Statements of changes in shareholders' equity
(deficit) for the year ended September 30,
1995 and five months ended February 29,
1996 (unaudited) P-4
Statements of cash flows for the year ended
September 30, 1995 and five months
ended February 29, 1996 (unaudited) P-5
Notes to financial statements P-7
</TABLE>
45
<PAGE> 57
INDEPENDENT AUDITORS' REPORT
To Aviation Group, Inc.
Dallas, Texas
We have audited the accompanying consolidated balance sheet of Aviation Group,
Inc. (a Texas corporation) and subsidiaries as of June 30, 1996, and the
related consolidated statements of operations, changes in shareholders' equity
and cash flows for the nine months then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aviation Group, Inc. and
subsidiaries as of June 30, 1996, and the results of their operations and cash
flows for the nine months then ended in conformity with generally accepted
accounting principles.
Arsement, Redd & Morella, L.L.C.
October 7, 1996
Lafayette, Louisiana
A-1
<PAGE> 58
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Tri-Star Aircraft, Inc. and
Tri-Star Airline Services, Inc.
We have audited the accompanying combined statements of income, changes in
shareholders' equity and cash flow of Tri-Star Aircraft, Inc. and Tri-Star
Airline Services, Inc. (Texas corporations) (the Predecessor) for the year
ended September 30, 1995. These financial statements are the responsibility of
the Predecessor's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
Our audit was conducted in accordance with generally accepted audited
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 combined statements of income, changes in shareholder's
equity and cash flow present fairly, in all material respects, the results of
operations of the Predecessor for the year ended September 30, 1995, in
conformity with generally accepted accounting principles.
JAMES SMITH & COMPANY
A Professional Corporation
December 22, 1995
Dallas, Texas
A-2
<PAGE> 59
AVIATION GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1996
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 457,000 $ 213,000
Accounts receivable 644,000 598,000
Inventory 143,000 172,000
Deferred tax assets 11,000 119,000
Prepaid expenses and other 22,000 10,000
------------ ------------
Total Current Assets 1,277,000 1,112,000
------------ ------------
Property and Equipment 2,409,000 2,657,000
Less: accumulated depreciation (220,000) (386,000)
------------ ------------
2,189,000 2,271,000
Other Assets
Goodwill, net 975,000 941,000
Other 83,000 247,000
------------ ------------
1,058,000 1,188,000
------------ ------------
$ 4,524,000 $ 4,571,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 209,000 $ 217,000
Short-term bank borrowings 223,000 223,000
Accounts payable 574,000 861,000
Accrued interest 36,000 15,000
Due to affiliates 2,000
Accrued liabilities 359,000 417,000
------------ ------------
Total Current Liabilities 1,403,000 1,733,000
------------ ------------
Long-Term Liabilities
Long-term debt, net of current maturities 1,350,000 1,329,000
Deferred income taxes 316,000 280,000
------------ ------------
1,666,000 1,609,000
------------ ------------
Shareholders' Equity
Preferred Stock, $.01 par value, 5,000,000 -- --
shares authorized, none outstanding
Common Stock, $.01 par value, 10,000,000
shares authorized, 1,600,250 shares issued
and outstanding 16,000 16,000
Additional paid-in capital 1,701,000 1,701,000
Retained earnings (deficit) (262,000) (488,000)
------------ ------------
1,455,000 1,229,000
------------ ------------
$ 4,524,000 $ 4,571,000
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
A-3
<PAGE> 60
AVIATION GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31,
June 30, September 30, (unaudited)
1996 1995 1996 1995
------------ ------------ ------------ ------------
(Nine Months) (Predecessor) (Predecessor)
<S> <C> <C> <C> <C>
Revenue $ 3,881,000 $ 2,533,000 $ 4,227,000 $ 927,000
Cost of Revenue 2,838,000 1,417,000 2,996,000 655,000
------------ ------------ ------------ ------------
Gross Profit 1,043,000 1,116,000 1,231,000 272,000
General and Administrative Expenses 752,000 553,000 1,319,000 285,000
Depreciation and Amortization 154,000 16,000 191,000 20,000
------------ ------------ ------------ ------------
906,000 569,000 1,510,000 305,000
------------ ------------ ------------ ------------
Income (Loss) From Operations 137,000 547,000 (279,000) (33,000)
------------ ------------ ------------ ------------
Other Income (Expenses)
Interest Income 2,000 -- -- --
Interest Expense (71,000) (20,000) (74,000) (16,000)
Other, net -- 3,000 8,000 3,000
------------ ------------ ------------ ------------
(69,000) (17,000) (66,000) (13,000)
------------ ------------ ------------ ------------
Income (Loss) Before Provision for Income
Taxes 68,000 530,000 (345,000) (46,000)
Provision (Benefit) for Income Taxes 34,000 188,000 (119,000) (16,000)
------------ ------------ ------------ ------------
Net Income (Loss) $ 34,000 $ 342,000 $ (226,000) $ (30,000)
============ ============ ============ ============
Pro forma earnings (loss) per common and
common equivalent share (unaudited) $ 0.02 $ (0.14)
============ ============
Pro forma weighted average common and
common equivalent shares outstanding
(unaudited) 1,605,156 1,605,156
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
A-4
<PAGE> 61
AVIATION GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Retained
-------------------------- Paid In Earnings
Shares Amount Capital (Deficit) Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Predecessor combined balances at
September 30, 1994 (1) $ 1,000 $ 50,000 $ 162,000 $ 213,000
Net Income -- -- -- 342,000 342,000
Contribution from The Sanders
Companies, Inc. (Note I) -- -- 151,000 -- 151,000
Dividend to The Sanders
Companies, Inc.(Note I) -- -- -- (787,000) (787,000)
----------- ----------- ----------- ----------- -----------
Predecessor combined balances at
September 30, 1995 (1) 1,000 201,000 (283,000) (81,000)
Restatement to reflect combination
of entities under common control
(Note A) 1,000,000 9,000 (9,000) -- --
----------- ----------- ----------- ----------- -----------
Balance, September 30, 1995
as restated 1,000,000 10,000 192,000 (283,000) (81,000)
Dividend to The Sanders
Companies, Inc. (Note I) -- -- -- (13,000) (13,000)
Issuance of shares in connection 500,000 5,000 1,209,000 -- 1,214,000
private offering
Issuance of shares in connection
with acquisition of Pride Aviation, Inc. 44,250 500 132,500 -- 133,000
Issuance of shares in connection
with settlement of long-term debt 56,000 500 167,500 -- 168,000
Net Income 34,000 34,000
----------- ----------- ----------- ----------- -----------
Balance, June 30, 1996 1,600,250 16,000 1,701,000 (262,000) 1,455,000
Net Income (unaudited) -- -- -- (226,000) (226,000)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 (unaudited) 1,600,250 $ 16,000 $ 1,701,000 $ (488,000) $ 1,229,000
=========== =========== =========== =========== ===========
</TABLE>
(1) The Predecessor entities, TriStar Aircraft Services, Inc. and TriStar
Airline Services, Inc. had 10,000 and 1,000 shares of common stock
outstanding, respectively, at both September 30, 1994 and 1995.
The accompanying notes are an integral part of these statements.
A-5
<PAGE> 62
AVIATION GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Six Months Ended
Ended Year Ended December 31,
June 30, September 30, (Unaudited)
1996 1995 1996 1995
------------ ------------ ------------ ------------
(Predecessor) (Predecessor)
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income (Loss) $ 34,000 $ 342,000 $ (226,000) $ (30,000)
------------ ------------ ------------ ------------
Adjustments to Reconcile Net Income (Loss)
to Net Cash Provided (Used) by Operating
Activities:
Depreciation and amortization 154,000 16,000 191,000 20,000
(Increase) decrease in deferred income taxes 47,000 36,000 (145,000) (16,000)
(Increase) decrease in accounts receivable (123,000) 147,000 46,000 (64,000)
(Increase) decrease in inventories (42,000) -- (30,000) (7,000)
(Increase) decrease in prepaids and
other current assets 29,000 (25,000) 13,000 11,000
Increase (decrease) in accounts payable (214,000) (87,000) 287,000 23,000
Increase (decrease) in interest payable 36,000 -- (21,000) --
Increase (decrease) in accrued liabilities (20,000) -- 58,000 (4,000)
Other (14,000) 11,000 (149,000) (5,000)
------------ ------------ ------------ ------------
Total Adjustments (147,000) 98,000 250,000 (42,000)
------------ ------------ ------------ ------------
Net Cash Provided (Used) by Operating Activities (113,000) 440,000 24,000 (72,000)
------------ ------------ ------------ ------------
Cash Flows From Investing Activities:
Cash paid for acquisition of Pride Aviation, Inc. (506,000) -- -- (22,000)
Cash payments for the purchase of equipment (12,000) (64,000) (248,000) (98,000)
------------ ------------ ------------ ------------
Net Cash Used by Investing Activities (518,000) (64,000) (248,000) (120,000)
------------ ------------ ------------ ------------
Cash Flows From Financing Activities:
Bank overdraft -- 29,000 -- 223,000
Proceeds from short-term borrowings 80,000 170,000 -- --
Repayments of short-term borrowings (27,000) -- -- --
Proceeds from issuance of long-term debt -- 194,000 -- 95,000
Advances to The Sanders Companies, Inc. -- (685,000) -- (126,000)
Proceeds from issuance of common stock 1,214,000 -- -- --
Principal payments on long-term debt (179,000) (84,000) (20,000) --
------------ ------------ ------------ ------------
Net Cash Provided (Used) by Financing Activities 1,088,000 (376,000) (20,000) 192,000
------------ ------------ ------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents 457,000 -- (244,000) --
Cash and Cash Equivalents at Beginning of Period -- -- 457,000 --
------------ ------------ ------------ ------------
Cash and Cash Equivalents at End of Period $ 457,000 $ -- $ 213,000 $ --
============ ============ ============ ============
Supplemental Disclosure of Cash Paid for Interest and
Income Taxes:
Cash paid for interest $ 35,000 $ 20,000 $ 45,000 $ 15,000
Cash paid for income taxes -- -- -- --
Supplemental Disclosure of Non-cash
Investing and Financing Activities:
Issuance of common stock in connection
with the acquisition of Pride
Aviation, Inc. $ 133,000 -- -- --
Issuance of long-term debt in
connection with the
the acquisition of Pride
Aviation, Inc. $ 857,000 -- -- --
Common stock issued to retire
long-term debt $ 168,000 -- -- --
Contribution from The Sanders
Companies, Inc. -- $ 151,000 -- $ 151,000
Dividend - to The Sanders
Companies, Inc. -- $ 787,000 -- $ 787,000
</TABLE>
The accompanying notes are an integral part of these statements.
A-6
<PAGE> 63
AVIATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996 and September 30, 1995
NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS
Aviation Group, Inc. (the "Company") (a Texas corporation) was
formed on December 4, 1995 for the purposes of combining certain
aircraft service operations formerly owned by The Sanders
Companies, Inc. ("Sanders") and to acquire additional aircraft
servicing related businesses. Sanders is 100% owned by Lee
Sanders, president and chief executive officer of the Company. On
February 21, 1996, the Company acquired Pride Aviation, Inc.
("Pride") in a business combination accounted for as a purchase.
Pride operates a Federal Aviation Administration ("FAA") approved
repair station and provides aircraft painting and maintenance
services (See Note C).
On December 20, 1995, the Company entered into an Exchange
Agreement (the "Exchange") whereby Sanders contributed all of the
outstanding common stock of Tri-Star Airline Services, Inc.
("Airline") and Tri-Star Aircraft Services, Inc. ("Aircraft")
(collectively "the Tri-Star Companies" or "Predecessor") to the
Company in exchange for 100% of the common stock (1,000,000 shares)
of the Company. The Exchange was accounted for similar to a
pooling of interest with no change in historical basis of assets
and liabilities as Sanders controlled 100% of the stock of the
companies prior to and subsequent to the transaction. Prior to the
Exchange, the Tri-Star Companies were operated as members of a
controlled group with other operations of Sanders. For periods
prior to the Exchange, the continuing operations of the Companies
have been separated from the controlled group.
The Company's primary business includes the operation of FAA
approved repair stations in New Iberia, Louisiana and Dallas, Texas
which provide painting and paint stripping services to the
commercial airline and corporate and private aircraft industry.
The Company also provides refueling services and light maintenance
services in Dallas, Texas and snack catering and aircraft cleaning
services at various commercial airports in the United States.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements present the
combined results of the Predecessor for all periods through
December 31, 1995, and the consolidated results of the Company and
its subsidiaries subsequent to that date. The Company changed its
fiscal year end during 1996 from September 30 to June 30. All
intercompany balances and transactions have been eliminated in
consolidation.
Interim Period Financial Statements
The unaudited financial statements as of December 31, 1996 and for
the six months ended December 31, 1996 and 1995, reflect, in the
opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to fairly state the financial
position and results of operations for the respective periods.
Operating results for the interim periods are not necessarily
indicative of the results for full years.
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 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.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers
all highly liquid investments purchased with an original maturity
of three months or less to be cash equivalents.
A-7
<PAGE> 64
AVIATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996 and September 30, 1995
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Accounts Receivable
The Company uses the allowance method in accounting for losses on
accounts receivable. Provision for losses on trade receivable is
made in amounts estimated to be adequate to cover anticipated bad
debts. Accounts receivable are charged against the allowance when
it is determined by management that payment will not be received.
Any subsequent receipts are credited to the allowance. Bad debt
expense charged to operations for the nine months ended June 30,
1996 and the year ended September 30, 1995 was $16,000 and $47,000,
respectively. The allowance for doubtful accounts was $30,000 at
June 30, 1996.
Inventory
Inventories are stated at the lower of cost or market, with cost
determined by the average costing method.
Goodwill
Goodwill represents the cost in excess of fair value of the net
assets (including tax attributes) acquired in the Pride
acquisition. Goodwill is being amortized on a straight line basis
over a 20 year period. Amortization expense and accumulated
amortization totaled $17,000 at June 30, 1996.
Property and Equipment
Property and equipment are stated at cost. Depreciation has been
provided using straight line and double declining balance methods
over the estimated useful lives of the assets which range from 5 to
30 years.
Income Taxes
The Company accounts for income taxes using Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
SFAS No. 109 requires an asset and liability approach to financial
accounting and reporting for income taxes. Deferred income tax
assets and liabilities are computed annually for differences
between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable
income.
Unaudited Pro Forma Net Income (Loss) Per Common Share
The Company's historical capital structure prior to 1996 is not
comparable to its current structure due to the Exchange discussed
in Note A and the issuance of common stock, warrants and
convertible debt during the fiscal period ended June 30, 1996 in
connection with a private placement of the Company's common stock
and the acquisition of Pride. Accordingly, historical net income
(loss) per common share is not considered meaningful and has not
been presented herein.
Pro forma net income (loss) per common share is computed based on
the weighted average number of common shares outstanding and gives
effect to certain adjustments described below. During the fiscal
period ended June 30, 1996, the Company issued common stock,
warrants and convertible debt with issuance and exercise prices
below that of the expected initial public offering ("IPO") price of
the Company's common stock of $8.00 per share. Pursuant to
Securities and Exchange Commission requirements, the dilutive
effect of these securities has been included in the calculation as
if they were outstanding as of the beginning of the periods
presented and the dilutive effect of the common stock and warrants
was measured using the treasury stock method. No adjustment was
made for the assumed conversion of the Company's convertible debt
since the effect would be antidilutive for the periods presented.
NOTE C - ACQUISITION OF PRIDE AVIATION, INC.
On February 21, 1996, the Company entered into an agreement to
acquire 99% of the outstanding common stock of Pride for cash of
$486,000, issuance of $857,000 of 10% Convertible Notes, issuance
of 44,250 shares of the Company's common stock valued at
approximately $133,000. At the closing of the acquisition, Pride
A-8
<PAGE> 65
AVIATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996 and September 30, 1995
NOTE C - ACQUISITION OF PRIDE AVIATION, INC., continued
had approximately $906,000 of long-term debt and $947,000 of other
liabilities. The acquisition was accounted for using the purchase
method. Accordingly, the purchase price was allocated to the net
assets acquired based on their estimated fair values. The
transaction was closed in early March 1996 and the results of
operations of Pride are included in the accompanying financial
statements beginning March 1, 1996. The excess of the purchase
price over the fair value of the net assets acquired (including tax
attributes) of $991,000 has been recorded as goodwill and is being
amortized using the straight-line method over 20 years.
Supplemental Pro Forma Results of Operations (Unaudited)
The following unaudited pro forma summary presents the consolidated
results of operations for the nine months ended June 30, 1996 as if
the Pride acquisition had occurred as of the beginning of the
Company's fiscal year (October 1, 1995). The summarized
information does not purport to be indicative of what would have
occurred had the acquisition actually been made as of such date or
of results which may occur in the future.
<TABLE>
<S> <C>
Revenues $ 6,755,000
Net Income $ 72,000
Net income per common share $ .05
</TABLE>
Adjustments made in arriving at pro forma unaudited results of
operations included, increased interest expense on acquisition
debt, additional depreciation expense, amortization of goodwill and
related tax adjustments.
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at June 30, 1996:
<TABLE>
<S> <C>
Machinery and equipment $1,659,000
Leasehold improvements 530,000
Furniture, fixtures and office equipment 114,000
Vehicles 106,000
----------
2,409,000
Less: accumulated depreciation (220,000)
----------
$2,189,000
==========
</TABLE>
Depreciation expense charged to operations for the nine months
ended June 30, 1996 and the year ended September 30, 1995 was
$137,000 and $16,000, respectively.
NOTE E - SHORT-TERM BANK BORROWINGS
The Company has a $250,000 line of credit facility with Compass
Bank ("Line of Credit") which is guaranteed by the U. S. Small
Business Administration. The Line of Credit was effectively
assumed by Tri-Star Aircraft Services, Inc. with the transfer of
assets and liabilities in connection with the Exchange discussed in
Note A.
The Line of Credit bears interest at a rate of prime plus 2%
(10.75% at June 30, 1996) and extends through September 30, 1997.
Borrowings under the Line of Credit are determined on a borrowing
base formula which is based on a percentage of qualifying accounts
receivable of the Company and Sanders. Borrowings outstanding
under the Line of Credit totaled $223,000 at June 30, 1996.
The Line of Credit is secured by the accounts receivable,
equipment, furniture and fixtures and capital stock of Sanders and
the Tri-Star Companies. Sanders, as primary maker, remains the
liable for borrowings under the Line of Credit. The Line of Credit
is also secured by the personal guaranty of Lee Sanders.
A-9
<PAGE> 66
AVIATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996 and September 30, 1995
NOTE E - SHORT-TERM BANK BORROWINGS, continued
The Line of Credit Agreement contains restrictive covenants which
among other things prohibits the creation of debt, corporate
mergers, sale of assets and other certain other transactions unless
consent is received from the bank. Management believes the Company
and Sanders were in compliance with the terms of the Line of Credit
agreement at June 30, 1996 and December 31, 1996.
NOTE F - LONG-TERM DEBT
<TABLE>
<S> <C>
Long-term debt consisted of the following at June 30, 1996:
Convertible notes payable, payable in quarterly installments
totaling $72,000 beginning April 1, 1998, bearing interest at
10%, maturing March 1, 2001 and secured by the Company's
shares of common stock of Pride Aviation, Inc. The notes are
convertible into shares of common stock of the Company at
conversion prices ranging from $3.00 to $4.50 per share, subject
to adjustment for certain equity transactions.
$ 884,000
Convertible notes payable to Louisiana Economic Development
Corporation dated March 1, 1996, payable in 60 monthly
installments of $3,800, including interest at 7.38% and one
final installment of the remaining unpaid balance on March 1,
2001. The note is secured by pledge of certain shares of common
stock, accounts receivable, inventory and equipment of Pride
Aviation, Inc. The note is convertible into shares of common
stock of the Company at a price of $4.50 per share, subject to
adjustment for certain equity transactions. 386,000
Note payable to Sunbelt Business Capital, L.L.C., payable in
monthly installments of $6,400, including interest at 12%, due
June 1998 and secured by certain accounts receivable and
equipment. 135,000
Note payable to Schwing Insurance Agency, payable currently, with
interest at 7.5% on the unpaid balance.
72,000
Note payable to Fidelity Bank, payable in monthly installments
of $1,000 including interest at prime plus 2.5% (10.75% at June
30, 1996), maturing August 1997 and secured by certain machinery
and equipment. 20,000
Note payable to Compass Bank, payable in monthly installments of
$1,600 including interest at prime plus 2.25% (10.5% at June 30,
1996), maturing September 1997 and secured by accounts
receivable, equipment, keyman life insurance policy, and personal
guaranty and pledge of stock of The Sanders Companies, Inc. by Lee
Sanders. 27,000
Various notes payable to finance companies, due in monthly 23,000
installments totaling $1,300, including interest at rates
ranging from 9.5% to 13.25%, maturing from April 1997 to
March 1998 and secured by certain vehicles.
Other 12,000
-----------
Total long-term debt 1,559,000
Less: current maturities of long-term debt (209,000)
-----------
Net long-term debt $ 1,350,000
===========
</TABLE>
A-10
<PAGE> 67
AVIATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996 and September 30, 1995
NOTE F - LONG TERM DEBT, continued
The Company's notes payable to Fidelity Bank and Compass Bank and
the notes payable to finance companies were originally made by
Sanders. This debt was effectively assumed by the Tri-Star
Companies with the transfer of assets and liabilities in connection
with the Exchange discussed in Note A. Sanders remains liable
under the note agreements as the primary maker.
Maturities of long-term debt for each of the next five years
are as follows:
<TABLE>
<CAPTION>
June 30,
<C> <C>
1997 $209,000
1998 186,000
1999 315,000
2000 316,000
2001 532,000
</TABLE>
NOTE G - LEASES
The Company leases various equipment and office and hanger
facilities under cancelable and noncancelable rental arrangements.
Rental expenses from operating leases and monthly rentals for the
nine months ended June 30, 1996 and year ended September 30, 1995,
were $252,000 and $42,000, respectively.
Minimum future lease payments for non-cancelable operating leases
for the next 5 years and thereafter are as follows:
<TABLE>
<CAPTION>
June 30,
<C> <C>
1997 $ 348,000
1998 322,000
1999 330,000
2000 334,000
2001 215,000
Thereafter 4,865,000
-----------
$ 6,414,000
===========
</TABLE>
NOTE H - COMMITMENTS AND CONTINGENCIES
The Company, in connection with the production of revenue, produces
chemical waste which is temporarily stored on the Company's
premises. Costs for disposal are expensed by the Company as waste
is produced. The provision for disposal of waste on hand totaled
$16,000 as of June 30, 1996, and is included in accrued liabilities
in the accompanying balance sheet.
One of the Company's subsidiaries is partially self-insured for
employee medical claims. Insurance with independent insurance
carriers is maintained to cover medical claims in excess of
self-insured limits. The Company's self insured limits vary by
month and policy year and are based on various factors including
the number of employees and dependants covered and certain
experience factors. In addition to aggregate annual and monthly
limitations, the Company's exposure is further limited to $30,000
per employee per year.
A-11
<PAGE> 68
AVIATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996 and September 30, 1995
NOTE I - SHAREHOLDERS' EQUITY
Private Offering
In March 1996, the Company issued 500,000 shares of common stock at
a price of $3.00 per share in a private offering and raised
approximately $1,214,000, net of sales commissions and offering
costs totaling $286,000.
In connection with the private offering, the Company issued
warrants to the placement agent to purchase 200,000 shares of the
Company's common stock at a price equal to $1.00 per share,
expiring February 28, 1999. The Company also issued warrants to an
investment banking advisor, for services provided in connection
with the offering, to purchase 80,000 shares of the Company's
common stock at a price equal to $2.50 per share, expiring February
28, 1999. The exercise price and number of shares issuable under
the warrants are subject to adjustment for certain equity
transactions and other circumstances. The warrants also contain a
"cashless" exercise feature whereby the warrants may be surrendered
in exchange for a number of shares to be determined based on the
difference between the exercise price and the market price for the
Company's common stock.
The holders of the Company's common stock and warrants have certain
registration rights, including the right to require the Company to
file a registration statement to register their securities with the
Securities and Exchange Commission, upon request of a majority of
the holders of the Company's common stock and warrants.
Debt Retirement
During March 1996, the Company issued 56,000 shares of common stock
to retire $168,000 of the outstanding principal amount of
indebtedness owed to Sunbelt Business Capital, L.L.C. (See Note F).
Dividend to/Contribution from The Sanders Companies, Inc.
Through September 30, 1995, the TriStar Companies had advanced
$787,000 to Sanders. These advances were declared and classified
as dividends since Sanders did not intend to repay the advances.
The Company's Tri-Star Companies subsidiaries were included in the
consolidated tax return of Sanders for the years ended December 31,
1995 and 1994. The contribution from Sanders for the year ended
September 30, 1995 represents the current tax expense generated by
the Tri-Star Companies for that fiscal year. The tax expense was
treated as a contribution from Sanders since Sanders did not intend
to require the Company to pay it for the expense. The dividend to
Sanders for the nine month period ended June 30, 1996 represents
the tax benefit generated by the Tri-Star Companies for the three
month period ended December 31, 1995. The tax benefit was treated
as a dividend to Sanders since Sanders does not intend to pay the
Company for the benefit.
NOTE J - RELATED PARTY TRANSACTIONS
For periods prior to the Exchange and through March 1, 1996,
Sanders provided services and allocated certain general and
administrative expenses to the companies operating under the
controlled group, including the Tri-Star Companies. Such charges
were allocated to the members of the controlled group based upon
the level of management and supervision time required, services
provided and certain other factors. Management of the Company
believes that such allocations are reasonable. These charges are
included in general and administrative expenses and totaled $77,000
and $203,000 for the period ended June 30, 1996 and year ended
September 30, 1995, respectively. One of the subsidiaries of the
Sanders controlled group was not profitable for the year ended
September 30, 1995, and subsequently ceased operations. The amount
of corporate overhead allocated to this subsidiary by Sanders
during the year ended September 30, 1995 was $144,000. Had this
subsidiary not operated in the year ended September 30, 1995, the
Company's corporate overhead allocation would have increased by
$97,000.
A-12
<PAGE> 69
AVIATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996 and September 30, 1995
NOTE J - RELATED PARTY TRANSACTIONS, continued
In connection with the Pride acquisition, on March 1, 1996, the
Company entered into consulting agreements with two former
shareholders of Pride. The consulting agreements provide for the
payment of monthly fees and reimbursement of certain expenses with
terms ranging from 12 to 24 months. Fees paid under these
arrangements totaled $40,000 for the period ended June 30, 1996
with $24,000 capitalized as other assets (See Note O) and $16,000
included in general and administrative expenses. Minimum future
payments over the remaining terms of these arrangements are $92,000
and $24,000 for the fiscal years ending June 30, 1997 and 1998,
respectively.
As of June 30, 1996, the Company owed $2,000 to Sanders for net
payments made by Sanders on behalf of the Company. Such amount is
reflected as "Due to affiliate" in the accompanying balance sheet.
NOTE K - PROVISION FOR INCOME TAXES
The Company's Tri-Star Companies subsidiaries were included in the
consolidated tax return of Sanders for the periods prior to and
through the date of the Exchange. Sanders did not require its
subsidiaries to pay for their share of the consolidated tax expense
or reimburse the subsidiaries for tax benefits generated.
Accordingly, for periods prior to the Exchange, the tax expense
(benefits) for the Tri Star Companies were computed as if it were a
separate taxpayer and the resulting amount treated as an equity
transaction with Sanders. (See Note I). The Company will file a
separate consolidated tax return for the period ended June 30,
1996.
The provision for income taxes consist of the following components:
<TABLE>
<CAPTION>
Nine Months Year
Ended Ended
June 30, 1996 September 30, 1995
------------- ------------------
<S> <C> <C>
Current provision (benefit) (See Note I) $(13,000) $151,000
Deferred taxes 47,000 37,000
-------- --------
Provision for income taxes $ 34,000 $188,000
======== ========
</TABLE>
Deferred taxes are principally due to differences in the basis and
depreciable lives for property and equipment for book and tax
purposes and unused net operating loss carryforwards.
Deferred tax assets and liabilities consisted of the following at
June 30, 1996:
<TABLE>
<S> <C>
Assets
Net operating loss carryforward $ 257,000
Liabilities
Property and equipment (536,000)
Other (26,000)
---------
Net deferred tax liability $(305,000)
=========
</TABLE>
The net deferred tax amounts are presented on the balance sheet as
follows:
<TABLE>
<S> <C>
Current deferred tax asset $ 11,000
Long-term deferred tax liability (316,000)
---------
$(305,000)
=========
</TABLE>
A-13
<PAGE> 70
AVIATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996 and September 30, 1995
NOTE K - PROVISION FOR INCOME TAXES, continued
The following is a reconciliation of taxes computed at the federal
statutory rate to the provision for income taxes included in the
financial statements:
<TABLE>
<CAPTION>
Nine Months Year
Ended Ended
June 30, 1996 September 30, 1995
------------- ------------------
<S> <C> <C>
Taxes computed by applying federal
statutory rate $ 23,000 $180,000
State income taxes, net of federal benefits 15,000 -
Expenses not deductible for tax purposes 6,000 8,000
Effect of graduated tax rates and other (10,000) -
------- --------
Provision for income taxes $34,000 $188,000
======= ========
</TABLE>
For income tax purposes, the Company has available at June 30,
1996, unused federal and state net operating loss carryforwards of
approximately $823,000 and $135,000, respectively, which may be
applied against future taxable income of the Company's subsidiary
(Pride), subject to certain annual limitations, expiring in various
years from 2005 to 2009. The Company believes that it is more
likely than not that the net operating loss carryforwards will be
utilized in the future and accordingly, no valuation allowance has
been recorded.
NOTE L - PROVISION FOR WARRANTY CLAIMS
The Company generally warrants its products and services against
defects in material and workmanship based on contract terms with
customers. The Company records an estimated liability for warranty
claims, based on actual claims experience, at the time the products
and services are provided and revenue is recognized. The Company's
warranty liability totaled $101,000 as of June 30, 1996, and is
included in accrued liabilities in the accompanying balance sheet.
Warranty claims, which are netted against revenue, totaled $38,000
and $0 for the period ended June 30, 1996 and year ended September
30, 1995, respectively
NOTE M - FAIR VALUE OF FINANCIAL INSTRUMENTS
For certain of the Company's financial instruments, including cash
equivalents, accounts receivable, short-term bank borrowings and
accounts payable, the carrying amounts approximate fair value due to
their short maturities.
The carrying amount reported for long-term debt approximates fair
value based on current interest rates for debt with similar terms
and maturities.
NOTE N - CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
Substantially all of the Company's accounts receivable at June 30,
1996, result from sales to third party companies in the airline
industry. This concentration of customers may impact the Company's
overall credit risk, either positively or negatively, in that
these entities may be similarly affected by changes in economic or
other conditions. The Company believes that the risk is mitigated
by the size, reputation and nature of its customers. Although, the
Company generally does not require collateral or other security to
support customer receivables, it may have certain rights, such as
the ability to place liens on aircraft serviced, in the event of
non-payment by its customers.
During the period ended June 30, 1996, the Company derived
approximately 62% of its revenues from United Airlines.
Receivables due from United Airlines totaled approximately $202,000
at June 30, 1996.
A-14
<PAGE> 71
AVIATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996 and September 30, 1995
NOTE N - CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS, continued
Revenues for the year ended September 30, 1995, included
$1,627,000, from major two major customers which represents 64% of
total revenues.
NOTE O - SUBSEQUENT EVENTS (unaudited)
Acquisition Agreement
On July 10, 1996, the Company entered into an agreement to acquire
certain aircraft refueling operations from a third party for
$170,000. Under the terms of the agreement, the Company would
acquire the seller's interest in a fuel farm held under an
operating lease arrangement and acquire certain refueling contract
rights and refueling equipment. The Company paid $50,000 as a down
payment for the acquisition. As of March 1, 1997, the transaction
had not closed pending certain required regulatory approvals. If
such approvals are not granted, the Company's down payment will be
returned and the agreement canceled.
New Aircraft Hangar and Contract Proposals
The Company has been pursuing efforts to obtain a contract with
United Airlines ("United") for the painting of United's Boeing 747
commercial aircraft fleet. The Company currently provides painting
services for United's non-747 fleet. Subsequent to June 30, 1996,
the Company submitted a Request For Proposal ("RFP") to United for
the painting of its Boeing 747 fleet. In conjunction with these
efforts, the Company has pursued and obtained commitments for
approximately $4,200,000 in Louisiana state and federal grants
toward the construction and operation of a new aircraft hangar at
the Company's New Iberia, Louisiana location. Approximately
$4,300,000 in additional financing will be required to fund the
hangar's $8,500,000 estimated cost. As of June 30, 1996, the
Company has capitalized approximately $24,000 in costs (See Note J)
associated with arranging financing commitments for the project.
There presently exists no binding agreement between the Company and
United to paint United's 747 fleet. The Company is not obligated
to construct the hangar or fund its $8.5 million cost. There can
be no assurance that if the United 747 paint contract is obtained
that sufficient or suitable financing can ultimately be arranged.
Bridge Notes
In February 1997, the Company completed a private offering of
$500,000 of its 10% unsecured, subordinated bridge notes. The
proceeds of this offering were used to fund costs of the Company's
initial public offering ("IPO") scheduled to be filed with the
Securities and Exchange Commission during March 1997 and general
working capital. If the Company successfully completes the IPO by
September 30, 1997, the terms of these notes require the Company to
issue to the holders that number of shares of Common Stock which
equals $250,000 divided by the initial public offering price.
Stock Options
The Company's Board and shareholders approved a 1997 Employee Stock
Option Plan (the "Plan") in February 1997. The Company may grant
options under the Plan to key employees and directors of the
Company. The Board has authorized the grant of options to purchase
26,000 shares of Common Stock exercisable at the initial public
offering price and 10,000 shares of Common Stock exercisable at
$4.50 per share.
A-15
<PAGE> 72
INDEPENDENT AUDITORS' REPORT
To Pride Aviation, Inc.
New Iberia, Louisiana
We have audited the accompanying balance sheet of Pride Aviation, Inc. as of
September 30, 1995, and the related statements of operations, changes in
stockholders' equity (deficit) and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pride Aviation, Inc. as of
September 30, 1995, and the results of its operations and cash flows for the
year then ended in conformity with generally accepted accounting principles.
Arsement, Redd & Morella, L.L.C.
October 7, 1996
Lafayette, Louisiana
P-1
<PAGE> 73
PRIDE AVIATION, INC.
BALANCE SHEET
September 30, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets
Cash and cash equivalents $ 1,000
Accounts receivable 366,000
Inventory 126,000
Note receivable 13,000
Other current assets 39,000
------------
Total Current Assets 545,000
------------
Plant and Equipment, net of accumulated
depreciation of $869,000 704,000
------------
Other Assets
Deposits and other 142,000
------------
$ 1,391,000
============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Bank overdraft $ 74,000
Note payable to stockholder 265,000
Current maturities of long-term debt 315,000
Accounts payable 796,000
Accrued expenses 331,000
------------
Total Current Liabilities 1,781,000
------------
Long-term Liabilities
Long-term debt, net of current maturities 685,000
------------
Shareholders' Equity (Deficit)
Common stock, $1.00 par value 50,000 shares
authorized, 10,000 shares issued and outstanding 10,000
Additional paid-in capital 1,480,000
Accumulated deficit (2,565,000)
------------
(1,075,000)
------------
$ 1,391,000
============
</TABLE>
P-2
The accompanying notes are an integral part of these statements.
<PAGE> 74
PRIDE AVIATION, INC.
STATEMENTS OF OPERATIONS
Years Ended September 30, 1995 and Five Months Ended
February 29, 1996
<TABLE>
<CAPTION>
Year Five Months
Ended Ended
September 30, February 29,
1995 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Revenue $ 6,519,000 $ 2,874,000
Cost of Revenue 4,302,000 2,117,000
------------ ------------
Gross Profit 2,217,000 757,000
General and Administrative Expenses 1,957,000 466,000
Depreciation and Amortization 174,000 60,000
------------ ------------
Income From Operations 86,000 231,000
------------ ------------
Other Income (Expenses)
Other income -- 22,000
Interest expense (167,000) (58,000)
------------ ------------
(167,000) (36,000)
------------ ------------
Net Income (Loss) $ (81,000) $ 195,000
============ ============
</TABLE>
P-3
The accompanying notes are an integral part of these statements.
<PAGE> 75
PRIDE AVIATION, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
Years Ended September 30, 1995 and Five Months Ended
February 29, 1996
<TABLE>
<CAPTION>
Common Paid in Accumulated
Stock Capital Deficit
----------- ----------- -----------
<S> <C> <C> <C>
Balance, September 30, 1994 $ 6,000 $ 1,480,000 $(2,484,000)
Net Loss -- -- (81,000)
Issuance of stock 4,000 -- --
----------- ----------- -----------
Balance, September 30, 1995 10,000 1,480,000 (2,565,000)
Net Income (Unaudited) -- -- 195,000
Contribution from stockholder(Unaudited) -- 95,000 --
----------- ----------- -----------
Balance, February 29, 1996 (Unaudited) $ 10,000 $ 1,575,000 $(2,370,000)
=========== =========== ===========
</TABLE>
P-4
The accompanying notes are an integral part of these statements.
<PAGE> 76
PRIDE AVIATION, INC.
STATEMENTS OF CASH FLOWS
Years Ended September 30, 1995 and Five Months Ended
February 29, 1996
<TABLE>
<CAPTION>
Year Five Months
Ended Ended
September 30, February 29,
1995 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss $ (81,000) $ 195,000
------------ ------------
Adjustments to Reconcile Net Loss to Net Cash
Provided (Used) by Operating Activities:
Depreciation and amortization 184,000 60,000
Interest paid with refinancing 36,000 --
(Increase) decrease in accounts receivable 61,000 (67,000)
(Increase) decrease in inventories (14,000) 8,000
(Increase) decrease in other current assets (36,000) 10,000
Increase (decrease) in accounts payable 200,000 15,000
Increase (decrease) in accrued liabilities 59,000 65,000
Increase (decrease) in interest payable (13,000) 5,000
Other -- 9,000
------------ ------------
Total Adjustments 477,000 105,000
------------ ------------
Net Cash Provided (Used) by Operating Activities 396,000 300,000
------------ ------------
Cash Flows From Investing Activities:
Cash payments for the purchase of equipment (209,000) (41,000)
Collection of notes receivable -- 13,000
------------ ------------
Net Cash Used by Investing Activities (209,000) (28,000)
------------ ------------
Cash Flows From Financing Activities:
Bank overdraft (9,000) (2,000)
Proceeds from short-term borrowings 2,047,000 --
Repayments on short-term borrowings (2,125,000) --
Proceeds from issuance of long-term debt 588,000 --
Principal payments on long-term debt (693,000) (93,000)
Advances to stockholder -- (177,000)
Proceeds from issuance of common stock 4,000 --
------------ ------------
Net Cash Provided (Used) by Financing Activities (188,000) (272,000)
------------ ------------
Net Decrease in Cash and Cash Equivalents -- --
Cash and Cash Equivalents at Beginning of Period 1,000 1,000
------------ ------------
Cash and Cash Equivalents at End of Period $ 1,000 $ 1,000
============ ============
Supplemental Disclosure of Cash Paid for
Interest and Income Taxes:
Cash paid for interest $ 145,000 $ 54,000
Cash paid for income taxes -- --
Supplemental Disclosure of Non-cash
Financing and Investing Activities:
Interest paid with refinancing of long-term debt $ 36,000 $ --
</TABLE>
P-5
The accompanying notes are an integral part of these statements.
<PAGE> 77
PRIDE AVIATION, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1995 and February 29, 1996 (unaudited)
NOTE A - ORGANIZATION AND NATURE OF BUSINESS
Pride Aviation, Inc. (an Oklahoma corporation) (the "Company"),
located in New Iberia, Louisiana, was established as a F.A.A.
repair station for specialized aircraft maintenance services
including paint stripping and painting operations on certain types
of aircraft.
In February 1996, the stockholders sold the company to Aviation
Group, Inc. ("Aviation Group") for cash of $486,000, 44,250 shares
of the Aviation Group, Inc. stock and assumption of the Company's
long-term debt and other liabilities. The accompanying statements
include statements of operations, changes in stockholders' deficit
and cash flows for the five month period through the effective date
of the sale, February 29, 1996. Subsequent to February 29, 1996,
the financial position and results of operations of the Company are
included with the consolidated financial statements of Aviation
Group, Inc. The accompanying financial statements were prepared on
the historical cost basis of accounting and do not reflect any
purchase accounting adjustments arising from the sale to Aviation
Group, Inc.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers
all highly liquid investments purchased with an original maturity
of three months or less to be cash equivalents.
Accounts Receivable
The Company uses the allowance method in accounting for losses on
accounts receivable. Management believes that all accounts
receivable as of September 30, 1995 and February 29, 1996 were
fully collectible; therefore, no allowance for doubtful accounts
was recorded. Bad debt expense charged to operations was $2,000
for the year ended September 30, 1995 and $0 (unaudited) for the
five months ended February 29, 1996.
The Company grants credit to customers, many of whom are in the
airline industry.
Inventory
Inventories are stated at the lower of cost, with cost determined
by the average costing method.
Machinery and Equipment
Machinery and equipment are stated at cost. Depreciation has been
provided using straight line and double declining balance methods
over the estimated useful lives of the assets which range from 3 to
40 years.
P-6
<PAGE> 78
PRIDE AVIATION, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1995 and February 29, 1996 (unaudited)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Income Taxes
The Company accounts for income taxes using Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
SFAS No. 109 requires an asset and liability approach to financial
accounting and reporting for income taxes. Deferred income tax
assets and liabilities are computed annually for differences
between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable
income.
Reclassifications
Certain reclassifications have been made to the prior year
statements to conform to the current year presentation.
NOTE C - PLANT AND EQUIPMENT
Plant and equipment consisted of the following at September 30, 1995:
<TABLE>
<S> <C>
Machinery and equipment $ 869,000
Leasehold improvements 465,000
Furniture, fixtures and office equipment 66,000
Vehicles 16,000
Construction in progress 157,000
-----------
1,573,000
Less: accumulated depreciation (869,000)
-----------
$ 704,000
===========
</TABLE>
NOTE D - NOTE RECEIVABLE
The Company has a note receivable owed from Industrial Helicopters,
Inc. in the original amount of $40,000. The note is non-interest
bearing and is secured by equipment.
P-7
<PAGE> 79
PRIDE AVIATION, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1995 and February 29, 1996 (unaudited)
NOTE E - LONG-TERM DEBT
Long-term debt consisted of the following at September 30, 1995:
<TABLE>
<S> <C>
Note payable to Louisiana Economic Development
Corporation, payable in 60 monthly installments
of $11,675, including interest at 7.28%, secured
by pledge of stock and personal guaranty of
Frank Rice, assignment of life insurance,
accounts receivable, inventory and equipment $ 533,000
Note payable to Sunbelt Business Capital, Inc.,
payable in monthly installments of $13,285
including interest at 12%, secured by personal
guaranty of the shareholders, accounts
receivable, inventory and equipment 372,000
Note payable to Schwing Insurance Agency,
payable in monthly installments of $3,825
including interest at 7.5% 72,000
Other 23,000
------------
1,000,000
Less: current maturities of long-term debt (315,000)
------------
Net long-term debt $ 685,000
============
</TABLE>
Maturities of long-term debt for each of the next five years are as
follows:
<TABLE>
<CAPTION>
September 30,
<C> <C>
1996 $302,000
1997 249,000
1998 235,000
1999 130,000
2000 66,000
</TABLE>
P-8
<PAGE> 80
PRIDE AVIATION, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1995 and February 29, 1996 (unaudited)
NOTE F - OPERATING LEASES
The Company leases various equipment and office and hanger
facilities under cancelable and noncancelable rental arrangements.
Rental expenses from operating leases and monthly rentals were as
follows:
<TABLE>
<CAPTION>
Year Five Months
Ended Ended
September 30, February 29,
1995 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Rent expense $ 401,000 $ 205,000
============ ============
</TABLE>
The Company is committed to several operating leases for its
hangars and certain equipment. Minimum future lease payments of
all non-cancelable operating leases for the next five years are as
follows:
<TABLE>
<CAPTION>
September 30,
<S> <C>
1996 $ 383,000
1997 383,000
1998 384,000
1999 388,000
2000 305,000
Thereafter 5,036,000
---------------
$ 6,879,000
===============
</TABLE>
NOTE G - COMMITMENTS AND CONTINGENCIES
The Company, in connection with the production of revenue, produces
chemical waste which is temporarily stored on the Company's
premises. Costs for disposal are expensed by the Company as waste
is produced. The provisions for disposal of waste on hand was as
follows and are included in other liabilities in the accompanying
balance sheet.
<TABLE>
<CAPTION>
Year Five Months
Ended Ended
September 30, February 29,
1995 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Provision for waste disposal $ 25,000 $ 18,000
=========== ============
</TABLE>
P-9
<PAGE> 81
PRIDE AVIATION, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1995 and February 29, 1996 (unaudited)
NOTE H - RELATED PARTY TRANSACTIONS
Frank Rice
Frank Rice was President of the Company and owned approximately
50.1% of the Company's common stock prior to the sale to Aviation
Group. The Company had the following transaction with Frank Rice
during the periods ending September 30, 1995 and February 29, 1996.
Note Payable to Stockholder
The Company had notes payable to Frank Rice totaling $265,000 as
of September 30, 1995, payable on demand with interest at 18%.
Interest expense related to this note was $33,000 during the
year ended September 30, 1995. At September 30, 1995, the
Company had $9,000 due to Frank Rice which is included in
accounts payable in the accompanying balance sheet.
Transfer of Alexandria Assets (Unaudited)
Effective after the fiscal year ended September 30, 1995, the
Company transferred its Alexandria, Louisiana operations to
Frank Rice. The agreement provided for among other things, the
assignment of all receivables, payables, fixed assets and leases
associated with the Alexandria location to Frank Rice in
exchange for Frank Rice's forgiveness of the $265,000 note
payable above and the Company's forgiveness of certain advances
made to Frank Rice on behalf of the Alexandria operations. The
excess of the amount of note payable forgiven over the net book
value of the assets transferred and the advances forgiven
totaled $95,000 and was recorded as a "Contribution from
stockholder" in the accompanying statement of changes in
stockholders' equity.
Sunbelt Business Capital
Sunbelt Business Capital was a stockholder of the Company prior to
the sale to Aviation Group. Charlie Weed, a consultant to the
Company, was also the President of Sunbelt Business Capital.
Consulting Fees
The amount of consulting fees incurred from Charlie Weed and
Sunbelt Business Capital for the year ended September 30, 1995
and the five months ended February 29, 1996 was as follows:
<TABLE>
<CAPTION>
Year Five Months
Ended Ended
September 30, February 29,
1995 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Charlie Weed $ 74,000 $ 30,000
============ ===========
Sunbelt Business Capital $ 7,000 $ --
============ ===========
</TABLE>
P-10
<PAGE> 82
PRIDE AVIATION, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1995 and February 29, 1996 (unaudited)
NOTE H - RELATED PARTY TRANSACTIONS, continued
Of the total amount of consulting fees for the year ended
September 30, 1995, approximately $33,000 was included in
accounts payable at September 30, 1995.
Financing
The Company had a note payable to Sunbelt Business Capital in
the amount of $372,000 as of September 30, 1995. In addition,
the Company had a $300,000 line of credit facility with Sunbelt
Business Capital which bore interest at 18% and expired on May
1, 1995. Interest expense related to the notes and line of
credit was as follows:
<TABLE>
<CAPTION>
Year Five Months
Ended Ended
September 30, February 29,
1995 1996
---------- -----------
(Unaudited)
<S> <C> <C>
Interest expense $ 77,000 $ 18,000
========== ===========
</TABLE>
NOTE I - INCOME TAXES
No provision or benefit for income taxes is recognized in the
financial statements for the year ended September 30, 1995 and the
five months ended February 29, 1996, due to the existence of net
operating losses and unrecognized net operating loss carryforwards.
Deferred tax assets consisted of the following at September 30,
1995:
<TABLE>
<S> <C>
Net operating losses $ 953,000
Valuation allowance on deferred tax asset (953,000)
----------
Net deferred tax asset $ -
==========
</TABLE>
For income tax purposes, the Company had available at September 30,
1995, unused operating loss carryforwards of $2,500,000, which were
available to be applied against future taxable income expiring in
various years from 2005 to 2009.
P-11
<PAGE> 83
PRIDE AVIATION, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1995 and February 29, 1996 (unaudited)
NOTE J - PROVISION FOR WARRANTY CLAIMS
The Company generally warrants its products and services against
defects in material and workmanship based on contract terms with
customers. The Company records an estimated liability for warranty
claims, based on actual claims experience, at the time the products
and services are provided and revenue is recognized. The Company's
warranty liability totaled $74,000 as of September 30, 1995, and is
included in other liabilities in the accompanying balance sheet.
The provision for warranty claims, which is netted against revenue,
was as follows:
<TABLE>
<CAPTION>
Year Five Months
Ended Ended
September 30, February 29,
1995 1996
---------- ------------
(Unaudited)
<S> <C> <C>
Provision for warranty claims $ 68,000 $ 43,000
========== ===========
</TABLE>
NOTE K - CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
Substantially all of the Company's accounts receivable at September
30, 1995, result from sales to third party companies in the airline
industry. This concentration of customers may impact the Company's
overall credit risk, either positively or negatively, in that
these entities may be similarly affected by changes in economic or
other conditions. The Company believes that the risk is mitigated
by the size, reputation and nature of its customers. In addition,
the Company generally does not require collateral or other security
to support customer receivables.
The following summarizes the customers which accounted for greater
than 10% of the Company's revenues during the year ended September
30, 1995 and the five months ended February 29, 1996:
<TABLE>
<CAPTION>
Year Five Months
Ended Ended
September 30, February 29,
1995 1996
---------- -----------
(Unaudited)
<S> <C> <C>
United Airlines 76% 96%
========== ===========
</TABLE>
P-12
<PAGE> 84
================================================================================
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT
RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY THOSE TO
WHICH IT RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE
SUCH OFFER IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT
IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO ITS
DATE.
-----------------------
TABLE OF CONTENTS
-----------------------
PAGE
<TABLE>
<S> <C>
Additional Information .................................................... 2
Prospectus Summary ........................................................ 3
Risk Factors .............................................................. 7
Use of Proceeds ........................................................... 13
Dilution .................................................................. 15
Dividend Policy ........................................................... 16
Capitalization ............................................................ 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ....... 17
Pro Forma Financial Data .................................................. 22
Business .................................................................. 23
Management ................................................................ 31
Certain Relationships and Related Transactions ............................ 35
Principal Shareholders .................................................... 36
Description of Securities ................................................. 37
Underwriting .............................................................. 42
Legal Opinions ............................................................ 44
Experts ................................................................... 44
</TABLE>
Until __________________, 1997 (25 days after the date of this
Prospectus), all dealers effecting transactions in the registered securities,
whether or not participating in this distribution, may be required to deliver a
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus when acting as underwriters and with respect to their unsold
allotments.
================================================================================
================================================================================
AVIATION GROUP, INC.
1,000,000 SHARES OF
COMMON STOCK
AND
1,000,000 WARRANTS
---------------------------
P R O S P E C T U S
---------------------------
RAS SECURITIES CORP.
FIRST LONDON
SECURITIES CORPORATION
______________, 1997
================================================================================
<PAGE> 85
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Texas Miscellaneous Corporation Laws Act. Article 1302-706 of the
Texas Miscellaneous Corporation Laws Act provides that the articles of
incorporation of a Texas corporation may provide:
"that a director of the corporation shall not be liable, or shall be
liable only to the extent provided in the articles of incorporation,
to the corporation or its shareholders or members for monetary damages
for an act or omission in the director's capacity as a director,
except that this article does not authorize the elimination or
limitation of the liability of a director to the extent the director
is found liable for:
(1) a breach of the director's duty of loyalty to the
corporation or its shareholders or members;
(2) an act or omission not in good faith that constitutes
a breach of duty of the director to the corporation or an act or
omission that involves intentional misconduct or a knowing violation
of the law;
(3) a transaction from which the director received an
improper benefit, whether or not the benefit resulted from an action
taken within the scope of the director's office; or
(4) an act or omission for which the liability of a
director is expressly provided by an applicable statute."
Texas Business Corporation Act. Article 2.02-1 of the Texas Business
Corporation Act provides as follows:
"A. In this article:
(1) "Corporation" includes any domestic or foreign
predecessor entity of the corporation in a merger, consolidation, or
other transaction in which the liabilities of the predecessor are
transferred to the corporation by operation of law and in any other
transaction in which the corporation assumes the liabilities of the
predecessor but does not specifically exclude liabilities that are the
subject matter of this article.
(2) "Director" means any person who is or was a director
of the corporation and any person who, while a director of the
corporation, is or was serving at the request of the corporation as a
director, officer, partner, venturer, proprietor, trustee, employee,
agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan, or other enterprise.
(3) "Expenses" include court costs and attorneys' fees.
(4) "Official capacity" means:
(a) when used with respect to a director, the
office of director in the corporation, and
(b) when used with respect to a person other than
a director, the elective or appointive office in the corporation held
by the officer or the employment or agency relationship undertaken by
the employee or agent in behalf of the corporation, but
(c) in both Paragraphs (a) and (b) does not
include service for any other foreign or domestic corporation or any
partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise.
(5) "Proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative, any appeal in such an
action, suit, or proceeding, and any inquiry or investigation that
could lead to such an action, suit, or proceeding.
B. A corporation may indemnify a person who was, is, or is
threatened to be made a named defendant or respondent in a
proceeding because the person is or was a director only if it
is determined in accordance with Section F of this article
that the person:
II-1
<PAGE> 86
(1) conducted himself in good faith;
(2) reasonably believed:
(a) in the case of conduct in his official
capacity as a director of the corporation, that his conduct was in the
corporation's best interests; and
(b) in all other cases, that his conduct was at
least not opposed to the corporation's best interests; and
(3) in the case of any criminal proceeding, had no
reasonable cause to believe his conduct was unlawful.
C. Except to the extent permitted by Section E of this article, a
director may not be indemnified under Section B of this
article in respect of a proceeding:
(1) in which the person is found liable on the basis that
personal benefit was improperly received by him, whether or not the
benefit resulted from an action taken in the person's official
capacity; or
(2) in which the person is found liable to the
corporation.
D. The termination of a proceeding by judgment, order,
settlement, or conviction, or on a plea of nolo contendere or
its equivalent is not of itself determinative that the person
did not meet the requirements set forth in Section B of this
article. A person shall be deemed to have been found liable
in respect of any claim, issue or matter only after the person
shall have been so adjudged by a court of competent
jurisdiction after exhaustion of all appeals therefrom.
E. A person may be indemnified under Section B of this article
against judgments, penalties (including excise and similar
taxes), fines, settlements, and reasonable expenses actually
incurred by the person in connection with the proceeding; but
if the person is found liable to the corporation or is found
liable on the basis that personal benefit was improperly
received by the person, the indemnification (1) is limited to
reasonable expenses actually incurred by the person in
connection with the proceeding and (2) shall not be made in
respect of any proceeding in which the person shall have been
found liable for willful or intentional misconduct in the
performance of his duty to the corporation.
F. A determination of indemnification under Section B of this
article must be made:
(1) by a majority vote of a quorum consisting of
directors who at the time of the vote are not named defendants or
respondents in the proceeding;
(2) if such a quorum cannot be obtained, by a majority
vote of a committee of the board of directors, designated to act in
the matter by a majority vote of all directors, consisting solely of
two or more directors who at the time of the vote are not named
defendants or respondents in the proceeding;
(3) by special legal counsel selected by the board of
directors or a committee of the board by vote as set forth in
Subsection (1) or (2) of this section, or, if such a quorum cannot be
obtained and such a committee cannot be established, by a majority
vote of all directors; or
(4) by the shareholders in a vote that excludes the
shares held by directors who are named defendants or respondents in
the proceeding.
G. Authorization of indemnification and determination as to
reasonableness of expenses must be made in the same manner as
the determination that indemnification is permissible, except
that if the determination that indemnification is permissible
is made by special legal counsel, authorization of
indemnification and determination as to reasonableness of
expenses must be made in the manner specified by Subsection
(3) of Section F of this article for the selection of special
legal counsel. A provision contained in the articles of
incorporation, the bylaws, a resolution of shareholders or
directors, or an agreement that makes mandatory the
indemnification permitted under Section B of this article
shall be deemed to constitute authorization of indemnification
in the manner required by this section even though such
provision may not have been adopted and authorized in the same
manner as the determination that indemnification is
permissible.
II-2
<PAGE> 87
H. A corporation shall indemnify a director against reasonable
expenses incurred by him in connection with a proceeding in
which he is a named defendant or respondent because he is or
was a director if he has been wholly successful, on the merits
or otherwise, in the defense of the proceeding.
I. If, in a suit for the indemnification required by Section H of
this article, a court of competent jurisdiction determines
that the director is entitled to indemnification under that
section, the court shall order indemnification and shall award
to the director the expenses incurred in securing the
indemnification.
J. If, upon application of a director, a court of competent
jurisdiction determines, after giving any notice the court
considers necessary, that the director is fairly and
reasonably entitled to indemnification in view of all the
relevant circumstances, whether or not he has met the
requirements set forth in Section B of this article or has
been found liable in the circumstances described by Section C
of this article, the court may order the indemnification that
the court determines is proper and equitable; but if the
person is found liable to the corporation or is found liable
on the basis that personal benefit was improperly received by
the person, the indemnification shall be limited to reasonable
expenses actually incurred by the person in connection with
the proceeding.
K. Reasonable expenses incurred by a director who was, is, or is
threatened to be made a named defendant or respondent in a
proceeding may be paid or reimbursed by the corporation, in
advance of the final disposition of the proceeding and without
the determination specified in Section F of this Article or
the authorization or determination specified in Section G of
this article, after the corporation receives a written
affirmation by the director of his good faith belief that he
has met the standard of conduct necessary for indemnification
under this article and a written undertaking by or on behalf
of the director to repay the amount paid or reimbursed if it
is ultimately determined that he has not met that standard or
if it is ultimately determined that indemnification of the
director against expenses incurred by him in connection with
that proceeding is prohibited by Section E of this article. A
provision contained in the articles of incorporation, the
bylaws, a resolution of shareholders or directors, or an
agreement that makes mandatory the payment or reimbursement
permitted under this section shall be deemed to constitute
authorization of that payment or reimbursement.
L. The written undertaking required by Section K of this article
must be an unlimited general obligation of the director but
need not be secured. It may be accepted without reference to
financial ability to make repayment.
M. A provision for a corporation to indemnify or to advance
expenses to a director who was, is, or is threatened to be
made a named defendant or respondent in a proceeding, whether
contained in the articles of incorporation, the bylaws, a
resolution of shareholders or directors, an agreement, or
otherwise, except in accordance with Section R of this article
as limited by the articles of incorporation, if such a
limitation exists.
N. Notwithstanding any other provision of this article, a
corporation may pay or reimburse expenses incurred by a
director in connection with his appearance as a witness or
other participation in a proceeding at a time when he is not a
named defendant or respondent in the proceeding.
O. An officer of the corporation shall be indemnified as, and to
the same extent, provided by Sections H, I, and J of this
article for a director and is entitled to seek indemnification
under those sections to the same extent as a director. A
corporation may indemnify and advance expenses to an officer,
employee, or agent of the corporation to the same extent that
it may indemnify and advance expenses or directors under this
article.
P. A corporation may indemnify and advance expenses to persons
who are not or were not officers, employees, or agents of the
corporation but who are or were serving at the request of the
corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary
of another foreign or domestic corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan, or
other enterprise to the same extent that it may indemnify and
advance expenses to directors under this article.
Q. A corporation may indemnify and advance expenses to an
officer, employee, agent, or person identified in Section P of
this article and who is not a director to such further extent,
consistent
II-3
<PAGE> 88
with law, as may be provided by its articles of incorporation,
bylaws, general or specific action of its board of directors,
or contract or as permitted or required by common law.
R. A corporation may purchase and maintain insurance or another
arrangement on behalf of any person who is or was a director,
officer, employee, or agent of the corporation or who is or
was serving at the request of the corporation as a director,
officer, partner, venturer, proprietor, trustee, employee,
agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan, or other enterprise, against any
liability asserted against him and incurred by him in such a
capacity or arising out of his status as such a person,
whether or not the corporation would have the power to
indemnify him against that liability under this article. If
the insurance or other arrangement is with a person or entity
that is not regularly engaged in the business of providing
insurance coverage, the insurance or arrangement may provide
for payment of a liability with respect to which the
corporation would not have the power to indemnify the person
only if including coverage for the additional liability has
been approved by the shareholders of the corporation. Without
limiting the power of the corporation to procure or maintain
any kind of insurance or other arrangement, a corporation may,
for the benefit of persons indemnified by the corporation, (1)
create a trust fund; (2) establish any form of self-insurance;
(3) secure its indemnity obligation by grant of a security
interest or other lien on the assets of the corporation; or
(4) establish a letter of credit, guaranty, or surety
arrangement. The insurance or other arrangement may be
procured, maintained, or established within the corporation or
with any insurer or other person deemed appropriate by the
board of directors regardless of whether all or part of the
stock or other securities of the insurer or other person are
owned in whole or part by the corporation. In the absence of
fraud, the judgment of the board of directors as to the terms
and conditions of the insurance or other arrangement and the
identity of the insurer or other person participating in an
arrangement shall be conclusive and the insurance or
arrangement shall not be voidable and shall not subject the
directors approving the insurance or arrangement to liability,
on any ground, regardless of whether directors participating
in the approval are beneficiaries of the insurance or
arrangement.
S. Any indemnification of or advance of expenses to a director in
accordance with this article shall be reported in writing to
the shareholders with or before the notice or waiver of notice
of the next submission to shareholders of a consent to action
without a meeting pursuant to Section A, Article 9.10, of this
Act and, in any case, within the 12 month period immediately
following the date of the indemnification or advance.
T. For purposes of this article, the corporation is deemed to
have requested a director to serve an employee benefit plan
whenever the performance by him of his duties to the
corporation also imposes duties on or otherwise involves
services by him to the plan or participants or beneficiaries
of the plan. Excise taxes assessed on a director with respect
to an employee benefit plan pursuant to applicable law are
deemed fines. Action taken or omitted by him with respect to
an employee benefit plan in the performance of his duties for
a purpose reasonably believed by him to be in the interest of
the participants and beneficiaries of the plan is deemed to be
for a purpose which is not opposed to the best interests of
the corporation.
U. The articles of incorporation of a corporation may restrict
the circumstances under which the corporation is required or
permitted to indemnify a person under Section H, I, J, O, P,
or Q of this article."
Articles of Incorporation. Article Eight of the Articles of
Incorporation states that "[t]he corporation shall indemnify any person who (i)
is or was a director, officer, employee, or agent of the corporation, or (ii)
while a director, officer, employee, or agent of the corporation, is or was
serving at the request of the corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise, to the
fullest extent that a corporation may or is required to grant indemnification
to a director under the Texas Business Corporation Act as now written or as
hereafter amended. The corporation may indemnify any person to such further
extent as permitted by law.
The corporation may purchase and maintain insurance on behalf of any
person who holds or who has held any position named hereinabove as allowed
under the Texas Business Corporation Act, as now written or as hereafter
amended."
Article Nine of the Articles of Incorporation provides that a director
will not be liable to the corporation or its shareholders for monetary damages
for an act or omission in the director's capacity as a director. This
provision specifically states that it does not eliminate or limit the liability
of the director for (a) a breach of a director's duty of loyalty to the
corporation or its shareholders; (b) an act or omission not in good faith or
that involves intentional misconduct or a knowing violation of the law; (c) a
transaction from which a director received an improper benefit, whether or not
the benefit resulted
II-4
<PAGE> 89
from an action taken within the scope of the director's office; (d) an act or
omission for which the liability of a director is expressly provided for by
statute; or (e) an act related to an unlawful stock repurchase or payment of a
dividend.
Bylaws. Section 22 of the Bylaws of the Company states that "[t]he
corporation shall (i) indemnify any person who is or was a director, officer,
employee, or agent of the corporation, or while a director, officer, employee,
or agent of the corporation, is or was serving at the request of the
corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise, to the fullest extent that a corporation may
or is required to grant indemnification to a director under the Texas Business
Corporation Act as now written or as hereafter amended, and (ii) shall pay or
reimburse reasonable expenses (including court costs and attorneys' fees)
incurred by any such person who was, is, or is threatened to be named defendant
or respondent in a proceeding (including any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in any such action, suit, or
proceeding, and any inquiry or investigation that could lead to such an action,
suit, or proceeding), in advance of the final disposition of the proceeding, to
the fullest extent that a corporation may or is required to advance such
expenses to a director under the Texas Business Corporation Act as now written
or as hereafter amended. The corporation may indemnify and advance expenses to
any person to such further extent as permitted by law.
The corporation may purchase and maintain insurance on behalf of any
person who holds or who has held any position named hereinabove as allowed
under the Texas Business Corporation Act, as now written or as hereafter
amended.
Except as otherwise provided by the Texas Business Corporation Act, as
now written or as hereafter amended, with respect to directors and
shareholders, no person shall be liable to the corporation for any loss,
damage, liability, or expense suffered by it on account of any action taken or
omitted to be taken by him as a director or officer of the corporation or of
any other corporation which he serves as a director or officer at the request
of the corporation, if such person (i) exercised the same degree of care and
skill as a prudent man would have exercised under the circumstances in the
conduct of his own affairs, or (ii) took or omitted to take such action in
reliance upon advice of counsel for the corporation, or for such other
corporation, or upon statements made or information furnished by directors,
officers, employees, or agents of the corporation, or of such other
corporation, which he had no reasonable grounds to disbelieve."
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be paid by the registrant in connection with this
offering are as follows:
<TABLE>
<S> <C> <C>
Securities and Exchange Commission registration fee . . . . . $ 13,681
Blue Sky fees and expenses . . . . . . . . . . . . . . . . . . 25,000 (1)
NASD fee . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,524
Nasdaq listing fees . . . . . . . . . . . . . . . . . . . . . 15,000 (1)
Pacific Stock Exchange listing fee . . . . . . . . . . . . . . 25,500 (1)
Printing and engraving expenses . . . . . . . . . . . . . . . 20,000 (1)
Accounting fees and expenses . . . . . . . . . . . . . . . . . 40,000 (1)
Legal fees and expenses . . . . . . . . . . . . . . . . . . . 100,000 (1)
Warrant Agent, Transfer Agent and Registrar fees . . . . . . . 5,000 (1)
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 52,295 (1)
------
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 300,000 (1)
</TABLE>
------------------------------------------
(1) Estimated amounts
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Since its inception, the Company has sold the following unregistered
securities:
On December 20, 1995, the Registrant was capitalized through the
issuance of 1,000,000 shares of Common Stock to The Sanders Companies, Inc. in
exchange for the transfer to the Registrant of all of the outstanding capital
stock of TriStar Airline Services, Inc. and TriStar Aircraft Services, Inc. in
a private transaction.
In a private offering completed in June 1996 and exempt under
Regulation D, the Registrant sold 500,000 shares of Common Stock, at $3.00 per
share, to a total of 41 accredited and non-accredited investors. The total
offering price was $1,500,000. The placement agent RAS Securities Corp.
received sales commissions of $195,000. As a result of the successful
completion of the Regulation D private offering, the Registrant also issued to
the placement agent and certain of its employees warrants, expiring February
28, 1999, to purchase an aggregate of 200,000 shares of Common Stock at $1.00
per share.
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<PAGE> 90
In June 1996, the Registrant and Richard Morgan, a consulting
investment banker, entered into a warrant agreement pursuant to which Mr.
Morgan may purchase up to 80,000 shares of Common Stock at $2.50 per share.
This agreement expires on February 28, 1999 and was issued in consideration
for services provided to the Registrant.
On March 1, 1996, the Registrant completed the purchase of Pride
Aviation, Inc. in a private transaction. In connection with the acquisition,
the Registrant issued (i) a total of 100,250 shares of Common Stock, and (ii)
10% Convertible Notes having an aggregate original principal balance of
$857,250. These securities were issued in various amounts to two holders of
59% of the outstanding stock of Pride and to the 11 holders of the outstanding
stock of Sunbelt Business Capital, Inc. which owned 40% of the outstanding
Pride stock.
In February 1997, the Registrant completed a private offering of
$500,000 in aggregate principal amount of its 10% Bridge Notes. The total
offering price was $500,000. The placement agents, RAS Securities Corp. and
First London Securities Corp., received total sales commissions of $50,000. If
the Registrant successfully completes an initial public offering of its Common
Stock by September 30, 1997, the terms of the Bridge Notes require the
Registrant to repay in full the Bridge Notes within five days after the funding
of the initial public offering and to issue, as additional compensation to the
holders of the Bridge Notes, that number of shares of Common Stock which equals
$250,000 divided by the initial public offering price per share for the Common
Stock.
Each transaction described above was exempt from registration under
the Securities Act pursuant to Section 4(2) of the Act, or Regulation D of the
Commission promulgated thereunder, as transactions not involving a public
offering.
ITEM 27. EXHIBITS
The following documents are included as exhibits to this Registration
Statement and are filed herewith unless otherwise indicated. Exhibits
incorporated by reference are so indicated by parenthetical information.
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
1.1 Form of Underwriting Agreement between Registrant and RAS Securities Corp.*
3.1 Articles of Incorporation of the Registrant filed with the Texas Secretary of State,
as amended
3.2 Bylaws of the Registrant, as amended
4.1 Articles of Incorporation of the Registrant (filed as Exhibit 3.1)
4.2 Form of Certificate representing Common Stock*
4.3 Form of Warrant Agreement*
4.4 Form of Warrant Certificate (attached as Exhibit A to Form of Warrant Agreement
filed as Exhibit 4.3)*
4.5 Form of 10% Convertible Note of the Registrant maturing March 1, 2001
4.6 Warrant Agreement dated as of June 30, 1996 between Registrant and Richard L.
Morgan, together with Warrant Certificate
4.7 Warrant Agreement dated March 1, 1996 between Registrant and RAS Securities Corp.,
together with form of warrant certificate
4.8 Form of 10% Bridge Note of the Registrant
4.9 Form of Representative's Warrant Agreement, by and between Registrant and RAS
Securities Corp.*
5.1 Opinion of Bracewell & Patterson, L.L.P. regarding the legality of the Common Stock
and Warrants being registered*
10.1 Aviation Group, Inc. 1997 Stock Option Plan
10.2 Employment Agreement dated March 1, 1996, by and between the Registrant and Lee
Sanders
10.3 Employment Agreement dated March 1, 1996, by and between the Registrant and Paul
Lubomirski
10.4 Consulting Agreement dated March 1, 1996, by and between the Registrant and Charles
E. Weed
10.5 Employment Agreement dated February 1, 1997, between the Registrant and Tony
Ramsaroop
10.6 Services Agreement dated June 10, 1994, by and between Pride and United Air Lines,
Inc., as extended by letter dated February 7, 1997
10.7 Lease Agreement dated September 18, 1996, effective as of August 1, 1996, by and
between Redbird Development, Inc., a Texas corporation, and Tri-Star Aircraft
Services, Inc.
</TABLE>
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<PAGE> 91
<TABLE>
<S> <C>
10. 8 Lease and Operating Agreement between Pride Aviation, Inc. and Iberia Parish Airport
Authority, dated December 28, 1994, relating to Hangar No. 88-C
10.9 Lease and Operating Agreement between Iberia Parish Airport Authority and Pride
Aviation, Inc., dated July 23, 1991, relating to Hangar No. 88, as amended by that
certain Agreement dated December 10, 1992
10.10 Lease and Operating Agreement dated October 2, 1991
10.11 Revolving Credit Note dated September 30, 1995 from The Sanders Companies, Inc.
payable to the order of Equitable Bank (now Compass Bank) in the amount of $250,000,
and SBA Loan Agreement, dated August 22, 1994, by and between The Sanders Companies,
Inc. and Equitable Bank (now Compass Bank) relating to a revolving line of credit
loan
10.12 Amended and Restated Promissory Note dated March 1, 1996 in the original principal
amount of $407,689.77 executed by Pride in favor of Louisiana Economic Development
Corporation ("LEDC")
10.13 Pledge Agreement dated March 1, 1996 from the Registrant in favor of LEDC
10.14 Exchange Agreement dated March 1, 1996 between the Registrant and LEDC
10.15 Form of 10% Convertible Note (included as Exhibit 4.5)
10.16 Form of Pledge Agreement from the Registrant in favor of holders of 10% Convertible
Notes
10.17 Stock Purchase Agreement dated February 21, 1996, by and among the Registrant,
Pride, Sunbelt Business Capital Incorporated ("Sunbelt"), Sunbelt Business Capital
L.L.C., and all the stockholders of Pride and Sunbelt (exhibits and schedules not
included but will be provided supplementally to the Commission upon request)
21.1 List of Subsidiaries of the Registrant
23.1 Consent of Bracewell & Patterson, L.L.P. (included in their opinion filed as
Exhibit 5)*
23.2 Consent of Arsement, Redd & Morella, L.L.C., independent certified public
accountants
23.3 Consent of James Smith & Company, a Professional Corporation, as independent
certified public accountants
24.1 Power of Attorney (included on signature page of Registration Statement)
27.1 Financial Data Schedule
99.1 Form of Lock-Up Agreement, executed by and between the Registrant and certain of the
Registrant's security-holders (included in Exhibit 1.1)
- ----------------------------
</TABLE>
* To be filed by amendment.
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3)
of the Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement.
(iii) Include any additional or changed material
information on the plan of distribution.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the registration statement is on Form S- 3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registration pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
II-7
<PAGE> 92
(2) That, for determining any liability under the Securities Act,
to treat each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time as the
initial bona fide offering.
(3) To file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to provide the
Underwriter at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-8
<PAGE> 93
SIGNATURES
In accordance with the requirements of the Securities Act, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and has authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Dallas, State of Texas, on the 4th day of March, 1997.
AVIATION GROUP, INC.
By: /s/ Lee Sanders
--------------------------------------------------
Lee Sanders, President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints, jointly and severally, Lee Sanders,
with full power to act alone, his or her true and lawful attorney-in-fact, with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact full power and authority to do and perform each and
every act and thing requisite and necessary to be done as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or any of them may lawfully do or cause to be
done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Lee Sanders President, Chief Executive March 4, 1997
- --------------------------- Officer and Director
Lee Sanders
/s/ Charles Weed Director February 28, 1997
- ---------------------------
Charles Weed
/s/ Gordon Whitener Director February 28, 1997
- ---------------------------
Gordon Whitener
/s/ Richard L. Morgan Director March 4, 1997
- ---------------------------
Richard L. Morgan
/s/ Gary Cooper Vice President, Treasurer, March 4, 1997
- --------------------------- Chief Accounting Officer and
Gary Cooper Chief Financial Officer
<PAGE> 94
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page
------- ----
<S> <C> <C>
1.1 Form of Underwriting Agreement between Registrant and RAS Securities Corp.*
3.1 Articles of Incorporation of the Registrant filed with the Texas Secretary of State,
as amended
3.2 Bylaws of the Registrant, as amended
4.1 Articles of Incorporation of the Registrant (filed as Exhibit 3.1)
4.2 Form of Certificate representing Common Stock*
4.3 Form of Warrant Agreement*
4.4 Form of Warrant Certificate (attached as Exhibit A to Form of Warrant Agreement
filed as Exhibit 4.3)*
4.5 Form of 10% Convertible Note of the Registrant maturing March 1, 2001
4.6 Warrant Agreement dated as of June 30, 1996 between Registrant and Richard L.
Morgan, together with Warrant Certificate
4.7 Warrant Agreement dated March 1, 1996 between Registrant and RAS Securities Corp.,
together with form of warrant certificate
4.8 Form of 10% Bridge Note of the Registrant
4.9 Form of Representative's Warrant Agreement, by and between Registrant and RAS
Securities Corp.*
5.1 Opinion of Bracewell & Patterson, L.L.P. regarding the legality of the Common Stock
and Warrants being registered*
10.1 Aviation Group, Inc. 1997 Stock Option Plan
10.2 Employment Agreement dated March 1, 1996, by and between the Registrant and Lee
Sanders
10.3 Employment Agreement dated March 1, 1996, by and between the Registrant and Paul
Lubomirski
10.4 Consulting Agreement dated March 1, 1996, by and between the Registrant and Charles
E. Weed
10.5 Employment Agreement dated February 1, 1997, between the Registrant and Tony
Ramsaroop
10.6 Services Agreement dated June 10, 1994, by and between Pride and United Air Lines,
Inc., as extended by letter dated February 7, 1997
10.7 Lease Agreement dated September 18, 1996, effective as of August 1, 1996, by and
between Redbird Development, Inc., a Texas corporation, and Tri-Star Aircraft
Services, Inc.
10. 8 Lease and Operating Agreement between Pride Aviation, Inc. and Iberia Parish Airport
Authority, dated December 28, 1994, relating to Hangar No. 88-C
10.9 Lease and Operating Agreement between Iberia Parish Airport Authority and Pride
Aviation, Inc., dated July 23, 1991, relating to Hangar No. 88, as amended by that
certain Agreement dated December 10, 1992
10.10 Lease and Operating Agreement dated October 2, 1991
10.11 Revolving Credit Note dated September 30, 1995 from The Sanders Companies, Inc.
payable to the order of Equitable Bank (now Compass Bank) in the amount of $250,000,
and SBA Loan Agreement, dated August 22, 1994, by and between The Sanders Companies,
Inc. and Equitable Bank (now Compass Bank) relating to a revolving line of credit
loan
10.12 Amended and Restated Promissory Note dated March 1, 1996 in the original principal
amount of $407,689.77 executed by Pride in favor of Louisiana Economic Development
Corporation ("LEDC")
10.13 Pledge Agreement dated March 1, 1996 from the Registrant in favor of LEDC
10.14 Exchange Agreement dated March 1, 1996 between the Registrant and LEDC
10.15 Form of 10% Convertible Note (included as Exhibit 4.5)
10.16 Form of Pledge Agreement from the Registrant in favor of holders of 10% Convertible
Notes
</TABLE>
<PAGE> 95
<TABLE>
<S> <C>
10.17 Stock Purchase Agreement dated February 21, 1996, by and among the Registrant,
Pride, Sunbelt Business Capital Incorporated ("Sunbelt"), Sunbelt Business Capital
L.L.C., and all the stockholders of Pride and Sunbelt (exhibits and schedules not
included but will be provided supplementally to the Commission upon request)
21.1 List of Subsidiaries of the Registrant
23.1 Consent of Bracewell & Patterson, L.L.P. (included in their opinion filed as
Exhibit 5)*
23.2 Consent of Arsement, Redd & Morella, L.L.C., independent certified public accountants
23.3 Consent of James Smith & Company, a Professional Corporation, as independent
certified public accountants
24.1 Power of Attorney (included on signature page of Registration Statement)
27.1 Financial Data Schedule
99.1 Form of Lock-Up Agreement, executed by and between the Registrant and certain of the
Registrant's security-holders (included in Exhibit 1.1)
</TABLE>
- ----------------------------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1
[THE STATE OF TEXAS SECRETARY OF STATE LETTERHEAD]
JAN. 24, 1997
BRACEWELL & PATTERSON SUSANN E. MITCHELL
500 N. AKARD ST., STE. 4000
DALLAS, TX 75201
RE:
AVIATION GROUP, INC.
CHARTER NUMBER 01379872-00
IT HAS BEEN OUR PLEASURE TO APPROVE AND PLACE ON RECORD YOUR ARTICLES OF
CORRECTION.
THE APPROPRIATE EVIDENCE IS ATTACHED FOR YOUR FILES AND THE ORIGINAL HAS BEEN
FILED IN THIS OFFICE.
PAYMENT OF THE FILING FEE IS ACKNOWLEDGED BY THIS LETTER.
IF WE CAN BE OF FURTHER SERVICE AT ANY TIME, PLEASE LET US KNOW.
/s/ ANTONIO O. GARZA, JR.
[SEAL] -------------------------------
Antonio O. Garza, Jr.,
Secretary of State
<PAGE> 2
[THE STATE OF TEXAS SECRETARY OF STATE LETTERHEAD]
CERTIFICATE OF CORRECTION
OF
AVIATION GROUP, INC.
CHARTER NUMBER 01379872
THE UNDERSIGNED, AS SECRETARY OF STATE OF THE STATE OF TEXAS, HEREBY
CERTIFIES THAT THE ATTACHED ARTICLES OF CORRECTION, DULY SIGNED HAVE BEEN
RECEIVED IN THIS OFFICE AND ARE FOUND TO CONFORM TO LAW.
ACCORDINGLY THE UNDERSIGNED, AS SUCH SECRETARY OF STATE, AND BY VIRTUE
OF THE AUTHORITY VESTED IN THE SECRETARY BY LAW, ISSUES THIS CERTIFICATE AND
ATTACHES HERETO A COPY.
DATES JAN. 23, 1997
/s/ ANTONIO O. GARZA, JR.
[SEAL] ------------------------------
Antonio O. Garza, Jr.,
Secretary of State
<PAGE> 3
FILED
in the Office of the
Secretary of State of Texas
January 23 1997
Corporations Section
ARTICLES OF CORRECTION
OF
AVIATION GROUP, INC.
Pursuant to the provisions of Article 1302-7.02 of the Texas
Miscellaneous Corporation Laws Act, the following correction is hereby made to
the articles of Incorporation of Aviation Group, Inc. (the "CORPORATION"):
ARTICLE ONE
The name of the Corporation is Aviation Group, Inc.
ARTICLE TWO
The document to be corrected is the Articles of Incorporation of
Aviation Group, Inc. (the "ARTICLES"), which was filed in the Office of the
Secretary of State on the 4th day of December, 1995.
ARTICLE THREE
Subparagraph (b) of Article Four of the Articles incorrectly states:
"Five million (5,000,000) shares of Preferred Stock, having a par value of ten
cents ($0.01) each (hereinafter "Preferred Stock")."
ARTICLE FOUR
Subparagraph (b) of Article Four of the Articles of Incorporation is
corrected to read in its entirety as follows: "Five million (5,000,000) shares
of Preferred Stock, having a par value of one cent ($0.01) each (hereinafter
"Preferred Stock")."
DATED as of this 21st day of January, 1997.
AVIATION GROUP, INC.
By: /s/ LEE SANDERS
---------------------------------
Lee Sanders, President
<PAGE> 4
[THE STATE OF TEXAS SECRETARY OF STATE LETTERHEAD]
DEC. 4, 1995
SUSANN E. MITCHELL--BRACEWELL & PATTERSON
LINCOLN PLAZA 500 N. AKARD STE 4000
DALLAS, TX 75201-3337
RE:
AVIATION GROUP, INC.
CHARTER NUMBER 01379872-00
IT HAS BEEN OUR PLEASURE TO APPROVE AND PLACE ON RECORD THE ARTICLES OF
INCORPORATION THAT CREATED YOUR CORPORATION. WE EXTEND OUR BEST WISHES FOR
SUCCESS IN YOUR NEW VENTURE.
AS A CORPORATION, YOU ARE SUBJECT TO STATE TAX LAWS. SOME NON-PROFIT
CORPORATIONS ARE EXEMPT FROM THE PAYMENT OF FRANCHISE TAXES AND MAY ALSO BE
EXEMPT FROM THE PAYMENT OF SALES AND USE TAX ON THE PURCHASE OF TAXABLE ITEMS.
IF YOU FEEL THAT UNDER THE LAW YOUR CORPORATION IS ENTITLED TO BE EXEMPT YOU
MUST APPLY TO THE COMPTROLLER OF PUBLIC ACCOUNTS FOR THE EXEMPTION. THE
SECRETARY OF STATE CANNOT MAKE SUCH DETERMINATION FOR YOUR OPERATION.
IF WE CAN BE OF FURTHER SERVICE AT ANY TIME, PLEASE LET US KNOW.
VERY TRULY YOURS,
/s/ ANTONIO O. GARZA, JR.
[SEAL] -------------------------------
Antonio O. Garza, Jr.,
Secretary of State
<PAGE> 5
[THE STATE OF TEXAS SECRETARY OF STATE LETTERHEAD]
CERTIFICATE OF INCORPORATION
OF
AVIATION GROUP, INC.
CHARTER NUMBER 01379872
THE UNDERSIGNED, AS SECRETARY OF STATE OF THE STATE OF TEXAS, HEREBY
CERTIFIES THAT THE ATTACHED ARTICLES OF INCORPORATION FOR THE ABOVE NAMED
CORPORATION HAVE BEEN RECEIVED IN THIS OFFICE AND ARE FOUND TO CONFORM TO LAW.
ACCORDINGLY, THE UNDERSIGNED, AS SUCH SECRETARY OF STATE, AND BY VIRTUE
OF THE AUTHORITY VESTED IN THE SECRETARY BY LAW, ISSUES THIS CERTIFICATE OF
INCORPORATION.
ISSUANCE OF THIS CERTIFICATE OF INCORPORATION DOES NOT AUTHORIZE THE
USE OF A CORPORATE NAME IN THIS STATE IN VIOLATION OF THE RIGHTS OF ANOTHER
UNDER THE FEDERAL TRADEMARK ACT OF 1946, THE TEXAS TRADEMARK LAW, THE ASSUMED
BUSINESS OR PROFESSIONAL NAME ACT OR THE COMMON LAW.
DATED DEC. 4, 1995
EFFECTIVE DEC. 4, 1995
/s/ ANTONIO O. GARZA, JR.
[SEAL] ------------------------------
Antonio O. Garza, Jr.,
Secretary of State
<PAGE> 6
FILED
In the Office of the
Secretary of State of Texas
DEC 04 1995
Corporations Section
ARTICLES OF INCORPORATION
OF
AVIATION GROUP, INC.
I, the undersigned natural person of the age of eighteen (18) years or
more, acting as the incorporator of a corporation under the Texas Business
Corporation Act, do hereby adopt the following Articles of Incorporation for
such corporation.
ARTICLE ONE
The name of the corporation is Aviation Group, Inc.
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The purpose for which the corporation is organized is to transact any
and all lawful business for which corporations may be incorporated under the
Texas Business Corporation Act.
ARTICLE FOUR
The aggregate number of shares of stock that the corporation shall
have authority to issue is fifteen million (15,000,000) shares, which shall be
divided into two (2) classes as follows:
(a) Ten million (10,000,000) shares of Common Stock, having a par
value of one cent ($0.01) each (hereinafter "Common Stock"); and
(b) Five million (5,000,000) shares of Preferred Stock, having a
par value of ten cents ($0.01) each (hereinafter "Preferred Stock").
The Board of Directors of the corporation shall have authority to
establish series of unissued shares of the Preferred Stock by fixing and
determining the relative rights and preferences of the shares of any series so
established in accordance with and to the extent permitted by the applicable
provisions of the Texas Business Corporation Act, and to increase or decrease
the number of shares within each such series, except that the Board of
Directors may not decrease the number of shares within a series to less than
the number of shares within such series that are then issued and may not
increase or decrease the number of shares in a series if prohibited by the
resolution or resolutions adopted by the Board of Directors
<PAGE> 7
providing for such series of Preferred Stock. Each such series of Preferred
Stock shall have distinctive serial designations.
Without limiting the generality of the foregoing, each series of
Preferred Stock
(a) may have such number of shares;
(b) may have such voting powers, full or limited, or may be
without voting powers;
(c) may be subject to redemption at such time or times and at such
prices;
(d) may be entitled to receive distributions (which may be
cumulative, noncumulative, or partially cumulative) at such rate or rates, on
such conditions, and at such times, and payable in preference to, or in such
relation to, the dividends payable on any other class or classes or series of
stock;
(e) may have such rights upon the dissolution of, or upon any
distribution of the assets of, the corporation;
(f) may be made convertible into shares of any other class or
classes or of any other series of the same or any other class or classes of
stock of the corporation at such ratios or prices, and with such adjustments;
(g) may be entitled to the benefit of a sinking fund or purchase
fund to be applied to the purchase or redemption of shares of such series in
such amount or amounts;
(h) may be exchangeable, subject to compliance with applicable
Texas law, for such property or indebtedness of the corporation; and
(i) may have such other relative, participating, optional or other
special rights and qualifications, limitations or restrictions thereof;
all as shall be stated in the resolution or resolutions of the Board of
Directors providing for the establishment of such series of Preferred Stock.
Shares of any series of Preferred Stock which have been redeemed
(whether through the operation of a sinking fund or otherwise) or purchased by
the corporation, or which, if convertible or exchangeable, have been converted
into shares of stock or exchanged for property or indebtedness of the
corporation shall have the status of authorized and unissued
-2-
<PAGE> 8
shares of Preferred Stock and may be reissued as a part of the series for which
they were originally apart or may be reclassified and reissued as part of a new
series of Preferred Stock to be created by resolution or resolutions of the
Board of Directors or as part of any other series of Preferred Stock, all
subject to the conditions or restrictions on issuance set forth in the
resolution or resolutions adopted by the Board of Directors providing for the
establishment of any series of Preferred Stock and to any filing required by
law.
Except as otherwise provided by law or by the resolution or
resolutions of the Board of Directors providing for the establishment of any
series of the Preferred Stock, the Common Stock shall have the exclusive right
to vote for the election of directors and for all other purposes, each holder
of the Common Stock being entitled to one (1) vote for each share held.
Subject to all of the rights of the Preferred Stock or any series
thereof, the holders of the Common Stock on account thereof shall be entitled
to receive, when, as and if declared by the Board of Directors, out of funds
legally available therefor, distributions payable in cash, stock or otherwise.
Upon any liquidation, dissolution or winding-up of the corporation,
whether voluntary or involuntary, and after the holders of the Preferred Stock
of each series shall have been paid in full the amounts to which they
respectively shall be entitled, or a sum sufficient for such payment in full
shall have been set aside for payment, the remaining net assets of the
corporation shall be distributed pro rata to the holders of the Common Stock in
accordance with their respective rights and interests, to the exclusion of the
holders of the Preferred Stock.
ARTICLE FIVE
The corporation will not commence business until it has received for
the issuance of its shares consideration at least equal to the aggregate value
of $1,000.00, consisting of money, labor done or property actually received.
ARTICLE SIX
The street address of the corporation's initial registered office is
1327 Empire Central, Suite 260, Dallas, Texas 75247, and the name of its
initial registered agent at such address is Lee Sanders.
-3-
<PAGE> 9
ARTICLE SEVEN
The initial Board of Directors shall consist of one (1) director;
however, thereafter, the number of directors constituting the Board shall be
fixed in the manner provided in the bylaws. The name and address of the person
who shall serve as initial director of the corporation until the first annual
meeting of the shareholders or until his successor is elected and qualified is
as follows:
Lee Sanders 1327 Empire Central, Suite 260
Dallas, Texas 75247
ARTICLE EIGHT
The corporation shall indemnify any person who (i) is or was a
director, officer, employee, or agent of the corporation, or (ii) while a
director, officer, employee, or agent of the corporation, is or was serving at
the request of the corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary of another foreign
or domestic corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan, or other enterprise, to the fullest extent that a
corporation may or is required to grant indemnification to a director under the
Texas Business Corporation Act as now written or as hereafter amended. The
corporation may indemnify any person to such further extent as permitted by
law.
The corporation may purchase and maintain insurance on behalf of any
person who holds or who has held any position named hereinabove as allowed
under the Texas Business Corporation Act, as now written or as hereafter
amended.
ARTICLE NINE
A director of the corporation shall not be liable to the corporation
or its shareholders for monetary damages for an act or omission in the
director's capacity as director, except that this Article does not eliminate or
limit the liability of a director for:
(a) a breach of a director's duty of loyalty to the
corporation or its shareholders;
(b) an act or omission not in good faith or that involves
intentional misconduct or a knowing violation of the law;
-4-
<PAGE> 10
(c) a transaction from which a director received an
improper benefit, whether or not the benefit resulted from an action
taken within the scope of the director's office;
(d) an act or omission for which the liability of a
director is expressly provided for by statute; or
(e) an act related to an unlawful stock repurchase or
payment of a dividend.
ARTICLE TEN
The name and address of the incorporator of the corporation is as
follows:
Susan E. Mitchell 500 North Akard Street
Suite 4000
Dallas, Texas 75201
ARTICLE ELEVEN
Preemptive rights of shareholders of the corporation are expressly
denied. No holder of any shares of stock of the corporation shall be entitled
as a matter of right to purchase or subscribe for any part of any shares of
stock of the corporation authorized by these Articles or of any additional
shares of stock of any class to be issued by reason of any increase in the
authorized capital stock of the corporation, or of any bonds, certificates of
indebtedness, debentures, warrants, options or other securities or rights
convertible into any class of capital stock of the corporation, but any shares
of stock authorized by these Articles or any such additional authorized issue
of any capital stock, rights or securities convertible into any shares of such
stock may be issued and disposed of by the Board of Directors to such persons,
firms, corporations or associations for such consideration, upon such terms and
in such manner as the Board of Directors may, in its discretion, determine
without any offering thereof on the same terms or on any other terms to the
shareholders then of record or to any class of shareholders; provided only that
such issuance may not be inconsistent with any provisions of law or with any of
the provisions of these Articles.
-5-
<PAGE> 11
ARTICLE TWELVE
Cumulative voting is expressly prohibited. At each election of
directors every shareholder entitled to vote at such election shall have the
right to vote, in person or by proxy, the number of shares owned by him with
respect to each of the persons nominated for election as a director and for
whose election he has a right to vote; and no shareholder shall be entitled to
cumulate his votes by giving one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of shares owned by
such shareholder, or by distributing such votes on the same principle among any
number of candidates.
IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of
December, 1995.
/s/ SUSAN E. MITCHELL
-------------------------------------
Susan E. Mitchell
-6-
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
AVIATION GROUP, INC.
<PAGE> 2
TABLE OF CONTENTS
TO
BYLAWS
OF
AVIATION GROUP, INC.
<TABLE>
<CAPTION>
Page
----
<S> <C>
OFFICES AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. (a) Registered Office and Registered Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Corporate Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. (a) Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Inspection of Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SHAREHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
5. (a) Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(c) Consent of Shareholders in Lieu of Meeting . . . . . . . . . . . . . . . . . . . . . . . . 3
(d) Meetings by Conference Telephone or Similar
Communications Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6. (a) Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Presiding Officials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
7. (a) Business Which May Be Transacted at Annual Meetings . . . . . . . . . . . . . . . . . . . . 4
(b) Business Which May Be Transacted at Special Meetings . . . . . . . . . . . . . . . . . . . 4
8. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
9. (a) Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) Registered Shareholders - Exceptions - Stock Ownership Presumed . . . . . . . . . . . . . . 5
10. Shareholders' Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
11. Directors - Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
12. (a) Powers of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Interested Director Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
13. Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
14. Acceptance of Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
15. Regular Meetings - Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
16. Special Meetings - Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
17. Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
18. Meetings by Conference Telephone or Similar Communications Equipment . . . . . . . . . . . . . . . . 8
19. Action Without a Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
20. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
21. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
22. Indemnification and Expenses; Liability of Directors and Officers . . . . . . . . . . . . . . . . . . 9
23. Executive and Other Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
24. Compensation of Directors and Committee Members . . . . . . . . . . . . . . . . . . . . . . . . . . 10
OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
25. (a) Officers - Who Shall Constitute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(c) Other Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
26. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
27. Salaries and Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
28. Delegation of Authority to Hire, Discharge, and Designate Duties . . . . . . . . . . . . . . . . . . 12
29. The Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
30. The President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
31. Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
32. The Secretary and Assistant Secretaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
33. The Treasurer and Assistant Treasurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
34. Duties of Officers May Be Delegated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SHARES OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
35. Payment for Shares of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
36. Certificates for Shares of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
37. Transfers of Shares - Transfer Agent - Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . 15
38. (a) Fixing Record Dates for Meetings, Distributions, Etc. . . . . . . . . . . . . . . . . . . . 16
(b) Fixing Record Dates for Consents to Action . . . . . . . . . . . . . . . . . . . . . . . . 16
39. Lost, Destroyed, or Stolen Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
40. Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
41. Fixing of Capital - Transfers of Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
42. Distributions or Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
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<TABLE>
<S> <C> <C>
43. Creation of Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
44. Depositories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
45. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
46. Directors' Annual Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
47. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
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<PAGE> 5
BYLAWS
OF
AVIATION GROUP, INC.
OFFICES AND RECORDS
1. (a) Registered Office and Registered Agent. The location
of the registered office and the name of the registered agent of the
corporation in the State of Texas shall be as stated in the articles of
incorporation or as shall be determined from time to time by the board of
directors and on file in the appropriate office of the State of Texas pursuant
to applicable provisions of law. Unless otherwise permitted by law, the
address of the registered office of the corporation and the address of the
business office of the registered agent shall be identical.
(b) Corporate Offices. The corporation may have such
corporate offices anywhere within or without the State of Texas as the board of
directors from time to time may determine or the business of the corporation
may require. The "principal place of business" or "principal business office"
or "executive office" of the corporation may be fixed and so designated from
time to time by the board of directors, but the location or residence of the
corporation in Texas shall be deemed for all purposes to be in the county in
which its registered office in Texas is maintained.
2. (a) Books and Records. The corporation shall keep books
and records of account and minutes of the proceedings of the corporation's
shareholders, board of directors and each committee of the board of directors.
The corporation shall keep at its registered office or principal place of
business, or at the office of its transfer agent or registrar, if any, books
and records in which shall be kept a record of the original issuance of shares
and a record of each transfer of those shares that have been presented to the
corporation for registration of transfer. Such share transfer records shall
contain the names and addresses of all past and current shareholders of the
corporation, the number, the series, and the class of the shares owned by them
respectively, the amount of shares paid, and by whom, and the transfer of such
shares with the date of transfer. Any books, records, minutes and share
transfer records may be in written form or in any other form capable of being
converted into written form within a reasonable time.
(b) Inspection of Records. Any person who shall have
been a shareholder of the corporation for at least six (6) months immediately
preceding his demand, or shall be the registered holder of at least five
percent (5%) of all the outstanding shares of the corporation, upon written
demand stating the purpose thereof, shall have the right to examine, in person
or by agent, accountant, or attorney, at any reasonable time or times, for any
proper purpose, the corporation's relevant books and
<PAGE> 6
records of account, minutes, and share transfer records, and to make extracts
therefrom. No shareholder shall use, permit to be used, or acquiesce in the
use by others of any information so obtained to the detriment competitively of
the corporation, nor shall he furnish or permit to be furnished any information
so obtained to any competitor of the corporation. The corporation as a
condition precedent to any shareholder's inspection of the records of the
corporation may require the shareholder to indemnify the corporation, in such
manner and for such amount as may be determined by the board of directors,
against any loss or damage which may be suffered by it arising out of or
resulting from any unauthorized disclosure made or permitted to be made by such
shareholder of information obtained in the course of such inspection.
SEAL
3. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the corporation and the words: "Corporate Seal - Texas."
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or in any manner reproduced.
SHAREHOLDERS' MEETINGS
4. Place of Meetings. All meetings of the shareholders shall be
held at the principal business office of the corporation in Texas, except such
meetings as the board of directors to the extent permissible by law expressly
determines shall be elsewhere, in which case such meetings may be held, upon
notice thereof as hereinafter provided, at such other place or places, within
or without the State of Texas, as the board of directors shall have determined,
and as shall be stated in such notice; and, unless specifically prohibited by
law, any meeting may be held at any place and time, and for any purpose, if
consented to in writing by all of the shareholders entitled to vote thereat.
5. (a) Annual Meetings. An annual meeting of shareholders
shall be held on a date designated by the corporation's President which date
shall be not later than the last day of May of each year beginning in 1996, or
at such other date as shall be designated from time to time by the board of
directors and stated in the notice of the meeting, when they shall elect a
board of directors and transact such other business as may properly be brought
before the meeting.
(b) Special Meetings. Special meetings of the
shareholders may be held for any purpose or purposes and may be called by the
chairman of the board, by the president, by the secretary, by the board of
directors, or by the holders of, or by any officer or shareholder upon the
written request of the holders of not less than ten percent (10%) of all
outstanding shares entitled to vote at any such meeting, and shall be called by
any officer directed to do so by the board of directors.
The "call" and the "notice" of any such meeting shall be
deemed to be synonymous.
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<PAGE> 7
(c) Consent of Shareholders in Lieu of Meeting. Any
action required to be taken or which may be taken at a meeting of the
shareholders may be taken without a meeting, without prior notice, and without
a vote, if a consent or consents in writing, setting forth the action so taken,
shall have been signed by all the shareholders entitled to vote with respect to
the subject matter thereof. The secretary shall file such consents with the
minutes of the meetings of the shareholders.
(d) Meetings by Conference Telephone or Similar
Communications Equipment. Subject to the requirements for notices of meetings,
unless otherwise restricted by the articles of incorporation or these bylaws or
by law, shareholders may participate in and hold a meeting of shareholders by
means of conference telephone or similar communications equipment whereby all
persons participating in the meeting can hear each other, and participation in
a meeting in this manner shall constitute presence in person at such meeting,
except where a person participates in a meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
6. (a) Notice. Written or printed notice of each meeting of
the shareholders, whether annual or special, stating the place, day and hour of
the meeting and, in case of a special meeting, the purpose or purposes thereof,
shall be delivered or given to each shareholder of record entitled to vote
thereat, either personally or by mail, by or at the direction of the president,
the secretary, or the officer or person calling the meeting, not less than ten
(10) nor more than sixty (60) days before the date of the meeting, unless, as
to a particular matter, other or further notice is required by law, in which
case such other or further notice shall be given.
Any notice of a shareholders' meeting sent by mail shall be
deemed to be delivered when deposited in the United States mail with postage
thereon prepaid addressed to the shareholder at his address as it appears on
the share transfer records of the corporation.
(b) Waiver of Notice. Whenever any notice is required to
be given under the provisions of these bylaws, of the articles of
incorporation, or of any law, a waiver thereof in writing signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
To the extent provided by law, attendance of a shareholder at
any meeting shall constitute a waiver of notice of such meeting.
(c) Presiding Officials. Every meeting of the
shareholders, for whatever object, shall be convened by the president, or by
the officer or any of the persons who called the meeting by notice as above
provided, but it shall be presided over by the officers specified in Sections
29, 30 and 31 of these bylaws; provided, however, that the
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<PAGE> 8
shareholders at any meeting, by a majority vote in amount of shares represented
thereat, and notwithstanding anything to the contrary contained elsewhere in
these bylaws, may select any persons of their choosing to act as chairman and
secretary of such meeting or any session thereof.
7. (a) Business Which May Be Transacted at Annual Meetings.
At each annual meeting of the shareholders, the shareholders shall elect a
board of directors to hold office until the next succeeding annual meeting or
until their successors shall have been elected and qualified and they may
transact such other business as may be desired, whether or not the same was
specified in the notice of the meeting, unless the consideration of such other
business without its having been specified in the notice of the meeting as one
of the purposes thereof is prohibited by law.
(b) Business Which May Be Transacted at Special Meetings.
Business transacted at all special meetings of the shareholders shall be
confined to the purposes stated in the notices of such meetings, unless the
transaction of other business is consented to by the holders of all the
outstanding shares of stock of the corporation entitled to vote thereat.
8. Quorum. Unless otherwise provided by law or by the articles
of incorporation, the holders of a majority of the outstanding shares entitled
to vote, represented in person or by proxy, shall constitute a quorum for the
transaction of business at all meetings of the shareholders. Unless otherwise
provided by law or by the articles of incorporation, once a quorum is present
at a meeting of shareholders, the shareholders represented in person or by
proxy at the meeting may conduct such business as may be properly brought
before the meeting until it is adjourned, and the subsequent withdrawal from
the meeting of any shareholder or the refusal of any shareholder represented in
person or by proxy to vote shall not affect the presence of a quorum at the
meeting. Unless otherwise provided by law or by the articles of incorporation,
the shareholders represented in person or by proxy at a meeting of shareholders
at which a quorum is not present may adjourn the meeting until such time and to
such place as may be determined by a vote of the holders of a majority of the
shares represented in person or by proxy at that meeting. At any subsequent
session of the meeting at which a quorum is present in person or by proxy any
business may be transacted which could have been transacted at the initial
session of the meeting if a quorum had been present.
9. (a) Proxies. At any meeting of the shareholders every
shareholder having the right to vote shall be entitled to vote in person or by
proxy executed in writing by such shareholder. A telegram, telex, cablegram,
or similar transmission by the shareholder, or a photographic, photostatic,
facsimile, or similar reproduction of a writing executed by a shareholder,
shall be treated as an execution in writing for these purposes. No proxy shall
be valid after eleven (11) months from the date of its execution, unless
otherwise provided in the proxy. A proxy shall be revocable unless the proxy
form conspicuously states that the proxy is irrevocable and the proxy is
coupled with an interest.
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<PAGE> 9
(b) Voting. Each shareholder shall have one vote for
each share of stock entitled to vote under the provisions of the articles of
incorporation and which is registered in his name on the books of the
corporation, and in the election of directors shall have for each such share
one vote for one candidate for each directorship to be filled, cumulative
voting not being permitted.
No person shall be admitted to vote on any shares of the
corporation belonging or hypothecated to the corporation.
(c) Registered Shareholders - Exceptions - Stock
Ownership Presumed. The corporation may regard the person in whose name any
shares issued by the corporation are registered in the share transfer records
of the corporation at any particular time as the owner of those shares at that
time for purposes of voting those shares, receiving distributions thereon or
notices in respect thereof, transferring those shares, exercising rights of
dissent with respect to those shares, exercising or waiving any preemptive
right with respect to those shares, entering into agreements with respect to
those shares in accordance with applicable law, or giving proxies with respect
to those shares, and the term "shareholder" as used in these bylaws means one
who is a holder of shares so registered in the share transfer records of the
corporation.
10. Shareholders' Lists. A complete list of the shareholders
entitled to vote at each meeting of the shareholders, or any adjournments
thereof, arranged in alphabetical order, with the address of and the number of
voting shares held by each, shall be prepared at least ten (10) days before
each such meeting by the officer or agent of the corporation having charge of
the share transfer records of the corporation, and, for a period of ten (10)
days prior to the meeting, shall be kept on file at the registered office or
principal place of business of the corporation and shall at any time during the
usual hours for business be subject to inspection by any shareholder. Such
list or a duplicate thereof also shall be produced and kept open at the time
and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting. Subject to the provisions of
Section 38 hereof, the original list or share transfer records shall be prima
facie evidence as to who are the shareholders entitled to examine such share
transfer records or to vote at any meeting of shareholders.
Failure to comply with the foregoing shall not affect the validity of
any action taken at any such meeting.
DIRECTORS
11. Directors - Number. Unless and until changed by the board of
directors as hereinafter provided, the number of directors to constitute the
board of directors shall be the same number as that provided for the first
board in the articles of incorporation. Directors need not be residents of the
state of Texas or shareholders unless the articles of incorporation at any time
so require. The board of directors shall have the power to change the number
of directors by resolution adopted by a majority of the whole board,
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<PAGE> 10
provided that any notice required by law of any such change is duly given, but
no decrease in the number of directors shall have the effect of shortening the
term of any incumbent director. At each annual meeting of shareholders the
shareholders shall elect directors to hold office until the next succeeding
annual meeting. Unless removed in accordance with provisions of these bylaws
or the articles of incorporation, each director shall hold office for the term
for which he is elected and until his successor shall have been elected and
qualified.
At any meeting of shareholders called expressly for that purpose any
director or the entire board of directors may be removed, with or without
cause, by a vote of the holders of a majority of the shares then entitled to
vote at an election of directors, subject to any further restrictions on
removal that may be contained in these bylaws.
12. (a) Powers of the Board. The powers of the corporation
shall be exercised by or under the authority of, and the business and affairs
of the corporation shall be managed under the direction of, the board of
directors of the corporation, acting as a board. The board shall have and is
vested with all and unlimited powers and authorities, except as may be
expressly limited by law, the articles of incorporation or these bylaws, to do
or cause to be done any and all lawful things for and on behalf of the
corporation, to exercise or cause to be exercised any or all of its powers,
privileges, and franchises, and to seek the effectuation of its objects and
purposes.
(b) Interested Director Transactions. Unless otherwise
provided by law, the articles of incorporation, or these bylaws, no contract or
transaction between the corporation and one or more of its directors or
officers, or between the corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers or have a financial interest, shall be void
or voidable solely for this reason, solely because the director or officer is
present at or participates in the meeting of the board or committee thereof
which authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose, if:
(1) The material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are
known to the board of directors or the committee, and the board or
committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or
(2) The material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are
known to the shareholders entitled to vote thereon, and the contract
or transaction is specifically approved in good faith by vote of the
shareholders; or
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<PAGE> 11
(3) The contract or transaction is fair as to the
corporation as of the time it is authorized, approved, or ratified by
the board of directors, a committee thereof, or the shareholders.
Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the board of directors or of a
committee which authorizes the contract or transaction.
13. Offices. The directors may have one or more offices, and keep
the books of the corporation (except share transfer records and such other
books and records as may by law be required to be kept at a particular place)
at such place or places within or without the State of Texas as the board of
directors may from time to time determine.
14. Acceptance of Election. Each director, upon his election,
shall qualify by accepting the office of director, and his attendance at, or
his written approval of the minutes of, any meeting of the newly-elected
directors shall constitute his acceptance of such office; or he may execute
such acceptance by a separate writing, which shall be placed in the minute
book.
15. Regular Meetings - Notice. Regular meetings of the board may
be held without notice at such times and places either within or without the
State of Texas as shall from time to time be fixed by resolution adopted by the
full board of directors. Any business may be transacted at a regular meeting.
16. Special Meetings - Notice. Special meetings of the board may
be called at any time by the chairman of the board, the president, any vice
president, or the secretary, or by any one or more of the directors. The place
may be within or without the State of Texas as designated in the notice.
Written or printed notice of each special meeting of the board,
stating the place, day, and hour of the meeting and to the extent, if any,
required by the articles of incorporation or by law, the purpose or purposes
thereof, shall be mailed to each director at least three (3) days before the
day on which the meeting is to be held, or shall be delivered to him personally
or sent to him by telegram at least two (2) days before the day on which the
meeting is to be held. If mailed, such notice shall be deemed to be delivered
when it is deposited in the United States mail with postage thereon prepaid and
addressed to the director at his residence or usual place of business. If
given by telegraph, such notice shall be deemed to be delivered when it is
delivered to the telegraph company, addressed to the director at his residence
or usual place of business as indicated on the records of the corporation, with
the cost of transmission prepaid. The notice may be given by any officer
having authority to call the meeting or by any director.
"Notice" and "call" with respect to such meetings shall be deemed to
be synonymous.
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<PAGE> 12
17. Waiver of Notice. Whenever any notice is required to be given
to any director under the provisions of these bylaws, the articles of
incorporation, or of any law, a waiver thereof in writing signed by such
director, whether before or after the time stated therein, shall be equivalent
to the giving of such notice. To the extent provided by law, attendance of a
director at any meeting shall constitute a waiver of notice of such meeting.
18. Meetings by Conference Telephone or Similar Communications
Equipment. Subject to the requirements for notice of meetings, unless
otherwise restricted by the articles of incorporation or these bylaws or by
law, members of the board of directors of the corporation, or members of any
committee designated by the board, may participate in and hold a meeting of
such board or committee by means of conference telephone or similar
communications equipment whereby all persons participating in a meeting in this
manner can hear each other, and participation in a meeting in this manner shall
constitute presence in person at such meeting, except when a person
participates in a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
19. Action Without a Meeting. Any action which is required to be
or may be taken at a meeting of the directors, or of the executive committee or
any other committee of the directors, may be taken without a meeting if a
consent in writing, setting forth the action so taken, is signed by all of the
members of the board or of the committee, as the case may be. Such consent
shall have the same force and effect as a unanimous vote at a meeting duly
held. The secretary shall file such consents with the minutes of the meetings
of the board of directors or of the committee as the case may be.
20. Quorum. At all meetings of the board a majority of the full
board of directors shall, unless a greater number as to any particular matter
is required by law, the articles of incorporation or these bylaws, constitute a
quorum for the transaction of business, and the act of a majority of the
directors present at any meeting at which there is a quorum, except as may be
otherwise specifically provided by law, the articles of incorporation or these
bylaws, shall be the act of the board of directors.
21. Vacancies. Unless otherwise provided in the articles of
incorporation or by law, vacancies on the board of directors may be filled by
the affirmative vote of a majority of the remaining directors, although less
than a quorum, or by a sole remaining director, or by election at an annual or
special meeting of shareholders called for that purpose. A director elected to
fill a vacancy shall be elected for the unexpired term of his predecessor in
office. Any directorship to be filled by reason of an increase in the number
of directors may be filled by election at an annual meeting or at a special
meeting of shareholders called for that purpose, or by the board of directors
for a term of office continuing only until the next election of one or more
directors by the shareholders; provided that the board of directors may not
fill more than two such directorships during the period between any two
successive annual meetings of shareholders. Notwithstanding the foregoing,
whenever the holders of any class or series of shares are entitled to elect one
or more
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<PAGE> 13
directors by the provisions of the articles of incorporation, any vacancies in
such directorships and any newly created directorship for such class or series
to be filled by reason of an increase in the number of such directors may be
filled by the affirmative vote of a majority of the directors elected by such
class or series then in office or by a sole remaining director so elected, or
by the vote of the holders of the outstanding shares of such class or series,
and such directorship shall not in any case be filled by the vote of the
remaining directors or the holders of the outstanding shares as a whole unless
otherwise provided in the articles of incorporation.
22. Indemnification and Expenses; Liability of Directors and
Officers. The corporation shall (i) indemnify any person who is or was a
director, officer, employee, or agent of the corporation, or while a director,
officer, employee, or agent of the corporation, is or was serving at the
request of the corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary of another foreign
or domestic corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan, or other enterprise, to the fullest extent that a
corporation may or is required to grant indemnification to a director under the
Texas Business Corporation Act as now written or as hereafter amended, and (ii)
shall pay or reimburse reasonable expenses (including court costs and
attorneys' fees) incurred by any such person who was, is, or is threatened to
be named defendant or respondent in a proceeding (including any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative, any appeal in any such action,
suit, or proceeding, and any inquiry or investigation that could lead to such
an action, suit, or proceeding), in advance of the final disposition of the
proceeding, to the fullest extent that a corporation may or is required to
advance such expenses to a director under the Texas Business Corporation Act as
now written or as hereafter amended. The corporation may indemnify and advance
expenses to any person to such further extent as permitted by law.
The corporation may purchase and maintain insurance on behalf of any
person who holds or who has held any position named hereinabove as allowed
under the Texas Business Corporation Act, as now written or as hereafter
amended.
Except as otherwise provided by the Texas Business Corporation Act, as
now written or as hereafter amended, with respect to directors and
shareholders, no person shall be liable to the corporation for any loss,
damage, liability, or expense suffered by it on account of any action taken or
omitted to be taken by him as a director or officer of the corporation or of
any other corporation which he serves as a director or officer at the request
of the corporation, if such person (i) exercised the same degree of care and
skill as a prudent man would have exercised under the circumstances in the
conduct of his own affairs, or (ii) took or omitted to take such action in
reliance upon advice of counsel for the corporation, or for such other
corporation, or upon statements made or information furnished by directors,
officers, employees, or agents of the corporation, or of such other
corporation, which he had no reasonable grounds to disbelieve.
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<PAGE> 14
23. Executive and Other Committees. The board of directors, by
resolution or resolutions adopted by a majority of the full board of directors,
may designate from among its members an executive committee and one or more
other committees, each of which committees, to the extent provided in said
resolution or resolutions, shall have and may exercise all the authority of the
board of directors in the management of the corporation, except to the extent
expressly prohibited by the Texas Business Corporation Act; provided, however,
that the designation of any such committee and the delegation thereto of
authority shall not operate to relieve the board of directors, or any member
thereof, of any responsibility imposed upon it or him by law.
Each committee so designated shall keep regular minutes of its
proceedings, which minutes shall be recorded in the minute book of the
corporation. The secretary or an assistant secretary of the corporation may
act as secretary for any such committee if such committee so requests.
24. Compensation of Directors and Committee Members. Directors
and members of all committees shall not receive any stated salary for their
services as such, unless authorized by resolution of the board. Also, by
resolution of the board, a fixed sum and expenses of attendance, if any, may be
allowed for attendance at each regular or special meeting of the board of
directors or any committee thereof. Nothing herein contained shall be
construed to preclude any director or committee member from serving the
corporation in any other capacity and receiving compensation therefor.
OFFICERS
25. (a) Officers - Who Shall Constitute. The officers of the
corporation shall consist of a chairman of the board, a president, one or more
vice presidents, a secretary, a treasurer, one or more assistant secretaries,
and one or more assistant treasurers. The board shall elect a president and a
secretary at its first meeting after each annual meeting of the shareholders.
The board then, or from time to time, also may elect one or more of the other
prescribed officers as it shall deem advisable, but need not elect any officers
other than a president and a secretary. The board may, if it desires, elect or
appoint additional officers as may be deemed necessary, and may further
identify or describe any one or more of the officers of the corporation.
The officers of the corporation need not be members of the
board of directors. Any two or more offices may be held by the same person.
An officer shall be deemed qualified when he enters upon the
duties of the office to which he has been elected or appointed and furnishes
any bond required by the board; but the board also may require his written
acceptance and promise faithfully to discharge the duties of such office.
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<PAGE> 15
(b) Term of Office. Each officer of the corporation
shall hold his office at the pleasure of the board of directors or for such
other period as the board may specify at the time of his election or
appointment, or until his death, resignation, or removal by the board,
whichever first occurs. In any event, each officer of the corporation who is
not reelected or reappointed at the annual election of officers by the board
next succeeding his election or appointment shall be deemed to have been
removed by the board, unless the board provides otherwise at the time of his
election or appointment.
(c) Other Agents. The board from time to time also may
appoint such other agents for the corporation as it shall deem necessary or
advisable, each of whom shall serve at the pleasure of the board or for such
period as the board may specify, and shall exercise such powers, have such
titles and perform such duties as shall be determined from time to time by the
board or by an officer empowered by the board to make such determinations.
26. Removal. Any officer or agent or member of a committee
elected or appointed by the board of directors, and any employee, may be
removed or discharged by the board whenever in its judgment the best interests
of the corporation would be served thereby, but such removal or discharge shall
be without prejudice to the contract rights, if any, of the person so removed
or discharged. Election or appointment of an officer or agent or member of a
committee shall not of itself create contract rights.
27. Salaries and Compensation. Salaries and compensation of all
elected officers of the corporation shall be fixed, increased, or decreased by
the board of directors, but this power, except as to the salary or compensation
of the chairman of the board and the president, unless prohibited by law, may
be delegated by the board to the chairman of the board, the president, or a
committee. Salaries and compensation of all appointed officers and agents, and
of all employees of the corporation, may be fixed, increased, or decreased by
the board of directors, but until action is taken with respect thereto by the
board of directors, the same may be fixed, increased or decreased by the
president or by such other officer or officers as may be empowered by the board
of directors to do so.
28. Delegation of Authority to Hire, Discharge, and Designate
Duties. The board from time to time may delegate to the chairman of the board,
the president or other officer or executive employee of the corporation,
authority to hire, discharge, fix, and modify the duties, salary or other
compensation of employees of the corporation under their jurisdiction, and the
board may delegate to such officer or executive employee similar authority with
respect to obtaining and retaining for the corporation the services of
attorneys, accountants, and other experts.
29. The Chairman of the Board. If a chairman of the board be
elected, he shall, except as otherwise provided for in Section 6(c) of these
bylaws, preside at all meetings of the shareholders and directors at which he
may be present and shall have such other duties, powers, and authority as may
be prescribed elsewhere in these bylaws. The board
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<PAGE> 16
of directors may delegate such other authority and assign such additional
duties to the chairman of the board, other than those conferred by law
exclusively upon the president, as it may from time to time determine, and, to
the extent permissible by law, the board may designate the chairman of the
board as the chief executive officer of the corporation with all of the powers
otherwise conferred upon the president of the corporation under Section 30 of
these bylaws, or it may, from time to time, divide the responsibilities,
duties, and authority for the general control and management of the
corporation's business and affairs between the chairman of the board and the
president. If the chairman of the board is designated as the chief executive
officer of the corporation, notice thereof shall be given to the extent and in
the manner as may be required by law.
30. The President. Unless the board otherwise provides, the
president shall be the chief executive officer of the corporation with such
general executive powers and duties of supervision and management as usually
are vested in the office of the chief executive officer of a corporation, and
he shall carry into effect all directions and resolutions of the board. Except
as otherwise provided for in Section 6(c) of these bylaws, the president, in
the absence of the chairman of the board or if there be no chairman of the
board, shall preside at all meetings of the shareholders and directors.
The president may execute all bonds, notes, debentures, mortgages, and
other contracts requiring a seal, under the seal of the corporation, may cause
the seal to be affixed thereto, and may execute all other instruments for and
in the name of the corporation.
Unless the board otherwise provides, the president, or any person
designated in writing by him, may (i) attend meetings of shareholders of other
corporations to represent this corporation thereat and to vote or take action
with respect to the shares of any such corporation owned by this corporation in
such manner as he or his designee may determine, and (ii) execute and deliver
waivers of notice and proxies for and in the name of this corporation with
respect to shares of any such corporation owned by this corporation.
He shall, unless the board otherwise provides, be an ex officio member
of all standing committees.
He shall have such other or further duties and authority as may be
prescribed elsewhere in these bylaws or from time to time by the board of
directors.
If a chairman of the board be elected and designated as the chief
executive officer of the corporation, as provided in Section 29 of these
bylaws, the president shall perform such duties as may be specifically
delegated to him by the board of directors or are conferred by law exclusively
upon him, and in the absence, disability, or inability or refusal to act of the
chairman of the board, the president shall perform the duties and exercise the
powers of the chairman of the board.
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<PAGE> 17
31. Vice Presidents. In the absence, disability, or inability or
refusal to act of the president, any vice president may perform the duties and
exercise the powers of the president, until the board otherwise provides. Vice
presidents shall perform such other duties as the board shall from time to time
prescribe.
32. The Secretary and Assistant Secretaries. The secretary shall
attend all sessions of the board and, except as otherwise provided for in
Section 6(c) of these bylaws, all meetings of the shareholders, shall prepare
minutes of all proceedings at such meetings, and shall preserve them in a
minute book of the corporation. He shall perform similar duties for the
executive and other standing committees when requested by the board or any such
committee.
He shall see that all books, records, lists, and information, or
duplicates, required to be maintained at the registered or other office of the
corporation in Texas, or elsewhere, are so maintained.
He shall keep in safe custody the seal of the corporation and, when
duly authorized to do so, shall affix it to any instrument requiring a
corporate seal, and, when so affixed, he shall attest the seal by his
signature.
He shall perform such other duties and have such other responsibility
and authority as may be prescribed elsewhere in these bylaws or from time to
time by the board of directors or the chief executive officer of the
corporation, under whose direct supervision he shall be.
He shall have the general duties, powers, and responsibilities of a
secretary of a corporation.
Any assistant secretary, in the absence, disability, or inability or
refusal to act of the secretary, may perform the duties and exercise the powers
of the secretary until the board otherwise provides. Assistant secretaries
shall perform such other duties and have such other authority as the board may
from time to time prescribe.
33. The Treasurer and Assistant Treasurers. The treasurer shall
have responsibility for the safekeeping of the funds and securities of the
corporation, shall keep or cause to be kept full and accurate accounts of
receipts and disbursements in books belonging to the corporation, and shall
keep, or cause to be kept, all other books of account and accounting records of
the corporation. He shall deposit or cause to be deposited all moneys and
other valuable effects in the name and to the credit of the corporation in such
depositories as may be designated by the board of directors or by any officer
of the corporation to whom such authority has been granted by the board.
He shall disburse, or permit to be disbursed, the funds of the
corporation as may be ordered, or authorized generally, by the board, and shall
render to the chief executive
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<PAGE> 18
officer of the corporation and the directors, whenever they may require it, an
account of all his transactions as treasurer and of those under his
jurisdiction, and of the financial condition of the corporation.
He shall perform such other duties and shall have such other
responsibility and authority as may be prescribed elsewhere in these bylaws or
from time to time by the board of directors.
He shall have the general duties, powers, and responsibility of a
treasurer of a corporation, and shall, unless otherwise provided by the board,
be the chief financial and accounting officer of the corporation.
If required by the board, he shall give the corporation a bond in a
sum and with one or more sureties satisfactory to the board for the faithful
performance of the duties of his office and for the restoration to the
corporation, in the case of his death, resignation, retirement, or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in his possession or under his control which belong to the corporation.
Any assistant treasurer, in the absence, disability, or inability or
refusal to act of the treasurer, may perform the duties and exercise the powers
of the treasurer until the board otherwise provides. Assistant treasurers
shall perform such other duties and have such other authority as the board may
from time to time prescribe.
34. Duties of Officers May Be Delegated. If any officer of the
corporation be absent or unable to act, or for any other reason that the board
may deem sufficient, the board may delegate, for the time being, some or all of
the functions, duties, powers, and responsibilities of any officer to any other
officer, or to any other agent or employee of the corporation or other
responsible person, provided a majority of the whole board of directors
concurs.
SHARES OF STOCK
35. Payment for Shares of Stock. The corporation shall not issue
shares of stock except for money paid, labor done, or property actually
received. No note or obligation given by any shareholder, whether secured by
deed of trust, mortgage, or otherwise, shall be considered as payment of any
part of the share or shares issued, and no loan of money for the purposes of
such payment shall be made by the corporation. Shares may not be issued until
the full amount of consideration for such shares has been paid to the
corporation.
36. Certificates for Shares of Stock. The certificates for shares
of stock of the corporation shall be numbered and shall be in such form as may
be prescribed by the board of directors in conformity with law. The issuance
of shares shall be entered in the share
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<PAGE> 19
transfer records of the corporation as they are issued. Such entries shall
show the name and address of the person, firm, partnership, corporation, or
association to whom each certificate is issued. Each certificate shall have
printed, typed, or written thereon the name of the person, firm, partnership,
corporation, or association to whom it is issued and the number of shares
represented thereby. It shall be signed by an officer of the corporation, and
may be sealed with the seal of the corporation, which signature and seal may be
facsimiles. In case such officer who has signed or whose facsimile signature
has been placed upon such certificate shall have ceased to be such officer
before such certificate is issued, it may be issued by the corporation with the
same effect as if such officer were such officer at the date of its issuance.
37. Transfers of Shares - Transfer Agent - Registrar. Transfers
of shares of stock shall be made in the share transfer records of the
corporation only by the person named in the stock certificate, or by his
attorney lawfully constituted in writing, and upon surrender of the certificate
therefor. The share transfer records shall be in the possession of the
secretary or of a transfer agent for the corporation. The corporation, by
resolution of the board, may from time to time appoint a transfer agent and, if
desired, a registrar, under such arrangements and upon such terms and
conditions as the board deems advisable, but until and unless the board
appoints some other person, firm, or corporation as its transfer agent (and
upon the revocation of any such appointment, thereafter until a new appointment
is similarly made) the secretary of the corporation shall be the transfer agent
of the corporation without the necessity of any formal action of the board, and
the secretary, or any person designated by him, shall perform all of the duties
thereof.
38. (a) Fixing Record Dates for Meetings, Distributions, Etc.
For the purpose of determining shareholders entitled to notice of or to vote at
any meeting of shareholders or any adjournment thereof, or entitled to receive
any distribution or dividend (other than a purchase or redemption by the
corporation of any of its own shares), or in order to make a determination of
shareholders for any other proper purpose (other than determining shareholders
entitled to consent to action by shareholders proposed to be taken without a
meeting of shareholders), the board of directors of the corporation may provide
that the share transfer records shall be closed for a stated period, which
shall not exceed sixty (60) days. If the share transfer records shall be
closed for the purpose of determining shareholders entitled to notice of or to
vote at a meeting of shareholders, such records shall be closed for at least
ten (10) days immediately preceding such meeting. In lieu of closing the share
transfer records, the board of directors may fix in advance a date as the
record date for any such determination of shareholders, such date in any case
to be not more than sixty (60) days and, in the case of a meeting of
shareholders, not less than ten (10) days prior to the date on which the
particular action requiring such determination of shareholders is to be taken.
If the share transfer records are not closed and no record date is fixed by the
board of directors for the determination of shareholders entitled to notice of
or to vote at a meeting of shareholders, or shareholders entitled to receive a
distribution or dividend (other than a repurchase or redemption by the
corporation of any of its own shares), the date on which notice of the meeting
is mailed or the date on which the
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<PAGE> 20
resolution of the board of directors declaring such distribution or dividend is
adopted, as the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as herein provided, such determination
shall apply to any adjournment thereof, except where the determination has been
made through the closing of share transfer records and the stated period of
closing has expired.
(b) Fixing Record Dates for Consents to Action. Unless a
record date shall have previously been fixed or determined pursuant to this
section, whenever action by shareholders is proposed to be taken by consent in
writing without a meeting of shareholders, the board of directors may fix a
record date for the purpose of determining shareholders entitled to consent to
that action, which record date shall not precede, and shall not be more than
ten (10) days after, the date upon which the resolution fixing the record date
is adopted by the board of directors. If no record date has been fixed by the
board of directors and the prior action of the board of directors is not
required by law, the record date for determining shareholders entitled to
consent to action in writing without a meeting shall be the first date on which
a signed written consent setting forth the action taken or proposed to be taken
is delivered to the corporation by delivery to its registered office, its
principal place of business, or an officer or an agent of the corporation
having custody of the books in which proceedings of meetings of shareholders
are recorded. Delivery shall be by hand or by certified or registered mail,
return receipt requested. Delivery to the corporation's principal place of
business shall be addressed to the president or the principal executive officer
of the corporation. If no record date shall have been fixed by the board of
directors and prior action of the board of directors is required by law, the
record date for determining shareholders entitled to consent to action in
writing without a meeting shall be at the close of business on the date on
which the board of directors adopts a resolution taking such prior action.
39. Lost, Destroyed, or Stolen Certificates. The board of
directors may direct a new certificate to be issued in lieu of any theretofore
issued by the corporation that is alleged to have been lost, destroyed, or
wrongfully taken, if before the corporation has notice that the shares
represented by such certificate have been acquired by a bona fide purchaser,
the owner of such shares submits to the corporation an affidavit in form and
substance satisfactory to the corporation's counsel, of the fact of loss,
destruction, or wrongful taking by the person alleging the certificate to have
been lost, destroyed, or wrongfully taken. When authorizing such issuance of a
new certificate, the board of directors, in its discretion and as a condition
precedent to the issuance thereof, may require the owner of such lost,
destroyed, or wrongfully taken certificate, or his legal representative, to
give the corporation a bond in such sum and form, and with such surety or
sureties, as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost, destroyed, or wrongfully taken, or may require both such conditions or
any other reasonable conditions or requirements; provided, however, that a new
certificate may be issued without requiring a bond when in the judgment of the
board it is proper to do so.
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<PAGE> 21
40. Regulations. The board of directors shall have power and
authority to make all such rules and regulations as it may deem expedient
concerning the issue, transfer, conversion, and registration of certificates
for shares of stock of the corporation, that are not inconsistent with the laws
of Texas, the articles of incorporation, or these bylaws.
GENERAL
41. Fixing of Capital - Transfers of Surplus. Except as may be
specifically otherwise provided in the articles of incorporation or by law, the
board of directors is expressly empowered to exercise all authority conferred
upon it or the corporation by any law or statute, and in conformity therewith,
relative to:
(i) determining what part of the consideration received
for shares of the corporation shall be stated capital;
(ii) increasing stated capital;
(iii) transferring surplus to stated capital;
(iv) determining the consideration to be received by the
corporation for its shares; and
(v) determining all similar or related matters;
provided that any concurrent action or consent by or of the corporation and its
shareholders, required to be taken or given pursuant to law, shall be duly
taken or given in connection therewith.
42. Distributions or Dividends. Distributions or dividends upon
the outstanding shares of the corporation, subject to the provisions of the
articles of incorporation and of any applicable law, may be declared by the
board of directors at any meeting. Distributions or dividends may be paid in
cash, in property, or in shares of the corporation's stock.
Liquidating distributions or dividends or distributions or dividends
representing paid-in surplus or a return of capital shall be made only when and
in the manner permitted by law.
43. Creation of Reserves. Before the payment of any dividend,
there may be set aside out of any funds of the corporation available for
dividends such sum or sums as the board of directors from time to time deems
proper as a reserve fund or funds to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for any other purpose deemed by the board to be conducive to the
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<PAGE> 22
interests of the corporation, and the board may abolish any such reserve in the
manner in which it was created.
44. Depositories. The moneys of the corporation shall be
deposited in the name of the corporation in such bank or banks or other
depositories as the board of directors shall designate, and shall be drawn out
only by check signed by persons designated by resolution adopted by the board
of directors. The board of directors may by resolution authorize an officer or
officers of the corporation to designate any bank or banks or other
depositories in which moneys of the corporation may be deposited, and to
designate the persons who may sign checks drawn on any particular account or
accounts of the corporation, whether created by direct designation of the board
of directors or by an authorized officer or officers as aforesaid.
45. Fiscal Year. The board of directors shall have power to fix
and from time to time change the fiscal year of the corporation. In the
absence of action by the board of directors, the fiscal year of the corporation
shall end each year on the date which the corporation treated as the close of
its first fiscal year, until such time, if any, as the fiscal year shall be
changed by the board of directors.
46. Directors' Annual Statement. The board of directors may
present at each annual meeting, and when called for by vote of the shareholders
shall present to any annual or special meeting of the shareholders, a full and
clear statement of the business and condition of the corporation.
47. Amendments. The bylaws of the corporation may from time to
time be altered, amended or repealed, or new bylaws may be adopted, in the
manner provided by law and the articles of incorporation, if any provision be
made therein.
CERTIFICATE
The undersigned secretary of Aviation Group, Inc., a Texas
corporation, hereby certifies that the foregoing bylaws are the bylaws of said
corporation adopted by the board of directors of said corporation, as amended,
effective on the date hereof.
DATED as of December 20th, 1995.
/s/ LEE SANDERS
____________________________________
Lee Sanders, Secretary
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<PAGE> 23
FIRST AMENDMENT TO THE BYLAWS
OF
AVIATION GROUP, INC.
The First Amendment to the Bylaws of Aviation Group, Inc. (the
"AMENDMENT"), is effective as of February 12, 1997, after having been duly
approved by the Board of Directors of Aviation Group, Inc., a Texas corporation
(the "CORPORATION").
1) AMENDMENTS TO THE BYLAWS. The Bylaws of the Corporation are
hereby amended as follows:
Section 11A is hereby added to the Bylaws to read in its
entirety as follows:
"11A. Staggered Board. Commencing with the special
meeting of shareholders held in February, 1997, in lieu of
electing the whole number of directors annually, the directors,
shall be divided, with respect to the time for which they
severally hold office, into three classes, as nearly equal in
number as is reasonably possible, with the term of office of
the first class ("Class I") to expire at the annual meeting of
shareholders to be held in 1997, the term of office of the
second class ("Class II") to expire at the annual meeting of
shareholders to be held in 1998, and the term of office of the
third class ("Class III") to expire at the annual meeting of
shareholders to be held in 1999, with each director to hold
office until his or her successor shall have been duly elected
and qualified unless earlier removed. At each annual meeting
of shareholders, commencing with the annual meeting of
shareholders to be held in 1997, (i) directors elected to
succeed those directors whose terms then expire shall be
elected for a term of office to expire at the third succeeding
annual meeting of shareholders after their election, with each
director to hold office until his or her successor shall have
been duly elected and qualified unless earlier removed, and
(ii) if authorized by a resolution of the board of directors,
directors may be elected to fill any vacancy on the board of
directors, regardless of how such vacancy shall have been
created. The initial Class III director shall be Lee Sanders.
The initial director or directors in each class shall be
determined by the election of shareholders at the special
meeting of the shareholders held in February, 1997.
Notwithstanding that a lesser percentage may be permitted from
time to time by applicable law, no provision of this Section
11A may be altered, amended or repealed in any respect, nor may
any provision inconsistent
<PAGE> 24
therewith be adopted, unless such alteration, amendment, repeal
or adoption is approved by the affirmative vote of the holders
of at least 80 percent of the combined voting stock of the
corporation voting together as a single class at a meeting of
shareholders called by the action of the board of directors.
2) CAPITALIZED TERMS. All capitalized terms used, but not
defined, herein shall have the meanings assigned to such terms in the Bylaws of
the Corporation.
The undersigned, being the duly elected and serving Secretary of the
Corporation does hereby certify that the foregoing is a true and correct copy of
the First Amendment to the Bylaws of Corporation that was duly adopted by the
board of directors at a meeting held on February 12, 1997.
/s/ DENA LOOPER
--------------------------------
Name: Dena Looper
---------------------------
Title: Secretary
<PAGE> 25
SECOND AMENDMENT TO THE BYLAWS
OF
AVIATION GROUP, INC.
This Second Amendment to the Bylaws of Aviation Group, Inc. (the
"AMENDMENT"), is effective as of February 28, 1997, after having been duly
approved by the Board of Directors of Aviation Group, Inc., a Texas corporation
(the "CORPORATION").
1. AMENDMENT TO THE BYLAWS. The Bylaws of the Corporation are
hereby amended as follows:
(a) Section 6(a) of the Bylaws is hereby amended to read
in its entirety as follows:
"6 (a) Notice.
(i) Written or printed notice of
each meeting of the shareholders, whether
annual or special, stating the place, day and
hour of the meeting, and in the case of a
special meeting, the purpose or purposes
thereof, shall be delivered or given to each
shareholder entitled to vote thereat, either
personally or by mail, by or at the direction
of the president, the secretary, or the
officer or person calling the meeting, not
less than ten (10) nor more than sixty (60)
days before the date of the meeting, unless,
as to a particular matter, other or further
notice is required by law, in which case such
other or further notice shall be given.
(ii) Any notice of a shareholders'
meeting sent by mail shall be deemed to be
delivered when deposited in the United States
mail with postage thereon prepaid addressed
to the shareholder at his address as it
appears on the share transfer records of the
corporation.
(iii) Any notice required to be given
to the shareholders under this Section 6(a)
shall also be given to The Pacific Stock
Exchange Incorporated and to The Nasdaq Stock
Market if, as, when, and for so long as, any
capital stock of the corporation is listed on
such exchanges or quoted on the Nasdaq Stock
Exchange."
<PAGE> 26
The undersigned, being the duly elected and serving Secretary
of the Corporation does hereby certify that the foregoing is a true
and correct copy of the Second Amendment to the Bylaws of Corporation
that was duly adopted by unanimous consent of the board of directors
dated as of February 28, 1997.
/s/ DENA LOOPER
---------------------------------------
Name: Dena Looper
----------------------------------
Title: Secretary
<PAGE> 1
EXHIBIT 4.5
================================================================================
THIS INSTRUMENT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND ANY STATES SECURITIES LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS
THEREUNDER. THIS INSTRUMENT MAY CONSTITUTE A "SECURITY" FOR THE PURPOSES OF
SUCH LAWS, AND, AS SUCH, MAY NOT BE FURTHER SOLD OR TRANSFERRED BY THE HOLDER
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER SUCH LAWS OR AN EXEMPTION
THEREUNDER APPLICABLE TO SUCH SALE OR TRANSFER.
================================================================================
10% CONVERTIBLE NOTE
DUE MARCH 1, 2001
AVIATION GROUP, INC., A TEXAS CORPORATION
$_____________
DATE: _______________, 1996 NO. _________
FOR VALUE RECEIVED, Aviation Group, Inc., a Texas corporation (the
"Company"), promises to pay to the registered holder
________________________________________________________________________ the
sum of ___________________
________________________________________________________ Dollars
($_________________) plus interest at the rate of ten percent (10%) per annum
accruing from the date hereof on the unpaid indebtedness hereof until finally
paid. Said principal and accrued interest shall be paid by the Company in
lawful money of the United States of America, at the Company's offices in
Dallas, Texas, or at such other place as may be designated in writing by the
Company, to the registered holder hereof as follows:
(a) Commencing on April 1, 1996, accrued interest
hereunder shall be payable in quarterly installments on the first day of April,
July, October and January of each year until maturity;
(b) Commencing on April 1, 1998, equal quarterly
installments of principal of $___________ each shall be payable on the first
day of April, July, October and January of each year until maturity; and
(c) All outstanding principal and unpaid accrued interest
shall be finally due and payable on March 1, 2001.
1. Prepayment. The principal or interest hereunder may be
prepaid at any time without penalty or premium; provided, however, the Company
shall provide at least (10) days prior written notice to the registered holder
of such prepayment, and such holder may elect to exercise its conversion rights
hereunder with respect to the indebtedness to be prepaid prior to receipt of
such prepayment.
<PAGE> 2
2. Secured Status of Holder. This debt instrument is secured by,
and the holder of this instrument shall also be entitled to the benefits of,
that certain Pledge Agreement dated of even date herewith executed by the
Company pursuant to which the Company has pledged certain shares of the common
stock of Pride Aviation, Inc. There is no sinking fund for this instrument.
3. Default. In the event of (i) any failure by the Company to
make any payment of principal or interest hereunder within ten (10) days after
written notice of default in such payment from the holder has been received by
the Company, (ii) the filing of a petition by or against the Company under the
provisions of any state insolvency law or under the provisions of the Federal
Bankruptcy Act (for bankruptcy or reorganization or other relief), or (iii) any
assignment by the Company for the benefit of its creditors, the holder hereof
may, at such holder's option, declare the entire unpaid balance hereof
immediately due and payable and, in addition, exercise any of its rights and
remedies under the Pledge Agreement. Any delay on the part of the holder in
exercising any rights hereunder shall not operate as a waiver of said rights;
acceptance of any payment after its due date shall not be deemed a waiver of
the right to require prompt payment when due of all other sums; and acceptance
of any payment after the holder has declared the entire indebtedness due and
payable shall not cure any default of the maker or operate as a waiver of any
rights of the holder hereunder. Upon default, the Company agrees to pay all
costs and reasonable actual attorneys' fees for collection of this debt
instrument.
4. Class of Notes. With respect to the repayment of this
instrument, the holder of this debt instrument shall have equal priority to and
be pari passu with the claims of all other holders of debt instruments of the
same class as this instrument. The Maker agrees to treat alike all holders of
promissory notes in the same class as this Note and not to favor one Noteholder
over any other Noteholder in the same class. Any value or benefits accruing or
payable on any note in such class, including this Note, shall accrue or be paid
pro rata with respect to all notes, including this Note, in the class, in
proportion to, and to the extent of their respective outstanding principal
amounts.
5. Conversion Rights.
(a) Terms. The holder of this debt instrument shall have
the right from time to time to convert any or all of the unpaid indebtedness
hereof (including accrued but unpaid interest) into shares of the Company's
Common Stock, par value $.01, at a conversion rate of Four and 50/100 Dollars
($4.50) of indebtedness per share of Common Stock. Such conversion right may be
exercised at any time prior to the maturity date of this instrument. To effect
such conversion, the holder must tender to the Company at its offices in
Dallas, Texas this instrument together with a written notice of exercise of
such conversion right stating the amount hereof being converted. Upon the
giving of the notice of conversion and receipt of this instrument as
hereinabove provided, no further interest shall accrue upon the converted
indebtedness hereof, and the Company shall issue to such holder a
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<PAGE> 3
certificate evidencing the shares of the Company's Common Stock to which such
holder is entitled in proper form. The Company will pay any documentary stamp
taxes attributable to the initial issuance of shares of its Common Stock upon
conversion of any debt represented hereby.
(b) Adjustments. In the event of any stock dividend,
split, combination or reclassification directly affecting the then outstanding
Common Stock of the Company, the then effective conversion rate at which the
indebtedness of this instrument may be converted into shares of Common Stock
shall be proportionately adjusted, upward or downward, to prevent dilution or
enlargement of the rights of the holder hereof, effective at the close of
business on the date of such dividend, split, combination or reclassification.
In the event the Common Stock of the Company shall be changed into another kind
of capital stock or debt (otherwise then through a stock dividend, split,
combination or reclassification) or shall represent the right to receive some
other security or property, as a result of any capital reorganization or any
merger or consolidation with another corporation in which the Company is not
the surviving corporation, or any sale of all or substantially all of the
assets of the Company to another corporation, such debt shall (subject to
further adjustment in conversion price as herein provided) thereafter entitle
the holder hereof to acquire upon conversion hereof the kind and number of
shares of stock or other securities or property to which such holder would have
been entitled if he had the Common Stock issuable upon the conversion of the
debt evidenced by this instrument immediately prior to such capital
reorganization, merger, consolidation or sale of assets. If the conversion
rate shall be adjusted as provided in this paragraph, the Company shall
forthwith prepare a statement signed by the Chairman of the Board, the
President, any Vice President, the Secretary or the Treasurer of the Company,
showing in reasonable detail the facts requiring such adjustment and the
conversion rate that will be effective after such adjustment. The Company shall
forthwith cause such statement to be sent by first class mail, postage prepaid,
to the registered holder of this instrument at his address appearing upon the
Company's register.
(c) Securities Laws and Transfers. The holders hereof
acknowledge that the Company has no obligation to register this instrument
under applicable securities laws or to provide a prospectus for any offer or
transfer thereof by the holder. Each debt instrument issued upon the transfer
of this debt instrument shall have the same restrictive legend contained on the
face hereof. The shares of the Company's Common Stock to be issued upon
conversion of this instrument shall not be registered pursuant to the
Securities Act of 1933 or any state securities law or regulation. The
certificates evidencing such shares shall bear an appropriate legend to the
effect that such shares have not been registered under the Securities Act of
1933 nor under the securities laws of any state and that such shares may not be
sold within the United States of America unless so registered or unless the
Company shall receive an opinion of counsel satisfactory to it that such
registration is unnecessary. This instrument is registered on the Company's
books both as to principal and interest and is transferable only on the
register of the Company by presentation of the instrument to the Company with
an instrument of transfer duly executed by the holder or his duly authorized
agent.
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<PAGE> 4
(d) Company Liquidation. In the event a voluntary or
involuntary dissolution, liquidation or winding up of the Company (other than
in connection with a consolidation, merger or sale of all or substantially all
of the assets of the Company) is at any time proposed, the Company shall give
at least ten days' written notice to the registered holder prior to the record
date as of which holders of the Company's Common Stock will be entitled to
receive distributions as a result of the proposed transaction. Such notice
shall contain: (i) the date on which the transaction is to take place; (ii) the
record date as of which holders of Common Stock will be entitled to receive
distributions as a result of the transaction; (iii) a brief description of the
transaction; (iv) a brief description of the distributions to be made to
holders of Common Stock as a result of the transaction; and (v) an estimate of
the fair value of the distributions. On the date of the transaction, if it
actually occurs, the conversion right granted under this instrument shall
terminate.
(e) No Fractional Shares. No fractional shares of Common
Stock shall be issued upon conversion of this instrument. Instead of any
fractional share which would otherwise be issuable upon conversion, the Company
will pay a cash adjustment with respect to such fractional share in an amount
equal to the same fraction of the then effective conversion rate.
(f) Rules of Procedure. The Board of Directors of the
Company, or a committee established by it, shall have the right from time to
time to adopt specific rules of procedure to carry out the full intent of the
conversion provisions of this instrument and to do all reasonable acts
therefor; provided that such rules and acts shall not violate the specific
terms of this debt instrument.
(g) Miscellaneous. The Company shall at all times
reserve and hold available sufficient shares of Common Stock to satisfy all
conversion rights of this instrument and other debt instruments of the same
class. Shares deliverable upon the conversion of the indebtedness of this
instrument shall, at delivery, be fully paid and nonassessable, free from all
taxes, liens and charges arising out of their issuance. In the case of the
conversion of less than all of the indebtedness of this instrument, the Company
shall cancel this instrument and execute and deliver a new instrument of like
tenor and date for the balance of the unpaid and unconverted indebtedness.
6. Registered Holder and Exchange. Prior to due presentment for
registration of transfer of this instrument, the Company may treat the
registered holder as the person exclusively entitled to receive payments and
notices and otherwise to exercise rights hereunder. Subject to the
restrictions on transfer herein contained, this instrument is exchangeable, on
its surrender by the registered owner to the Company, for two or more new
instruments of like tenor and date, representing in the aggregate the same
principal amount of this instrument, in denominations designated by the
registered holder at the time of surrender.
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<PAGE> 5
7. Rights of Offset. The Company has the right to offset
against amounts owing by it under this debt instrument certain amounts that may
be owed to it under that certain Stock Purchase Agreement dated December ___,
1995 between the Company, Sunbelt Business Capital Incorporated ("Sunbelt"),
Pride Aviation, Inc. ("Pride") and the stockholders of Sunbelt and Pride.
8. Miscellaneous. This instrument does not entitle the holder to
any voting rights or other rights as a shareholder of the Company, or to any
other rights whatsoever except the rights herein expressed. No dividends are
payable or will accrue on this instrument or the shares of Common Stock into
which the principal amount hereof may be converted until, and except to the
extent that, the conversion right granted in this instrument is exercised.
This instrument is not subject to redemption. No provisions of this
instrument restrict any declaration of dividends by the Company, require the
maintenance by the Company of any reserves or any minimum financial condition,
or restrict the incurrence of additional debt or the issuance of additional
securities by the Company. This instrument is not issued pursuant to a trust
indenture, and no third party trustee shall act on behalf of or represent the
holder of this instrument or monitor the compliance of the Company with the
provisions hereof on behalf of the holder.
IN WITNESS WHEREOF, Aviation Group, Inc. has caused this instrument to
be executed in its name and behalf and its corporate seal to be hereto affixed
by its President, thereunto duly authorized, as of the day and year first above
written.
ATTEST: AVIATION GROUP, INC.
By:
- --------------------------------- ----------------------------------
Its: Its:
----------------------------- ---------------------------------
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<PAGE> 6
TRANSFER FORM
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers to:
Name:
---------------------------------------------
Address:
------------------------------------------
------------------------------------------
this instrument and irrevocably appoints ___________________________________
attorney (with full power of substitution) to transfer this instrument on the
books of Aviation Group, Inc.
Date: SIGNATURE:
--------------------------
------------------------------------
(Please sign exactly as name appears on
instrument)
Taxpayer Identification Number:
------------------------------------
In the presence of: Signature guaranteed by:
- ------------------------------- ------------------------------------
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<PAGE> 7
CONVERSION FORM
The undersigned hereby:
(1) Irrevocably elects to convert $_____________ of the
indebtedness of this instrument into shares of the Common Stock of Aviation
Group, Inc. in accordance with the terms of said instrument;
(2) Requests that a certificate for such shares be issued in the
name of the undersigned and delivered to the undersigned at the address below;
and
(3) Requests that, if such indebtedness is not all of the unpaid
indebtedness under said instrument, a new instrument of like tenor for the
balance of the unpaid and unconverted indebtedness of said instrument be issued
in the name of the undersigned and delivered to the undersigned at the address
below.
Date: SIGNATURE:
----------------------
------------------------------------
(Please sign exactly as name appears on
face of instrument)
Address:
------------------------------------
------------------------------------
Taxpayer Identification Number:
------------------------------------
-7-
<PAGE> 1
EXHIBIT 4.6
AVIATION GROUP, INC.
AND
RICHARD L. MORGAN
______________________
WARRANT AGREEMENT
DATED AS OF JUNE 30, 1996
<PAGE> 2
WARRANT AGREEMENT
This WARRANT AGREEMENT (the "AGREEMENT") is dated as of June 30, 1996
between AVIATION GROUP, INC., a Texas corporation (the "COMPANY"), and RICHARD
L. MORGAN, a Texas resident, his heirs, personal representatives and assigns
(collectively, "MORGAN").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to Morgan warrants ("WARRANTS")
to purchase up to an aggregate of 80,000 shares of Common Stock (as defined in
Section 8.5), $.01 par value, of the Company.
NOW, THEREFORE, in consideration of the premises, the agreements set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Grant. Effective herewith, Morgan is hereby granted the right
to purchase, at any time prior to 5:00 p.m., New York time on February 28,
1999, 80,000 shares of Common Stock (the "SHARES"). One share of Common Stock
is hereinafter referred to as a "Warranty Security" and more than one
collectively referred to as the "Warrant Securities." The exercise price of
each Warrant shall equal (subject to adjustment as provided in Section 8) $2.50
per Warrant Security subject to the terms and conditions of this Agreement.
2. Warrant Certificates. The warrant certificates (the "WARRANT
CERTIFICATES") delivered and to be delivered pursuant to this Agreement shall
be in the form set forth in EXHIBIT A, attached hereto and made a part hereof,
with such appropriate insertions, omissions, substitutions, and other
variations as required or permitted by this Agreement.
3. Exercise of Warrant.
3.1 Method of Exercise. The Warrants initially are
exercisable at an aggregate initial exercise price (subject to
adjustment as provided in Section 8 hereof) per Warrant Security set
forth in Section 6 hereof payable by certified or official bank check
in New York Clearing House funds, subject to adjustment as provided in
Section 8 hereof. Upon surrender of a Warrant Certificate with the
annexed Form of Election to Purchase duly executed, together with
payment of the Exercise Price (as hereinafter defined) for the Warrant
Securities purchased at the Company's principal offices (presently
located at 700 North Pearl, Suite 2170, Dallas, Texas 75201) the
registered holder of a Warrant Certificate ("HOLDER" or "HOLDERS")
shall be entitled to receive a certificate or certificates for the
shares of Common Stock so purchased. The purchase rights represented
by each Warrant Certificate are exercisable at the option of the
Holders thereof, in whole or part
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<PAGE> 3
(but not as to fractional shares of the Common Stock). In the case of
the purchase of less than all Warrant Securities purchasable under any
Warrant Certificate, the Company shall cancel said Warrant Certificate
upon the surrender thereof and shall execute and deliver a new Warrant
Certificate of like tenor for the balance of the Warrant Securities
purchasable thereunder.
3.2 Exercise by Surrender of Warrant. In addition to the
method of payment set forth in Section 3.1 and in lieu of any cash
payment required thereunder, the Holder(s) of the Warrants shall have
the right at any time and from time to time to exercise the Warrants
in full or in part by surrendering the Warrant Certificate in the
manner specified in Section 3.1. The number of shares of Common Stock
to be issued pursuant to this Section 3.2 shall be equal to the
difference between (a) the number of shares of Common Stock in respect
of which the Warrants are exercised and (b) a fraction, the numerator
of which shall be the number of shares of Common Stock in respect of
which the Warrants are exercised multiplied by the Exercise Price (as
hereinafter defined) and the denominator of which shall be the Market
Price (as defined in Section 3.3).
3.3 Definition of Market Price. As used herein, the
phrase "MARKET PRICE" at any date shall be deemed to be the last
reported sale price, or, in case no such reported sale takes place on
such day, the average of the last reported sale prices for the last
three (3) trading days, in either case as officially reported by the
principal securities exchange on which the Common Stock is listed or
admitted to trading or by the NASDAQ National Market ("NNM"), or, if
the Common Stock is not listed or admitted to trading on any national
securities exchange or quoted by NNM, the average closing bid price as
furnished by the National Association of Securities Dealers, Inc.
("NASD") through NASDAQ or similar organization if NASDAQ is no longer
reporting such information, or if the Common Stock is not quoted on
NASDAQ, or such similar organization as determined in good faith by
resolution of the Board of Directors of the Company, based on the best
information available to it. Notwithstanding the foregoing, for
purposes of Section 8, the Market Price of a share of Common Stock
shall be determined by reference to the relevant information set forth
above during the thirty (30) trading days immediately preceding the
date of the event requiring the determination of the Market Price
(except that, in the event of a public offering of shares of Common
Stock, the Market Price of a share of Common Stock shall be determined
by reference to the trading day immediately preceding the effective
date of the public offering and not such thirty (30) trading day
period).
4. Issuance of Certificates. Upon the exercise of the Warrants,
the issuance of certificates for shares of Common Stock and/or other
securities, properties or rights underlying such Warrants shall be made
forthwith (and in any event within five (5) business days thereafter) without
charge to the Holder thereof including, without limitation, any tax which may
be payable in respect of the issuance thereof, and such certificates shall
(subject to the provisions of Sections 5 and 7 hereof) be issued in the name
of, or in such names as may be directed by, the Holder thereof; provided,
however, that the Company shall not be required to pay any tax which may be
2
<PAGE> 4
payable in respect of any transfer involved in the issuance and delivery of any
such certificates in a name other than that of the Holder and the Company shall
not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the Shares
(and/or other securities, property or rights issuable upon the exercise of the
Warrants) shall be executed on behalf of the Company by the manual or facsimile
signature of the then present Chairman or Vice Chairman of the Board of
Directors or President or Vice President of the Company under its corporate
seal reproduced thereon, attested to by the manual or facsimile signature of
the then present Secretary or Assistant Secretary of the Company. Warrant
Certificates shall be dated the date of execution by the Company upon initial
issuance, division, exchange, substitution or transfer.
5. Restriction On Transfer of Warrants. The Holder of a Warrant
Certificate, by its acceptance thereof, covenants and agrees that the Warrants
are being acquired as an investment and not with a view to the distribution
thereof; that the Warrants may not be sold, transferred, assigned, hypothecated
or otherwise disposed of, in whole or in part, for a period of one (1) year
from the date hereof, except to direct family members or their affiliates. Any
such person or entity who acquires any Warrants shall be subject to the same
restrictions.
6. Exercise Price.
6.1 Initial and Adjusted Exercise Price. Except as
otherwise provided in Section 8 hereof, the initial exercise price of
each Warrant shall be $2.50 per Warrant Security. The adjusted
exercise price shall be the price which shall result from time to time
from any and all adjustments of the initial exercise price in
accordance with the provisions of Section 8 hereof.
6.2 Exercise Price. The term "EXERCISE PRICE" herein
shall mean the initial exercise price or the adjusted exercise price,
depending upon the context.
7. Registration Rights.
7.1 Piggyback Registration.
(a) If, at any time commencing after the
Termination Date and expiring on the seventh anniversary
thereafter, the Company proposes to register any of its
securities under the Securities Act of 1933, as amended (the
"ACT"), either for its own account or the account of any other
security holder or holders of the Company possessing
registration rights ("OTHER STOCKHOLDERS") (other than
pursuant to Form S-4, Form S-8 or comparable registration
statement), it shall give written
3
<PAGE> 5
notice, at least thirty (30) days prior to the filing of each
such registration statement, to Morgan and to all other
Holders of Warrants and/or Shares, of its intention to do so.
If Morgan or other such Holders notify the Company within
twenty-one (21) days after the receipt of any such notice of
its or their desire to include any Shares or shares of Common
Stock issuable upon the exercise of the Warrants
(collectively, the "REGISTRABLE SECURITIES") in such proposed
registration statement, the Company shall afford Morgan and
such other Holders of such Registrable Securities the
opportunity to have any such securities registered under such
registration statement.
(b) If the registration of which the Company
gives notice is for a registered public offering involving an
underwriting, the Company shall so advise Morgan and such
other Holders as part of the written notice given pursuant to
Section 7.1(a) hereof. The right of Morgan or any such other
Holder to registration pursuant to this Section 7.1 shall be
conditioned upon their participation in such underwriting and
the inclusion of their Registrable Securities in the
underwriting to the extent hereinafter provided. Morgan and
all other Holders proposing to distribute their securities
through such underwriting shall (together with the Company and
any officers, directors or Other Stockholders distributing
their securities through such underwriting) enter into an
underwriting agreement in customary form with the
representative of the underwriter or underwriters selected by
the Company. Notwithstanding any other provision of this
Section 7.1, if the representative of the underwriter or
underwriters advises the Company in writing that marketing
factors require a limitation or elimination of the number of
shares of Common Stock or other securities to be underwritten,
the representative may limit the number of shares of Common
Stock or other securities to be included in the registration
and underwriting. The Company shall so advise Morgan and all
other Holders of Registrable Securities requesting
registration, and the number of shares of Common Stock or
other securities that are entitled to be included in the
registration and underwriting shall be allocated among Morgan
and other Holders requesting registration, in each case, in
proportion, as nearly as practicable, to the respective
amounts of securities which they had requested to be included
in such registration at the time of filing the registration
statement.
(c) Notwithstanding the provisions of this
Section 7.1, the Company shall have the right at any time
after it shall have given written notice pursuant to Section
7.1(a) hereof (irrespective of whether a written request for
inclusion of any such securities shall have been made) to
elect not to file any such proposed registration statement, or
to withdraw the same after the filing but prior to the
effective date thereof.
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<PAGE> 6
7.2 Covenants of the Company with Respect to
Registration. In connection with any registration under Section 7.1
hereof, the Company covenants and agrees as follows:
(a) The Company shall use its best efforts to
file a registration statement within forty- five (45) days of
receipt of any demand therefor, shall use its best efforts to
have any registration statements declared effective at the
earliest practicable time, and shall furnish each Holder
desiring to sell Registrable Securities such number of
prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs, expenses and
fees (excluding fees and expenses of Holder(s)' counsel and
any underwriting or selling commissions), in connection with
all registration statements filed pursuant to Section 7.1
hereof including, without limitation, the Company's legal and
accounting fees, printing expenses, blue sky fees and
expenses. If the Company shall fail to comply with the
provisions of Section 7.2(a), the Company shall, in addition
to any other equitable or other relief available to the
Holder(s), extend the exercise period of the Warrants by such
number of days as shall equal the delay caused by the
Company's failure.
(c) The Company will take all necessary action
which may be required in qualifying or registering the
Registrable Securities included in a registration statement
for offering and sale under the securities or blue sky laws of
such states as reasonably are requested by the Holder(s);
provided that, the Company shall not be obligated to execute
or file any general consent to service of process or to
qualify as a foreign corporation to do business under the laws
of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of
the Registrable Securities to be sold pursuant to any
registration statement and each person, if any, who controls
such Holders within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as
amended ("EXCHANGE ACT"), against all loss, claim, damage,
expense or liability (including all expenses reasonably
incurred in investigating, preparing or defending against any
claim whatsoever) to which any of them may become subject
under the Act, the Exchange Act or otherwise, arising from
such registration statement except for matters for which the
Company is indemnified under subsection 7.2(e) hereof.
(e) The Holder(s) of the Registrable Securities
to be sold pursuant to a registration statement, and their
successors and assigns, shall severally, and not jointly,
indemnify the Company, its officers and directors and each
person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act,
against all loss, claim, damage or expense or liability
5
<PAGE> 7
(including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which
they may become subject under the Act, the Exchange Act or
otherwise, arising from information furnished by or on behalf
of such Holders, or their successors or assigns, for specific
inclusion in such registration statement.
(f) For a period of ninety (90) days after the
effectiveness of any registration statement filed pursuant to
Section 7.1 hereof, the Company shall not permit any other
registration statement (other than (1) a registration
statement relating to the securities for which the Company has
made available to the Holder(s) of the Registrable Securities
piggyback registration rights hereunder and (2) a registration
statement filed on Forms S-4 or S-8 or a shelf registration on
Form S-3) to be or remain effective during the effectiveness
of a registration statement or a shelf registration on Form
S-3 filed pursuant to Section 7.1 hereof, without the prior
written consent of the Holders of the Registrable Securities
representing a majority of such securities.
(g) The Company shall furnish to each Holder
participating in the offering and to each underwriter, if any,
a signed counterpart, addressed to such Holder or underwriter,
of (i) an opinion of counsel to the Company, dated the
effective date of such registration statement (and, if such
registration includes an underwritten public offering, an
opinion dated the date of the closing under the underwriting
agreement), and (ii) a "cold comfort" letter dated the
effective date of such registration statement (and, if such
registration includes an underwritten public offering, a
letter dated the date of the closing under the underwriting
agreement) signed by the independent public accountants who
have issued a report on the Company's financial statements
included in such registration statement, in each case covering
substantially the same matters with respect to such
registration statement (and the prospectus included therein)
and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to underwriters in underwritten
public offerings of securities.
(h) The Company shall as soon as practicable
after the effective date of any registration statement filed
pursuant to Section 7.1 hereof, and in any event within
fifteen (15) months thereafter, make "generally available to
its security holders" (within the meaning of Rule 158 under
the Act) an earnings statement (which need not be audited)
complying with Section 11(a) of the act and covering a period
of at least twelve (12) consecutive months beginning after the
effective date of the registration statement.
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<PAGE> 8
(i) The Company shall deliver promptly to each
Holder participating in the offering requesting the
correspondence and memoranda described below and to the
managing underwriters, copies of all written correspondence
between the Commission and the Company, its counsel or
auditors and all memoranda relating to discussions with the
Commission or its staff with respect to the registration
statement and permit each Holder and underwriters to do such
investigation, upon reasonable advance notice, with respect to
information contained in or omitted from the registration
statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the NASD. Such
investigation shall include access to books, records and
properties and opportunities to discuss the business of the
Company with its officers and independent auditors, all to
such reasonable extent and at such reasonable times and as
often as any such Holder or underwriter shall reasonably
request.
(j) Nothing contained in this Agreement shall be
construed as requiring the Holder(s) to exercise their
Warrants prior to the initial filing of any registration
statement or the effectiveness thereof.
(k) In addition to the Registrable Securities,
upon the written request therefor, by any Holder(s), the
Company shall include in the registration statement any other
shares of Common Stock of the Company held by such Holder(s)
as of the date of filing of such registration statement,
including without limitation restricted shares of Common
Stock.
7.3 Restrictive Legends. In the event that the Company
fails to maintain the effectiveness of the Registration Statement,
such that the exercise, in part or in whole, of the Warrants are not,
at the time of such exercise, registered under the Act, any
certificates representing the Shares underlying the Warrants and any
of the other securities issuable upon exercise of the Warrants shall
bear the following restrictive legend:
The securities represented by this certificate have
not been registered under the Securities Act of 1933,
as amended ("Act"), and may not be offered or sold
except pursuant to (i) an effective registration
statement under the Act, (ii) to the extent
applicable, Rule 144 under the Act (or any similar
rule under such Act relating to the disposition of
securities), or (iii) an opinion of counsel, if such
opinion shall be reasonably satisfactory to counsel
to the issuer, that an exemption from registration
under such Act is available.
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<PAGE> 9
8. Adjustments to Exercise Price and Number of Securities.
8.1 Computation of Adjusted Exercise Price. Except as
hereinafter provided, in the event the Company shall at any time after
the date hereof issue or sell any shares of Common Stock including
shares held in the Company's treasury (other than (i) the issuances or
sales referred to in Section 8.7 hereof, (ii) shares of Common Stock
issued upon the exercise of any options, rights or warrants to
subscribe for shares of Common Stock, or (iii) shares of Common Stock
issued upon the direct or indirect conversion or exchange of
securities for shares of Common Stock), for a consideration per share
less than the Market Price in effect immediately prior to the issuance
or sale of such shares, or without consideration, then forthwith upon
such issuance or sale, the Exercise Price shall (until another such
issuance or sale) be reduced to the price (calculated to the nearest
full cent) equal to the quotient derived by dividing (i) an amount
equal to the sum of (a) the total number of shares of Common Stock
outstanding immediately prior to the issuance or sale of such shares,
multiplied by the Exercise Price in effect immediately prior to such
issuance or sale, and (b) the aggregate of the amount of all
consideration, if any, received by the Company upon such issuance or
sale, by (ii) the total number of shares of Common Stock outstanding
immediately after such issuance or sale; provided, however, that in no
event shall the Exercise Price be adjusted pursuant to this
computation to an amount in excess of the Exercise Price in effect
immediately prior to such computation, except in the case of a
combination of outstanding shares of Common Stock, as provided by
Section 8.3 hereof.
For the purposes of this Section 8 the term Exercise Price
shall mean the Exercise Price per share of Common Stock set forth in
Section 6 hereof, as adjusted from time to time pursuant to the
provisions of this Section 8.
For the purposes of any computation to be made in accordance
with this Section 8.1, the following provisions shall be applicable:
(a) In case of the issuance or sale of shares of
Common Stock for a consideration part or all of which shall be
cash, the amount of the cash consideration therefor shall be
deemed to be the amount of cash received by the Company for
such shares (or, if shares of Common Stock are offered by the
Company for subscription, the subscription price, or, if
either of such securities shall be sold to underwriters or
dealers for public offering without a subscription offering,
the initial public offering price) before deducting therefrom
any compensation paid or discount allowed in the sale,
underwriting or purchase thereof by underwriters or dealers or
others performing similar services, or any expenses incurred
in connection therewith.
(b) In case of the issuance or sale (other than
as a dividend or other distribution on any stock of the
Company) of shares of Common Stock for a
8
<PAGE> 10
consideration part or all of which shall be other than cash,
the amount of the consideration therefor other than cash shall
be deemed to be the value of such consideration as determined
in good faith by the Board of Directors of the Company and
shall include any amounts payable to security holders or any
affiliates thereof including, without limitation, pursuant to
any employment agreement, royalty, consulting agreement,
covenant not to compete, earnout or contingent payment right
or similar arrangement, agreement or understanding, whether
oral or written; all such amounts being valued for the
purposes hereof at the aggregate amount payable thereunder,
whether such payments are absolute or contingent, and
irrespective of the period or uncertainty of payment, the rate
of interest, if any, or the contingent nature thereof;
provided, however, that if any Holder(s) does not agree with
such evaluation, a mutually acceptable independent appraiser
shall make such evaluation, the cost of which shall be borne
by the Company.
(c) Shares of Common Stock issuable by way of
dividend or other distribution on any stock of the Company
shall be deemed to have been issued immediately after the
opening of business on the day following the record date for
the determination of stockholders entitled to receive such
dividend or other distribution and shall be deemed to have
been issued without consideration.
(d) The reclassification of securities of the
Company other than shares of Common Stock into securities
including shares of Common Stock shall be deemed to involve
the issuance of such shares of Common Stock for a
consideration other than cash immediately prior to the close
of business on the date fixed for the determination of
security holders entitled to receive such shares, and the
value of the consideration allocable to such shares of Common
Stock shall be determined as provided in subsection (ii) of
this Section 8.1.
(e) The number of shares of Common Stock at any
one time outstanding shall include the aggregate number of
shares issued or issuable (subject to readjustment upon the
actual issuance thereof) upon the exercise of options, rights,
warrants and upon the conversion or exchange of convertible or
exchangeable securities.
8.2 Options, Rights, Warrants and Convertible and
Exchangeable Securities. In case the Company shall at any time after
the date hereof issue options, rights or warrants to subscribe for
shares of Common Stock, or issue any securities convertible into or
exchangeable for shares of Common Stock, for a consideration per share
less than the Market Price in effect immediately prior to the issuance
of such options, rights or warrants, or such convertible or
exchangeable securities, or without consideration, the Exercise Price
in effect immediately prior to the issuance of such options, rights or
warrants, or such convertible or exchangeable securities, as the case
may be, shall be
9
<PAGE> 11
reduced to a price determined by making a computation in accordance
with the provisions of Section 8.1 hereof, provided that:
(a) The aggregate maximum number of shares of
Common Stock, as the case may be, issuable under such options,
rights or warrants shall be deemed to be issued and
outstanding at the time such options, rights or warrants were
issued, and for a consideration equal to the minimum purchase
price per share provided for in such options, rights or
warrants at the time of issuance, plus the consideration
(determined in the same manner as consideration received on
the issue or sale of shares in accordance with the terms of
the Warrants), if any, received by the Company for such
options, rights or warrants.
(b) The aggregate maximum number of shares of
Common Stock issuable upon conversion or exchange of any
convertible or exchangeable securities shall be deemed to be
issued and outstanding at the time of issuance of such
securities, and for a consideration equal to the consideration
(determined in the same manner as consideration received on
the issue or sale of shares of Common Stock in accordance with
the terms of the Warrants) received by the Company for such
securities, plus the minimum consideration, if any, receivable
by the Company upon the conversion or exchange thereof.
(c) If any change shall occur in the price per
share provided for in any of the options, rights or warrants
referred to in subsection (a) of this Section 8.2, or in the
price per share at which the securities referred to in
subsection (b) of this Section 8.2 are convertible or
exchangeable, such options, rights or warrants or conversion
or exchange rights, as the case may be, shall be deemed to
have expired or terminated on the date when such price change
became effective in respect of shares not theretofore issued
pursuant to the exercise or conversion or exchange thereof,
and the Company shall be deemed to have issued upon such date
new options, rights or warrants or convertible or exchangeable
securities at the new price in respect of the number of shares
issuable upon the exercise of such options, rights or warrants
or the conversion or exchange of such convertible or
exchangeable securities.
8.3 Subdivision and Combination. In case the Company
shall at any time subdivide or combine the outstanding shares of
Common Stock, the Exercise Price shall forthwith be proportionately
decreased in the case of subdivision or increased in the case of
combination.
8.4 Adjustment in Number of Securities. Upon each
adjustment of the Exercise Price pursuant to the provisions of this
Section 8, the number of Warrant Securities issuable upon the exercise
at the adjusted exercise price of each Warrant shall be adjusted to
the nearest full amount by multiplying a number equal to the Exercise
Price in effect
10
<PAGE> 12
immediately prior to such adjustment by the number of Warrant
Securities issuable upon exercise of the Warrants immediately prior to
such adjustment and dividing the product so obtained by the adjusted
Exercise Price.
8.5 Definition of Common Stock. For the purpose of this
Agreement, the term "COMMON STOCK" shall mean (i) the class of stock
designated as Common Stock in the Articles of Incorporation of the
Company as amended as of the date hereof, or (ii) any other class of
stock resulting from successive changes or reclassifications of such
Common Stock consisting solely of changes in par value, or from par
value to no par value, or from no par value to par value. In the
event that the Company shall after the date hereof issue securities
with greater or superior voting rights than the shares of Common Stock
outstanding as of the date hereof, the Holder, at its option, may
receive upon exercise of any Warrant either shares of Common Stock or
a like number of such securities with greater or superior voting
rights.
8.6 Merger or Consolidation. In case of any
consolidation of the Company with, or merger of the Company with, or
merger of the Company into, another corporation (other than a
consolidation or merger which does not result in any reclassification
or change of the outstanding Common Stock), the corporation formed by
such consolidation or merger shall execute and deliver to the Holder a
supplemental warrant agreement providing that the holder of each
Warrant then outstanding or to be outstanding shall have the right
thereafter (until the expiration of such Warrant) to receive, upon
exercise of such Warrant, the kind and amount of shares of stock and
other securities and property receivable upon such consolidation or
merger, by a holder of the number of shares of Common Stock of the
Company for which such Warrant might have been exercised immediately
prior to such consolidation, merger, sale or transfer. Such
supplemental warrant agreement shall provide for adjustments which
shall be identical to the adjustments provided in Section 8. The
above provision of this subsection shall similarly apply to successive
consolidations or mergers.
8.7 No Adjustment of Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Warrants or
the shares of Common Stock issuable upon the exercise of the
Warrants; or
(b) If the amount of such adjustment shall be
less than two cents ($.02) per Warrant Security, provided,
however, that in such case any adjustment that would otherwise
be required then to be made shall be carried forward and shall
be made at the time of and together with the next subsequent
adjustment which, together with any adjustment so carried
forward, shall amount to at least two cents ($.02) per Warrant
Security; or
11
<PAGE> 13
(c) If the Exercise Price would be less than the
par value per share of Common Stock.
8.8 Dividends and Other Distributions. In the event that
the Company shall at any time prior to the exercise of all Warrants
declare a dividend (other than a dividend consisting solely of shares
of Common Stock) or otherwise distribute to its stockholders any
assets, property, rights, evidences of indebtedness, securities (other
than shares of Common Stock), whether issued by the Company or by
another, or any other thing of value, the Holders of the unexercised
Warrants shall thereafter be entitled, in addition to the shares of
Common Stock or other securities and property receivable upon the
exercise thereof, to receive, upon the exercise of such Warrants, the
same property, assets, rights, evidences of indebtedness, securities
or any other thing of value that they would have been entitled to
receive at the time of such dividend or distribution as if the
Warrants had been exercised immediately prior to such dividend or
distribution. At the time of any such dividend or distribution, the
Company shall make appropriate reserves to ensure the timely
performance of the provisions of this Section 8.8.
9. Exchange and Replacement of Warrant Certificates. Each
Warrant Certificate is exchangeable without expense, upon the surrender thereof
by the registered Holder at the principal executive office of the Company, for
a new Warrant Certificate of like tenor and date representing in the aggregate
the right to purchase the same number of Warrant Securities in such
denominations as shall be designed by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be
required to issue fractional shares of Common Stock upon the exercise of
Warrants. Warrants may only be exercised in such multiples as are required to
permit the issuance by the Company of one or more whole shares of Common Stock.
If one or more Warrants shall be presented for exercise in full at the same
time by the same Holder, the number of whole shares of Common Stock which shall
be issuable upon such exercise thereof shall be computed on the basis of the
aggregate number of shares of Common Stock purchasable on exercise of the
Warrants so presented. If any fraction of a share of Common Stock would,
except for the provisions provided herein, be issuable on the exercise of any
Warrant (or specified portion thereof), the Company shall pay an amount in cash
equal to such fraction multiplied by the then current market value of a share
of Common Stock, determined as follows:
12
<PAGE> 14
(a) If the Common Stock is listed, or admitted to
unlisted trading privileges on the NYSE or the AMEX, or is traded on
the NNM, the current market value of a share of Common Stock shall be
the closing sale price of the Common Stock at the end of the regular
trading session on the last business day prior to the date of exercise
of the Warrants on whichever of such exchanges or NNM had the highest
average daily trading volume for the Common Stock on such day; or
(b) If the Common Stock is not listed or admitted to
unlisted trading privileges, on either the NYSE or the AMEX and is not
traded on NNM, but is quoted or reported on NASDAQ, the current market
value of a share of Common Stock shall be the average of the
representative closing bid and asked prices (or the last sale price,
if then reported by NASDAQ) of the Common Stock at the end of the
regular trading session on the last business day prior to the date of
exercise of the Warrants as quoted or reported on NASDAQ, as the case
may be; or
(c) If the Common Stock is not listed, or admitted to
unlisted trading privileges, on either of the NYSE or the AMEX, and is
not traded on NNM or quoted or reported on NASDAQ, but is listed or
admitted to unlisted trading privileges on the BSE or another national
securities exchange (other than the NYSE or the AMEX), the current
market value of a share of Common Stock shall be the closing sale
price of the Common Stock at the end of the regular trading session on
the last business day prior to the date of exercise of the Warrants on
whichever of such exchanges has the highest average daily trading
volume for the Common Stock on such day; or
(d) If the Common Stock is not listed or admitted to
unlisted trading privileges on any national securities exchange, or
listed for trading on NNM or quoted or reported on NASDAQ, but is
traded in the over-the-counter market, the current market value of a
share of Common Stock shall be the average of the last reported bid
and asked prices of the Common Stock reported by the National
Quotation Bureau, Inc. on the last business day prior to the date of
exercise of the Warrants; or
(e) If the Common Stock is not listed, admitted to
unlisted trading privileges on any national securities exchange, or
listed for trading on NNM or quoted or reported on NASDAQ, and bid and
asked prices of the Common Stock is not reported by the National
Quotation Bureau, Inc., the current market value of a share of Common
Stock shall be an amount, not less than the book value thereof as of
the end of the most recently completed fiscal quarter of the Company
ending prior to the date of exercise, determined in accordance with
generally acceptable accounting principles, consistently applied.
11. Reservation and Listing of Securities. The Company shall at
all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Warrants,
such number of shares of Common Stock or other securities, properties or rights
as shall be issuable upon the exercise thereof. The Company covenants and
13
<PAGE> 15
agrees that, upon exercise of the Warrants and payment of the Exercise Price
therefor, all shares of Common Stock and other Securities issuable upon such
exercise shall be duly and validly issued, fully paid, non-assessable and not
subject to the preemptive rights of any stockholder.
12. Notices to Warrant Holders. Nothing contained in this
Agreement shall be construed as conferring upon the Holders the right to vote
or to consent or to receive notice as a stockholder in respect of any meetings
of stockholders for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any
time prior to the expiration of the Warrants and their exercise, any of the
following events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable other than in cash, or a cash
dividend or distribution payable other than out of current or retained
earnings, as indicated by the accounting treatment of such dividend or
distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital
stock of the Company, or any option, right or warrant to subscribe
therefor; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation or merger) or a
sale of all or substantially all of its property, assets and business
as an entirety shall be proposed;
then, in any one or more of such events, the Company shall give written notice
of such event to the Holders at least fifteen (15) days prior to the date fixed
as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled to
vote on such proposed dissolution, liquidation, winding up or sale. Such
notice shall specify such record date or the date of closing the transfer book,
as the case may be. Failure to give such notice or any defect therein shall
not affect the validity of any action taken in connection with the declaration
or payment of any such dividend, or the issuance of any convertible or
exchangeable securities, or subscription rights, options or warrants, or any
proposed dissolution, liquidation, winding up or sale.
13. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made and sent when delivered, or mailed by registered or certified mail,
return receipt requested:
(a) If to the registered Holder of the Warrants, to the
address of such Holder as shown on the books of the Company; or
14
<PAGE> 16
(b) If to the Company, to the address set forth in
Section 3 hereof or to such other address as the Company may designate
by notice to the Holders.
14. Supplements and Amendments. The Company and Morgan may from
time to time supplement or amend this Agreement without the approval of any
Holders of the Warrant Certificates in order to cure any ambiguity, to correct
or supplement any provision contained herein which may be defective or
inconsistent with any provisions herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and Morgan
may deem necessary or desirable and which the Company and Morgan deem shall not
adversely affect the interests of the Holders of the Warrant Certificates.
15. Successors. All the covenants and provisions of this
Agreement shall be binding upon and inure to the benefit of the Company, the
Holders and their respective successors and assigns hereunder.
16. Governing Law; Submission to Jurisdiction. This Agreement and
each Warrant Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of New York and for all purposes shall be construed
in accordance with the laws of such State without giving effect to the rules of
such State governing the conflicts of laws.
The Company, Morgan and any other registered Holders hereby agree that
any action, proceeding or claim against it arising out of, or relating in any
way to, this Agreement shall be brought and enforced in the courts of the State
of New York or of the United States of America for the Southern District of New
York, and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company, Morgan and any other registered Holders hereby
irrevocably waive any objection to such exclusive jurisdiction or inconvenient
forum. Any such process or summons to be served upon any of the Company,
Morgan and the Holders (at the option of the party bringing such action,
proceeding or claim) may be served by transmitting a copy thereof, by
registered or certified mail, return receipt requested, postage prepaid,
addressed to it at the address set forth in Section 13 hereof. Such mailing
shall be deemed personal service and shall be legal and binding upon the party
so served in any action, proceeding or claim. The Company, Morgan and any
other registered Holders agree that the prevailing party(ies) in any such
action or proceeding shall be entitled to recover from the other party(ies) all
of its/their reasonable legal costs and expenses relating to such action or
proceeding and/or incurred in connection with the preparation therefor.
17. Entire Agreement; Modification. This Agreement contains the
entire understanding between the parties hereto with respect to the subject
matter hereof and may not be modified or amended except by a writing duly
signed by the party against whom enforcement of the modification or amendment
is sought.
15
<PAGE> 17
18. Severability. If any provision of this Agreement shall be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Agreement.
19. Captions. The caption headings of the Sections of this
Agreement are for convenience of reference only and are not intended, nor shall
they be construed as, a part of this Agreement and shall be given no
substantive effect.
20. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company and
Morgan and any other registered Holder(s) of the Warrant Certificates or
Warrants Securities any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for the sole benefit of the Company and
Morgan and any other registered Holders of Warrant Certificates or Warrant
Securities.
21. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
AVIATION GROUP, INC.
By:/s/ LEE SANDERS
------------------------------------
Lee Sanders, President
---------------------------------------
Richard L. Morgan
16
<PAGE> 18
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, February 28, 1999
No. W-011 Warrants to Purchase 80,000
Shares of Common Stock
WARRANT CERTIFICATE
This Warrant Certificate certifies that Richard L. Morgan, or
registered assigns, is the registered holder of 80,000 Warrants to purchase
initially, at any time from June 30, 1996 until 5:00 p.m. New York time on
February 28, 1999 ("Expiration Date"), up to 80,000 fully-paid and
non-assessable shares of common stock, $.01 par value ("Common Stock") of
AVIATION GROUP, INC. a Texas corporation (the "Company"), at the initial
exercise price, subject to adjustment in certain events (the "Exercise Price"),
of $2.50 per share of Common Stock upon surrender of this Warrant Certificate
and payment of the Exercise Price at an office or agency of the Company, but
subject to the conditions set forth herein and in the Warrant Agreement dated
as of June 30, 1996 between the Company and Richard L. Morgan (the "Warrant
Agreement"). Payment of the Exercise Price shall be made by certified or
official bank check in New York Clearing House funds payable to the order of
the Company or by surrender of this Warrant Certificate.
No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of
this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "holders" or "holder" meaning the registered
holders or registered holder) of the Warrants.
<PAGE> 19
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the
rights of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided herein and in the
Warrant Agreement, without any charge except for any tax or other governmental
charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of June 30, 1996
AVIATION GROUP, INC.
[SEAL] By: /s/ LEE SANDERS
-------------------------------------
Lee Sanders, President
Attest:
- -------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
-2-
<PAGE> 20
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase:
Warrant Securities
---------------------------------
and herewith tenders in payment for such securities a certified or official
bank check payable in New York Clearing House Funds to the order Aviation
Group, Inc. in the amount of $_______, all in accordance with the terms of
Section 3.1 of the Warrant Agreement dated as of June 30, 1996 between Aviation
Group, Inc. and Richard L. Morgan, a Texas resident. The undersigned request
that a certificate for such Securities be registered in the name of
___________________, whose address is
_____________________________________________ and that such Certificate be
delivered to ____________________, whose address is
______________________________.
Signature
------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate)
---------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
-1-
<PAGE> 21
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate)
FOR VALUE RECEIVED, _______________________________ hereby sells,
assigns and ______________ unto ______________________________________________
______________________________________________________________________________.
(Please print name and address of transferee)
_______ Warrant Certificate, together with all right, title and interest
therein, and does hereby reasonably constitute and appoint
______________________, as Attorney, to transfer the within Warrant Certificate
on the books of the within- named Company, with full power of substitution.
Date:
------------------------
Signature:
-----------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate)
---------------------------------------
(Insert Social Security or Other
Identifying Number of Assignee)
-1-
<PAGE> 1
EXHIBIT 4.7
AVIATION GROUP, INC.
AND
RAS SECURITIES CORP.
--------------
WARRANT AGREEMENT
Dated as of March 1, 1996
1
<PAGE> 2
WARRANT AGREEMENT dated as of March 1, 1996 between AVIATION GROUP,
INC., a Texas corporation (the "Company") and RAS SECURITIES CORP., its
successors, designees and assigns (hereinafter referred to as "RAS").
WITNESSETH:
WHEREAS, the Company proposes to issue to RAS warrants ("Warrants") to
purchase up to an aggregate of 200,000 shares of common stock, $.01 par value,
of the Company's ("Common Stock") if the maximum number of shares (i.e.,
500,000) offered pursuant to the Company's Confidential Private Offering
Memorandum dated January 15, 1996 (as amended, the "Memorandum") are sold,
120,000 shares of Common Stock if the number of shares (i.e., 300,000) offered
in such offering are sold and a pro rata number of shares between 200,000 and
120,000 if the number of shares sold in such offering exceed the number offered
but are less than the maximum offered. (One share of Common Stock is
hereinafter referred to as a "Warrant Security" and more than one collectively
referred to as the "Warrant Securities"); and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued on the Closing Date (as such term is defined in the Agency Agreement
between RAS and the Company dated January 19, 1996, the "Agency Agreement") by
the Company to RAS in consideration for, and as part of RAS's compensation in
connection with RAS acting as the placement agent pursuant to the Agency
Agreement;
NOW, THEREFORE, in consideration of the premises, the agreements set
forth herein and in the Agency Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. Grant. On each Closing Date under the Agency Agreement, RAS
is hereby granted the right to purchase, at any time from the Termination Date
(as defined in the Agency Agreement) until 5:00 p.m., New York time on the
third anniversary of such Termination Date up to that number of shares of
Common Stock (the "Shares") as shall equal the product of
2
<PAGE> 3
200,000 times the ratio (the "Offering Ratio") that the aggregate number of
Shares sold though such Closing Date by the Company in the private offering
pursuant to the Memorandum (the "Offering") bears to 500,000. Each such grant
shall be evidenced by the issuance by the Company of a Warrant Certificate (as
defined below) to RAS. Each Warrant Certificate issued on a Closing Date to
RAS, except for the initial Closing Date, shall replace and supersede the
Warrant Certificate issued to RAS on the immediately preceding Closing Date,
and RAS shall return such previously issued Warrant Certificate to the Company
for the purpose of cancellation. All exercise price of each Warrant issued on a
Closing Date under the Agency Agreement shall equal (subject to adjustment as
provided in Section 8 hereof) $1.00 per Warrant Security subject to the terms
and conditions of this Agreement. As an example, if a total of 400,000 Shares
were sold by the Company in the Offering, the Company would issued to RAS a
Warrant to purchase 160,000 Shares (i.e., 200,000 times 400,000 divided by
500,000) at an exercise price of $1.00 per Warrant Security. Except as set
forth herein or in the Agency Agreement, the shares issuable upon exercise of
the Warrants are in all respects identical to the shares of Common Stock being
purchased by the investors pursuant to the terms and provisions of the
Memorandum.
2. Warrant Certificates. The warrant certificates (the
"Warrant Certificates") delivered and to be delivered pursuant to this
Agreement shall be in the form set forth in Exhibit A, attached hereto and made
a part hereof, with such appropriate insertions, omissions, substitutions, and
other variations as requited or permitted by, this Agreement.
3. Exercise of Warrant.
3.1 Method of Exercise. The Warrants initially are
exercisable at an aggregate initial exercise price (subject to adjustment as
provided in Section 8 hereof) per Warrant Security set forth in Section 6
hereof payable by certified or official bank check in New York Clearing House
funds, subject to adjustment as provided in Section 8 hereof. Upon surrender of
a Warrant Certificate with the annexed Form of Election to Purchase duly
executed, together with payment of the Exercise Price (as hereinafter defined)
for the Warrant Securities purchased at the Company's principal offices
(presently located at 1327 Empire Central, Suite 260, Dallas, Texas
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<PAGE> 4
75247) the registered holder of a Warrant Certificate ("Holder" or "Holders")
shall be entitled to receive a certificate or certificates for the shares of
Common Stock so purchased. The purchase rights represented by each Warrant
Certificate are exercisable at the option of the Holders thereof, in whole or
part (but not as to fractional shares of the Common Stock). In the case of the
purchase of less than all Warrant Securities purchasable under any Warrant
Certificate, the Company shall cancel said Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the Warrant Securities purchasable thereunder.
3.2 Exercise by Surrender of Warrant. In addition to the
method of payment set forth in Section 3.1 and in lieu of any cash payment
required thereunder, the Holder(s) of the Warrants shall have the right at any
time and from time to time to exercise the Warrants in full or in part by
surrendering the Warrant Certificate in the manner specified in Section 3.1.
The number of shares of Common Stock to be issued pursuant to this Section 3.2
shall be equal to the difference between (a) the number of shares of Common
Stock in respect of which the Warrants are exercised and (b) a fraction, the
numerator of which shall be the number of shares of Common Stock in respect of
which the Warrants are exercised multiplied by the Exercise Price (as
hereinafter defined) and the denominator of which shall be the Market Price.
3.3 Definition of Market Price. As used herein, the
phrase "Market Price" at any date shall be deemed to be the last reported sale
price, or, in case no such reported sale takes place on such day, the average
of the last reported sale prices for the last three (3) trading days, in either
case as officially reported by the principal securities exchange on which the
Common Stock is listed or admitted to trading or by the Nasdaq National Market
("NNM"), or, if the Common Stock is not listed or admitted to trading on any
national securities exchange or quoted by NNM, the average closing bid price as
furnished by the National Association of Securities Dealers, Inc. ("NASD")
through Nasdaq or similar organization if Nasdaq is no longer reporting such
information, or if the Common Stock is not quoted on Nasdaq, or such similar
organization as determined in good faith by resolution of the Board of
Directors of the Company, based on the best information available to it.
Notwithstanding the foregoing, for purposes of Section 8,
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<PAGE> 5
the Market Price of a share of Common Stock shall be determined by reference to
the relevant information set forth above during the thirty (30) trading days
immediately preceding the date of the event requiring the determination of the
Market Price (except that, in the event of a public offering of shares of Common
Stock, the Market Price of a share of Common Stock shall be determined by
reference to the trading day immediately preceding the effective date of the
public offering and not such thirty (30) trading day period).
4. Issuance of Certificates. Upon the exercise of the
Warrants, the issuance of certificates for shares of Common Stock and/or other
securities, properties or rights underlying such Warrants shall be made
forthwith (and in any event within five (5) business days thereafter) without
charge to the Holder thereof including, without rotation, any tax which may be
payable in respect of the issuance thereof, and such certificates shall
(subject to the provisions of Sections 5 and 7 hereof) be issued in the name
of, or in such names as may be directed by, the Holder thereof; provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificates in a name other than that of the Holder and the Company shall
not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the Shares
(and/or other securities, property or rights issuable upon the exercise of the
Warrants) shall be executed on behalf of the Company by the manual or facsimile
signature of the then present Chairman or Vice Chairman of the Board of
Directors or President or Vice President of the Company under its corporate
seal reproduced thereon, attested to by the manual or facsimile signature of
the then present Secretary or Assistant Secretary of the Company. Warrant
Certificates shall be dated the date of execution by the Company upon initial
issuance, division, exchange, substitution or transfer.
5. Restriction On Transfer of Warrants. The Holder of a Warrant
Certificate, by its acceptance thereof, covenants and agrees that the Warrants
are being acquired as an investment
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<PAGE> 6
and not with a view to the distribution thereof; that the Warrants may not be
sold, transferred, assigned, hypothecated or otherwise disposed of, in whole or
in part, for a period of one (1) year from the date hereof, except to officers
of RAS. Any such officers of RAS who acquire any Warrants shall be subject to
die same restrictions.
6. Exercise Price.
6.1 Initial and Adjusted Exercise Price. Except as
otherwise provided in Section 8 hereof, the initial exercise price of each
Warrant shall be $1.00 per Warrant Security. The adjusted exercise price shall
be the price which shall result from time to time from any and all adjustments
of the initial exercise price in accordance with the provisions of Section 8
hereof.
6.2 Exercise Price. The term "Exercise Price" herein
shall mean the initial exercise price or the adjusted exercise price, depending
upon the context.
7. Registration Rights.
7.1 Piggyback Registration. (a) If, at any time
commencing after the Termination Date (as defined in the Agency Agreement) and
expiring on the seventh (7th) anniversary thereafter, the Company proposes to
register any of its securities under the Securities Act of 1933 (the "Act")
either for its own account or the account of any other security holder or
holders of the Company possessing registration rights ("Other Stockholders")
(other than pursuant to Form S-4, Form S-8 or comparable registration
statement), it shall give written notice, at least thirty (30) days prior to
the filing of each such registration statement, to RAS and to all other Holders
of Warrants and/or Shares, of its intention to do so. If RAS or other such
Holders notify the Company within twenty-one (21) days after the receipt of any
such notice of its or their desire to include any Shares or shares of Common
Stock issuable upon the exercise of the Warrants (collectively, the
"Registrable Securities") in such proposed registration statement, the Company
shall afford RAS and such other Holders of such Registrable Securities the
opportunity to have any such securities registered under such registration
statement.
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<PAGE> 7
(b) If the registration of which the Company gives notice
is for a registered public offering involving an underwriting, the Company
shall so advise RAS and such other Holders as part of the written notice given
pursuant to Section 7.1(a) hereof. The right of RAS or any such other Holder to
registration pursuant to this Section 7.1 shall be conditioned upon their
participation in such underwriting and the inclusion of their Registrable
Securities in the underwriting to the extent hereinafter provided. RAS and all
other Holders proposing to distribute their securities through such
underwriting shall (together with the Company and any officer, directors or
Other Stockholders distributing their securities through such underwriting)
enter into an underwriting agreement in customary form with the representative
of the underwriter or underwriters selected by the Company. Notwithstanding any
other provision of this Section 7.1, if the representative of the underwriter
or underwriters advises the Company in writing that marketing factors require a
limitation or elimination of the number of shares of Common Stock or other
securities to be underwritten, the representative may limit the number of
shares of Common Stock or other securities to be included in the registration
and underwriting. The Company shall so advise RAS and all other Holders of
Registrable Securities requesting registration, and the number of shares of
Common Stock or other securities that are entitled to be included in the
registration and underwriting shall be allocated among RAS and other Holders
requesting registration, in each case, in proportion, as nearly as practicable,
to the respective amounts of securities which they had requested to be included
in such registration at the time of filing the registration statement.
(c) Notwithstanding the provisions of this Section 7.1,
the Company shall have the right at any time after it shall have given written
notice pursuant to Section 7.1(a) hereof (irrespective of whether a written
request for inclusion of any such securities shall have been made) to elect not
to file any such proposed registration statement, or to withdraw the same after
the filing but prior to the effective date thereof.
7.2 Demand Registration (a) At any time commencing three
months following the Termination Date (as defined in the Agency Agreement) and
ending on the fifth (5th) anniversary thereafter, the Holders of Registrable
Securities representing a "Majority" (as hereinafter defined) of such
securities (assuming the exercise of all of the Warrants) (the
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<PAGE> 8
"Initiating Holders") shall have the right (which right is in addition to the
registration rights under Section 7.1 hereof), exercisable by written notice to
the Company, to have the Company prepare and file with the Commission, on one
occasion, a registration statement and such other documents, including a
prospectus, as may be necessary in the opinion of both counsel for the Company
and counsel for the Holders, in order to comply with the provisions of the Act,
so as to permit a public offering and sale of their respective Registrable
Securities for up to two hundred and seventy (270) days by such Holders and any
other Holders of Registrable Securities, as well as any other security holders
possessing similar registration rights, who notify the Company within
twenty-one (21) days after receiving notice from the Company of such request.
(b) The Company covenants and agrees to give written
notice of any registration request under this Section 7.2 by any Holder or
Holders to all other registered Holders of Registrable Securities, as well as
any other security holders possessing similar registration rights, within ten
(10) days after the date of the receipt of any such registration request.
(c) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 7.2(a) hereof. The right of any Holder to registration pursuant to this
Section 7.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent and subject to the limitations provided herein. A
Holder may elect to include in such underwriting all or a part of the
Registrable Securities it holds.
(d) The Company shall (together with all Holders,
officers, directors and Other Stockholders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriter of underwriters
selected for such underwriting by the Initiating Holders, which underwriters)
shall be reasonably acceptable to RAS. Notwithstanding any other provision of
this Section 7.2, if the representative of the underwriter or underwriters
advises the Initiating Holders in writing that marketing factors require a
limitation or elimination of the number of shares of Common Stock or other
securities to be underwritten, the representative may limit the number of
shares of Common Stock or other securities to be included in the registration
and underwriting. The Company shall so advise RAS and all Holders of
Registrable Securities requesting registration,
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<PAGE> 9
and the number of shares of Common Stock or other securities that are entitled
to be included in the registration and underwriting shall be allocated among
RAS and other Holders requesting registration, in each case, in proportion, as
nearly as practicable, to the respective amounts of securities which they had
requested to be included in such registration at the time of filing the
registration statement. If the Company or any Holder of Registrable Securities
who has requested inclusion in such registration as provided above disapproves
of the terms of any such underwriting, such person may elect to withdraw its
securities therefrom by written notice to the Company, the underwriter and the
Initiating Holders. Any securities so excluded shall be withdrawn from such
registration. No securities excluded from such registration by reason of such
underwriters' marketing limitations shall be included in such registration. To
facilitate the allocation of shares in accordance with this Section 7.2(d), the
Company or underwriter or underwriters selected as provided above may round the
number of securities of any holder which may be included in such registration
to the nearest 100 shares.
(e) In the event that the Initiating Holders are unable
to sell all of the Registrable Securities for which they have requested
registration due to the provisions of Section 7.2(d) hereof and if at that
time, the Initiating Holders are not permitted to sell Registrable Securities
under Rule 144(k), the Initiating Holders shall be entitled to require the
Company to afford the Initiating Holders an opportunity to effect one
additional demand registration under this Section 7.2.
(f) In addition to the registration rights under Section
7.1 and subsection (a) of Section 7.2 hereof, at any time commencing three
months following the Termination Date (as defined in the Agency Agreement) and
expiring five (5) years thereafter any Holder of Registrable Securities shall
have the right, exercisable by written request to the Company, to have the
Company prepare and file, on one occasion, with the Commission a registration
statement so as to permit a public offering and sale for 270 days by any such
Holder of its Registrable Securities provided, however, that the provisions of
Section 7.3(b) hereof, shall not apply to any such registration request and
registration and all costs incident thereto shall be at the expense of the
Holder or Holder's making such request.
(g) Notwithstanding anything to the contrary contained
herein, if the Company shall not have filed a registration statement for the
Registrable Securities of the Initiating Holders
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<PAGE> 10
or the Holder(s) referred to in Section 7.3(f) above (the "Paying Holders"),
within the time period specified in Section 7.3(a) below, the Company shall
upon the written notice of election of the Initiating Holders or the Paying
Holders, as the case may be, repurchase (i) any and all Shares at the higher of
the Market Price per share of Common Stock on (x) the date of the notice sent
to the Company under Section 7.2(a) or (f), as the case may be, or (y) the
expiration of the period specified in Section 7.3(a) and (ii) any and all
Warrants at such Market Price less the Exercise Price of such Warrant. Such
repurchase shall be in immediately available funds and shall close within five
(5) business days after the expiration of the period specified in Section
7.3(a).
7.3 Covenants of the Company With Respect to
Registration. In connection with any registration under Sections 7.1 and 7.2
hereof, the Company covenants and agrees as follows:
(a) The Company shall use its best efforts to file a
registration statement within forty five (45) days of receipt of any demand
therefor, shall use its best efforts to have any registration statements
declared effective at the earliest practicable time, and shall furnish each
Holder desiring to sell Registrable Securities such number of prospectuses as
shall reasonably be requested.
(b) The Company shall pay all costs, expenses and fees
(excluding fees and expenses of Holder(s)' counsel and any underwriting or
selling commissions), in connection with all registration statements filed
pursuant to Sections 7.1 and 7.2 hereof including, without limitation, the
Company's legal and accounting fees, printing expenses, blue sky fees and
expenses. If the Company shall fail to comply with the provisions of Section
7.3(a), the Company shall, in addition to any other equitable or other relief
available to the Holder(s), extend the exercise period of the Warrants by such
number of days as shall equal the delay caused by the Company's failure.
(c) The Company will take all necessary action which may
be required in qualifying or registering the Registrable Securities included in
a registration statement for offering and sale under the securities or blue sky
laws of such states as reasonably are requested by the Holder(s); provided that
the Company shall not be obligated to execute or file any general consent to
service of process or to qualify as a foreign corporation to do business under
the laws
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<PAGE> 11
of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the
Registrable Securities to be sold pursuant to any registration statement and
each person, if any, who controls such Holders within the meaning of Section 15
of the Act or Section 20(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), against all loss, claim, damage, expense or liability
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which any of them may become subject
under the Act, the Exchange Act or otherwise, arising from such registration
statement except for matters for which the Company is indemnified under
subsection 7.3(e) hereof.
(e) The Holder(s) of the Registrable Securities to be
sold pursuant to a registration statement, and their successors and assigns,
shall severally, and not jointly, indemnify the Company, its officers and
directors and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, against all
loss, claim, damage or expense or liability (including all expenses reasonably
incurred in investigating, preparing or defending against any claim whatsoever)
to which they may become subject under the Act, the exchange Act or otherwise,
arising from information furnished by or on behalf of such Holders, or their
successors or assigns, for specific inclusion in such registration statement.
(f) For a period of ninety (90) days after the
effectiveness of any registration statement filed pursuant to Section 7.2
hereof, the Company shall not permit any other registration statement (other
than (1) a registration statement relating to the securities for which the
Company has made available to the Holder(s) of the Registrable Securities
piggyback registration rights hereunder and (2) a registration statement filed
on Forms S-4 or S-8 or a shelf registration on Form S-3) to be or remain
effective during the effectiveness of a registration statement or a shelf
registration on Form S-3 filed pursuant to Section 7.2 hereof, without the
prior written consent of the Holders of the Registrable Securities representing
a Majority of such securities.
(g) The Company shall furnish to each Holder
participating in the offering and to each underwriter, if any, a signed
counterpart, addressed to such Holder or underwriter, of (i) an opinion of
counsel to the Company, dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering, an opinion
dated the date of
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the closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities.
(h) The Company shall as soon as practicable after the
effective date of any registration statement filed pursuant to Sections 7.1 and
7.2 hereof, and in any event within 15 months thereafter, make "generally
available to its security holders" (within the meaning of Rule 158 under the
Act) an earnings statement (which need not be audited) complying with Section
11(a) of the act and covering a period of at least 12 consecutive months
beginning after the effective date of the registration statement.
(i) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below and to the managing underwriters, copies of all written
correspondence between the Commission and the Company, its counsel or auditors
and all memoranda relating to discussions with the Commission or its staff with
respect to the registration statement and permit each Holder and underwriters
to do such investigation, upon reasonable advance notice, with respect to
information contained in or omitted from the registration statement as it deems
reasonably necessary to comply with applicable securities laws or rules of the
NASD. Such investigation shall include access to books, records and properties
and opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable
times and as often as any such Holder or underwriter shall reasonably request.
j) With respect to any registration under Section 7.2
hereof, the Company shall enter into an underwriting agreement with the
managing underwriter selected for such underwriting by the Initiating Holders
or the Paying Holders, as the case may be, which may be RAS. Such agreement
shall be satisfactory in form and substance to the Company, each Holder
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<PAGE> 13
and such managing underwriters, and shall contain such representations,
warranties and covenants by the Company and such other terms as are customarily
contained in agreements of that type used by the managing underwriter. The
Holders shall be parties to any underwriting agreement relating to an
underwritten sale of their Registrable Securities and may, at their option,
require that any or all the representations, warranties and covenants of the
Company to or for the benefit of such underwriters shall also be made to and
for the benefit of such Holders. Such Holders shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters, except as they may relate to such Holders and their intended
methods of distribution.
(k) For purposes of this Agreement, the term "Majority"
in reference to the Holders of Registrable Securities, shall mean in excess of
fifty percent (50%) of the then outstanding Warrants and/or Shares that (i) are
not held by the Company, an affiliate, officer, creditor, employee or agent
thereof or any of their respective affiliates, members of their family, persons
acting as nominees or in conjunction therewith and (ii) have not been resold to
the public pursuant to a registration statement filed with the Commission under
the Act.
(l) Nothing contained in this Agreement shall be
construed as requiring the Holder(s) to exercise their Warrants prior to the
initial filing of any registration statement or the effectiveness thereof.
(m) In addition to the Registrable Securities, upon the
written request therefor, by any Holder(s), the Company shall include in the
registration statement any other shares of Common Stock of the Company held by
such Holder(s) as of the date of filing of such registration statement,
including without limitation restricted shares of Common Stock.
7.4 Restrictive Legends. In the event that the Company
fails to maintain the effectiveness of the Registration Statement, such that
the exercise, in part or in whole, of the Warrants are not, at the time of such
exercise, registered under the Act, any certificates representing the Shares
underlying the Warrants and any of the other securities issuable upon exercise
of the Warrants shall bear the following restrictive legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended
("Act"), and may not be offered or
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<PAGE> 14
sold except pursuant to (i) an effective registration
statement under the Act, (ii) to the extent applicable, Rule
144 under the Act (or any similar rule under such Act relating
to the disposition of securities), or (iii) an opinion of
counsel, if such opinion shall be reasonably satisfactory to
counsel to the issuer, that an exemption from registration
under such Act is available.
8. Adjustments to Exercise Price and Number of Securities.
8.1 Computation of Adjusted Exercise Price. Except as
hereinafter provided, in the event the Company shall at any time after the date
hereof issue or sell any shares of Common Stock including Shares held in the
Company's treasury (other than (1) the issuances or sales referred to in
Section 8.7 hereof, and (ii) shares of Common Stock issued upon the exercise of
any options, rights or warrants to subscribe for shares of Common Stock or
(iii) shares of Common Stock issued upon the direct or indirect conversion or
exchange of securities for shares of Common Stock), for a consideration per
share less than the Market Price in effect immediately prior to the issuance or
sale of such shares, or without consideration, then forthwith upon such
issuance or sale, the Exercise Price shall (until another such issuance or
sale) be reduced to the price (calculated to the nearest full cent) equal to
the quotient derived by dividing (i) an amount equal to the sum of (a) the
total number of shares of Common Stock outstanding immediately prior to the
issuance or sale of such shares, multiplied by the Exercise Price in effect
immediately prior to such issuance or sale, and (b) the aggregate of the amount
of all consideration, if any, received by the Company upon such issuance or
sale, by (ii) the total number of shares of Common Stock outstanding
immediately after such issuance or sale; provided, however, that in no event
shall the Exercise Price be adjusted pursuant to this computation to an amount
in excess of the Exercise Price in effect immediately prior to such
computation, except in the case of a combination of outstanding shares of
Common Rock, as provided by Section 8.3 hereof.
For the purposes of this Section 8 the term Exercise Price shall mean
the Exercise Price per share of Common Stock set forth in Section 6 hereof, as
adjusted from time to time pursuant to the provisions of this Section 8.
For the purposes of any computation to be made in accordance with this
Section 8.1, the
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following provisions shall be applicable:
(i) In case of the issuance or sale of shares of Common
Stock for a consideration part or all of which shall be cash, the amount of the
cash consideration therefor shall be deemed to be the amount of cash received
by the Company for such shares (or, if shares of Common Stock are; offered by
the Company for subscription, the subscription price, or, if either of such
securities shall be sold to underwriters or dealers for public offering without
a subscription offering, the initial public offering price) before deducting
therefrom any compensation paid or discount allowed in the sale, underwriting
or purchase thereof by underwriters or dealers or others performing similar
services, or any expenses incurred in connection therewith.
(ii) In case of the issuance or sale (other than as a
dividend or other distribution on any stock of the Company) of shares of Common
Stock for a consideration part or all of which shall be other than cash, the
amount of the consideration therefor other than cash shall be deemed to be the
value of such consideration as determined in good faith by the Board of
Directors of the Company and shall include any amounts payable to security
holders or any affiliates thereof, including without limitation, pursuant to
any employment agreement, royalty, consulting agreement, covenant not to
compete, earnout or contingent payment right or similar arrangement, agreement
or understanding, whether oral or written; all such amounts being valued for
the purposes hereof at the aggregate amount payable thereunder, whether such
payments are absolute or contingent, and irrespective of the period or
uncertainty of payment, the rate of interest, if any, or the contingent nature
thereof, provided, however, that if any Holder(s) does not agree with such
evaluation, a mutually acceptable independent appraiser shall make such
evaluation, the cost of which shall be borne by the Company.
(iii) Shares of Common Stock issuable by way of dividend or
other distribution on any stock of the Company shall be deemed to have been
issued immediately after me opening of business on the day following the record
date for the determination of stockholders entitled to receive such dividend or
other distribution and shall be deemed to have been issued without
consideration.
(iv) The reclassification of securities of the Company
other than shares of Common Stock into securities including shares of Common
Stock shall be deemed to involve the issuance of such shares of Common Stock
for a consideration other than cash immediately prior
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to the close of business on the date fixed for the determination of security
holders entitled to receive such shares, and the value of the consideration
allocable to such shares of Common Stock shall be determined as provided in
subsection (ii) of this Section 8.1.
(v) The number of shares of Common Stock at any one time
outstanding shall include the aggregate number of shares issued or issuable
(subject to readjustment upon the actual issuance thereof) upon the exercise of
options, rights, warrants and upon the conversion or exchange of convertible or
exchangeable securities.
8.2 Options, Rights, Warrants and Convertible and
Exchangeable Securities. In case the Company shall at any time after the date
hereof issue options, rights or warrants to subscribe for shares of Common
Stock, or issue any securities convertible into or exchangeable for shares of
Common Stock, for a consideration per share less than the Market Price in
effect immediately prior to the issuance of such options, rights or warrants,
or such convertible or exchangeable securities, or without consideration, the
Exercise Price in effect immediately prior to the issuance of such options,
rights or warrants, or such convertible or exchangeable securities, as the case
may be, shall be reduced to a price determined by making a computation in
accordance with the provisions of Section 8.1 hereof, provided that:
(a) The aggregate maximum number of shares of Common
Stock, as the case may be, issuable under such options, rights or warrants
shall be deemed to be issued and outstanding at the time such options, rights
or warrants were issued, and for a consideration equal to the minimum purchase
price per share provided for in such options, rights or warrants at the time of
issuance, plus the consideration (determined in the same manner as
consideration received on the issue or sale of shares in accordance with the
terms of the Warrants), if any, received by the Company for such options,
rights or warrants.
(b) The aggregate maximum number of shares of Common
Stock issuable upon conversion or exchange of any convertible or exchangeable
securities shall be deemed to be issued and outstanding at the time of issuance
of such securities, and for a consideration equal to the consideration
(determined in the same manner as consideration received on the issue or sale
of shares of Common Stock in accordance with the terms of the Warrants)
received by the Company for such securities, plus the minimum consideration, if
any, receivable by the Company
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<PAGE> 17
upon the conversion or exchange thereof.
(c) If any change shall occur in the price per share
provided for in any of the options, rights or warrants referred to in
subsection (a) of this Section 8.2, or in the price per share at which the
securities referred to in subsection (b) of this Section 8.2 are convertible or
exchangeable, such options, rights or warrants or conversion or exchange
rights, as the case may be, shall be deemed to have expired or terminated on
the date when such price change became effective in respect of shares not
theretofore issued pursuant to the exercise or conversion or exchange thereof,
and the Company shall be deemed to have issued upon such date new options,
rights or warrants or convertible or exchangeable securities at the new price
in respect of the number of shares issuable upon the exercise of such options,
rights or warrants or the conversion or exchange of such convertible or
exchangeable securities.
8.3 Subdivision and Combination. In case the Company
shall at any time subdivide or combine the outstanding shares of Common Stock,
the Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
8.4 Adjustment in Number of Securities. Upon each
adjustment of the Exercise Price pursuant to the provisions of this Section 8,
the number of Warrant Securities issuable upon the exercise at the adjusted
exercise price of each Warrant shall be adjusted to the nearest full amount by
multiplying a number equal to the Exercise Price in effect immediately prior to
such adjustment by the number of Warrant Securities issuable upon exercise of
the Warrants immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.
8.5 Definition of Common Stock. For the purpose of this
Agreement, the term "Common Stock" shall mean (i) the class of stock designated
as Common Stock in the Articles of Incorporation of the Company as amended as
of the date hereof, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value. In the event that the Company shall after the date hereof issue
securities with greater or
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<PAGE> 18
superior voting rights than the shares of Common Stock outstanding as of the
date hereof, the Holder, at its option, may receive upon exercise of any
Warrant either shares of Common Stock or a like number of such securities with
greater or superior voting rights.
8.6 Merger or Consolidation. In case of any consolidation
of the Company with, or merger of the Company with, or merger of the Company
into, another corporation (other than a consolidation or merger which does not
result in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
the Holder a supplemental warrant agreement providing that the holder of each
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of such
warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the
number of shares of Common Stock of the Company for which such warrant might
have been exercised immediately prior to such consolidation, merger, sale or
transfer. Such supplemental warrant agreement shall provide for adjustments
which shall be identical to the adjustments provided in Section 8. The above
provision of this subsection shall similarly apply to successive consolidations
or mergers.
8.7 No Adjustment of Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Warrants or the
shares of Common Stock issuable upon the exercise of the Warrants; or
(b) If the amount of said adjustment shall be less than
two cents (2) per Warrant Security, provided, however, that in such case any
adjustment that would otherwise be required then to be made shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment which, together with any adjustment so carried forward, shall amount
to at least two cents (2) per Warrant Security; or
(c) If the Exercise Price would be less than the par
value per share of Common Stock.
8.8 Dividends and Other Distributions. In the event that
the Company shall at
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<PAGE> 19
any time prior to the exercise of all Warrants declare a dividend (other than a
dividend consisting solely of shares of Common Stock) or otherwise distribute
to its stockholders any assets, property, rights, evidences of indebtedness,
securities (other than shares of Common Stock), whether issued by the Company
or by another, or any other thing of value, the Holders of the unexercised
Warrants shall thereafter be entitled, in addition to the shares of Common
Stock or other securities and property receivable upon the exercise thereof, to
receive, upon the exercise of such Warrants same property, assets, rights,
evidences of indebtedness, securities or any other thing of value that they
would have been entitled to receive at the time of such dividend or
distribution as if the Warrants had been exercised immediately prior to such
dividend or distribution. At the time of any such dividend or distribution, the
Company shall make appropriate reserves to ensure the timely performance of the
provisions of this subsection 8.8.
9. Exchange and Replacement of Warrant Certificates. Each Warrant
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Warrant Securities in such denominations
as shall be designed by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Warrants, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be
required to issue fractional shares of Common Stock upon the exercise of
Warrants. Warrants may only be exercised in such multiples as are required to
permit the issuance by the Company of one or more whole shares of Common Stock.
If one or more Warrants shall be presented for exercise in full at the same
time by the same Holder, the number of whole shares of Common Stock which shall
be issuable upon such exercise thereof shall be computed on the basis of the
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<PAGE> 20
aggregate number of shares of Common Stock purchasable on exercise of the
Warrants so presented. If any fraction of a share of Common Stock would, except
for the provisions provided herein, be issuable on the exercise of any Warrant
(or specified portion thereof), the Company shall pay an amount in cash equal
to such fraction multiplied by the then current market value of a share of
Common Stock, determined as follows:
(1) If the Common Stock is listed, or admitted to
unlisted trading privileges on the NYSE or the AMEX, or is traded on the NNM,
the current market value of a share of Common Stock shall be the closing sale
price of the Common Stock at the end of the regular trading session on the last
business day prior to the date of exercise of the Warrants on whichever of such
exchanges or NNM had the highest average daily trading volume for the Common
Stock on such day; or
(2) If the Common Stock is not listed or admitted to
unlisted trading privileges, on either the NYSE or the AMEX and is not traded
on NNM, but is quoted or reported on Nasdaq, the current market value of a
share of Common Stock shall be the average of the representative closing bid
and asked prices (or the last sale price, if then reported by Nasdaq) of the
Common Stock at the end of the regular trading session on the last business day
prior to the date of exercise of the Warrants as quoted or reported on Nasdaq,
as the case may be; or
(3) If the Common Stock is not listed, or admitted to
unlisted trading privileges, on either of the NYSE or the AMEX, and is not
traded on NNM or quoted or reported on Nasdaq, but is listed or admitted to
unlisted trading privileges on the BSE or another national securities exchange
(other than the NYSE or the AMEX), the current market value of a share of
Common Stock shall be the closing sale price of the Common Stock at the end of
the regular trading session on the last business day prior to the date of
exercise of the Warrants on whichever of such exchanges has the highest average
daily trading volume for the Common Stock on such day; or
(4) If the Common Stock is not listed or admitted to
unlisted trading privileges on any national securities exchange, or listed for
trading on NNM or quoted or reported on Nasdaq, but is traded in the
over-the-counter market, the current market value of a share of Common Stock
shall be the average of the last reported bid and asked prices of the Common
Stock reported by the National Quotation Bureau, Inc. on the last business day
prior to the date
20
<PAGE> 21
of exercise of the Warrants; or
(5) If the Common Stock is not listed, admitted to
unlisted trading privileges on any national securities exchange, or listed for
trading on NNM or quoted or reported on Nasdaq, and bid and asked prices of the
Common Stock is not reported by the National Quotation Bureau, Inc., the
current market value of a share of Common Stock shall be an amount, not less
than the book value thereof as of the end of the most recently completed fiscal
quarter of the Company ending prior to the date of exercise, determined in
accordance with generally acceptable accounting principles, consistently
applied.
11. Reservation and Listing of Securities. The Company shall at
all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Warrants,
such number of shares of Common Stock or other securities, properties or rights
as shall be issuable upon the exercise thereof. The Company covenants and
agrees that, upon exercise of the Warrants and payment of the Exercise Price
therefor, all shares of Common Stock and other Securities issuable upon such
exercise shall be duly and validly issued, fully paid, non-assessable and not
subject to the preemptive rights of any stockholder.
12. Notices to Warrant Holders. Nothing contained in this
Agreement shall be construed as conferring upon the Holders the right to vote
or to consent or to receive notice as a stockholder in respect of any meetings
of stockholders for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the
following events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a dividend
or distribution payable other than in cash, or a cash dividend or distribution
payable other than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares
21
<PAGE> 22
of capital stock of the Company, or any option, right or warrant to subscribe
therefor; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property, assets and business as an entirety
shall be proposed; then, in any one or more of said events, the Company shall
give written notice of such event to the Holders at least fifteen (15) days
prior to the date fixed as a record date or the date of closing the transfer
books for the determination of the stockholders entitled to such dividend,
distribution, convertible or exchangeable securities or subscription rights, or
entitled to vote on such proposed dissolution, liquidation, winding up or sale.
Such notice shall specify such record date or the date of closing the transfer
book, as the case may be. Failure to give such notice or any defect therein
shall not affect the validity of any action taken in connection with the
declaration or payment of any such dividend, or the issuance of any convertible
or exchangeable securities, or subscription rights, options or warrants, or any
proposed dissolution, liquidation, winding up or sale.
13. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made and sent when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of the Warrants, to the
address of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in
Section 3 hereof or to such other address as the Company may designate by
notice to the Holders.
14. Supplements and Amendments. The Company and RAS may from time
to time supplement or amend this Agreement without the approval of any Holders
of Warrant Certificates in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or
inconsistent with any provisions herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and RAS may
deem necessary or desirable and which the Company and RAS deem shall not
adversely affect the interests of the Holders of Warrant Certificates.
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<PAGE> 23
15. Successors. All the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holders and
their respective successors and assigns hereunder.
16. Governing Law; Submission to Jurisdiction. This Agreement and
each Warrant Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of New York and for all purposes shall be construed
in accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
The Company, RAS and any other registered Holders hereby agree that
any action, proceeding or claim against it arising out of, or relating in any
way to, this Agreement shall be brought and enforced in the courts of the State
of New York or of the United States of America for the Southern District of New
York, and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company, RAS and any other registered Holders hereby irrevocably
waive any objection to such exclusive jurisdiction or inconvenient forum. Any
such process or summons to be served upon any of the Company, RAS and the
Holders (at the option of the party bringing such action, proceeding or claim)
may be served by transmitting a copy thereof, by registered or certified mail,
return receipt requested, postage prepaid, addressed to it at the address set
forth in Section 13 hereof. Such mailing shall be deemed personal service and
shall be legal and binding upon the party so served in any action, proceeding
or claim. The Company, RAS and any other registered Holders agree that the
prevailing party(ies) in any such action or proceeding shall be entitled to
recover from the other party(ies) all of its/their reasonable legal costs and
expenses relating to such action or proceeding and/or incurred in connection
with the preparation therefor.
17. Entire Agreement; Modification. This Agreement (including the
Agency Agreement to the extent portions thereof are referred to herein)
contains the entire understanding between the parties hereto with respect to
the subject matter hereof and may not be modified or amended except by a
writing duly signed by the party against whom enforcement of the modification
or amendment is sought.
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<PAGE> 24
18. Severability. If any provision of this Agreement shall be held
to be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
19. Captions. The caption headings of the Sections of this
Agreement are for convenience of reference only and are not intended, nor
should they be construed as, a part of this Agreement and shall be given no
substantive effect.
20. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and RAS
and any other registered Holder(s) of the Warrant Certificates or Warrants
Securities any legal or equitable right, remedy or claim under this Agreement;
and this Agreement shall be for the sole benefit of the Company and RAS and any
other registered Holders of Warrant Certificates or Warrant Securities.
21. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
AVIATION GROUP, INC.
By: /s/ LEE SANDERS
----------------------------------
Lee Sanders, President
RAS SECURITIES CORP.
By: /s/ ROBERT A. SCHNEIDER
----------------------------------
Robert A. Schneider, Chairman
EXHIBIT A
24
<PAGE> 25
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME,
-----,-----
No. W- Warrants to Purchase
-----
Shares of Common
---------
Stock
WARRANT CERTIFICATE
This Warrant Certificate certifies that ____, or registered assigns,
is the registered holder of _____ Warrants to purchase initially, at any time
from March 1, 1996 until 5:00 p.m. New York time on February 28, 1999
("Expiration Date"), up to _____ fully-paid and non-assessable shares of common
stock, $.01 par value ("Common Stock") of AVIATION GROUP, INC. a Texas
corporation (the "Company"), at the initial exercise price, subject to
adjustment in certain events (the "Exercise Price"), of 1.00 per common stock
upon surrender of this Warrant Certificate and payment of the Exercise Price at
an office or agency of the Company, but subject to the conditions set forth
herein and in the Warrant Agreement dated as of March 1, 1996 between the
Company and RAS SECURITIES CORP. (the "Warrant Agreement"). Payment of the
Exercise Price shall be made by certified or official bank check in New York
Clearing House funds payable to the order of the Company or by surrender of
this Warrant Certificate.
No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
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<PAGE> 26
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of
this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "holders" or "holder" meaning the registered
holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the
rights of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided herein and in the
Warrant Agreement, without any charge except for any tax or other governmental
charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
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<PAGE> 27
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of March 1, 1996
AVIATION GROUP, INC.
[SEAL]
By:
---------------------------
Lee Sanders, President
Attest:
- ---------------------------
Name:
Title:
27
<PAGE> 28
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase:
Warrant Securities
--------
and herewith tenders in payment for such securities a certified or official
bank check payable in New York Clearing House Funds to the order Aviation
Group, Inc. in the amount of $ _____, all in accordance with the terms of
Section 3.1 of the Warrant Agreement dated as of March 1, 1996 between Aviation
Group, Inc. and RAS Securities Corp. The undersigned request that a certificate
for such Securities be registered in the name of _____________ whose
address is ________ and that such Certificate be delivered to _________ whose
address is _____________.
Signature
-----------------------------------------
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
--------------------------------------------------
(Insert Social Security or Other Identifying Number
of Holder)
28
<PAGE> 29
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED____________________________hereby sells, assigns and
________________ unto
- ---------------------------------------------------------------------------
(Please print name and address of transferee)
_______ Warrant Certificate, together with all right, title and interest
therein, and does hereby reasonably constitute and appoint __________, as
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Date: Signature:
-------------------- -----------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
---------------------------------------------
(Insert Social Security or Other Identifying
Number of Assignee)
29
<PAGE> 1
EXHIBIT 4.8
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE
PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNTIL (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAW OR (2) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE COMPANY OR OTHER COUNSEL TO THE HOLDER OF SUCH NOTE WHICH OTHER
COUNSEL IS REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH NOTE MAY BE
PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
AVIATION GROUP, INC.
10% Promissory Note
$_____ _____, 1997
AVIATION GROUP, INC., a Texas corporation (the "Company"), for value
received, hereby promises to pay to _____________________ residing at
________________ or registered assigns (the "Payee" or "Holder") upon due
presentation and surrender of this Note on the Repayment Date (as hereinafter
defined) the principal amount of _________________ Dollars ($ ) and accrued
interest thereon as hereinafter provided. ---- This Note is issued by the
Company pursuant to a certain Confidential Private Offering Memorandum dated
January 24, 1997. The promissory notes issued in connection with the private
placement described in the January 24, 1997 memorandum are referred to
hereafter as the "Notes."
1. PAYMENT OF PRINCIPAL AND INTEREST; METHOD OF PAYMENT.
1.1 Payment. Payment of the principal and accrued interest on
this Note shall be made in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts. Interest (computed on the basis of a 360-day year
of twelve 30-day months) on the unpaid portion of said principal amount from
time to time outstanding shall be paid by the Company at the rate of ten
percent (10%) per annum (the "Stated Interest Rate"), said interest payable
to the Payee on fifteenth day following the end of each calendar quarter.
The principal shall be due and payable on the Repayment Date. The Company
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<PAGE> 2
will pay or cause to be paid all sums becoming due hereon for principal and
interest by check sent to the Holder's above address or to such other address
as the Holder may designate for such purpose from time to time by written
notice to the Company, which payment shall be made only upon presentation and
surrender of this Note to the Company at its address set forth herein.
1.2 Repayment Date. For purposes hereof, unless sooner repaid by
the Company, the "Repayment Date" shall mean the earliest of the following
dates: (i) the date five (5) days after the successful completion and funding
of the Company's initial public offering (the "Offering"), if any; or (ii)
if an initial public offering of the Company's Common Stock has not been
successfully completed by September 30, 1997, the principal will be repaid
in four equal quarterly installments, commencing December 31, 1997.
1.3 Issuance of Common Stock. In addition to the interest
payable pursuant to Section 1.1 above, subject to and upon the successful
completion and funding of the Offering, the Company agrees to issue to
the Holder as additional compensation the number of shares of the Company's
$0.01 par value common stock ("Common Stock") that equals one-half of the
original principal amount of this Note divided by the public offering price
per share of Common Stock in the Offering. The Company will use reasonable
good faith efforts to cause the registration with the Securities and
Exchange Commission of such shares of Common Stock for the purpose of the
offer and sale by the Holder thereof, provided however, by accepting this
Note, Holder acknowledges and understands that such shares will not be
included in the underwritten distribution of the Company's shares of Common
Stock in the Offering and may not be sold or transferred by Holder for a
period of one-year following the closing of the Offering, unless the prior
written consent of the managing underwriter of the Offering is obtained.
The Company will be obligated to maintain the effectiveness of such
registration with the SEC for a period ending the earlier of the Second
anniversary of the closing of the Offering or the sale or transfer of all of
the shares of Common Stock issued to the Holder under this Section 1.3. The
Company will pay the expenses of such registration, except for the expenses
of Holder's counsel and any selling or underwriting discounts or
commissions. If the Offering is not successfully completed and funded by
September 30, 1997, the Company will have no obligation to issue the shares of
Common Stock as additional compensation to the Holder. The Company agrees to
use reasonable efforts to complete the Offering by that date.
1.4 Prepayment. The Notes may be prepaid in full or in part
by the Company at any time prior to the Repayment Date upon thirty (30)
days prior written notice to Holder. In the event that the Company prepays
the Notes less than in full, this Note shall be prepaid on a pro rata basis
with all other Notes. Any prepayment of this Note shall be applied first to
any accrued but unpaid interest, then to the principal amount of the Note.
1.5 Unconditional Obligation; Waivers. The obligations to make
the payments provided for in this Note are absolute and unconditional and
not subject to any defense, set-off, counterclaim, rescission, recoupment or
adjustment whatsoever. The Company hereby expressly waives demand and
presentment for payment, notice of nonpayment, notice of dishonor, protest,
notice of protest, bringing of suit and diligence in taking any action to
collect any amount called for hereunder, and shall be directly and primarily
liable for the payment of all sums owing and to be
-2-
<PAGE> 3
owing hereon, regardless of and without any notice, diligence, act
or omission with respect to the collection of any amount called for
hereunder.
2. RANKING OF NOTE.
2.1 Junior to Existing Debt. The Company, for itself, its
successors and assigns, covenants and agrees, and the Payee and each
successive Holder by acceptance of this Note, likewise covenants and agrees
that the payment of the principal of and interest on this Note ranks junior
and is subordinate to all existing indebtedness, including trade debt.
In addition, the Company shall be entitled to grant a security
interest in its accounts receivable to a banking institution for the sole
purpose of collateralizing a revolving line of credit up to $500,000.00,
which is to be used for working capital.
2.2 Indebtedness. "Indebtedness" means (a) any liability of the
Company (i) for borrowed money, or (ii) evidenced by a note, debenture,
bond or other instrument of indebtedness (including, without limitation, a
purchase money obligation), given in connection with the acquisition of
property, assets or services, (iii) for the payment of rent or other amounts
relating to capitalized lease obligations, or (iv) trade accounts payable and
trade credit; (b) any liability of others described in the preceding clause
(a) which the Company has guaranteed or which is otherwise its legal liability;
and (c) any modification, renewal, extension, replacement or refunding of any
such liability described in the preceding clauses (a) and (b) except that
Indebtedness.
2.3 Further Actions. Each Holder agrees to execute such
subordination agreements, instruments or waivers as may be reasonably necessary
to reflect the subordination of this Note to the Indebtedness.
2.4 Default. Upon any default of the Company in the payment
of any Indebtedness when due, whether at maturity or otherwise, no payment
may be made with respect to the principal of or interest on this Note or in
respect of any redemption, retirement, purchase or other acquisition
thereof, unless and until such default has been cured or waived or has
ceased. Upon any other default with respect to any Indebtedness
permitting the holders thereof to accelerate the maturity thereof and upon
written notice of the Indebtedness given to the Company, no payment may be
made with respect to the principal of or interest on this Note or in respect
of any redemption, retirement, purchase or other acquisition thereof unless and
until such default has been cured, waived or has ceased.
2.5 Liquidation; Dissolution, Etc. Upon any payment or
distribution of the assets of the Company to creditors upon any
dissolution, total or partial liquidation or reorganization of or similar
proceeding relating to the Company, the holders of the Indebtedness will be
entitled to receive payment in full before any Holder is entitled to receive
any payment on this Note.
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<PAGE> 4
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Holder that the Company:
(a) is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas;
(b) has all requisite power and authority and all
necessary licenses and permits to own and operate its properties and to carry
on its business as now conducted and as presently proposed to be conducted, the
failure of which would not have a material adverse effect on the business,
operations, properties, liabilities or condition (financial or otherwise) of
the Company; and
(c) is duly licensed or qualified and is in good standing
as a foreign corporation in each jurisdiction wherein the nature of the
business transacted by it or the nature of the property owned or leased by it
makes such licensing or qualification necessary, the failure of which would not
have a material adverse effect on the business, operations, properties,
liabilities or condition (financial or otherwise) of the Company.
4. EVENTS OF DEFAULT.
It shall be an Event of Default with respect to this Note upon the
occurrence and continuation uncured of any of the following events:
4.1 Default in Payment, Etc.
(a) A default in the payment of any interest or principal
payments on this Note, and such default shall continue uncured for fifteen
(15) days after due date and notice is received from Holder of such default for
the making of such interest or principal payment; or
(b) default in the performance, or breach, of any other
covenant of the Company in this Note and continuance of such default or breach
uncured for a period of thirty (30) days after receipt of notice as to such
breach or after the Company knew or should have known of such breach.
4.2 Bankruptcy. The entry of a decree or order by a court having
jurisdiction adjudging the Company a bankrupt or insolvent, or approving a
petition seeking reorganization, arrangement, adjustment or composition of or
in respect of the Company, under federal bankruptcy law, as now or hereafter
constituted, or any other applicable federal or state bankruptcy, insolvency or
other similar law, and the continuance of any such decree or order unstayed and
in effect for a period of sixty (60) days; or the commencement by the Company
of a voluntary case under federal bankruptcy law, as now or hereafter
constituted, or any other applicable Federal or state bankruptcy, insolvency,
or other similar law, or the consent by it to the institution of bankruptcy or
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<PAGE> 5
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under federal bankruptcy law or any
other applicable Federal or state law, or the consent by it to the filing of
such petition or to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator or similar official of the Company or of any substantial
part of its property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its debts
generally as they become due, or the taking of corporate action by the Company
in furtherance of any such action.
5. REMEDIES UPON DEFAULT.
5.1 Acceleration. Upon an Event of Default and at any time during
the continuation thereof, the Holder, by notice in writing given to the
Company, may declare the entire principal of this Note then outstanding to be
due and payable immediately, and upon any such declaration the same shall
become and be due and payable immediately, anything herein contained to the
contrary notwithstanding.
5.2 Proceedings and Actions. During the continuation of any Event
of Default, the Holder may institute such actions or proceedings in law or
equity as it shall deem expedient for the protection of its rights and may
prosecute and enforce its claims against all assets of the Company, and in
connection with any such action or proceeding shall be entitled to receive from
the Company payment of the principal amount of this Note plus accrued interest
to the date of payment plus reasonable expenses of collection including,
without limitation, attorney's fees and expenses.
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<PAGE> 6
6. RESTRICTIONS ON TRANSFER.
6.1 The Holder acknowledges that he has been advised by
the Company that this Note has not been registered under the Act, that the Note
is being issued on the basis of the statutory exemption provided by section
4(2) of the Act and/or Regulation D promulgated thereunder relating to
transactions by an issuer not involving any public offering, and that the
Company's reliance thereon is based in part upon the representations made by
the Holder in the Holder's Subscription Agreement. The Holder acknowledges that
he has been informed by the Company of, or is otherwise familiar with, the
nature of the limitations imposed by the Act and the rules and regulations
thereunder on the transfer of securities. In particular, the Holder agrees that
no sale, assignment or transfer of the Note shall be valid or effective, and
the Company shall not be required to give any effect to any such sale,
assignment or transfer, unless (i) the sale, assignment or transfer of the Note
is registered under the Act, it being understood that the Note is not currently
registered for sale and that the Company has no obligation or intention to so
register the Notes, or (ii) the Note is sold, assigned or transferred in
accordance with all the requirements and limitations of Rule 144 under the Act,
it being understood that Rule 144 is not available at the present time for the
sale of the Note and that there can be no assurance that Rule 144 sales will be
available at any time in the future, or (iii) such sale, assignment, or
transfer is otherwise exempt from registration under the Act. The Holder of
this Note and each transferee hereof further agrees that if any distribution of
this Note is proposed to be made by them otherwise than by delivery of a
prospectus meeting the requirements of Section 10 of the Act, such action shall
be taken only after submission to the Company of an opinion of counsel,
reasonably satisfactory in form and substance to the Company's counsel, to the
effect that the proposed distribution will not be in violation of the Act or of
applicable state law. Furthermore, it shall be a condition to the transfer of
this Note that any transferee thereof deliver to the Company his written
agreement to accept and be bound by all of the terms and conditions contained
in this Note.
7. MISCELLANEOUS.
7.1 No Recourse. No recourse whatsoever, either directly or
through the Company or any trustee, receiver or assignee, shall be had in any
event or in any manner against any past, present or future stockholder,
director or officer of the Company for the payment of the principal of or
interest on this Note or for any claim based thereon or otherwise in respect
this Note, this Note being a corporate obligation only.
7.2 Notices. All communications provided hereunder shall be in
writing and, if to the Company, delivered or mailed by registered or certified
mail addressed to Aviation Group, Inc., 700 North Pearl Street, Suite 2170,
Dallas, Texas 75201 or, if to the Holder, at the address shown for the Holder
in the registration books maintained by the Company.
7.3 Lost, Stolen or Mutilated Note. In case this Note shall be
mutilated, lost, stolen or destroyed, the Company may, in its discretion, issue
and deliver in exchange and substitution for and upon cancellation of the
mutilated Note, or in lieu of and substitution for the Note, lost, stolen or
destroyed, a new Note of like tenor and representing an equivalent right or
interest, but only
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<PAGE> 7
upon receipt of evidence satisfactory to the Company of such loss, theft or
destruction and an indemnity, if requested, also satisfactory to it.
7.4 Course of Dealing. No course of dealing between the Company
and the Holder hereof shall operate as a waiver of any right of any Holder
hereof, and no delay on the part of the Holder in exercising any right
hereunder shall so operate.
7.5 Amendments. This Note may be amended only by a written
instrument executed by the Company and the Holder hereof. Any amendment shall
be endorsed upon this Note, and all future holders shall be bound thereby.
7.6 Governing Law. This Note shall be construed in accordance with
and governed by the laws of the State of Texas, without giving effect to
conflict of laws principles.
DATED the date first written above.
AVIATION GROUP, INC.
By:
-----------------------------
,President
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<PAGE> 1
EXHIBIT 10.1
AVIATION GROUP, INC.
1997 STOCK OPTION PLAN
SECTION 1. Purpose of the Plan. The purpose of this Aviaton
Group, Inc. 1997 Stock Option Plan ("Plan") is to encourage ownership of common
stock, $.01 par value ("Common Stock"), of Aviation Group, Inc., a Texas
corporation (the "Company"), by eligible key employees and directors of the
Company and its Affiliates (as defined below) and to provide increased
incentive for such employees and directors to render services and to exert
maximum effort for the business success of the Company. In addition, the
Company expects that the Plan will further strengthen the identification of
employees and directors with the stockholders. Certain options to be granted
under this Plan are intended to qualify as Incentive Stock Options ("ISOs")
pursuant to Section 422 of the Internal Revenue Code of 1986, as amended
("Code"), while other options granted under this Plan will be nonqualified
options which are not intended to qualify as ISOs ("Nonqualified Options"),
either or both as provided in the agreements evidencing the options as provided
in Section 6 hereof. As used in this Plan, the term "Affiliates" means any
"parent corporation" of the Company and any "subsidiary corporation" of the
Company within the meaning of Code Sections 424(e) and (f), respectively.
SECTION 2. Administration of the Plan.
(a) Composition of Committee. The Plan shall be
administered by the Board of Directors (the "Board") or a Compensation
Committee designated by the Board which shall also designate the
Chairman of the Compensation Committee. If the Company is subject to
Section 16 of the Securities Exchange Act of 1934, as amended
("Exchange Act"), no director shall serve as a member of the
Compensation Committee unless he is a "Non-Employee Director" within
the meaning of Rule 16b-3 promulgated by the Securities and Exchange
Commission ("Commission") under the Exchange Act ("Rule 16b-3"). The
Board or the Compensation Committee as administrators of the Plan
shall hereinafter be referred to as "Committee."
(b) Committee Action. The Committee shall hold its
meetings at such times and places as it may determine. A majority of
its members shall constitute a quorum, and all determinations of the
Committee shall be made by not less than a majority of its members.
Any decision or determination reduced to writing and signed by a
majority of the members shall be fully effective as if it had been
made by a majority vote of its members at a meeting duly called and
held. The Committee may designate the Secretary of the Company or
other Company employees to assist the Committee in the administration
of the Plan, and may grant
<PAGE> 2
authority to such persons to execute award agreements or other
documents on behalf of the Committee and the Company. Any duly
constituted committee of the Board satisfying the qualifications of
this Section 2 may be appointed as the Committee.
(c) Committee Expenses. All expenses and liabilities
incurred by the Committee in the administration of the Plan shall be
borne by the Company. The Committee may employ attorneys,
consultants, accountants or other persons.
SECTION 3. Stock Reserved for the Plan. Subject to adjustment as
provided in Section 6(k) hereof, the aggregate number of shares of Common Stock
that may be optioned under the Plan is 150,000. The shares subject to the
Plan shall consist of authorized but unissued shares of Common Stock and such
number of shares shall be and is hereby reserved for sale for such purpose.
Any of such shares which may remain unsold and which are not subject to
outstanding options at the termination of the Plan shall cease to be reserved
for the purpose of the Plan, but until termination of the Plan or the
termination of the last of the options granted under the Plan, whichever last
occurs, the Company shall at all times reserve a sufficient number of shares to
meet the requirements of the Plan. Should any option expire or be cancelled
prior to its exercise in full, the shares theretofore subject to such option
may again be made subject to an option under the Plan.
SECTION 4. Eligibility. The persons eligible to participate in the
Plan as a recipient of options ("Optionee") shall include only key employees
and directors of the Company or its Affiliates at the time the option is
granted. An employee who has been granted an option hereunder may be granted
an additional option or options, if the Committee shall so determine.
SECTION 5. Grant of Options.
(a) Committee Discretion. Except where the Committee has
explicitly given the authority to some other individual, the Committee
shall have sole and absolute discretionary authority (i) to determine,
authorize, and designate those key employees and directors of the
Company or its Affiliates who are to receive options under the Plan,
(ii) to determine the number of shares of Common Stock to be covered
by such options and the terms thereof, and (iii) to determine the type
of option granted: ISO, Nonqualified Option or a combination of ISO
and Nonqualified Options; provided that a director may not receive any
ISOs. The Committee shall thereupon grant options in accordance with
such determinations as evidenced by a written option agreement.
Subject to the express provisions of the Plan, the Committee shall
have discretionary authority to prescribe, amend and rescind rules and
regulations relating to the Plan, to interpret the Plan, to prescribe
and amend the terms of the option agreements (which need not be
identical) and to make all other determinations deemed necessary or
advisable for the administration of the Plan.
<PAGE> 3
(b) Stockholder Approval. All options granted under this
Plan are subject to, and may not be exercised before, the approval of
this Plan by the stockholders prior to the first anniversary date of
the Board meeting held to approve the Plan, by the affirmative vote of
the holders of a majority of the outstanding shares of the Company
present, or represented by proxy, and entitled to vote thereat or by
written consent in accordance with the laws of the State of Texas;
provided that if such approval by the stockholders of the Company is
not forthcoming, all options previously granted under this Plan shall
be void.
(c) Limitation on Incentive Stock Options. The aggregate
fair market value (determined in accordance with Section 6(b) of this
Plan at the time the option is granted) of the Common Stock with
respect to which ISOs may be exercisable for the first time by any
Optionee during any calendar year under all such plans of the Company
and its Affiliates shall not exceed $100,000.
SECTION 6. Terms and Conditions. Each option granted under the
Plan shall be evidenced by an agreement, in a form approved by the Committee,
which shall be subject to the following express terms and conditions and to
such other terms and conditions as the Committee may deem appropriate.
(a) Option Period. The Committee shall promptly notify
the Optionee of the option grant and a written agreement shall
promptly be executed and delivered by and on behalf of the Company and
the Optionee, provided that the option grant shall expire if a written
agreement is not signed by said Optionee (or his agent or attorney)
and returned to the Company within 60 days from date of receipt by the
Optionee of such agreement. The date of grant shall be the date the
option is actually granted by the Committee, even though the written
agreement may be executed and delivered by the Company and the
Optionee after that date. Each option agreement shall specify the
period for which the option thereunder is granted (which in no event
shall exceed ten years from the date of grant) and shall provide that
the option shall expire at the end of such period. If the original
term of an option is less than ten years from the date of grant, the
option may be amended prior to its expiration, with the approval of
the Committee and the Optionee, to extend the term so that the term as
amended is not more than ten years from the date of grant. However,
in the case of an ISO granted to an individual who, at the time of
grant, owns stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company or its
Affiliate ("Ten Percent Stockholder"), such period shall not exceed
five years from the date of grant.
(b) Option Price. The purchase price of each share of
Common Stock subject to each option granted pursuant to the Plan shall
be determined by the Committee at the time the option is granted and,
in the case of ISOs, shall not be less than 100% of the fair market
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<PAGE> 4
value of a share of Common Stock on the date the option is granted, as
determined by the Committee. In the case of an ISO granted to a Ten
Percent Stockholder, the option price shall not be less than 110% of
the fair market value of a share of Common Stock on the date the
option is granted. The purchase price of each share of Common Stock
subject to a Nonqualified Option under this Plan shall be determined
by the Committee prior to granting the option. The Committee shall
set the purchase price for each share subject to a Nonqualified Option
at such price as the Committee in its sole discretion shall determine.
For all purposes under the Plan, the fair market value of a
share of Common Stock on a particular date shall be equal to the mean
of the reported high and low sales prices of the Common Stock on the
New York Stock Exchange Composite Tape on that date, or if no prices
are reported on that date, on the last preceding date on which such
prices of the Common Stock are so reported. If the Common Stock is
not traded on the New York Stock Exchange at the time a determination
of its fair market value is required to be made hereunder, its fair
market value shall be deemed to be equal to the average between the
closing bid and ask prices of the Common Stock on the most recent date
the Common Stock was publicly traded. In the event the Common Stock
is not publicly traded at the time a determination of its value is
required to be made hereunder, the determination of its fair market
value shall be made by the Committee in such manner as it deems
appropriate.
(c) Exercise Period. The Committee may provide in the
option agreement that an option may be exercised in whole,
immediately, or is to be exercisable in increments. However, no
portion of any option may be exercisable by an Optionee prior to the
approval of the Plan by the stockholders of the Company.
(d) Procedure for Exercise. Options shall be exercised
by the delivery of written notice to the Secretary of the Company
setting forth the number of shares with respect to which the option is
being exercised. Such notice shall be accompanied by cash or
cashier's check, bank draft, postal or express money order payable to
the order of the Company, or at the option of the Committee, in Common
Stock theretofore owned by such Optionee (or any combination of cash
and Common Stock). Notice may also be delivered by fax or telecopy
provided that the purchase price of such shares is delivered to the
Company via wire transfer on the same day the fax is received by the
Company. The notice shall specify the address to which the
certificates for such shares are to be mailed. An Optionee shall be
deemed to be a stockholder with respect to shares covered by an option
on the date the Company receives such written notice and such option
payment.
As promptly as practicable after receipt of such written notification
and payment, the Company shall deliver to the Optionee certificates
for the number of shares with respect to which such option has been so
exercised, issued in the Optionee's name or such other name
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<PAGE> 5
as Optionee directs; provided, however, that such delivery shall be
deemed effected for all purposes when a stock transfer agent of the
Company shall have deposited such certificates in the United States
mail, addressed to the Optionee at the address specified pursuant to
this Section 6(d).
(e) Termination of Employment. If an employee to whom an
option is granted ceases to be employed by the Company for any reason
other than death, disability or retirement or if a director to whom an
option is granted ceases to serve on the Board for any reason other
than death, disability or retirement, any option which is exercisable
on the date of such termination of employment or cessation from the
Board shall expire on a date, as determined by the Committee in its
sole discretion, which shall be on or before the three-month
anniversary date of the date of such termination of employment or
cessation from the Board; provided, however, the Committee, in its
sole discretion, may allow an Optionee to exercise all or a portion of
the Options granted but unexercised for a period of time after the
Optionee's termination of employment or cessation from the Board.
(f) Disability, Disability or Retirement of Optionee. In
the event of the death, determination of disability or retirement
(attaining age 65) of an Optionee under the Plan while he is employed
by the Company or while he serves on the Board, the options previously
granted to him may be exercised (to the extent he would have been
entitled to do so at the date of the determination of disability or
death) at any time and from time to time, within a three-month period
after such death, determination of disability or retirement, by the
former employee or director, the guardian of his estate, the executor
or administrator of his estate or by the person or persons to whom his
rights under the option shall pass by will or the laws of descent and
distribution, but in no event may the option be exercised after its
expiration under the terms of the option agreement. An Optionee shall
be deemed to be disabled if, in the opinion of a physician selected by
the Committee, he is incapable of performing services for the Company
of the kind he was performing at the time the disability occurred by
reason of any medically determinable physical or mental impairment
which can be expected to result in death or to be of long, continued
and indefinite duration. The date of determination of disability for
purposes hereof shall be the date of such determination by such
physician. The Committee, in its sole discretion, may allow an
Optionee to exercise all or a portion of the Options granted but
unexercised for a longer period than three months after death,
determination of disability or retirement.
(g) Assignability. An option shall not be assignable or
otherwise transferable except by will or by the laws of descent and
distribution. During the lifetime of an Optionee, an option shall be
exercisable only by him.
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<PAGE> 6
(h) Incentive Stock Options. Each option agreement may
contain such terms and provisions as the Committee may determine to be
necessary or desirable in order to qualify an option designated as an
incentive stock option.
(i) No Rights as Stockholder. No Optionee shall have any
rights as a stockholder with respect to shares covered by an option
until the option is exercised by the written notice and accompanied by
payment as provided in clause (d) above.
(j) Extraordinary Corporate Transactions. The existence
of outstanding options shall not affect in any way the right or power
of the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations, exchanges, or other
changes in the Company's capital structure or its business, or any
merger or consolidation of the Company, or any issuance of Common
Stock or other securities or subscription rights thereto, or any
issuance of bonds, debentures, preferred or prior preference stock
ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of
all or any part of its assets or business, or any other corporate act
or proceeding, whether of a similar character or otherwise. If the
Company recapitalizes or otherwise changes its capital structure, or
merges, consolidates, sells all of its assets or dissolves (each of
the foregoing a "Fundamental Change"), then thereafter upon any
exercise of an option theretofore granted the Optionee shall be
entitled to purchase under such option, in lieu of the number of
shares of Common Stock as to which option shall then be exercisable,
the number and class of shares of stock and securities to which the
Optionee would have been entitled pursuant to the terms of the
Fundamental Change if, immediately prior to such Fundamental Change,
the Optionee had been the holder of record of the number of shares of
Common Stock as to which such option is then exercisable. If (i) the
Company shall not be the surviving entity in any merger or
consolidation (or survives only as a subsidiary of another entity),
(ii) the Company sells all or substantially all of its assets to any
other person or entity (other than a wholly-owned subsidiary), (iii)
any person or entity (including a "group" as contemplated by Section
13(d)(3) of the Exchange Act) acquires or gains ownership or control
of (including, without limitation, power to vote) more than 50% of the
outstanding shares of Common Stock, (iv) the Company is to be
dissolved and liquidated, or (v) as a result of or in connection with
a contested election of directors, the persons who were directors of
the Company before such election shall cease to constitute a majority
of the Board (each such event in clauses (i) through (v) above is
referred to herein as a "Corporate Change"), the Committee, in its
sole discretion, may accelerate the time at which all or a portion of
an Optionee's Options may be exercised for a limited period of time
before or after a specified date.
(k) Changes in Company's Capital Structure. If the
outstanding shares of Common Stock or other securities of the Company,
or both, for which the option is then exercisable shall at any time
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<PAGE> 7
be changed or exchanged by declaration of a stock dividend, stock
split, or combination of shares, the number and kind of shares of
Common Stock or other securities which are subject to the Plan or
subject to any options theretofore granted, and the option prices,
shall be appropriately and equitably adjusted so as to maintain the
proportionate number of shares or other securities without changing
the aggregate option price.
(l) Acceleration of Options. Except as hereinbefore
expressly provided, (i) the issuance by the Company of shares of stock
of any class of securities convertible into shares of stock of any
class, for cash, property, labor or services, upon direct sale, upon
the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into
such shares or other securities, (ii) the payment of a dividend in
property other than Common Stock or (iii) the occurrence of any
similar transaction, and in any case whether or not for fair value,
shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number of shares of Common Stock subject to
options theretofore granted or the purchase price per share, unless
the Committee shall determine in its sole discretion than an
adjustment is necessary to provide equitable treatment to Optionee.
Notwithstanding anything to the contrary contained in this Plan, the
Committee may in its sole discretion accelerate the time at which any
option may be exercised, including, but not limited to, upon the
occurrence of the events specified in this Section 6, and is
authorized at any time (with the consent of the Optionee) to purchase
options pursuant to Section 7.
SECTION 7. Relinquishment of Options.
(a) The Committee, in granting options hereunder, shall
have discretion to determine whether or not options shall include a
right of relinquishment as hereinafter provided by this Section 7.
The Committee shall also have discretion to determine whether an
option agreement evidencing an option initially granted by the
Committee without a right of relinquishment shall be amended or
supplemented to include such a right of relinquishment. Neither the
Committee nor the Company shall be under any obligation or incur any
liability to any person by reason of the Committee's refusal to grant
or include a right of relinquishment in any option granted hereunder
or in any option agreement evidencing the same. Subject to the
Committee's determination in any case that the grant by it of a right
of relinquishment is consistent with clause i) hereof, any option
granted under this Plan, and the option agreement evidencing such
option, may provide:
i) That the Optionee, or his heirs or other
legal representatives to the extent entitled to exercise the
option under the terms thereof, in lieu of purchasing the
entire number of shares subject to purchase thereunder, shall
have the right to relinquish all or any part of the then
unexercised portion of the option (to the extent then
exercisable) for a number of shares of Common Stock, for an
amount of cash
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<PAGE> 8
or for a combination of Common Stock and cash to be determined
in accordance with the following provisions of this clause i):
a) The written notice of exercise of
such right of relinquishment shall state the
percentage, if any, of the Appreciated Value (as
defined below) that the Optionee elects to receive in
cash ("Cash Percentage"), such Cash Percentage to be
in increments of 10% of such Appreciated Value up to
100% thereof;
b) The number of shares of Common
Stock, if any, issuable pursuant to such
relinquishment shall be the number of such shares,
rounded to the next greater number of full shares, as
shall be equal to the quotient obtained by dividing
(A) the difference between (I) the Appreciated Value
and (II) the result obtained by multiplying the
Appreciated Value and the Cash Percentage by (B) the
then current market value per share of Common Stock;
c) The amount of cash payable pursuant
to such relinquishment shall be an amount equal to
the Appreciated Value less the aggregate current
market value of the Common Stock issued pursuant to
such relinquishment, if any, which cash shall be paid
by the Company subject to such conditions as are
deemed advisable by the Committee to permit
compliance by the Company with the withholding
provisions applicable to employers under the Code and
any applicable state income tax laws;
d) For the purpose of this clause i),
"Appreciated Value" means the excess of (x) the
aggregate current market value of the shares of
Common Stock covered by the option or the portion
thereof to be relinquished over (y) the aggregate
purchase price for such shares specified in such
option;
ii) That such right of relinquishment may be
exercised only upon receipt by the Company of a written notice
of such relinquishment which shall be dated the date of
election to make such relinquishment; and that, for the
purposes of this Plan, such date of election shall be deemed
to be the date when such notice is sent by registered or
certified mail, or when receipt is acknowledged by the
Company, if mailed by other than registered or certified mail
or if delivered by hand or by any telegraphic communications
equipment of the sender or otherwise delivered; provided,
that, in the event the method just described for determining
such date of election shall not be or remain consistent with
the provisions of Section 16(b) of the Exchange Act or the
rules and regulations adopted by the Commission thereunder,
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<PAGE> 9
as presently existing or as may be hereafter amended, which
regulations exempt from the operation of Section 16(b) of the
Exchange Act in whole or in part any such relinquishment
transaction, then such date of election shall be determined by
such other method consistent with Section 16(b) of the
Exchange Act or the rules and regulations thereunder as the
Committee shall in its discretion select and apply;
iii) That the "current market value" of a share of
Common Stock on a particular date shall be deemed to be its
fair market value on that date as determined in accordance
with Paragraph 6(b); and
iv) That the option, or any portion thereof, may
be relinquished only to the extent that (A) it is exercisable
on the date written notice of relinquishment is received by
the Company, (B) the Committee, subject to the provisions of
Paragraph 7(b), shall consent to the election of the holder
to relinquish such option in whole or in part for cash as set
forth in such written notice of relinquishment and (C) the
holder of such option pays, or makes provision satisfactory to
the Company for the payment of, any taxes which the Company is
obligated to collect with respect to such relinquishment.
(b) The Committee shall have sole discretion to consent
to or disapprove, and neither the Committee nor the Company shall be
under any liability by reason of the Committee's disapproval of, any
election by a holder of an option to relinquish such option in whole
or in part for cash as provided in Paragraph 7(a), except that no such
consent to or approval of a relinquishment for cash shall be required
under the following circumstances. Each Optionee who is subject to
the short-swing profits recapture provisions of Section 16(b) of the
Exchange Act ("Covered Optionee") shall be entitled to receive payment
only in cash when options are relinquished during any window period
commencing on the third business day following the Company's release
of a quarterly or annual summary statement of sales and earnings and
ending on the twelfth business day following such release ("Window
Period"); provided, however, that payment shall be so made in cash
only in respect of 50% of the options covered by any stock option
agreement. A Covered Optionee shall be entitled to receive payment
only in shares of Common Stock upon (a) the relinquishment of options
outside a Window Period and (b) the relinquishment of options during a
Window Period once such Optionee has received payment in cash for the
relinquishment of 50% of the options covered by any stock option
agreement.
(c) The Committee, in granting options hereunder, shall
have discretion to determine the terms upon which such options shall
be relinquishable, subject to the applicable provisions of this Plan,
and including such provisions as are deemed advisable to permit the
exemption from the operation from Section 16(b) of the Exchange Act of
any such
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<PAGE> 10
relinquishment transaction, and options outstanding, and option
agreements evidencing such options, may be amended, if necessary, to
permit such exemption. If an option is relinquished, such option
shall be deemed to have been exercised to the extent of the number of
shares of Common Stock covered by the option or part thereof which is
relinquished, and no further options may be granted covering such
shares of Common Stock.
(d) Neither any option nor any right to relinquish the
same to the Company as contemplated by this Section 7 shall be
assignable or otherwise transferable except by will or the laws of
descent and distribution.
(e) Except as provided in Paragraph 7(f) below, no right
of relinquishment may be exercised within the first six months after
the initial award of any Option containing, or the amendment or
supplementation of any existing option agreement adding, the right of
relinquishment.
(f) No right of relinquishment may be exercised after the
initial award of any option containing, or the amendment or
supplementation of any existing option agreement adding the right of
relinquishment, unless such right of relinquishment is effective upon
the Optionee's death, disability or termination of his relationship
with the Company and the payment upon the exercise of such right is
only in cash.
SECTION 8. Amendments or Termination. The Board may amend,
alter or discontinue the Plan, but no amendment or alteration shall be made
which would impair the rights of any Optionee, without his consent, under any
option theretofore granted, or which, without the approval of the stockholders,
would: (i) except as is provided in Paragraph 6(k) of the Plan, increase the
total number of shares reserved for the purposes of the Plan, (ii) change the
class of persons eligible to participate in the Plan as provided in Section 4
of the Plan, (iii) extend the applicable maximum option period provided for in
Paragraph 6(a) of the Plan, (iv) extend the expiration date of this Plan set
forth in Section 15 of the Plan, (v) except as provided in Paragraph 6(k) of
the Plan, decrease to any extent the option price of any option granted under
the Plan or (vi) withdraw the administration of the Plan from the Committee.
SECTION 9. Compliance With Other Laws and Regulations. The Plan, the
grant and exercise of options thereunder, and the obligation of the Company to
sell and deliver shares under such options, shall be subject to all applicable
federal and state laws, rules and regulations and to such approvals by any
governmental or regulatory agency as may be required. The Company shall not be
required to issue or deliver any certificates for shares of Common Stock prior
to the completion of any registration or qualification of such shares under any
federal or state law or issuance of any ruling or regulation of any government
body which the Company shall, in its sole discretion,
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<PAGE> 11
determine to be necessary or advisable. Any adjustments provided for in
paragraphs 6(j), (k) and (l) shall be subject to any shareholder action
required by Texas corporate law.
SECTION 10. Purchase for Investment. Unless the options and shares of
Common Stock covered by this Plan have been registered under the Securities Act
of 1933, as amended, or the Company has determined that such registration is
unnecessary, each person exercising an option under this Plan may be required
by the Company to give a representation in writing that he is acquiring such
shares for his own account for investment and not with a view to, or for sale
in connection with, the distribution of any part thereof.
SECTION 11. Taxes.
(a) The Company may make such provisions as it may deem
appropriate for the withholding of any taxes which it determines is
required in connection with any options granted under this Plan.
(b) Notwithstanding the terms of Paragraph 11(a), any
Optionee may pay all or any portion of the taxes required to be
withheld by the Company or paid by him in connection with the exercise
of a nonqualified option by electing to have the Company withhold
shares of Common Stock, or by delivering previously owned shares of
Common Stock, having a fair market value, determined in accordance
with Paragraph 6(b), equal to the amount required to be withheld or
paid. An Optionee must make the foregoing election on or before the
date that the amount of tax to be withheld is determined ("Tax Date").
All such elections are irrevocable and subject to disapproval by the
Committee.
SECTION 12. Replacement of Options. The Committee from time to
time may permit an Optionee under the Plan to surrender for cancellation any
unexercised outstanding option and receive from the Company in exchange an
option for such number of shares of Common Stock as may be designated by the
Committee. The Committee may, with the consent of the person entitled to
exercise any outstanding option, amend such option, including reducing the
exercise price of any option to not less than the fair market value of the
Common Stock at the time of the amendment and extending the term thereof.
SECTION 13. No Right to Company Employment. Nothing in this Plan or
as a result of any option granted pursuant to this Plan shall confer on any
individual any right to continue in the employ of the Company or interfere in
any way with the right of the Company to terminate an individual's employment
at any time. The option agreements may contain such provisions as the
Committee may approve with reference to the effect of approved leaves of
absence.
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<PAGE> 12
SECTION 14. Liability of Company. The Company and any Affiliate
which is in existence or hereafter comes into existence shall not be liable to
an Optionee or other persons as to:
(a) The Non-Issuance of Shares. The non-issuance or sale
of shares as to which the Company has been unable to obtain from any
regulatory body having jurisdiction the authority deemed by the
Company's counsel to be necessary to the lawful issuance and sale of
any shares hereunder; and
(b) Tax Consequences. Any tax consequence expected, but
not realized, by any Optionee or other person due to the exercise of
any option granted hereunder.
SECTION 15. Effectiveness and Expiration of Plan. The Plan shall be
effective on the date the Board approve the Plan ("Effective Date"). If the
stockholders of the Company fail to approve the Plan within twelve months of
the Effective Date, the Plan shall terminate and all options previously granted
under the Plan shall become void and of no effect. The Plan shall expire ten
years after the Effective Date and thereafter no option shall be granted
pursuant to the Plan.
SECTION 16. Non-Exclusivity of the Plan. Neither the adoption by the
Board nor the submission of the Plan to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may deem desirable,
including without limitation, the granting of restricted stock or stock options
otherwise than under the Plan, and such arrangements may be either generally
applicable or applicable only in specific cases.
SECTION 17. Governing Law. This Plan and any agreements hereunder
shall be interpreted and construed in accordance with the laws of the State of
Texas and applicable federal law.
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
foregoing by directors of the Company, Aviation Group, Inc. has caused these
presents to be duly executed in its
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<PAGE> 13
name and behalf by its proper officers thereunto duly authorized as of this
12th day of February, 1997.
AVIATION GROUP, INC.
By: /s/ LEE SANDERS
-----------------------------
Name: Lee Sanders
-----------------------------
Title: President and C.E.O.
-----------------------------
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<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
by and between Aviation Group, Inc., a Texas corporation (the "Company"), and
Lee Sanders, an individual resident of the State of Texas ("Employee"), as of
March 1, 1996 (the "Effective Date").
W I T N E S S E T H :
In consideration of the mutual covenants herein contained, the
employment of Employee upon the terms, conditions and covenants set forth
herein and each act performed pursuant hereto, the parties hereto agree as
follows:
I.
Employment and Duties
1.1 Employment. For the term of employment as below stated, the
Company hereby employs Employee as its President and Chief Executive Officer.
Employee shall have the responsibility, subject to the general direction and
control of the Board of Directors of the Company (the "Board"), of formulating
the policies of the Company and administering its affairs and such other duties
as are normally associated with and inherent in the capacities of President and
Chief Executive Officer. Employee shall have authority to hire the staff
necessary to accomplish the Company's goals.
1.2 Employee's Loyalty. Employee agrees that, without the prior
consent of the Company, Employee shall not during the term of this Agreement
directly or indirectly (i) invest in any business which is competitive with
that of the Company, (ii) attempt to influence customers or other business
associates not to do business with or not to continue to do business with the
Company, or (iii) take any other action inconsistent with the fiduciary
responsibility of an employee to his employer.
II.
Term of Employment
2.1 Term. Subject to earlier termination as hereinafter provided,
the initial term of employment of Employee hereunder shall commence on the
Effective Date and shall end on the third anniversary of the Effective Date.
Thereafter, this Agreement shall be automatically extended from year to year
unless either party shall have provided written notice of non-renewal to the
other party hereto not less than thirty (30) days prior to such expiration
date, or unless terminated in accordance with the provisions of Section 2.2 of
this Agreement. As used herein, the phrase "Term of Employment" shall mean
said initial term of employment as well as any renewal terms thereof.
<PAGE> 2
2.2 Termination. This Agreement may be terminated at any time
during the Term of Employment only by reason of and in accordance with the
following:
(a) Death. If Employee dies during the term of this
Agreement and while in the employ of the Company, this Agreement shall
automatically terminate as of the date of Employee's death; and the
Company shall have no further obligation to Employee or his estate,
except to pay to the estate of Employee (i) any accrued, but unpaid,
Salary (as hereinafter defined) and any vacation or sick leave
benefits which have accrued as of the date of death but were then
unpaid or unused, and (ii) any declared, accrued Bonus Compensation
(as hereinafter defined), if any.
(b) Disability. If, during the term of this Agreement,
Employee shall be prevented from performing his duties hereunder by
reason of becoming totally disabled, then the Company, on thirty (30)
days' prior notice to Employee, may terminate this Agreement. For
purposes of this Agreement, Employee shall be deemed to have become
totally disabled when (i) he receives "total disability benefits"
under the Company's disability plan (whether funded with insurance or
self-funded by the Company), or (ii) the Board, upon the written
report of a qualified physician (after complete examination of
Employee) designated by the Board, shall have determined that Employee
has become physically and/or mentally incapable of performing his
duties under this Agreement on a permanent basis. In the event of
termination pursuant to this Section, the Company shall be relieved of
all of its obligations under this Agreement, except to pay Employee
any accrued, but unpaid Salary, any vacation or sick leave benefits
which have accrued as of the date on which such permanent disability
is determined, but then remain unpaid, and any declared Bonus
Compensation. The provisions of the preceding sentence shall not
affect Employee's rights to receive payments under the Company's
disability insurance plan, if any.
(c) Termination by the Company for Cause. Prior to the
expiration of the term of this Agreement, the Company may discharge
Employee for cause and terminate this Agreement without any further
liability hereunder to Employee or his estate, except to pay any
accrued, but unpaid, Salary, any declared Bonus Compensation, and any
vacation benefits due to him. For purposes of this Agreement, a
"discharge for cause" shall mean termination of Employee upon written
notification to Employee limited, however, to one or more of the
following reasons:
(i) Fraud, misappropriation or embezzlement by
Employee in connection with the Company; or
(ii) Conviction of Employee for a felony crime.
<PAGE> 3
III.
Compensation and Benefits
3.1 Salary and Bonus. As compensation for his services to the
Company and other duties and responsibilities herein contemplated, Employee
shall receive from the Company an annual salary in the amount of $144,000.00
per year ("Salary"). Employee will be entitled to receive the bonuses and
additional compensation ("Bonus Compensation"), if any, described in Section
3.4 below.
3.2 Employment Benefits. In addition to the Salary and Bonus
Compensation payable to Employee hereunder, Employee shall be entitled to the
following benefits upon satisfaction by Employee of the eligibility
requirements therefor, subject to the following limitations:
(a) Sick Leave Benefits and Disability Insurance. Unless
this Agreement is terminated pursuant to the provisions of Section
2.2(b) hereof, Employee shall be paid sick leave benefits at his then
prevailing Salary rate during his absence due to illness or other
incapacity, reduced by the amount, if any, of worker's compensation,
social security entitlements or disability benefits, if any, under the
Company's group disability insurance plan. The Company, at its own
expense, shall provide Employee with the maximum amount of disability
insurance benefits allowed for one in the position of Employee with
the Company under and consistent with any group disability insurance
plan which the Company, at its election, may adopt. Notwithstanding
anything herein to the contrary, Employee's sick leave days shall not
exceed the number of sick leave days provided to employees of similar
tenure and position in the Company as provided in the Company's policy
manual, if any.
(b) Life Insurance. The Company, at its own expense,
shall provide Employee, subject to Employee passing any physical
examination required by the Company's insurance company, life
insurance benefits in a face amount of not less than one year's Salary
under and consistent with any group term life insurance plan which the
Company, at its election, may adopt.
(c) Hospitalization, Accident, Major Medical and Dental
Insurance. The Company, at its own expense, shall provide Employee
(and all dependents of Employee) with group hospitalization, group
accident, major medical, and dental insurance in amounts of coverage
comparable to the coverage, if any, provided other employees in
similar positions with the Company.
(d) Vacations. Employee shall be entitled to a
reasonable paid vacation each year during the term of this Agreement
as determined by the Board, exclusive of holidays and weekends, which
vacation shall be taken by Employee in accordance with the business
requirements of the Company at the time and its personnel policies
then in effect relative to this subject. Employee shall be entitled
to at least four weeks of paid vacation per year, which
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<PAGE> 4
Employee may use at any time during each year, and to the extent not
used, during a subsequent year.
(e) Working Facilities. The Company shall provide, at
its expense, adequate facilities, equipment, supplies and personnel
(including professional, clerical, support and other personnel) for
Employee's use in performing his duties and responsibilities under
this Agreement.
(f) Other Employment Benefits. As an employee of the
Company, Employee shall participate in and receive such other fringe
benefits as may be in effect from time to time for employees of the
Company, whether or not specifically enumerated herein and whether or
not through any written plan or arrangement, upon satisfaction by
Employee of the eligibility requirements therefor.
3.3 Reimbursement of Employee Expenses. Employee is authorized to
incur ordinary, necessary and reasonable expenses in connection with the
performance of his duties and responsibilities under this Agreement and for the
promotion of the business and activities of the Company during the term hereof,
including, without limitation, expenses for necessary travel and entertainment
and other items of expenses required in the normal and routine course of
Employee's employment hereunder. The Company will reimburse Employee from time
to time for all such business expenses incurred pursuant to and in conformity
with the provisions of this Section provided that Employee presents to the
Company documentary evidence of such expenses necessary to satisfy the
reporting requirements of the Internal Revenue Code of 1986, as amended.
3.4 Bonus Compensation. As additional compensation to Employee
for his services to the Company and other duties and responsibilities herein
contemplated, Employee may receive a bonus, the amount of which shall be within
the sole discretion of the Board, based on merit, the Company's financial
performance and other relevant criteria.
3.5 Severance Pay. If the Company terminates the employment of
Employee at any time, or if a change in ownership or control (as defined below)
of the Company occurs and Employee voluntarily terminates his employment with
the Company within one year after such change in ownership or control, the
Company shall be required to pay Employee severance pay in an amount equal to
the sum of the unpaid Salary for the remainder of the term of this Agreement
plus the total Salary and Bonus Compensation paid to Employee by the Company
during the 365 day period preceding such termination. Such severance pay shall
be payable to Employee by the Company in cash on or before the thirtieth day
after the effective date of such termination. For purposes of this Section
3.5, a "change in ownership or control" of the Company shall mean:
(a) the appointment of any person other than Employee as
President or Chief Executive Officer of the Company, or the failure to elect or
re-elect Employee to, or the removal of Employee from, either of such
positions;
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<PAGE> 5
(b) any change in the composition of the Board of
Directors of the Company whereby a majority of its number consists of persons
who are not members of the Board as of the date of this Agreement, except if
the election or appointment of such new directors was recommended or approved
in advance and in writing by Employee;
(c) any change in the constructive or actual ownership of
the Company which would trigger the application of Section 382 of the Internal
Revenue Code of 1986, as amended, to the Company;
(d) any transfer or issuance of shares of the Company's
stock representing more than 25% of the beneficial ownership of the Company if
such transfer is not approved in advance and in writing by Employee;
(e) any material change in the nature or scope of the
authority, powers, functions or duties attached to the positions of President
and Chief Executive Officer of the Company; or
(f) any breach by the Company of any provision of this
Agreement that is not embraced within the foregoing clauses (a) through (e) and
that is not remedied within ten (10) days after receipt by the Company of
written notice from Employee.
IV.
Restrictive Covenants
4.1 Trade Secrets, Propriety and Confidential Information.
Employee recognizes and acknowledges that Employee will acquire during his
employment hereunder access to certain trade secrets and confidential and
proprietary information of the Company (including, but not limited to,
financial data, marketing and sales plans, customer and supplier lists, and
technical and commercial information relating to the Company's properties,
customers and suppliers). Employee acknowledges that the information he
obtains through his employment hereunder constitutes valuable, special, and
unique property of the Company and that the Company would suffer great loss and
damage if he should violate the covenants set forth in this Agreement.
Employee acknowledges that such covenants and conditions are reasonable and
necessary for the protection of the Company's business.
4.2 Solicitation of Employees. Employee agrees that during the
Term of Employment and until three years after the termination or expiration of
the Term of Employment, he will not, directly or indirectly, or by act in
concert with others, employ or attempt to employ or solicit for employment to
any business which is competitive with the Company, any of the Company's
employees, or seek to influence any employees of the Company to leave their
employment with the Company.
4.3 Nondisclosure of Trade Secrets, Propriety and Confidential
Information. Employee agrees that without the prior written approval of the
Company, Employee shall not during the Term of Employment or following the
cessation of the Term of Employment for any reason disclose any
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<PAGE> 6
of the Company's trade secrets or confidential or proprietary information to
any person or firm, company, association, or other entity (except for
authorized personnel of the Company) for any reason or purpose whatsoever;
provided, however, that this Section shall not apply to the extent that
Employee shall be required to provide information pursuant to a valid, lawful
subpoena or court order so long as Employee shall have made his best efforts in
good faith to cause the court of relevant jurisdiction, to the greatest extent
possible, to limit the scope of such subpoena or order and protect the
confidentiality of the information so disclosed.
4.4 Noncompetition Agreement. Employee covenants and agrees to
refrain for three years after any termination or expiration of his employment
with the Company from engaging in, or being employed by or performing
consulting services for any company or firm engaged in, the business of
providing painting and/or paint stripping services for aircraft, aircraft
cleaning services, ground handling services and/or light catering to the
airline industry or any other business in which the Company may be engaged at
the time of such employment termination or expiration.
4.5 Solicitation of Business of Company. Employee covenants and
agrees that during the Term of Employment Employee will not attempt to
influence customers, suppliers, and other business associates not to do
business with or not to continue to do business with the Company or its
affiliates.
4.6 Survival of Covenants. Sections 4.2, 4.3 and 4.4 hereof shall
survive any expiration or termination of this Agreement and shall continue to
bind the parties hereto in accordance with the terms hereof. The covenants
contained in this Article IV shall be construed as covenants or agreements
independent of any other provision of this Agreement and the allegation or
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of the covenants contained herein.
4.7 Remedies. In the event of breach or threatened breach by
Employee of any provision of this Article IV, the Company shall be entitled to
relief by temporary restraining order, temporary injunction, permanent
injunction, or otherwise in addition to other legal and equitable relief to
which it may be entitled, including any and all monetary damages which the
Company may incur as a result of said breach, violation or threatened breach or
violation. The Company may pursue any remedy available to it concurrently or
consecutively in any order as to any breach, violation, or threatened breach or
violation, and the pursuit of one of such remedies at any time will not be
deemed an election of remedies or waiver of the right to pursue any other of
such remedies as to such breach, violation, or threatened breach or violation,
or as to any other breach, violation, or threatened breach or violation.
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<PAGE> 7
V.
Miscellaneous Provisions
5.1 Notices. Whenever, in connection with this Agreement, any
notice is required to be given or any other act or event is to be done or occur
on or by a particular number of days, and the date thus particularized should
be a Saturday, Sunday, or bank holiday in the City of Dallas, Texas, such date
shall be postponed to the next day which shall not be a Saturday, Sunday, or
bank holiday in the City of Dallas, Texas. In the event a notice or other
document is required to be given hereunder to the Company or Employee, such
notice or other document shall either be personally delivered or be mailed to
the party entitled to receive the same by registered or certified mail, return
receipt requested, at the appropriate address set forth below or at such other
address as such party shall designate in a written notice given in accordance
with this Section:
Company: Employee:
Aviation Group, Inc. Lee Sanders
1327 Empire Central, Suite 260 503 Little Creek Trail
Dallas, Texas 75247 Oak Leaf, Texas 75154
Notice shall be deemed given on the date of actual delivery, if delivered in
person, or, if mailed, then on the date noted on the return receipt.
5.2 Binding Effect. The rights and obligations of the parties
shall inure to the benefit of and shall be binding upon their heirs,
representatives, successors and assigns as the case may be.
5.3 Severability. If any provision contained in this Agreement is
determined to be void, illegal or unenforceable, in whole or in part, then the
other provisions contained herein shall remain in full force and effect as if
the provision which was determined to be void, illegal, or unenforceable had
not been contained herein.
5.4 Waiver, Modification, and Integration. The waiver by any
party hereto of a breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach by any party. This
instrument contains the entire agreement of the parties concerning employment
and supersedes all prior and contemporaneous representations, understandings
and agreements, either oral or in writing, between the parties hereto with
respect to the employment of Employee by the Company and all such prior or
contemporaneous representations, understandings and agreements, both oral and
written, are hereby terminated. This Agreement may not be modified, altered or
amended except by written agreement of all the parties hereto.
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<PAGE> 8
5.5 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AND ACTIONS HEREON SHALL BE
BROUGHT IN DALLAS COUNTY, TEXAS.
5.6 Counterpart Execution. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute but one and the same instrument.
5.7 Captions. The captions herein are inserted for convenience
only and shall not affect the construction of this Agreement.
IN WITNESS WHEREOF, this Agreement is executed as of the date first
set forth above.
COMPANY:
AVIATION GROUP, INC., a
Texas corporation
By: /s/ LEE SANDERS
-------------------------------------------------
Name: Lee Sanders
-----------------------------------------------
Title: President
----------------------------------------------
EMPLOYEE:
/s/ LEE SANDERS
----------------------------------------------------
Lee Sanders
-8-
<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
by and between Aviation Group, Inc., a Texas corporation (the "Company"), and
Paul Lubomirski, an individual resident of the State of Louisiana ("Employee"),
as of March 1, 1996 (the "Effective Date").
W I T N E S S E T H :
In consideration of the mutual covenants herein contained, the
employment of Employee upon the terms, conditions and covenants set forth
herein and each act performed pursuant hereto, the parties hereto agree as
follows:
I.
Employment and Duties
1.1 Employment. For the term of employment as below stated, the
Company hereby employs Employee as its President to perform such duties as the
Board of Directors of the Company (the "Board") shall from time to time
prescribe.
1.2 Employee's Resources. Employee shall devote substantially all
of his time, energy and capabilities to the performance of such duties and
shall not devote any material portion of his time or abilities to the planning,
organization, promotion, direction, management or conduct of any other business
activity, whether or not such other business activity is pursued for the gain,
profit or pecuniary advantage of Employee, without having first obtained the
consent of the Company. Employee further agrees that, without the prior
consent of the Company, Employee shall not during the term of this Agreement
directly or indirectly (i) invest in any business which is competitive with
that of the Company, (ii) attempt to influence customers or other business
associates not to do business with or not to continue to do business with the
Company, or (iii) take any other action inconsistent with the fiduciary
responsibility of an employee to his employer.
II.
Term of Employment
2.1 Term. Subject to earlier termination as hereinafter provided,
the initial term of employment of Employee hereunder shall commence on the
Effective Date and shall end on the third anniversary of the Effective Date.
Thereafter, this Agreement shall be automatically extended from year to year
unless the Company shall have provided written notice of non-renewal to the
Employee
<PAGE> 2
not less than thirty (30) days prior to such expiration date, or unless
terminated in accordance with the provisions of Section 2.2 of this Agreement.
As used herein, the phrase "Term of Employment" shall mean said initial term of
employment as well as any renewal terms thereof.
2.2 Termination. This Agreement may be terminated at any time
during the Term of Employment only by reason of and in accordance with the
following:
(a) Death. If Employee dies during the term of this
Agreement and while in the employ of the Company, this Agreement shall
automatically terminate as of the date of Employee's death; and the
Company shall have no further obligation to Employee or his estate,
except to pay to the estate of Employee (i) any accrued, but unpaid,
Salary (as hereinafter defined) and any vacation or sick leave
benefits which have accrued as of the date of death but were then
unpaid or unused, and (ii) any declared, accrued Bonus Compensation
(as hereinafter defined), if any.
(b) Disability. If, during the term of this Agreement,
Employee shall be prevented from performing his duties hereunder by
reason of becoming totally disabled, then the Company, on thirty (30)
days' prior notice to Employee, may terminate this Agreement. For
purposes of this Agreement, Employee shall be deemed to have become
totally disabled when (i) he receives "total disability benefits"
under the Company's disability plan (whether funded with insurance or
self-funded by the Company), or (ii) the Board, upon the written
report of a qualified physician (after complete examination of
Employee) designated by the Board, shall have determined that Employee
has become physically and/or mentally incapable of performing his
duties under this Agreement on a permanent basis. In the event of
termination pursuant to this Section, the Company shall be relieved of
all of its obligations under this Agreement, except to pay Employee
any accrued, but unpaid Salary, any vacation or sick leave benefits
which have accrued as of the date on which such permanent disability
is determined, but then remain unpaid, and any declared Bonus
Compensation. The provisions of the preceding sentence shall not
affect Employee's rights to receive payments under the Company's
disability insurance plan, if any.
(c) Termination by the Company for Cause. Prior to the
expiration of the term of this Agreement, the Company may discharge
Employee for cause and terminate this Agreement without any further
liability hereunder to Employee or his estate, except to pay any
accrued, but unpaid, Salary, any declared Bonus Compensation, and any
vacation benefits due to him. For purposes of this Agreement, a
"discharge for cause" shall mean termination of Employee upon written
notification to Employee limited, however, to one or more of the
following reasons:
(i) Fraud, misappropriation or embezzlement by
Employee in connection with the Company as determined by the
affirmative vote of at least a majority of the Board; or
<PAGE> 3
(ii) Mismanagement or neglect of Employee's
duties as determined by the affirmative vote of at least a
majority of the Board; or
(iii) Willful and unauthorized disclosure of
information proprietary and confidential to the Company; or
(iv) Employee's breach of any material term or
provision of this Agreement, after notice to Employee of the
particular details thereof and a period of thirty (30) days
thereafter within which to cure such breach, if any, and the
failure of Employee to cure such breach within such thirty
(30) day period.
(d) Termination by Employee with Notice. Employee may
terminate this Agreement at any time upon thirty (30) days notice to
the Company, in which event Employee shall be paid his then prevailing
Salary prorated to the date of termination, plus any accrued, but
unused, vacation benefits.
III.
Compensation and Benefits
3.1 Salary and Bonus. As compensation for his services to the
Company and other duties and responsibilities herein contemplated, Employee
shall receive from the Company an annual salary in the amount of $90,000.00 per
year. Employee will be entitled to receive the bonuses and additional
compensation ("Bonus Compensation"), if any, described in Section 3.4 below.
3.2 Employment Benefits. In addition to the Salary and Bonus
Compensation payable to Employee hereunder, Employee shall be entitled to the
following benefits upon satisfaction by Employee of the eligibility
requirements therefor, subject to the following limitations:
(a) Sick Leave Benefits and Disability Insurance. Unless
this Agreement is terminated pursuant to the provisions of Section
2.2(b) hereof, Employee shall be paid sick leave benefits at his then
prevailing Salary rate during his absence due to illness or other
incapacity, reduced by the amount, if any, of worker's compensation,
social security entitlements or disability benefits, if any, under the
Company's group disability insurance plan. The Company, at its own
expense, shall provide Employee with the maximum amount of disability
insurance benefits allowed for one in the position of Employee with
the Company under and consistent with any group disability insurance
plan which the Company, at its election, may adopt. Notwithstanding
anything herein to the contrary, Employee's sick leave days shall not
exceed the number of sick leave days provided to employees of similar
tenure and position in the Company as provided in the Company's policy
manual, if any.
(b) Life Insurance. The Company, at its own expense,
shall provide Employee, subject to Employee passing any physical
examination required by the Company's insurance
-3-
<PAGE> 4
company, life insurance benefits in a face amount of not less than one
year's salary under and consistent with any group term life insurance
plan which the Company, at its election, may adopt.
(c) Hospitalization, Accident, Major Medical and Dental
Insurance. The Company, at its own expense, shall provide Employee
(and all dependents of Employee) with group hospitalization, group
accident, major medical, and dental insurance in amounts of coverage
comparable to the coverage, if any, provided other employees in
similar positions with the Company.
(d) Vacations. Employee shall be entitled to a
reasonable paid vacation each year during the term of this Agreement
as determined by the Board, exclusive of holidays and weekends, which
vacation shall be taken by Employee in accordance with the business
requirements of the Company at the time and its personnel policies
then in effect relative to this subject.
(e) Working Facilities. The Company shall provide, at
its expense, adequate facilities, equipment, supplies and personnel
(including professional, clerical, support and other personnel) for
Employee's use in performing his duties and responsibilities under
this Agreement.
(f) Other Employment Benefits. As an employee of the
Company, Employee shall participate in and receive such other fringe
benefits as may be in effect from time to time for employees of the
Company, whether or not specifically enumerated herein and whether or
not through any written plan or arrangement, upon satisfaction by
Employee of the eligibility requirements therefor.
3.3 Reimbursement of Employee Expenses. Employee is authorized to
incur ordinary, necessary and reasonable expenses in connection with the
performance of his duties and responsibilities under this Agreement and for the
promotion of the business and activities of the Company during the term hereof,
including, without limitation, expenses for necessary travel and entertainment
and other items of expenses required in the normal and routine course of
Employee's employment hereunder. The Company will reimburse Employee from time
to time for all such business expenses incurred pursuant to and in conformity
with the provisions of this Section provided that Employee presents to the
Company documentary evidence of such expenses necessary to satisfy the
reporting requirements of the Internal Revenue Code of 1986, as amended.
3.4 Bonus Compensation. As additional compensation to Employee
for his services to the Company and other duties and responsibilities herein
contemplated, Employee shall receive a bonus, the amount of which shall be
based on the Company's financial performance, as follows:
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<PAGE> 5
(a) if the net profit for Pride Aviation, Inc. ("Pride")
for any fiscal year during the term of this Agreement is more than
$600,000 but less than $700,000, the bonus will be 10% of the
Employee's annual salary;
(b) if the net profit for Pride for a fiscal year is
equal to or more than $700,000 but less than $800,000, the bonus will
be 20% of the Employee's annual salary;
(c) if the net profit for Pride for a fiscal year is
equal to or more than $800,000 but less than $900,000, the bonus will
be 40% of the Employee's annual salary; or
(d) if the net profit for Pride for a fiscal year is
equal to or more than $900,000, the bonus will be 70% of the
Employee's annual salary.
IV.
Restrictive Covenants
4.1 Trade Secrets, Propriety and Confidential Information.
Employee recognizes and acknowledges that Employee will acquire during his
employment hereunder access to certain trade secrets and confidential and
proprietary information of the Company (including, but not limited to,
financial data, marketing and sales plans, customer and supplier lists, and
technical and commercial information relating to the Company's properties,
customers and suppliers). Employee acknowledges that the information he
obtains through his employment hereunder constitutes valuable, special, and
unique property of the Company and that the Company would suffer great loss and
damage if he should violate the covenants set forth in this Agreement.
Employee acknowledges that such covenants and conditions are reasonable and
necessary for the protection of the Company's business.
4.2 Solicitation of Employees. Employee agrees that during the
Term of Employment and until three years after the termination or expiration of
the Term of Employment, he will not, directly or indirectly, or by act in
concert with others, employ or attempt to employ or solicit for employment to
any business which is competitive with the Company, any of the Company's
employees, or seek to influence any employees of the Company to leave their
employment with the Company.
4.3 Nondisclosure of Trade Secrets, Propriety and Confidential
Information. Employee agrees that without the prior written approval of the
Company, Employee shall not during the Term of Employment or following the
cessation of the Term of Employment for any reason disclose any of the
Company's trade secrets or confidential or proprietary information to any
person or firm, company, association, or other entity (except for authorized
personnel of the Company) for any reason or purpose whatsoever; provided,
however, that this Section shall not apply to the extent that Employee shall be
required to provide information pursuant to a valid, lawful subpoena or court
order so long as Employee shall have made his best efforts in good faith to
cause the court of relevant jurisdiction, to the greatest extent possible, to
limit the scope of such subpoena or order and protect the confidentiality of
the information so disclosed.
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<PAGE> 6
4.4 Noncompetition Agreement. Employee covenants and agrees to
refrain for three years after any termination or expiration of his employment
with the Company from engaging in, or being employed by or performing
consulting services for any company or firm engaged in, the business of
providing painting and/or paint stripping services for aircraft, aircraft
cleaning services, ground handling services and/or light catering to the
airline industry or any other business in which the Company may be engaged at
the time of such employment termination or expiration.
4.5 Solicitation of Business of Company. Employee covenants and
agrees that during the Term of Employment Employee will not attempt to
influence customers, suppliers, and other business associates not to do
business with or not to continue to do business with the Company or its
affiliates.
4.6 Survival of Covenants. Sections 4.2, 4.3 and 4.4 hereof shall
survive any expiration or termination of this Agreement and shall continue to
bind the parties hereto in accordance with the terms hereof. The covenants
contained in this Article IV shall be construed as covenants or agreements
independent of any other provision of this Agreement and the allegation or
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of the covenants contained herein.
4.7 Remedies. In the event of breach or threatened breach by
Employee of any provision of this Article IV, the Company shall be entitled to
relief by temporary restraining order, temporary injunction, permanent
injunction, or otherwise in addition to other legal and equitable relief to
which it may be entitled, including any and all monetary damages which the
Company may incur as a result of said breach, violation or threatened breach or
violation. The Company may pursue any remedy available to it concurrently or
consecutively in any order as to any breach, violation, or threatened breach or
violation, and the pursuit of one of such remedies at any time will not be
deemed an election of remedies or waiver of the right to pursue any other of
such remedies as to such breach, violation, or threatened breach or violation,
or as to any other breach, violation, or threatened breach or violation.
V.
Miscellaneous Provisions
5.1 Notices. Whenever, in connection with this Agreement, any
notice is required to be given or any other act or event is to be done or occur
on or by a particular number of days, and the date thus particularized should
be a Saturday, Sunday, or bank holiday in the City of Dallas, Texas, such date
shall be postponed to the next day which shall not be a Saturday, Sunday, or
bank holiday in the City of Dallas, Texas. In the event a notice or other
document is required to be given hereunder to the Company or Employee, such
notice or other document shall either be personally delivered or be mailed to
the party entitled to receive the same by registered or certified mail, return
receipt requested, at the appropriate address set forth below or at such other
address as such party shall designate in a written notice given in accordance
with this Section:
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<PAGE> 7
Company: Employee:
Aviation Group, Inc. Mr. Paul Lubomirski
1327 Empire Central, Suite 260 315 Darby Lane
Dallas, Texas 75247 New Iberia, Louisiana 70560
Notice shall be deemed given on the date of actual delivery, if delivered in
person, or, if mailed, then on the date noted on the return receipt.
5.2 Binding Effect. The rights and obligations of the parties
shall inure to the benefit of and shall be binding upon their heirs,
representatives, successors and assigns as the case may be.
5.3 Severability. If any provision contained in this Agreement is
determined to be void, illegal or unenforceable, in whole or in part, then the
other provisions contained herein shall remain in full force and effect as if
the provision which was determined to be void, illegal, or unenforceable had
not been contained herein.
5.4 Waiver, Modification, and Integration. The waiver by any
party hereto of a breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach by any party. This
instrument contains the entire agreement of the parties concerning employment
and supersedes all prior and contemporaneous representations, understandings
and agreements, either oral or in writing, between the parties hereto with
respect to the employment of Employee by the Company and all such prior or
contemporaneous representations, understandings and agreements, both oral and
written, are hereby terminated. This Agreement may not be modified, altered or
amended except by written agreement of all the parties hereto.
5.5 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AND ACTIONS HEREON SHALL BE
BROUGHT IN DALLAS COUNTY, TEXAS.
5.6 Counterpart Execution. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute but one and the same instrument.
5.7 Captions. The captions herein are inserted for convenience
only and shall not affect the construction of this Agreement.
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<PAGE> 8
IN WITNESS WHEREOF, this Agreement is executed as of the date first
set forth above.
COMPANY:
AVIATION GROUP, INC., a
Texas corporation
By: /s/ LEE SANDERS
---------------------------------------------
Name: Lee Sanders
-------------------------------------------
Title: President
------------------------------------------
EMPLOYEE:
/s/ PAUL LUBOMIRSKI
------------------------------------------------
Paul Lubomirski
-8-
<PAGE> 1
EXHIBIT 10.4
CONSULTING AGREEMENT
This Consulting Agreement ("Agreement") is entered into this 1st day
of March, 1996 between AVIATION GROUP, INC., a Texas corporation
("Corporation"), and CHARLES E. WEED ("Consultant"), but effective for all
purposes as of the expiration or termination of the existing Consulting
Agreement between Consultant and Pride Aviation, Inc., which Consultant agrees
shall not be renewed.
RECITALS
A. Corporation desires to engage Consultant to provide certain
financial and business consulting services to Corporation with respect to
Corporation's businesses, and Consultant desires to accept such engagement, all
upon the terms and conditions hereinafter set forth.
B. This Agreement shall govern the consulting relationship
between the parties from the date hereof and it supersedes all previous
agreements between them, either written or oral, heretofore made.
NOW THEREFORE, in consideration of the covenants herein contained, the
parties hereto hereby agree as follows:
1. Recitals. The above recitals are true and correct.
2. Consulting Agreement. Corporation hereby engages the services
of Consultant to provide to Corporation and its subsidiaries the financial and
business consulting services hereinafter specified. Consultant hereby accepts
such engagement and agrees to provide the financial and business consulting
services hereinafter specified. Consultant is an independent contractor and
shall not be deemed or construed to be an employee or agent of Corporation or
any of its subsidiaries for any purposes whatsoever.
3. Services to be Provided by Consultant. Consultant shall make
himself available to Corporation and its subsidiaries, in person or by
telephone, from time to time, for the purpose of reviewing materials furnished
to Consultant with respect to the business and financial affairs of Corporation
and its subsidiaries, and of conferring or consulting with, and otherwise
advising, Corporation, its subsidiaries and their respective officers and
directors with respect to the management, development and expansion of the
businesses of Corporation and its subsidiaries and with respect to the
availability, terms and sources of financing for Corporation and its
subsidiaries from sources in the United States of America and, in particular,
the State of Louisiana. Consultant
<PAGE> 2
shall also confer with and assist Corporation and its subsidiaries in their
relationships with the Louisiana Economic Development Corporation, local and
state governmental agencies in the State of Louisiana, officials of Iberia
Parish, Louisiana and the Iberia Parish Airport Authority and other Louisiana
organizations, agencies and firms. Corporation may require Consultant to
travel in connection with his rendering of the foregoing services. Corporation
agrees to provide Consultant with any and all information which he may
reasonably request to enable him to carry out his obligations hereunder.
Consultant shall provide such services at such times as Corporation may
reasonably request or at such other times as may be mutually agreed upon by
Consultant and Corporation. Consultant shall devote such energy, skill, and
working time as may be necessary for the faithful and diligent performance of
the foregoing services, but in no event will such time be more than twenty
hours per week unless agreed to by Consultant.
4. Term. The term of this Agreement shall commence on the
effective date hereof and unless sooner terminated hereunder shall continue for
twenty-four (24) months thereafter.
5. Compensation. For all services rendered by Consultant to
Corporation hereunder, Consultant shall receive a fee of $6,000.00 per month
for the first twelve (12) months of the term hereof and $3,000.00 per month for
the second twelve (12) months of the term hereof.
6. Expenses. Corporation shall reimburse Consultant (upon the
submission by Consultant of reasonably itemized accounts thereof) for such
out-of-pocket costs and expenses as Consultant may reasonably incur in
connection with Consultant's performance of his services hereunder.
7. Confidential Data. Consultant recognizes and acknowledges that
the list of Corporation's customers, as it may exist from time to time, its
financial data, computer programs and future plans of Corporation are valuable,
special and unique assets of Corporation. At no time will Consultant disclose
any such list or information, or any part thereof to any person, firm,
corporation, association or other entity for any reason or purpose whatsoever.
In the event of a breach or threatened breach by Consultant of the provisions
of this paragraph, Corporation shall be entitled to an injunction restraining
Consultant from disclosing in whole or in part, such list or information, or
from rendering any services to any person, firm, corporation, association or
other entity to whom such list or information, in whole or in part, has been
disclosed or is threatened to be disclosed. Nothing herein shall be construed
as prohibiting Corporation from pursuing any other remedies available to them
for such breach or threatened breach, including recovery of damages from
Consultant.
8. Termination.
(a) Consultant may elect to terminate this Agreement at
any time upon thirty (30) days prior written notice to Corporation.
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<PAGE> 3
(b) The Agreement shall terminate upon the happening of
any of the following events:
(1) the death of Consultant;
(2) the dissolution of Corporation; or
(3) at any time by written agreement of the
parties.
(c) Corporation may elect to terminate this Agreement
upon thirty (30) days prior written notice to Consultant if:
(1) Consultant is grossly negligent in the
conduct of his services hereunder or wilfully derelict in his duties hereunder;
(2) Consultant commits any fraud or material
misrepresentation in connection with his services hereunder;
(3) Consultant violates any covenant in this
Agreement and does not cure such violation within ten (10) days after notice to
Consultant thereof; and
(4) Consultant or any of his affiliates files,
makes or commences any action, suit or claim against Corporation or any of its
subsidiaries or affiliates or any of their respective assets.
9. Payment of Compensation in Event of Termination.
Notwithstanding anything contained herein to the contrary, in the event
Consultant is terminated pursuant to paragraph 8 hereof, Corporation shall pay
Consultant all accrued but unpaid compensation but shall have no further
obligation to pay compensation hereunder.
10. Notices. All notices required to be given under this
Agreement shall be in writing, sent certified mail, return receipt requested,
postage prepaid, to the following addresses:
IF TO CONSULTANT: IF TO CORPORATION:
Charles E. Weed Aviation Group, Inc.
461 Dudley 1327 Empire Central, Suite 260
Shreveport, LA 71104 Dallas, TX 75247
11. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
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<PAGE> 4
12. Waiver. The waiver by either party hereto of any breach of
any provision of this Agreement shall not operate or be construed as a waiver
of any other or subsequent breach by either party hereto.
13. Binding Effect and Assignment. This Agreement shall be binding
upon the parties hereto, their heirs, personal representatives and successors
and assigns. This Agreement is personal as to Consultant and may not be
assigned by Consultant without first obtaining the written consent of
Corporation. No duties of Consultant may be performed for him by any other
party.
14. Entire Agreement. This Agreement contains the entire
understanding of the parties relating to the engagement of Consultant by
Corporation. It may not be changed orally but only by an agreement in writing
signed by the parties against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
15. Headings. The headings contained herein are for the sole
purpose of convenience of reference, and shall not in any way limit or affect
the meaning or interpretation of any of the terms or provisions of the
Agreement.
16. Waiver, etc. The failure of either of the parties hereto at
any time to enforce any of the provisions of this Agreement shall not be deemed
or construed to be a waiver of any such provision, nor in any way affect the
validity of this Agreement or any provision hereof or the right of either of
the parties hereto thereafter to enforce each and every provision of this
Agreement. No waiver of any breach of any of the provisions of this Agreement
shall be effective unless set forth in a written instrument executed by the
party against whom or which enforcement of such waiver is sought; and no waiver
of any such breach shall be construed or deemed to be a waiver of any other or
subsequent breach.
17. Relationship. It is the intent of the parties hereto that
Consultant shall be an independent contractor as to Corporation and its
subsidiaries and shall not be deemed or construed to be an agent, partner or
joint venturer of or with Corporation or any of its subsidiaries by reason of
this Agreement. Consultant shall serve solely as a consultant, adviser and
source of information and shall take no action on behalf of, or bind, either
Corporation or any of its subsidiaries with respect to any third parties by
virtue of this Agreement.
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<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
CORPORATION:
WITNESSES: AVIATION GROUP, INC.,
a Texas corporation
/s/ [ILLEGIBLE] By: /s/ LEE SANDERS
- --------------------------- --------------------------------------
Name: Lee Sanders
------------------------------------
Title: Chairman & C.E.O.
-----------------------------------
CONSULTANT:
/s/ [ILLEGIBLE] /s/ CHARLES E. WEED
- --------------------------- -----------------------------------------
Charles E. Weed
-5-
<PAGE> 1
EXHIBIT 10.5
EXECUTION COPY
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made and entered into
by and between Aviation Group, Inc., a Texas corporation (the "COMPANY"), and
Tony Ramsaroop, an individual resident of the State of Texas ("EMPLOYEE"), as
of February 1, 1997 (the "EFFECTIVE DATE").
W I T N E S S E T H :
In consideration of the mutual covenants herein contained, the
employment of Employee upon the terms, conditions and covenants set forth
herein and each act performed pursuant hereto, the parties hereto agree as
follows:
ARTICLE I
EMPLOYMENT AND DUTIES
1.1 Employment. For the term of employment as below stated, the
Company hereby employs Employee as its Vice-President of its Ground Handling &
Service Division to perform such duties as the Chief Executive Officer of the
Company shall from time to time prescribe.
1.2 Employee's Resources. Employee shall devote substantially all
of his time, energy and capabilities to the performance of such duties and
shall not devote any material portion of his time or abilities to the planning,
organization, promotion, direction, management or conduct of any other business
activity, whether or not such other business activity is pursued for the gain,
profit or pecuniary advantage of Employee, without having first obtained the
consent of the Company. Employee further agrees that, without the prior
consent of the Company, Employee shall not during the term of this Agreement
directly or indirectly (i) invest in any business which is competitive with
that of the Company, (ii) attempt to influence customers or other business
associates not to do business with or not to continue to do business with the
Company, or (iii) take any other action inconsistent with the fiduciary
responsibility of an employee to his employer.
ARTICLE II
TERM OF EMPLOYMENT
2.1 Term. Subject to earlier termination as hereinafter provided,
the initial term of employment of Employee hereunder shall commence on the
Effective Date and shall end on the
<PAGE> 2
third anniversary of the Effective Date. Thereafter, this Agreement shall be
automatically extended from year to year unless the Company shall have provided
written notice of non-renewal to the Employee not less than thirty (30) days
prior to such expiration date, or unless terminated in accordance with the
provisions of Section 2.2 of this Agreement. As used herein, the phrase "Term
of Employment" shall mean said initial term of employment as well as any
renewal terms thereof.
2.2 Termination. This Agreement may be terminated at any time
during the Term of Employment only by reason of and in accordance with the
following:
(a) Death. If Employee dies during the term of this
Agreement and while in the employ of the Company, this Agreement shall
automatically terminate as of the date of Employee's death; and the
Company shall have no further obligation to Employee or his estate,
except to pay to the estate of Employee (i) any accrued, but unpaid,
Salary (as hereinafter defined) and any vacation or sick leave
benefits which have accrued as of the date of death but were then
unpaid or unused, and (ii) any declared, accrued Bonus Compensation
(as hereinafter defined), if any.
(b) Disability. If, during the term of this Agreement,
Employee shall be prevented from performing his duties hereunder by
reason of becoming totally disabled, then the Company, on thirty (30)
days' prior notice to Employee, may terminate this Agreement. For
purposes of this Agreement, Employee shall be deemed to have become
totally disabled when (i) he receives "total disability benefits"
under the Company's disability plan (whether funded with insurance or
self-funded by the Company), or (ii) the Board, upon the written
report of a qualified physician (after complete examination of
Employee) designated by the Board, shall have determined that Employee
has become physically and/or mentally incapable of performing his
duties under this Agreement on a permanent basis. In the event of
termination pursuant to this Section, the Company shall be relieved of
all of its obligations under this Agreement, except to pay Employee
any accrued, but unpaid Salary, any vacation or sick leave benefits
which have accrued as of the date on which such permanent disability
is determined, but then remain unpaid, and any declared Bonus
Compensation. The provisions of the preceding sentence shall not
affect Employee's rights to receive payments under the Company's
disability insurance plan, if any.
(c) Termination by the Company for Cause. Prior to the
expiration of the term of this Agreement, the Company may discharge
Employee for cause and terminate this Agreement without any further
liability hereunder to Employee or his estate, except to pay any
accrued, but unpaid, Salary, any declared Bonus Compensation, and any
vacation benefits due to him. For purposes of this Agreement, a
"discharge for cause" shall mean termination of Employee upon written
notification to Employee limited, however, to one or more of the
following reasons:
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<PAGE> 3
(i) Fraud, misappropriation or embezzlement by
Employee in connection with the Company as determined by the
affirmative vote of at least a majority of the Board; or
(ii) Mismanagement or neglect of Employee's
duties as determined by the affirmative vote of at least a
majority of the Board; or
(iii) Willful and unauthorized disclosure of
information proprietary or confidential to the Company; or
(iv) Employee's breach of any material term or
provision of this Agreement, after notice to Employee of the
particular details thereof and a period of thirty (30) days
thereafter within which to cure such breach, if any, and the
failure of Employee to cure such breach within such thirty
(30) day period.
(d) Termination by Employee with Notice. Employee may
terminate this Agreement at any time upon thirty (30) days' notice to
the Company, in which event Employee shall be paid his then prevailing
Salary prorated to the date of termination, plus any accrued, but
unused, vacation benefits.
ARTICLE III
COMPENSATION AND BENEFITS
3.1 Salary and Bonus. As compensation for his services to the
Company and other duties and responsibilities herein contemplated, Employee
shall receive from the Company a salary, payable in equal monthly installments,
equivalent to $60,000.00 per year until such time as the Company successfully
completes an initial public offering of its Common Stock (the "Public
Offering"). Commencing on the first pay period after successful completion of
the Public Offering, Employee shall receive a salary, payable in equal monthly
installments, equivalent to $70,000.00 per year. Employee may also be entitled
to receive from time to time bonuses and additional compensation ("BONUS
COMPENSATION") when, as, and if determined by the Board.
3.2 Employment Benefits. In addition to the Salary and Bonus
Compensation payable to Employee hereunder, Employee shall be entitled to the
following benefits upon satisfaction by Employee of the eligibility
requirements therefor, subject to the following limitations:
(a) Sick Leave Benefits and Disability Insurance. Unless
this Agreement is terminated pursuant to the provisions of Section
2.2(b) hereof, Employee shall be paid sick leave benefits at his then
prevailing Salary rate during his absence due to illness or other
incapacity, reduced by the amount, if any, of worker's compensation,
social security
-3-
<PAGE> 4
entitlements or disability benefits, if any, under the Company's group
disability insurance plan. The Company, at its own expense, shall
provide Employee with the maximum amount of disability insurance
benefits allowed for one in the position of Employee with the Company
under and consistent with any group disability insurance plan which
the Company, at its election, may adopt. Notwithstanding anything
herein to the contrary, Employee's sick leave days shall not exceed
the number of sick leave days provided to employees of similar tenure
and position in the Company as provided in the Company's policy
manual, if any.
(b) Life Insurance. The Company, at its own expense,
shall provide Employee, subject to Employee passing any physical
examination required by the Company's insurance company, life
insurance benefits in a face amount of not less than one year's salary
under and consistent with any group term life insurance plan which the
Company, at its election, may adopt.
(c) Hospitalization, Accident, Major Medical and Dental
Insurance. The Company, at its own expense, shall provide Employee
(and all dependents of Employee) with group hospitalization, group
accident, major medical, and dental insurance in amounts of coverage
comparable to the coverage, if any, provided other employees in
similar positions with the Company.
(d) Vacations. Employee shall be entitled to a
reasonable paid vacation each year during the term of this Agreement
as determined by the Board, exclusive of holidays and weekends, which
vacation shall be taken by Employee in accordance with the business
requirements of the Company at the time and its personnel policies
then in effect relative to this subject.
(e) Working Facilities. The Company shall provide, at
its expense, adequate facilities, equipment, supplies and personnel
(including professional, clerical, support and other personnel) for
Employee's use in performing his duties and responsibilities under
this Agreement.
(f) Other Employment Benefits. As an employee of the
Company, Employee shall participate in and receive such other fringe
benefits as may be in effect from time to time for employees of
similar tenure and position in the Company, whether or not
specifically enumerated herein and whether or not through any written
plan or arrangement, upon satisfaction by Employee of the eligibility
requirements therefor.
3.3 Reimbursement of Employee Expenses. Employee is authorized to
incur ordinary, necessary and reasonable expenses in connection with the
performance of his duties and responsibilities under this Agreement and for the
promotion of the business and activities of the
-4-
<PAGE> 5
Company during the term hereof, including, without limitation, expenses for
necessary travel and entertainment and other items of expenses required in the
normal and routine course of Employee's employment hereunder. The Company will
reimburse Employee from time to time for all such business expenses incurred
pursuant to and in conformity with the provisions of this Section provided that
Employee presents to the Company documentary evidence of such expenses
necessary to satisfy the reporting requirements of the Internal Revenue Code of
1986, as amended.
ARTICLE IV
RESTRICTIVE COVENANTS
4.1 Trade Secrets, Propriety and Confidential Information.
Employee recognizes and acknowledges that Employee will acquire during his
employment hereunder access to certain trade secrets and confidential and
proprietary information of the Company (including, but not limited to,
financial data, marketing and sales plans, customer and supplier lists, and
technical and commercial information relating to the Company's properties,
customers and suppliers). Employee acknowledges that the information he
obtains through his employment hereunder constitutes valuable, special, and
unique property of the Company and that the Company would suffer great loss and
damage if he should violate the covenants set forth in this Agreement.
Employee acknowledges that such covenants and conditions are reasonable and
necessary for the protection of the Company's business.
4.2 Solicitation of Employees. Employee agrees that during the
Term of Employment and until three years after the termination or expiration of
the Term of Employment, he will not, directly or indirectly, or by act in
concert with others, employ or attempt to employ or solicit for employment to
any business which is competitive with the Company, any of the Company's
employees, or seek to influence any employees of the Company to leave their
employment with the Company.
4.3 Nondisclosure of Trade Secrets, Propriety and Confidential
Information. Employee agrees that without the prior written approval of the
Company, Employee shall not during the Term of Employment or following the
cessation of the Term of Employment for any reason disclose any of the
Company's trade secrets or confidential or proprietary information to any
person or firm, company, association, or other entity (except for authorized
personnel of the Company) for any reason or purpose whatsoever; provided,
however, that this Section shall not apply to the extent that Employee shall be
required to provide information pursuant to a valid, lawful subpoena or court
order so long as Employee shall have made his best efforts in good faith to
cause the court of relevant jurisdiction, to the greatest extent possible, to
limit the scope of such subpoena or order and protect the confidentiality of
the information so disclosed.
-5-
<PAGE> 6
4.4 Noncompetition Agreement. Employee covenants and agrees to
refrain for three years after any termination or expiration of his employment
with the Company from engaging in, or being employed by or performing
consulting services for any company or firm engaged in, the business of
providing painting and/or paint stripping services for aircraft, aircraft
cleaning services, ground handling services and/or light catering to the
airline industry or any other business in which the Company may be engaged at
the time of such employment termination or expiration.
4.5 Solicitation of Business of Company. Employee covenants and
agrees that during the Term of Employment Employee will not attempt to
influence customers, suppliers, and other business associates not to do
business with or not to continue to do business with the Company or its
affiliates.
4.6 Survival of Covenants. Sections 4.2, 4.3 and 4.4 hereof shall
survive any expiration or termination of this Agreement and shall continue to
bind the parties hereto in accordance with the terms hereof. The covenants
contained in this Article IV shall be construed as covenants or agreements
independent of any other provision of this Agreement and the allegation or
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of the covenants contained herein.
4.7 Remedies. In the event of breach or threatened breach by
Employee of any provision of this Article IV, the Company shall be entitled to
relief by temporary restraining order, temporary injunction, permanent
injunction, or otherwise in addition to other legal and equitable relief to
which it may be entitled, including any and all monetary damages which the
Company may incur as a result of said breach, violation or threatened breach or
violation. The Company may pursue any remedy available to it concurrently or
consecutively in any order as to any breach, violation, or threatened breach or
violation, and the pursuit of one of such remedies at any time will not be
deemed an election of remedies or waiver of the right to pursue any other of
such remedies as to such breach, violation, or threatened breach or violation,
or as to any other breach, violation, or threatened breach or violation.
ARTICLE V
MISCELLANEOUS PROVISIONS
5.1 Notices. Whenever, in connection with this Agreement, any
notice is required to be given or any other act or event is to be done or occur
on or by a particular number of days, and the date thus particularized should
be a Saturday, Sunday, or bank holiday in the City of Dallas, Texas, such date
shall be postponed to the next day which shall not be a Saturday, Sunday, or
bank holiday in the City of Dallas, Texas. In the event a notice or other
document is required to be given hereunder to the Company or Employee, such
notice or other document shall either be personally
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<PAGE> 7
delivered or be mailed to the party entitled to receive the same by certified
mail, return receipt requested, at the appropriate address set forth below or
at such other address as such party shall designate in a written notice given
in accordance with this Section:
Company: Employee:
Aviation Group, Inc. Mr. Tony Ramsaroop
700 North Pearl Street, Suite 2170 [[ P. O. Box 542192 ]]
Dallas, Texas 75201 [[ Dallas, TX 75354 ]]
Notice shall be deemed given on the date of actual delivery, if delivered in
person, or, if mailed, then on the date noted on the return receipt.
5.2 Binding Effect. The rights and obligations of the parties
shall inure to the benefit of and shall be binding upon their heirs,
representatives, successors and assigns as the case may be.
5.3 Severability. If any provision contained in this Agreement is
determined to be void, illegal or unenforceable, in whole or in part, then the
other provisions contained herein shall remain in full force and effect as if
the provision which was determined to be void, illegal, or unenforceable had
not been contained herein.
5.4 Waiver, Modification, and Integration. The waiver by any
party hereto of a breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach by any party. This
instrument contains the entire agreement of the parties concerning employment
and supersedes all prior and contemporaneous representations, understandings
and agreements, either oral or in writing, between the parties hereto with
respect to the employment of Employee by the Company and all such prior or
contemporaneous representations, understandings and agreements, both oral and
written, are hereby terminated. This Agreement may not be modified, altered or
amended except by written agreement of all the parties hereto.
5.5 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AND ACTIONS HEREON SHALL BE
BROUGHT IN DALLAS COUNTY, TEXAS.
5.6 Counterpart Execution. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute but one and the same instrument.
5.7 Captions. The captions herein are inserted for convenience
only and shall not affect the construction of this Agreement.
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<PAGE> 8
IN WITNESS WHEREOF, this Agreement is executed as of the date first set forth
above.
COMPANY:
AVIATION GROUP, INC., a Texas corporation
By: /s/ LEE SANDERS
-------------------------------------------------
Name: Lee Sanders
-----------------------------------------------
Title: President & Chief Executive Officer
----------------------------------------------
EMPLOYEE:
/s/ TONY RAMSAROOP
----------------------------------------------------
Tony Ramsaroop
-8-
<PAGE> 1
EXHIBIT 10.6
UAL Contract
NO. 123002
SERVICES AGREEMENT
BY AND BETWEEN
PRIDE AVIATION, INC.
AND
UNITED AIR LINES, INC.
RELATING TO THE PURCHASE OF
AIRCRAFT PAINTING SERVICES
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
------- ----
<S> <C>
1. SELLER'S RESPONSIBILITIES 1
2. UNITED'S RESPONSIBILITIES 4
3. DELIVERY AND REDELIVERY 5
4. CHARGES AND PAYMENTS 7
5. WARRANTY 7
6. EXCUSABLE DELAY 9
7. TAXES 10
8. TITLE, LIENS 10
9. INSURANCE AND INDEMNITY 10
10. TERMINATION 12
11. PATENT INDEMNITY 14
12. CONSEQUENTIAL DAMAGES 15
13. CONFIDENTIAL INFORMATION 15
14. MISCELLANEOUS 16
EXHIBIT 1 - STATEMENT OF WORK
EXHIBIT 2 - SERVICE SCHEDULE
EXHIBIT 3 - PRICING
EXHIBIT 4 - DELIVERY RECEIPTS
EXHIBIT 5 - PARTS SUPPORT
</TABLE>
ii
<PAGE> 3
SERVICES AGREEMENT
AGREEMENT, entered into as of June 10, 1994, by and between UNITED AIR
LINES, INC., a Delaware Corporation with its principal office in the Township
of Elk Grove, State of Illinois (hereafter referred to as "United"), and PRIDE
AVIATION, INC., an Oklahoma corporation with its principal office in the City
of New Iberia, State of Louisiana (hereafter referred to as "Seller"). In
consideration of the mutual covenants set forth herein, United and Seller agree
as follows:
ARTICLE 1. - SELLER'S RESPONSIBILITIES.
1.1 SERVICES.
Seller will perform the services described in Exhibit 1 hereto (the
"Services") with respect to B737-222, B737-291, B737-322, B737-522
and B727-222A aircraft ("Aircraft") operated by United for a period of
three years from the date first set forth above. Seller will perform
the Services at its facilities in New Iberia, Louisiana. Seller shall
provide Services for (i) the quantity of Aircraft described in Exhibit
2 for the period described therein, and (ii) an approximately similar
quantity of Aircraft, on a prorated basis, for the remainder of the
term of this Agreement.
1.2 SCHEDULE.
Seller shall perform the Services (i) with respect to the Aircraft
described in Exhibit 2 in accordance with the schedule set forth
therein, and (ii) for the remainder of the term of this Agreement in
accordance with a schedule to be designated by United. United shall
designate the schedule of Services for such Aircraft for each year no
later than December 31 of the preceding year.
1.3 ADDITIONAL SERVICES.
Seller will perform additional services ("Additional Services") upon
(i) United's request and Seller's concurrence and (ii) execution of an
amendment to this Agreement.
1.4 OPTIONS.
Seller hereby grants United:
a. an option to extend the period of Services described in
Article 1.1 above from three years to five years. United may
exercise such option by giving notice to Seller on or
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<PAGE> 4
before March 1, 1997. Such additional period is referred to
hereinafter as the "Option Period".
b. an option to purchase Services for up to forty-two (42)
B757-222 Aircraft ("Option Aircraft") during the B-757 Option
Period (described below) in accordance with (i) a schedule
designated by United, and (ii) the provisions of Paragraph 4
of Exhibit 2 hereto. The B-757 Option Period shall extend from
the date United exercises such option to March 1, 1997. United
may exercise such option by giving notice to seller on or
before February 28, 1995. Upon exercise of such option, United
shall designate a schedule of Services, which schedule United
may revise during the B-757 Option Period.
c. An option to extend the Option Period of Services described in
Article 1.4.b above from three (3) years to five (5) years.
United may exercise such option by giving notice to Seller on
or before March 1, 1997.
1.5 SELLER FURNISHED MATERIAL.
Seller shall provide all parts and materials required in connection
with the services, except for the parts and materials described in
Article 2.3. Seller will establish inspection procedures at its own
facility and at its supplier's facilities to verify that such parts
and material are in compliance with United's regulatory and technical
requirements as described in this Agreement. Seller shall furnish the
results of such inspections to United on a periodic basis to ensure
compliance with such procedures.
1.6 TOOLING.
(a) Seller shall provide, at Seller's expense, all tooling,
fixtures and equipment which nay be required to accomplish the
Services (including routine and non-routine work) and for all
Additional Services.
(b) In the event Seller deems it necessary to lease or purchase
any tooling, fixture or equipment in order to provide Additional
Services, Seller will notify United and obtain United's approval prior
to leasing or purchasing any such items. Any such items purchased by
Seller and charged to United shall become the property of United and
be delivered to United at the conclusion of this Agreement.
1.7 USE OF OTHER FACILITIES OR SUBCONTRACTORS.
Seller will not perform Services hereunder at any facility other than
that listed in Article 1.1 above without United's prior approval.
Seller will not use outside services in
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<PAGE> 5
performance of Services hereunder without the prior approval of
United. Such approval shall not he unreasonably withheld.
1.8 REGULATORY AND TECHNICAL REQUIREMENTS.
Seller shall cause Services to be performed in accordance with
(i) all applicable regulations of the Federal Aviation Administration
(FAA), (ii) all applicable regulations and standards of the
Environmental Protection Agency (EPA) and state and local agencies,
(iii) Seller's current FAA-approved Repair Station Manual and (iv)
United's Specifications and procedures or equivalent as approved by
United. Seller shall comply with United's Quality Assurance
Certification Program requirements for Outside Service Vendor (OSV)
painting, dated February 4, 1994.
1.9 REGULATORY QUALIFICATIONS.
Seller warrants that it holds Repair Station Certificates issued under
Part 145 of the Federal Aviation Regulations, with ratings applicable
to performance of the Services. Seller shall comply with all Federal,
State and local laws and standards applicable to performing the
Services, including EPA Certification, and Random Drug Testing
Programs ("DOT" Program").
1.10 ON-SITE REPRESENTATIVES.
Seller shall furnish to United without additional charge, secure
office space, including furniture, telephone and telefax, in or
conveniently located to the facility where Services are performed.
Such office space shall be reasonably adequate for use by a maximum of
three (3) of United's personnel and United's designated
subcontractor(s) if applicable. United will provide qualified staff,
as necessary, at such facility where Seller performs Services
hereunder. All long distance telephone calls and telefax messages from
such office space shall be charged to United at actual cost.
1.11 REMOVED MATERIAL.
(a) Seller shall store in a safe and segregated location, all
property, including without limitation, fixtures, equipment and
instruments, which Seller deems necessary to remove from each Aircraft
in connection with performing the Services.
(b) Seller shall provide United a listing of all property removed
from each Aircraft which property is not to be reinstalled in
connection with the Services. Seller shall provide such listing within
five (5) days after removal of such property from each Aircraft. Such
listing shall be by
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<PAGE> 6
part number where applicable, and shall include a description and
quantity.
1.12 THIRD PARTY WARRANTIES.
(a) Seller will notify United of any potential warranty claims
against third party suppliers which are discovered by Seller during
the performance of Services. Seller will make available to United data
necessary to support such third party warranty claims. If requested by
United Seller shall file on behalf of United any such third party
warranty claims.
(b) United shall be entitled at any time to take over and conduct
in Seller's name any prosecution and/or settlement of any claim made
under any warranties which may exist from time to time in favor of
Seller from third party suppliers used by Seller in performing
Services under this Agreement and all such warranty rights shall be
subrogated to United accordingly.
ARTICLE 2. - UNITED'S RESPONSIBILITIES.
2.1 UNITED REMOVED MATERIAL DISPOSITION.
United shall instruct Seller as to how to dispose of the parts and
material described in Article 1.11 (parts and material removed from
Aircraft). Except as the parties may otherwise agree, Seller will hold
such parts and material in segregated and restricted storage for
twenty one (21) days after redelivery of each Aircraft and dispose of
such material as instructed by United at United's cost. In the event
United does not furnish such instructions within twenty one (21) days
or such other agreed period, Seller may dispose of such parts and
materials in a reasonable manner at United's cost.
2.2 SPECIFICATIONS.
United will provide complete and accurate information, and documents
including, but not limited to, task work cards, Materials and Process
Document for Decorative Finishing of Aircraft Exteriors, Revision
#003, dated 12/06/93, current aid book(s), design drawings,
maintenance and work manuals, hereinafter referred to as
("Specifications"), including revisions thereto, in a timely fashion
to assist Seller in performing the Services and to comply with any
applicable FAA requirements.
2.3 PARTS AND MATERIAL PROVISIONING.
United shall provide Seller prior to delivery of each Aircraft top
coat enamel, placards, decals, stencils and masks for
4
<PAGE> 7
United's name, logo, N#'s and fleets (collectively "Material") which
is unique to the Aircraft in accordance with the terms set forth in
Exhibit 5 hereto to accomplish the Services hereunder. Title to all
Material delivered by United to Seller shall at all times be and
remain with United. Seller shall store all such Material in a
segregated and secure area designated only for United Material and in
compliance with material Specification requirements. Risk of loss
shall be with Seller for all such Material in Seller's custody or
control.
2.4 INSPECTION.
United will maintain possession of and enter in the Aircraft Log all
entries including signing of the maintenance release.. The signing of
the return to service for work performed hereunder will be the
responsibility of the United on-site representative.
United may perform any inspections on any Aircraft during the time
Services are being performed, provided that United shall perform any
such inspection prior to closure of any affected area on an Aircraft.
ARTICLE 3. - DELIVERY AND REDELIVERY.
3.1 DELIVERY OF AIRCRAFT.
(a) United shall deliver the Aircraft to Seller for Services at
Seller's facility in accordance with the schedule described in Exhibit
2 hereto. United shall obtain at its expense all necessary clearances
for landing and taking off of Aircraft if applicable. Seller shall
assist United in obtaining any such clearances if so requested by
United. Upon delivery the parties shall comply with the applicable
inspection requirements set forth in Article 3.1 (b).
(b) Within four (4) hours after arrival of each Aircraft at
Seller's facility, United and Seller shall jointly inspect such
Aircraft and inventory the loose equipment (the "Arrival Inspection").
The parties shall produce a report of such inspection within eight (8)
hours after such arrival. Such report shall set forth any facts
concerning the general condition of the Aircraft or of the equipment
on which they are not in agreement and shall attach such notation to
an "Aircraft Receivable Inspection and Loose Equipment Inventory
Report" which shall be signed by both parties. Each party shall
complete its inspection within four (4) hours after arrival of each
Aircraft.
5
<PAGE> 8
(c) After completion of the Arrival Inspection, Seller shall
remove and store in a safe and segregated location, all fixtures,
equipment, instruments or other property which Seller removes during
the performance of Services hereunder. Seller shall cause such removed
items to be covered by Seller's described in Article 9. Title to the
Aircraft and to such removed and stored items shall remain with United
or its lessor at all times.
(d) Within forty-eight (48) hours after delivery of each Aircraft
to Seller, Seller shall inform the United on-site representative of
any applicable earlier re-delivery date based upon the Services to be
performed on such Aircraft as described in Exhibit 2 hereto.
3.2 REDELIVERY OF AIRCRAFT.
(a) Upon completion of Services Seller shall redeliver each
Aircraft to United at Seller's facility in accordance with the
schedule described in Exhibit 2 hereto. Prior to redelivery, Seller
shall unseal any areas closed off by it, reinstall such fixtures,
equipment, instruments and other property as may have been removed
during the performance of Services and submit each Aircraft to United
for inspection (the "Redelivery Inspection").
(b) Prior to redelivery of each Aircraft, United may conduct an
inspection of such Aircraft at it's expense, which inspection may
include a flight test. United shall conduct any such test flight in
accordance with its procedures and will have at duly qualified flight
crew in command at all times. Seller's personnel may participate in
any such test flight as observers. If any such test flight shall
terminate other than at Seller's facility, return travel costs will be
borne by United only if Seller's personnel had been requested by
United to participate. Seller may designate up to three (3) of its
representatives to accompany the Aircraft on such flight as observers.
3.3 AIRCRAFT RECEIPTS
Each transfer of possession of any Aircraft between the parties will
be accompanied by delivery to the transferring party of a receipt,
substantially in the form set forth in Attachment A to Exhibit 4
hereto, which has been executed by an authorized representative of the
receiving party.
3.4 DELIVERY OF UNITED FURNISHED PARTS AND MATERIAL.
(a) Upon receipt of any parts and material furnished by United at
Seller's facility, Seller and United shall execute
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<PAGE> 9
an appropriate delivery receipt substantially in the form set forth in
Attachment B to Exhibit 4 hereto.
(b) Within four (4) hours after arrival at Seller's facility of
each shipment of parts and material furnished by United, United and
Seller shall jointly inspect such items to determine the condition and
quantity. The parties shall produce a report of such inspection within
eight (8) hours after such arrival. Such report shall set forth any
facts concerning the condition or quantity of such items on which they
are not in agreement and shall be signed by both parties.
(c) Seller shall bear the risk of loss for all parts and material
furnished by or on behalf of United which have been received pursuant
to the procedures described in this Article 3.4, while such property
is in Seller's custody or control.
ARTICLE 4. - CHARGES AND PAYMENTS.
4.1 CHARGES.
Seller will invoice United the charges set forth in Exhibit 3 in
United States Dollars for all goods and services provided hereunder.
4.2 OVERTIME.
Overtime labor shall not be charged to United under this Agreement
unless requested by United in writing.
4.3 PAYMENT.
United shall pay invoices properly issued hereunder in United States
Dollars within thirty (30) days from the date of such invoice.
4.4 AUDIT RIGHTS.
Seller will make available for audit by United all records necessary
to substantiate labor and material charges applicable for Services or
any Additional Services and any termination charges. Such records
shall be made available during regular business hours at Seller's
facility prior to completion of Services and for one (1) year
thereafter.
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<PAGE> 10
ARTICLE 5. - WARRANTY.
5.1 COVERAGE.
Seller warrants that the Services performed hereunder (i) will
conform to the Specifications, (ii) be free from defects in
workmanship; and (iii) that goods manufactured by Seller will be free
from defects in design, material and workmanship. For purposes of this
warranty any such defect will hereinafter be referred to individually
as a "Defect". It is understood and agreed that abnormal erosion or
chipping from impact damage shall not be deemed a Defect.
5.2 WARRANTY PERIOD.
The Warranty period shall commence from the date of redelivery of each
Aircraft and shall extend for the period the Aircraft is owned or
operated by United for all paint Services and fourteen (14) months for
any other Services.
5.3 CORRECTION OF DEFECTS.
(a) If, during the warranty period, a Defect which causes damage
to a part or renders such part unserviceable, Seller will correct the
Defect by either replacing or repairing, at Seller's expense and
option, any damaged part to the condition it was in at the time the
damage occurred, provided that the cost of any replacement part which
has a life limit established by the manufacturer or government
authority will be shared pro rata by United and Seller based upon the
unused life of the damaged part at the time it was damaged.
(b) Notwithstanding the provisions of subparagraph 5.3 (a) above,
United may correct any Defect itself, provided United obtains Seller's
concurrence of United's intent to correct any such Defect which United
estimates will cost more than $2,000 to correct. Seller's concurrence
will not be unreasonably withheld. In such event Seller will reimburse
United for (i) labor at a rate of $45.00 per man hour and (ii)
materials, at United's standard material charges, which are necessary
to correct the Defect and any part damaged as a result of such Defect,
including but not limited to removal, reinstallation and testing.
United shall not be required to obtain Seller's concurrence to correct
any Defect if failure to promptly correct such Defect may impact the
safe operation of the Aircraft or result in a delay or cancellation of
the Aircraft.
5.4 CONDITIONS.
Seller's warranty obligations hereunder are subject to the following
conditions:
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<PAGE> 11
(a) The item which is the subject of the warranty claim has not
been altered or repaired by anyone other than Seller or
United, unless authorized in writing by Seller, and has been
maintained in accordance with United's FAA approved
Airworthiness Maintenance Program and Maintenance Manual;
(b) The item which is the subject of the warranty claim has been
used under normal operating conditions as established by
United's maintenance specifications and procedures and has not
been subject to misuse, neglect or accident; and
(c) United, within the warranty period, notifies Seller in writing
of any Defect. Seller shall notify United in writing within
fifteen (15) days after receipt of United's Warranty Claim of
Seller acceptance or rejection of such claim.
5.5 TRANSPORTATION.
For Defects to be corrected by Seller, United will ship at Seller's
expense and risk the warranted item for correction to Seller's
facility. Seller will promptly correct any Defect and redeliver at its
expense and risk the warranted item to United's Maintenance Operations
Center. In the event United elects to return any Aircraft to Seller's
facility for correction of a Defect, Seller shall reimburse United for
the costs to return such Aircraft to and from Seller's facility on a
flight hour basis at the rate of $2,100.00 per flight hour.
5.6 DISCLAIMER.
THE WARRANTIES SET FORTH ABOVE IN THIS ARTICLE AND THE OBLIGATIONS AND
LIABILITIES OF SELLER THEREUNDER, ARE EXPRESSLY IN LIEU OF AND UNITED
HEREBY WAIVES AND RELEASES SELLER FROM ANY AND ALL OTHER WARRANTIES,
AGREEMENTS, GUARANTEES, CONDITIONS, DUTIES, OBLIGATIONS, REMEDIES OR
LIABILITIES, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE,
INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY AND
FITNESS FOR PURPOSE, WITH RESPECT TO SELLER'S PERFORMANCE HEREUNDER.
ARTICLE 6. - EXCUSABLE DELAY.
6.1 INABILITY TO PERFORM.
Neither party will be liable for any delay in performance hereunder
due to acts of God or the public enemy, war or warlike operations,
insurrection or riots, floods, explosions, fires, earthquakes, any
governmental act, failure of
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transportation, strikes or other labor disputes, or any other cause
beyond such party's control and not occasioned by such party's fault
or negligence. Delays resulting from any of the foregoing causes are
referred to as "Excusable Delays".
6.2 NOTICE OF DELAY.
If either party experiences an Excusable Delay, or has reason to
believe it will experience an Excusable Delay it shall immediately
notify the other party in writing.
6.3 TERMINATION.
If an Excusable Delay extends for more than ten (10) days and if the
parties have not by such date agreed on a revised schedule for
continuing the work at the end of such Excusable Delay, then the party
not experiencing Excusable Delay may terminate this Agreement seven
(7) days after notice to the other party, with respect to any affected
Aircraft.
ARTICLE 7. - TAXES.
7.1 TAXES.
United shall pay and agree to indemnify and hold Seller harmless from
any sales or use taxes (except that part of any sales or use tax in
excess of three percent (3%)) imposed by any taxing authority required
to be paid by Seller or United as a result of performance of this
Agreement. If a claim is made against Seller for any such taxes,
Seller shall promptly notify United. If requested by United in
writing, Seller shall, at United's expense, take such action as United
may reasonably direct with respect to such asserted liability and
shall not pay any such charges, except under protest, if protest is
necessary. If payment is made Seller shall, at United's expense, take
such action as United may reasonably direct to recover payment and
shall, if requested, permit United in Seller's name to file a claim or
commence an action to recover such payment. If all or any part of any
charges be refunded or credited, Seller shall repay United such part
thereof as United shall have paid, including any interest received
thereon.
7.2 REIMBURSEMENT TO SELLER.
United shall reimburse Seller upon demand for all expenses (including,
without limitation, all costs, expenses, legal and accountant's fees,
penalties and interest) incurred by Seller in making payment defending
pay or endeavoring to obtain refund of any such charges.
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ARTICLE 8. - TITLE, LIENS.
8.1 TITLE.
Title to the Aircraft and to all property removed from the Aircraft
shall remain in United or its lessor at all times.
8.2 NO LIENS.
Seller shall not permit any lien, claim or encumbrance of any kind
whatsoever to attach to the Aircraft or any other property of United.
Seller expressly acknowledges that United has not consented to any
liens on its Aircraft or other property and Seller agrees to waive any
and all liens of every nature and kind whatsoever, whether statutory
or otherwise, including, without limitation, any possessory,
consensual or mechanics' liens which Seller might assert against the
Aircraft or other property of United in Seller's possession by reason
of work, labor or services performed or materials provided by Seller
hereunder.
ARTICLE 9. - INSURANCE AND INDEMNITY.
9.1 INSURANCE.
Seller shall, at its sole cost and expense, produce and maintain in
full force and effect during the term of this Agreement policies of
insurance of the type and in the minimum amounts stated below with
companies and under terms satisfactory to United.
(a) Hangarkeepers ground liability insurance in an amount not less
than $50,000,000 per Aircraft in Seller's possession. Should more than
two (2) Aircraft be in Seller's possession at the same time, Seller
agrees to provide levels of insurance as requested by United.
(b) Aircraft Product liability insurance, including contractual
coverage in an amount not less than $50,000,000 prior to October 10,
1994 and $200,000,000 thereafter, and Seller shall maintain such
insurance beyond the termination of its present coverage for a period
of three (3) years after expiration of the warranty period applicable
to the last services completed;
(c) Property insurance covering all risks and covering all United
property other than the Aircraft, in Seller's custody and control.
Said property insurance shall be carried on a "replacement cost"
basis; and
(d) Employer's liability insurance in statutory amounts.
11
<PAGE> 14
(e) United shall accept a price adjustment not to exceed $1133.36
per Aircraft for up to forty-five (45) Aircraft annually for the
Insurance amount required after October 10 as described in paragraph
9(b) above. Any annual amount of Aircraft which exceeds forty-five
(45) Aircraft shall be at no additional price adjustment to United. In
the event less than forty-five (45) Aircraft are serviced on an annual
basis, Seller shall invoice United for the difference in the
additional insurance amount required during the term of this
Agreement. Such price adjustment shall be in addition to the prices
described in Exhibit B. Should United request an increase in the
amount of insurance described in this Article 9, Seller shall advise
United within five (5) days of any adjustment in the prices shown in
Exhibit 3 to reflect such increase. United shall promptly notify
Seller of United's acceptance or rejection of such price adjustment.
If United rejects such price adjustment, United may terminate this
Agreement upon giving Seller not less than ten (10) days prior notice
of its intent to terminate.
9.2 ADDITIONAL PROVISIONS.
(a) Seller represents and warrants that the insurance coverage as
referred to in Article 9.1 (a), (b), and (d) are presently in effect.
(b) Seller represents and warrants that the property insurance
provided hereunder pursuant to Article 9.1 (c), will, subject to and
in accordance with its terms and conditions, (i) cover losses to
United's property as described in Article 9.1 (c) while in Seller's
custody and control, and (ii) be payable as the party's interests may
appear.
(c) Seller shall furnish to United prior to commencement of
Services hereunder underwriter's certificates certifying that the
policies of insurance required pursuant to Article 9.1, are in full
force and effect, and that United shall be given thirty (30) days'
prior notice by the insurers in the event that either the insurers or
Seller desire to cancel or materially change such policies of
insurance to materially restrict the coverage thereof. The certificate
furnished relative to the insurance described in Section 9.1 (b) will
certify that such insurance covers the obligations assumed by Seller
under Article 9.3 of this Agreement.
9.3 INDEMNITY.
Seller hereby agrees to indemnify and hold harmless United, its
directors, officers, employees and agents from and against any and all
liabilities, claims, demands, actions, proceedings, damages and losses
(including, without limitation, all legal fees, costs and expenses in
connection
12
<PAGE> 15
therewith or incident thereto) for death of, or injury to any persons
whomsoever (other than an employee of United) and for loss of, damage
to, destruction of, any property whatsoever in any manner arising out
of any acts or omissions of Seller in connection with the performance
of this Agreement. Seller will, at the request of United, negotiate
any claim or defend any action or suit brought against United or in
which United is joined as a party defendant based upon any matters for
which Seller has agreed to indemnify United as provided above.
Seller's obligations under this Article 9.3 will survive the
termination of this Agreement.
ARTICLE 10. - TERMINATION.
10.1 FAILURE TO PERFORM.
Except as provided in Article 6, if either party fails to perform its
obligations under this Agreement and such failure to perform continues
for a period of thirty (30) days after notice to such party by the
other party thereof, such other party may terminate this Agreement
immediately upon notice. The right of each party to require strict
performance of any obligations hereunder will not be affected in any
way by any previous waiver, forbearance or course of dealing. If
either party exercises its right to terminate hereunder such exercise
will not affect or impair any other rights such party may have as a
result of the default of the other party.
10.2 TERMINATION FOR CONVENIENCE.
United may terminate this Agreement for convenience upon ninety (90)
days notice to Seller provided, that if Seller is not in default
hereunder at the end of such ninety (90) day period, ("Notice Date"),
United will pay for all work completed as of the Notice Date upon
delivery thereof to United. Seller will cease all work hereunder as of
the Notice Date, unless otherwise instructed by United, and United
will reimburse Seller for all work in progress under this Agreement as
of the Notice Date. Payments under this paragraph by United will be at
the established prices, or percentage thereof equal to percentage of
completion, provided in this Agreement. United shall also reimburse
Seller for its reasonable termination costs within thirty (30) days
after receipt of a detailed breakdown of costs to substantiate such
termination costs.
10.3 INSOLVENCY.
If either party (the "Defaulting Party") becomes insolvent; if the
other party (the "Insecure Party") has evidence that the Defaulting
Party is not paying its bills when due without just
13
<PAGE> 16
cause; if a receiver of the Defaulting Party's assets is appointed; if
the Defaulting Party takes any step leading to its cessation as a
going concern; or if the Defaulting Party either ceases or suspends
operations for reasons other than a strike, then the Insecure Party
may immediately terminate this Agreement on notice to the Defaulting
Party unless the Defaulting Party immediately gives adequate
assurance, satisfactory to the Insecure Party, of the future
performance of this Agreement. If bankruptcy proceedings are commenced
with respect to the Defaulting Party and if this Agreement has not
otherwise been terminated, then the Insecure Party may suspend all
further performance of this Agreement until the Defaulting party
assumes or rejects this Agreement pursuant to Section 365 of the
Bankruptcy Code or any similar or successor provision. Any such
suspension of further performance by the Insecure Party pending the
Defaulting Party's assumption or rejection will not be a breach of
this Agreement and will not affect the Insecure Party's right to
pursue or enforce any of its rights under this Agreement or otherwise,
including the right to procure the contracted for services from any
other supplier or suppliers of its choice.
10.4 CESSATION OF BUSINESS.
If Seller ceases to do business or suspends operations as a going
concern, Seller will provide to United, promptly all drawings,
specifications and documentation not previously furnished to United,
necessary for United to obtain substitute performance of any duties or
obligations of Seller under this Agreement that Seller cease to
perform, and hereby grants to United and its agents the right to use
such information and documentation for such purposes, at no additional
charge to United.
10.5 SURVIVABILITY.
The obligations of Seller which are of a continuing nature including,
but not limited to, the obligations set forth in Article 5 (Warranty)
and Article 9 (Insurance & Indemnity) shall survive the termination of
this Agreement.
Article II. - PATENT INDEMNITY.
11.1 INDEMNITY.
Seller hereby agrees to indemnify, protect and save harmless United
from and against all claims, demands, action or proceedings, and all
liabilities, expenses and costs (excluding any consequential damages,
costs, expenses, liabilities and loss of profits resulting from loss
of use, but including cost of replacing the infringing item or
14
<PAGE> 17
otherwise curing any infringement on account of which use of Aircraft
by United is; prevented), by any of the goods or services provided by
Seller hereunder or the use or operation thereof; provided, however,
that the foregoing agreement by Seller to indemnify, protect and save
harmless United shall not apply (i) to equipment, parts or components
which are not manufactured by Seller or pursuant to Seller's detailed
design or which are furnished by United; or (ii) to the extent United
is a contributory infringer or induces such infringement; or (iii) if
United has combined any products or services in a way not contemplated
herein or with a product not furnished herein or without Seller's
written consent and, by reason of such combination, Seller is held or
alleged to be an infringer.
11.2 CONDITIONS.
Seller's liability hereunder with respect to any actual or alleged
infringement is conditioned upon commencement of any actions or
proceedings against United or United's receipt of written charge of
such infringement, and upon notice by United to Seller within fifteen
(15) days after the receipt by United of notice of the institution of
such action or proceedings. Seller shall have the option at any time
to conduct negotiations with the party or parties claiming
infringement to intervene in any action or proceedings commenced, and
to assume, conduct or control the defense thereof; provided, United
shall have the right at its expense to participate in the defense of
any such action or proceedings to the extent of its own interest.
Seller's liability hereunder with respect to any actual or alleged
infringement is also conditioned upon United promptly furnishing to
Seller all data, papers, records and other assistance or defense
against any such claim or action or proceedings for infringement.
ARTICLE 12. - CONSEQUENTIAL DAMAGES.
Neither party will be liable for, and each party hereby waives and
releases any claims against the other party for, any special, incidental, or
consequential damages, including without limitation, lost revenues, lost
profit, or loss of bargain, resulting from performance or failure to perform
under this Agreement.
ARTICLE 13. - CONFIDENTIAL INFORMATION.
13.1 DEFINITION.
"Confidential Information" means confidential information including,
without limitation, manufacturing, financial and marketing data,
orders, forecasts, plans, designs, drawings and specifications of
either United or Seller, which is
15
<PAGE> 18
contained in written documents stamped "CONFIDENTIAL" and which is
provided by one party to the other during the term of this Agreement,
provided that job cards furnished by United hereunder will be deemed
Confidential Information whether or not so stamped. Notwithstanding
the foregoing sentence, information, which would otherwise be
Confidential Information, shall riot be deemed to be Confidential
Information if (i) such information was already in the possession of
the other party, (ii) is placed in the public domain through no fault
of the party receiving such information, or (iii) becomes available to
the receiving party through other proper sources.
13.2 DISCLOSURE.
Each party will use the same degree of care in protecting the
confidentiality of the other party's Confidential Information in its
possession as it uses to protect its own Confidential Information,
which in any event shall be a reasonable standard of care. Neither
party will (i) provide or disclose Confidential Information to any
other person, firm or corporation without the other party's prior
consent, (ii) reproduce Confidential Information except for essential
copies for its own internal use in connection with the performance of
this Agreement, and (iii) use Confidential Information for any purpose
other that the performance of this Agreement. The obligations of this
Paragraph shall extend beyond the term of this Agreement.
ARTICLE 14. - MISCELLANEOUS.
14.1 NOTICES.
All notices, requests, reports, consents, approvals or designations
given in connection with this Agreement will be given in writing and
will be sent by first class mail, postage prepaid, telegram, teletype,
telex, cable or any other customary means of communication to the
addresses listed below, unless either party hereto notifies the other
party of different address.
For United: United Air Lines, Inc.
Director of Maintenance Purchasing
Purchasing Department - SFOPP
San Francisco International Airport
San Francisco, CA 94128-3800
For Seller: Pride Aviation, Inc.
1218 Hangar Drive
New Iberia, LA 70560
16
<PAGE> 19
The effective date of any notice, request or designation given
in conjunction with this Agreement will be the date on which
it is received by addressee.
14.2 PUBLICITY.
Neither party will refer to this Agreement or use the name of
the other party in any form of publicity or advertising,
either directly or indirectly, without the prior consent of
the other party which shall not be unreasonably withheld.
14.3 DEFINITIONS.
The terms '"Federal Aviation Administration" or "FAA" mean the
Federal Aviation Administration of the United States, and
include the Administrator of the Federal Aviation
Administration and any other authority or agency of the
Federal Government of the United States having like
jurisdiction. Reference to the "Federal Aviation Regulations",
or to parts thereof, means the United States Federal Aviation
Regulations and, if they are redesignated or discontinued, any
comparable regulations or parts thereof issued by the Federal
Aviation Administration or successor agency exercising the
same or similar jurisdiction.
14.4 ASSIGNMENT.
Neither party may assign this Agreement in whole or in part
without the prior consent of the other party, and any such
attempted assignment shall be void, provided, however, that
United may assign this Agreement and its rights and
obligations hereunder to a successor corporation insulting
from a merger or consolidation with such party. Subject to the
foregoing, the provisions herein will inure to the benefit of,
and be binding upon, any such successor corporation and any
permitted assignees of the respective parties hereto. Consent
by either party, to such assignment in one instance will not
constitute consent by either party to any other assignment.
14.5 PARTIAL INVALIDITY.
If any provision of this Agreement is for any reason held
invalid, ineffective, unenforceable or contrary to public
policy, the remainder of this Agreement will remain in full
force and effect notwithstanding.
14.6 ENTIRE AGREEMENT, HEADINGS.
This Agreement embodies the entire Agreement and understanding
of the parties and, as of its effective date, terminates and
supersedes all prior or independent agreements and
17
<PAGE> 20
understandings between the parties covering the same subject
matter. The article and paragraph headings contained herein
are for convenience and reference and are not intended to
define or limit the scope of any provisions of this Agreement.
"This Agreement" means this Services Agreement, including all
Exhibits and amendments.
14.7 AMENDMENTS.
This Agreement shall not be modified except by written
agreement dated even herewith or subsequent hereto signed on
behalf of Seller and United by their respective duly
authorized representatives.
14.8 GOVERNING LAW.
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California, excluding
provisions thereof which refer to the laws of another
jurisdiction.
EXECUTED as of the day and year first above written.
PRIDE AVIATION, INC. UNITED AIR LINES, INC.
By: /s/ PAUL LUBOMIRSKI By: /s/ DOUGLAS A. HACKER
------------------------------ ---------------------------------
Douglas A. Hacker
Title: VP/Gen Mgr Title: Sr. Vice President - Finance
--------------------------- ------------------------------
18
<PAGE> 21
Exhibit 1
Page 1 of 2
STATEMENT OF WORK
A. SERVICES.
Seller shall perform the following Services in accordance with the
Specifications described in Article 2.2 and in accordance with the terms
and conditions of this Agreement:
1. Receive and hangar Aircraft.
2. Prepare Aircraft surface and paint in accordance with
United's Specifications, including without limitation the
following task work cards as applicable:
WORK TASK CARDS AIRCRAFT TYPE
SSR OSV Paint dated 03/15/94 B737-222
SSR OSV Paint dated 03/15/94 B737-291
SSR OSV Paint dated 03/15/94 B737-322
SSR OSV Paint dated 03/15/94 B737-522
SSR 0SV Paint dated 03/15/94 B727-222A
SSR OSV Paint dated 03/15/94 B757-222
Seller shall not substitute any materials, processes or
otherwise deviate from United's Specifications without prior
written approval from United.
3. Perform Services as necessary on the Aircraft wings (upper
and lower) and horizontal stabilizers upon request by
United's on-site representative. United's on-site
representative shall give notice to Seller of the type of
Services to be performed within forty-eight (48) hours after
completion of the Arrival Inspection.
4. Review with United's on-site representative all quality and
workmanship issues upon completion of Services for each
Aircraft and take corrective action as necessary.
5. Accomplish #2 Service as described in the applicable work
task cards and fuel Aircraft as needed.
6. Prepare Aircraft for redelivery.
The Services described in this Paragraph A shall not include (i) painting
of the landing gear, wheel wells (except for the
<PAGE> 22
Exhibit 1
Page 2 of 2
lip of each wheel well) and interior landing gear doors, (ii) removal,
balance and installation of primary flight controls or (iii) cleaning,
lavatory or cabin service.
B. ADDITIONAL SERVICES.
Seller will perform Additional Services pursuant to Article 1.3 of this
Agreement.
C. OPTION AIRCRAFT SERVICES.
In the event United exercises any of the options described in Article 1.4
of this Agreement, Seller will perform the applicable Services described
in Paragraph A of this Exhibit on the Option Aircraft.
D. BACKSHOP REQUIREMENTS.
Parts and components which require time or cycle based overhaul or on-
condition repair will be (i) identified by Seller and accomplished by
Seller pursuant to United's Specifications or (ii) subcontracted by
Seller to United approved vendors. Should Seller recommend a vendor which
is not approved by United, Seller will provide United necessary
information on the vendor's qualifications and United will perform the
necessary vendor approval process in an expeditious manner or provide an
alternate vendor which will not impede the schedule unduly. United shall
have the right to exchange such parts or components from United's
resources in order to minimize schedule impact, provided that United
notifies Seller of United's intent to exchange rather than overhaul or
repair a given part or component prior to shop disposition or shipping
disposition for parts or components designed by Seller to be overhauled
or repaired by a vendor. Labor and material rates for such Services shall
be as described in Paragraph B of Exhibit 3.
E. MISCELLANEOUS.
Prior to redelivery of the Aircraft to United, Seller shall (i) unseal
any areas closed off by Seller (ii) reinstall such fixtures, equipment,
instruments and other property as may have been removed during the
performance of services and (iii) submit each Aircraft to United at
Seller's facility for inspection and acceptance of the Services by the
United representative.
<PAGE> 23
Exhibit 4
Page 1 of 1
DELIVERY RECEIPTS
Delivery receipts for Aircraft, parts or material shall be in the following
formats:
A. Attachment A to this Exhibit 4 - Aircraft Delivery Receipt.
B. Attachment B to this Exhibit 4 - BFE Packing Lists.
<PAGE> 24
ATTACHMENT A to Exhibit 4
Page 1 of 1
AIRCRAFT DELIVERY RECEIPT
RECEIPT is hereby acknowledged on behalf ___________________________
__________________________________________________________________ of the
delivery to it by __________________________________________________ at
_____________________M., this ______ day of ______________________, 19__, at
______________________ of the following described Aircraft, together with the
parts and equipment attached hereto and included therewith, in accordance with
the terms of that certain Agreement designated as UAL Contract No. __________
and dated __________________, 19__, between UNITED AIR LINES, INC and PRIDE
AVIATION, INC:
A. One (1) Aircraft
Registration No.________________________________________________________
Manufacturer's Serial No._______________________________________________
with the following engines:
Manufacturer's Serial No.
Engine No.1 ___________________
Engine No. 2 ___________________
Engine No. 3 ___________________
By:
---------------------------------------
Title:
------------------------------------
<PAGE> 25
Attachment B to Exhibit 4
Page 1 of 1
INVOICE/PACKING LIST
- --------------------------------------------------------------------------------
DATE PACKING NUMBER CUSTOMER NUMBER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SOLD TO SHIP TO
- --------------------------------------------------------------------------------
QUANTITY ITEM/DESCRIPTION TOTAL VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AIRWAY BILL NUMBER COMPANY
- --------------------------------------------------------------------------------
WEIGHT
- --------------------------------------------------------------------------------
DIMENSIONS
- --------------------------------------------------------------------------------
CONTRACT NUMBER
- --------------------------------------------------------------------------------
LETTER OF CREDIT
- --------------------------------------------------------------------------------
MISCELLANEOUS INFORMATION
- --------------------------------------------------------------------------------
<PAGE> 26
Exhibit 5
Page 1 of 2
PARTS SUPPORT
1. The term "Parts" as used in this Agreement means parts and materials used
in the maintenance of the Aircraft, including, but not limited to,
hardware, raw material, parts, accessories, components, paint and
sealant. All Parts provided hereunder shall be on a sale or exchange
basis at United's election.
2. Except for what United shall provide pursuant to Paragraph 2.b of this
Exhibit, Seller shall furnish all Parts which are required in
connection with the performance of Services under this Agreement, subject
to the following provisions of this Paragraph 2:
(a) Seller shall obtain United's approval prior to furnishing any Part
which costs more than US $1000 in vendor's catalog price, provided
that United's on-site representative may waive such price limit to
avoid delays in Seller's acquisition of parts.
(b) United shall furnish all Parts described in Article 2.3. United at
its election and upon notice to Seller may furnish Parts which
Seller would otherwise be required to supply pursuant to Article
1.5. Seller shall not be liable for any delay in the performance
of Services hereunder caused by any delay by United in furnishing
such Parts. Seller and United shall consult and cooperate with
each other regarding United furnishing any Parts in addition to
those set forth in this Agreement.
(c) Seller shall repair Parts removed from the Aircraft which are
intended for reinstallation (R & R Parts), provided that, at
United's election, United may repair any R & R Parts. Seller shall
not be liable for any delay in the performance of Services
hereunder caused by any delay by United in the repair of R & R
Parts.
3. Parts furnished by Seller under this Agreement shall be: (i) unused and
traceable to the original equipment manufacturer (O.E.M.) (or an FAR
Part 145 Repair Agency, or (ii) made serviceable by an authorized Repair
Agency pursuant to Seller's approved vendor procedures and traceable to
the authorized Repair Agency, the O.E.M. or an FAR Part 145 Repair
Agency. Seller shall purchase Parts for use hereunder from vendors listed
on United's approved vendor list.
<PAGE> 27
Exhibit 5
Page 2 of 2
For each Part furnished by Seller hereunder which is intended to meet
Military Specifications or Boeing Standards, Seller shall require its
suppliers to furnish data, upon request, which certifies that such Part
(i) meets the physical and chemical properties of such specifications or
standards and (ii) was manufactured by a source listed in the current
Qualified Products List (QPL) or Boeing Standards.
4. United may conduct a receiving inspection on overhauled and repaired
Parts at Seller's facility. United shall conduct any such inspection in
a timely manner consistent with the Service Schedule set forth in Exhibit
2 to this Agreement.
5. Seller shall issue an invoice to United for the Parts furnished hereunder
for each Aircraft in accordance with the prices specified in Exhibit 3
to this Agreement.
<PAGE> 28
[UNITED AIRLINES LETTERHEAD]
February 7, 1997
Mr. Paul Lubomirski
President/General Manager
Pride Aviation, Inc.
1218 Hangar Drive
New Iberia, LA 70560
Subject: Option Extension Award/United Contract No. 123002
dated June 10, 1994
Dear Paul:
We are pleased to inform you that United is exercising its option as described
in Article 1.4 of the subject Agreement to extend Pride Aviation's Services
through June 10, 1999.
Such extension of Services are contingent on mutual agreement of annual
schedules to be included in an amendment to the Agreement.
Thank you for your continuing support of United's needs.
Sincerely,
/s/ C. E. DOYLE
C. E. Doyle
Director, Maintenance Purchasing
<PAGE> 29
Exhibit 1
Page 1 of 2
STATEMENT OF WORK
A. SERVICES.
Seller shall perform the following Services in accordance with the
Specifications described in Article 2.2 and in accordance with the terms
and conditions of this Agreement:
1. Receive and hangar Aircraft.
2. Prepare Aircraft surface and paint in accordance with
United's Specifications, including without limitation the
following task work cards as applicable:
WORK TASK CARDS AIRCRAFT TYPE
SSR OSV Paint dated 03/15/94 B737-222
SSR OSV Paint dated 03/15/94 B737-291
SSR OSV Paint dated 03/15/94 B737-322
SSR OSV Paint dated 03/15/94 B737-522
SSR 08V Paint dated 03/15/94 B727-222A
SSR OSV Paint dated 03/15/94 B757-222
Seller shall not substitute any materials, processes or
otherwise deviate from United's Specifications without prior
written approval from United.
3. Perform Services as necessary on the Aircraft wings (upper
and lower) and horizontal stabilizers upon request by
United's on-site representative. United's on-site
representative shall give notice to Seller of the type of
Services to be performed within forty-eight (48) hours after
completion of the Arrival Inspection.
4. Review with United's on-site representative all quality and
workmanship issues upon completion of Services for each
Aircraft and take corrective action as necessary.
5. Accomplish #2 Service as described in the applicable work
task cards and fuel Aircraft as needed.
6. Prepare Aircraft for redelivery.
The Services described in this Paragraph A shall not include (i) painting
of the landing gear, wheel wells (except for the
<PAGE> 30
Exhibit 1
Page 2 of 2
lip of each wheel well) and interior landing gear doors, (ii) removal,
balance and installation of primary flight controls or (iii) cleaning,
lavatory or cabin service.
B. ADDITIONAL SERVICES.
Seller will perform Additional Services pursuant to Article 1.3 of this
Agreement.
C. OPTION AIRCRAFT SERVICES.
In the event United exercises any of the options described in Article 1.4
of this Agreement, Seller will perform the applicable Services described
in Paragraph A of this Exhibit on the Option Aircraft.
D. BACKSHOP REQUIREMENTS.
Parts and components which require time or cycle based overhaul or on-
condition repair will be (i) identified by Seller and accomplished by
Seller pursuant to United's Specifications (Dr (ii) subcontracted by
Seller to United approved vendors. Should Seller recommend a vendor which
is not approved by United, Seller will provide United necessary
information on the vendor's qualifications and United will perform the
necessary vendor approval process in an expeditious manner or provide an
alternate vendor which will not impede the schedule unduly. United shall
have the right to exchange such parts or components from United's
resources in order to minimize schedule impact, provided that United
notifies Seller of United's intent to exchange rather than overhaul or
repair a given part or component prior to shop disposition or shipping
disposition for parts or components designed by Seller to be overhauled
or repaired by a vendor. Labor and material rates for such Services shall
be as described in Paragraph B of Exhibit 3.
E. MISCELLANEOUS.
Prior to redelivery of the Aircraft to United, Seller shall (i) unseal
any areas closed off by Seller (ii) reinstall such fixtures, equipment,
instruments and other property as may have been removed during the
performance of services and (iii) submit each Aircraft to United at
Seller's facility for inspection -and acceptance of the Services by the
United representative.
<PAGE> 31
Exhibit 4
Page 1 of 1
DELIVERY RECEIPTS
Delivery receipts for Aircraft, parts or material shall be in the following
formats:
A. Attachment A to this Exhibit 4 - Aircraft Delivery Receipt.
B. Attachment B to this Exhibit 4 - BFE Packing Lists.
<PAGE> 32
ATTACHMENT A to Exhibit 4
Page 1 of 1
AIRCRAFT DELIVERY RECEIPT
RECEIPT is hereby acknowledged on behalf ___________________________
- ------------------------------------------------------------------ of the
delivery to it by --------------------------------------------- at
_____________________M., this ______ day of ______________________, 19__, at
______________________ of the following described Aircraft, together with the
parts and equipment attached hereto and included therewith, in accordance with
the terms of that certain Agreement designated as UAL Contract No. __________
and dated __________________, 19__, between UNITED AIR LINES, INC and PRIDE
AVIATION, INC:
A. One (1) Aircraft
Registration No.
-------------------------------------------------------
Manufacturer's Serial No.
------------------------------------------------
with the following engines:
Manufacturer's Serial No.
Engine No.1
--------------------
Engine No. 2
--------------------
Engine No. 3
--------------------
By:
------------------------------------
Title:
------------------------------------
<PAGE> 33
Attachment B to Exhibit 4 Page 1 of 1
INVOICE/PACKING LIST
- --------------------------------------------------------------------------------
DATE PACKING NUMBER CUSTOMER NUMBER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SOLD TO SHIP TO
- --------------------------------------------------------------------------------
QUANTITY ITEM/DESCRIPTION TOTAL VALUE
- --------------------------------------------------------------------------------
AIRWAY BILL NUMBER COMPANY
- --------------------------------------------------------------------------------
WEIGHT
- --------------------------------------------------------------------------------
DIMENSIONS
- --------------------------------------------------------------------------------
CONTRACT NUMBER
- --------------------------------------------------------------------------------
LETTER OF CREDIT
- --------------------------------------------------------------------------------
MISCELLANEOUS INFORMATION
- --------------------------------------------------------------------------------
<PAGE> 34
Exhibit 5
Page 1 of 2
PARTS SUPPORT
1. The term "Parts" as used in this Agreement means parts and materials used
in the maintenance of the Aircraft, including, but not limited to,
hardware, raw material, parts, accessories, components, paint and
sealant. All Parts provided hereunder shall be on a sale or exchange
basis at United's election.
2. Except for what United shall provide pursuant to Paragraph 2.b of this
Exhibit, Seller shall furnish all Parts which are required in
connection with the performance of Services under this Agreement, subject
to the following provisions of this Paragraph 2:
(a) Seller shall obtain United's approval prior to furnishing any Part
which costs more than US $1000 in vendor's catalog price, provided
that United's on-site representative may waive such price limit to
avoid delays in Seller's acquisition of parts.
(b) United shall furnish all Parts described in Article 2.3. United at
its election and upon notice to Seller may furnish Parts which
Seller would otherwise be required to supply pursuant to Article
1.5. Seller shall not be liable for any delay in the performance
of Services hereunder caused by any delay by United in furnishing
such Parts. Seller and Unied shall consult and co-operate with
each other regarding United furnishing any Parts in addition to
those set forth in this Agreement.
(c) Seller shall repair Parts removed from the Aircraft which are
intended for reinstallation (R & R Parts), provided that, at
United's election, United may repair any R & R Parts. Seller shall
not be liable for any delay in the performance of Services
hereunder caused by any delay by United in the repair of R & R
Parts.
3. Parts furnished by Seller under this Agreement shall be: (i) unused and
traceable to the original equipment manufacturer (O.E.M.) (or an FAR
Part 145 Repair Agency, or (ii) made serviceable by an authorized Repair
Agency pursuant to Seller's approved vendor procedures -and traceable to
the authorized Repair Agency, the O.E.M. or an FAR Part 145 Repair
Agency. Seller shall purchase Parts for use hereunder from vendors listed
on United's approved vendor list.
<PAGE> 35
Exhibit 5
Page 2 of 2
For each Part furnished by Seller hereunder which is intended to meet
Military Specifications or Boeing Standards, Seller shall require its
suppliers to furnish data, upon request, which certifies that such Part
(i) meets the physical and chemical properties of such specifications or
standards and (ii) was manufactured by at source "listed in the current
Qualified Products List (QPL) or Boeing Standards.
4. United may conduct a receiving inspection on overhauled and repaired
Parts at Seller's facility. United shall conduct any such inspection in
a timely manner consistent with the Service Schedule set forth in Exhibit
2 to this Agreement.
5. Seller shall issue an invoice to United for the Parts furnished hereunder
for each Aircraft in accordance with the prices specified in Exhibit 3
to this Agreement.
<PAGE> 1
EXHIBIT 10.7
LEASE AGREEMENT
This LEASE AGREEMENT, is made and entered into by and between REDBIRD
DEVELOPMENT,INC., a Texas Corporation, ITS HEIRS/SUCCESSORS/OR ASSIGNEES,
designated herein as "Redbird," and TRI-STAR AIRCRAFT SERVICES, INC.,
designated as "Tri-Star" and/or as "Tenant. "
I. DESCRIPTION OF THE LEASED PREMISES
Redbird leases to Tri-Star as Tenant certain facilities at Redbird
Airport, identified as office area #1 and hangar #1 located at Texas 75237
hereinafter referred to as the "Leased Premises".
II. TERM
The term of this Lease Agreement shall commence on August 1, 1996 and
shall terminate on July 31, 2006 ("Primary Terms"), unless such lease term is
extended by the exercise of one of the Lease Extension options, as hereinafter
provided. The Tenant shall have two separate options to extend the term of this
Lease Agreement as follows:
1. First Lease Extension Option ("First Option"). As long as Tenant is
not in default of payment of rent under the terms of this Lease
Agreement as of the date of exercise of the First Option, Tenant
shall have the right to extend the term of this Lease Agreement for a
period of six (6) years, with such period to commence on August 1,
2006 and shall terminate on July 31, 2012 (such period is hereinafter
referred to the "First Option Term").
2. Second Lease Extension Option ("Second Option"). If the Tenant
exercises the First Option and provided Tenant is not in default of
payment of rent under the terms of this Lease Agreement as of the date
of exercise of the Second Option, then Tenant shall have the right to
further extend the term of this Lease Agreement for a period of six
(6) years, with such period to commence on August 1, 2012, and
terminate on July 31, 2018 (such period is hereinafter referred to the
"Second Option Term").
The Primary Term, as the same may be extended by the First Option Term
and Second Option Term, is hereinafter referred to as the "Term".
The First Option and Second Option may be exercised by the Tenant by
providing written notice to Redbird of its exercise of such option to extend
the Term of this Lease Agreement, with such notice to be delivered to Redbird,
not later than sixty (60) days prior to the end of Primary Term or First Option
Term as applicable.
DALLAS REDBIRD LEASE AGREEMENT - PAGE 1
<PAGE> 2
III. RENT
Tenant agrees to pay rent to Redbird during the Primary Term in the
amount of $3,500 per month. If Tenant exercises the first lease extension
option, Tenant agrees cc pay monthly rent to Redbird during the term of the
First Option in the amount of $3,675 per month. If the Tenant exercises the
second lease extension option, Tenant agrees to pay monthly rent to Redbird
during the term of the Second Option in the amount of $3,860 per month. Rent
shall be payable monthly and due on the 1st day of each month. Tenant further
agrees to pay the sum of five percent (5%) of the monthly rent as a late charge
in the event that the rent is not paid in full to Redbird within twenty (20)
days after the date rent is due (a "default"). Tenant shall pay the additional
sum of Twenty-Five Dollars ($25.00) for any check in payment of rent that is
returned by the maker's bank for insufficient funds or stopped payment.
IV. DEFAULT
In the event that Tenant defaults in the payment of rent twenty (20)
days after the date rent is due ("monetary default") or violates any of the
other provisions of this Lease Agreement "non-monetary default"), then Tenant
shall cure any such monetary default within ten (10) days after receipt of
written notice from Redbird of such default, and shall cure any such
non-monetary default within thirty (30) days after receipt of written notice
from Redbird of such default. Written notice as provided herein is a mandatory
condition precedent for Redbird to exercise any remedy for default. If any
non-monetary default remains uncured at the end of such thirty (30) day period
and provided further that Tenant has commenced and is diligently pursuing a
cure of such default, then Tenant shall have an additional thirty (30) days in
which to cure such non-monetary default prior to Redbird pursuing any remedy
available to it for default. If any default has not been cured (or cure has not
been commenced and is being diligently pursued) within the periods provided
above, only then may Redbird re-enter the premises, take possession, and
institute and maintain a statutory suit of forcible entry and detainer in a
proper court of law and obtain writ of possession thereby, or exercise all
other legal rights and remedies available at law or in equity.
In the event that Redbird fails to perform any of its obligations and
agreements hereunder (a "default"), then Redbird shall cure such default within
fifteen (15) days after receipt from Tenant of written notice of such default.
If any default remains uncured at the end of such fifteen (15) day period and
provided further that Redbird has commenced and is diligently pursuing a cure
of such default, then Redbird shall have an additional thirty (30) days in
which to cure such default prior to Tenant pursuing any remedy available to it
for default, at law or in equity, including but not limited to, specific
performance or an action for damages for breach of contract. If any default by
Redbird has not been cured (or cure has not been commenced and is being
diligently pursued) within the periods provided above, then Tri- Star may
exercise its right of termination as provided in this Lease Agreement and
pursue any other legal remedy available at law or in equity.
DALLAS REDBIRD LEASE AGREEMENT - PAGE 2
<PAGE> 3
V. USE
Tenant may use the Leased Premises for the following purposes:
aviation related activity and any other lawful use determined by Tri-Star to be
consistent with aviation services. Tenant shall not use any of the Leased
Premises for non-aviation related activities without the consent of Redbird.
VI. UTILITIES
Tenant shall pay the actual expense for monthly use of all utilities,
deposits, i.e. water, electricity, gas, telephone, and any other regular
utility expense. Any storm sewer construction on the Leased Premises
necessitated by the erection of additions to or improvements to or upon the
Leased Premises in order to provide for drainage will be the responsibility of
Redbird. Tenant will, at its expense, make arrangements for the installation or
connection of whatever further private utilities it may desire or need for
Tenant's equipment in connection with the use of the Leased Premises.
VII. CASUALTY DAMAGE
If the improvements (including, but not limited to the office
buildings and hanger facility) on the Leased Premises occupied by Tenant shall
be damaged by fire or other casualty, Tenant shall give prompt written notice
thereof to Redbird. Redbird at its sole cost and expense, shall commence and
proceed with reasonable diligence to restore such improvements located within
the Leased Premises, if any, to substantially the same condition in which it
was immediately prior to the casualty occurrence, except that Redbird shall not
be required to rebuild, repair, or replace any part of Tenant's furniture or
furnishings or fixture and equipment removable by Tenant under the provisions
of this Lease Agreement. Redbird shall allow Tenant a fair reduction and waiver
of rent during the time and to the extent the Premises are unfit for occupancy.
The amount of reduction and waiver of rent, if any, and whether or not the
Premises are unfit for occupancy, shall be determined jointly by Redbird and
Tenant. If such improvements on the Leased Premises are damaged by fire or
other casualty resulting from the intentional misconduct of Tenant or any of
Tenant's agents, employees, or invitees, the rent shall not be reduced during
the repair of such damage.
VIII. CONDEMNATION
If the whole or any substantial part of the Leased Premises or the
improvements on the Leased Premises shall be taken or condemned for any public
or quasi-public use under governmental law, ordinance or regulation, or by
right of eminent domain, or by private purchase in lieu thereof, then Tenant
may, at its option and sole discretion, terminate this Lease Agreement without
notice, and the rent shall be reduced and abated during the remaining unexpired
portion of this Lease Agreement, effective when the physical taking of the
Leased Premises or the improvements on the Leased Premises occurs. In the
DALLAS REDBIRD LEASE AGREEMENT - PAGE 3
<PAGE> 4
event the Tenant elects not to terminate this Lease Agreement following the
taking or condemnation of any portion of the Leased Premises or the
improvements on the Leased Premises, a portion of the rent shall be waived for
the unexpired term of this Lease Agreement effective when the physical taking
of said portion of the Premises occurs, with the amount of such rent reduction
and waiver to be determined by mutual agreement of the Tenant and Redbird.
All compensation awarded for any such taking or condemnation, or sale proceeds
in lieu thereof, shall be the property of Redbird, and Tenant shall have no
claim thereto, the same being hereby expressly waived by Tenant, except for any
portion of such award or proceeds which are specifically allocated by the
condemning or purchasing party to the Tenant's interest in the Lease Agreement
and for the taking of or damage to furnishings, fixtures, and equipment of
Tenant, which Tenant specifically reserves to itself.
IX. MAINTENANCE AND REPAIRS
A. Tenant will at all times maintain the Leased Premises in good
repair and in a clean and orderly condition, as may be reasonably directed by
Redbird or the City of Dallas, at Tenant's sole expense, except for repairs
which are obligations of Redbird, as hereinafter provided. Redbird is
responsible for the concrete pads, all plumbing and roof leaks, structural
integrity of the building, and exterior maintenance of the hanger and all
improvements on the Leased Premises. Redbird shall have no responsibility for
interior painting, lighting, ventilating equipment, and any other building
maintenance or repairs not designated as Tenant's responsibility. In the event
Tenant shall suffer any loss or other damage as the result of Redbird's failure
to maintain and repair the Leased Premises, then Redbird shall be obligated to
and shall promptly reimburse Tenant for the losses and other damage Tenant
suffers including reasonable and necessary attorney's fees to make demand and
collect reimbursement if Redbird fails to promptly make reimbursement.
B. Redbird shall not be liable to Tenant, or to any invitee or
licensee of Tenant, for any injury to a person or damage to property resulting
from the Leased Premises becoming out of repair or from a defect in or failure
of equipment for which Tenant is responsible for maintenance and repairs,
except where due to Redbird's knowing failure to make required repairs after
written notice to Redbird of the need for such repairs.
C. Tenant shall:
1. Be responsible for pest control inside of the premises at
Tenant's sole expense;
2. Keep all fixtures, equipment and personal property in good
condition (reasonable wear and tear excepted) and perform all
ordinary repairs and interior painting. Such repairs and
painting by Tenant to be of a quality and class not inferior
to the original material and workmanship. In addition, Tenant
shall at its own expense perform all necessary repairs and
other maintenance to floor covering, interior painting, and
DALLAS REDBIRD LEASE AGREEMENT - PAGE 4
<PAGE> 5
utility connections to Tenant's equipment; provided, however,
Tenant shall not be liable for repairs necessitated by
construction defects. All interior light bulbs are to be
maintained in working order at Tenant's sole expense;
3. Provide and maintain (except for mobile fire fighting
equipment) personal fire protection and safety equipment;
4. Use its best efforts to control the conduct and demeanor of
its employees and shall require its employees to wear uniforms
where appropriate or other suitable means of identification;
and
5. Control all vehicular traffic in and on the Leased Premises
(exclusive of public roadways) where aircraft may be located,
take all precautions reasonably necessary to promote the
safety of its passengers, customer, business visitors and
other persons, and employ such means as may be reasonably
necessary to direct the movement of vehicular traffic in such
areas.
D. If the performance of any of the foregoing maintenance,
repair, replacement or painting obligations of Tenant requires work to be
performed near an active taxiway or where safety of operations is involved,
Tenant agrees that it will, at its own expense, erect barriers or other
safeguards at such locations so as to provide for the safety of work performed.
X. OPERATIONAL REGULATIONS
Notwithstanding any provision of the Lease Agreement, the City of
Dallas has expressly reserved its proprietary rights, whatever they may be, to
impose reasonable regulations which might have the effect of limiting Tenant's
operations during the term of this Lease Agreement. It is understood that
neither the City nor Redbird are liable to Tenant for any damages resulting
from Tenant's compliance with the regulations. However, it is further
understood that Tenant reserves the right to contest any such regulations to
protect its interests, and to seek contribution and make any claim against
Redbird for injury or damages to Tenant resulting from Redbird's failure to
comply with any such regulation.
XI. TENANT'S RIGHT TO TERMINATE
A. Redbird understands that Tenant conducts an aviation services
and aircraft maintenance business in the Leased Premises, which necessarily
requires that Tenant not be prohibited by any federal, state, or local
regulatory authority from conducting such business, and requires that Tenant's
customers and their airplanes have virtually unlimited access to the Leased
Premises and are able to land and take-off from Redbird Airport. Further,
Tenant may need additional electrical service brought to the Leased Premises to
enable Tenant to properly operate the power units and other equipment necessary
to conduct an aircraft maintenance business in the Leased Premises. Therefore,
Tenant shall have the automatic right to terminate this Lease Agreement without
notice upon the occurrence of any of the following events:
DALLAS REDBIRD LEASE AGREEMENT - PAGE 5
<PAGE> 6
1. Any federal, state, municipal or other local authority imposes any
law, regulation or restriction, or enforces any existing law in such a
manner, so as to prohibit or unreasonably limit or restrict Tenant's
use of the Leased Premises;
2. Any federal, state, municipal or other local authority imposes any
law, regulation or restriction which establishes limits that are more
restrictive than limit existing on August 1, 1995, on the type of
aircraft which may take-off and land at Redbird Airport; or
3. Failure of TU Electric or other servicing utility to bring electrical
service to the Leased Premises in quantities sufficient to enable the
Tenant to properly operate the power units and other equipment
necessary for Tenant's use of the Leased Premises.
B. Tenant shall have the automatic right to terminate this Lease
Agreement without notice in the event that Redbird either (a) is in breach of a
provision of this Lease Agreement, (or defaults in the performance of any
obligation under this Lease Agreement, or (b) fails to comply with any
operational regulation imposed by any federal, state, municipal or other local
authority, with the result that Tenant is prohibited or unreasonably limited or
restricted in Tenant's use of the Leased Premises.
C. Tenant shall have the absolute and unilateral right to
terminate this Lease Agreement for any reason at Tenant's sole discretion by
giving prior written notice to Redbird and upon payment of the rent penalty
provided herein. Tenant shall give at least thirty (30) days prior written
notice of Tenant's intention to terminate the lease and vacate the premises. On
or before the date Tenant vacates the premises, Tenant shall pay to Redbird a
rent penalty in an amount equal to the two (2) months of rent payments due
following the date of termination of the Lease Agreement. Upon payment of the
rent penalty and vacating the Leased Premises, and provided that Tenant is not
in default in payment of rent, this Lease Agreement shall terminate and Tenant
shall be excused from any further obligation under any provision of the Lease
Agreement.
DALLAS REDBIRD LEASE AGREEMENT - PAGE 6
<PAGE> 7
XII. REPRESENTATIONS AND WARRANTIES
A. Tenant Representations. Tenant hereby covenants, warrants and
represents that: (i) the person executing this Lease Agreement on behalf of
Tenant is authorized to execute and deliver same on behalf of Tenant in
accordance with the organizational documents of Tenant; (ii) this Lease
Agreement is binding upon Tenant; (iii) Tenant is duly organized and legally
existing in the state of its organization, and is qualified to do business in
the State of Texas; (iv) upon written request, Tenant will provide Redbird with
true and correct copies of all organizational documents of Tenant, and any
amendments thereto; and (v) the execution and enforcement of this Lease
Agreement by Tenant will not result in any breach of, or constitute a default
under, any mortgage, deed of trust, lease, loan, credit agreement, partnership
agreement or other contract or instrument to which Tenant is a party or by
which Tenant may be bound.
B. Redbird representations. Redbird hereby covenants, warrants
and represents that: (i) the person executing this Lease Agreement on behalf of
Redbird is authorized to execute and deliver same on behalf of Redbird in
accordance with the organizational documents of Redbird; (ii) this Lease
Agreement is binding upon Redbird; (iii) Redbird is duly organized and legally
existing in the state of its organization, and is qualified to do business in
the State of Texas; (iv) upon written request, Redbird will provide Tenant with
true and correct copies of all organizational documents of Redbird, and any
amendments thereto; and (v) the execution and enforcement of this Lease
Agreement by Redbird will not result in any breach of, or constitute a default
under, any mortgage, deed of trust, lease, loan, credit agreement, partnership
agreement or other contract or instrument to which Redbird is a party or by
which Redbird may be bound, including but not limited to any lease between
Redbird and the City of Dallas.
XIII. INSPECTIONS
Redbird or City of Dallas may make inspection of the property at all
reasonable times after giving reasonable notice prior to the visit. Occupancy
by Tenant shall not constitute a nuisance or disturbance to others.
XIV. SUBLET OR ASSIGNMENT BY TENANT
Tenant may assign or sublet any portion of the Leased Premises by
notifying Redbird at least thirty (30) days in advance of sublet or assignment
date notification to Redbird.
XV. TENANT'S RIGHT TO REMOVE PROPERTY
A. Tenant shall be entitled, during the term of the Lease
Agreement and upon termination, to remove from the Leased Premises all tools,
machinery, equipment, portable buildings, materials and supplies of Tenant, not
including any currently existing fixtures or other fixtures which have been
installed to the Leased Premises and which are not removable without damaging
the Leased Premises, such as heaters, water fountains, counters, air
conditioners, cabinets, water heaters, and exhaust fans. Redbird waives any
current or future claim for a security interest in or a lien upon personal
property,
DALLAS REDBIRD LEASE AGREEMENT - PAGE 7
<PAGE> 8
furnishings, and equipment of Tenant.
B. If Tenant fails to remove its property within thirty (30) days
after the termination or expiration of this Lease Agreement, Redbird may remove
such property to a public warehouse for deposit or retain the same in its own
possession. If Tenant fails to take possession and remove such property, after
paying any reasonable and necessary rental fees, then after ninety (90) days
after termination or expiration of the Lease Agreement the property shall be
deemed to be abandoned and Redbird may sell the same at public auction or
dispose of the property, at Redbird's expense.
XVI. INDEMNIFICATION
A. Tenant shall use reasonable care and diligence in its conduct
of activities and operations on the Leased Premises. Tenant shall indemnify,
defend and hold harmless Redbird and all of its officers, agents, and employees
from all judgments for any personal injury, death or damage received or
sustained by any person or property as a result of Tenant's conduct of any
activity or operation on the Leased Premises.
B. Redbird shall use reasonable care and diligence in its conduct
of activities and operations on the Leased Premises. Redbird shall indemnify,
defend and hold harmless Tenant and all of its officers, agents, and employees
from all judgments for any personal injury, death or damage received or
sustained by any person or property as a result of Redbird's conduct of any
activity or operation on the Leased Premises.
C. Tenant shall give Redbird prompt notice of any claim covered
by this Section and shall forward to Redbird every demand, notice, summons, or
process received in any claim or legal proceedings covered by this Section.
Likewise, Redbird shall give prompt notice to Tenant of any such claim.
XVII. SIGNS
All exterior signs shall comply with applicable City ordinances or
regulations. Directional entrance and exit signs erected by Tenant shall not
exceed 18 inches in width and 36 inches in height. Except where the City's
Director of Aviation has given his written consent, any other sign erected by
Tenant shall not exceed 5 feet in height and 8 feet in length. Upon the
expiration or termination of this Lease Agreement, Tenant shall remove,
obliterate or paint out, as required by the City of Dallas or Redbird, any and
all signs and advertising on the Leased Premises if pertaining to Tenant, and
in this regard, Tenant shall restore the premises to the same condition as
prior to the placement thereon of any signs or advertising subject only to wear
and tear. In the event that Tenant fails to remove, obliterate or paint out
each and every sign or advertisement of Tenant after a request by Redbird and
reasonable opportunity to perform the work, then Redbird may, at its option,
have the necessary work performed at the expense of Tenant, and the charge
therefore shall be paid by Tenant to Redbird upon demand for reimbursement.
DALLAS REDBIRD LEASE AGREEMENT - PAGE 8
<PAGE> 9
XVIII. GOVERNMENTAL REQUIREMENTS, RULES, AND REGULATIONS
Tenant agrees no obtain, from all governmental authorities having
jurisdiction, all licenses, certificates and permits necessary for the conduct
of its operations, and to keep them current. In operating and conducting
business on the Leased Premises, Tenant agrees to comply with the applicable
provisions of all Federal, State, and Municipal laws, regulations, and
ordinances. Tenant agrees to observe all rules and regulations which the City
of Dallas has established, and may from time to time, establish pertaining to
Dallas Redbird Airport.
XIX. INSURANCE
A. Redbird shall maintain or cause to be maintained fire and
extended coverage insurance on the improvements on the Leased Premises in
amounts equal to the full replacement cost of all improvements.
B. Tenant shall maintain at its expense, in an amount equal to
full replacement cost, fire and extended coverage insurance on all of its
personal property, including removable trade fixtures and leasehold and Tenant
improvements, located in the Leased Premises.
C. Redbird and Tenant each hereby waives on behalf of itself and
its insurers, to the extent permitted by law, (none of which insurers shall
ever be assigned any such claim or be entitled to subrogation) any and all
rights of recovery, claim, action, or cause of action, against the other, its
agents, officers or employees, for any loss or damage that may occur to the
Premises, or any improvements thereto or the Building of which the Premises are
a part, or any improvements thereto, or any personal property of such party
therein, by reason of fire, the elements, or any other cause(s) which are, or
could be, insured against under the terms of the standard fire and extended
coverage insurance policies herein referred to, regardless of whether such
insurance is actually maintained and regardless of the cause or origin of the
damage involved, including sole, joint or concurrent, negligence of the other
party hereto, its agents, officers, or employees.
D. Redbird and Tenant shall, each at its own expense, maintain
during the term of this Lease Agreement a policy or policies of comprehensive
general liability insurance (including endorsement or separate policy for owned
or non-owned automobile liability) with respect to their respective activities
on the Leased Premises, with the premiums thereon fully paid on or before the
due date. Such insurance shall afford minimum protection of not less than
$200,000.00 per occurrence per person coverage for bodily injury, property
damage, personal injury, or combination thereof.
E. Redbird and Tenant each hereby waives subrogation on its
behalf and on behalf of its insurer, to the extent subrogation on a paid claim
can be legally waived prior to loss by contract between the parties, in respect
of any payment made by such insurer under any liability policy. Neither Redbird
nor Tenant shall be liable to the other or any insurance company (by way of
subrogation or otherwise) insuring the other party for any loss or damage to
any building,
DALLAS REDBIRD LEASE AGREEMENT - PAGE 9
<PAGE> 10
structure or other tangible property or bodily injury or personal injury, or
any resulting loss of income, even though such loss or damage might have been
occasioned by the negligence of such party, its agents or employees, if any
such loss or damage is covered by insurance benefiting the party suffering such
loss or damage or was required to be covered by insurance pursuant to this
Lease Agreement.
XX. TAXES
In no event shall Tenant be liable for real property taxes on the
Leased Premises. Redbird and Tenant shall attempt to obtain separate
assessments for Tenant's personal property consisting of equipment, inventory,
movable fixtures, and furniture. Tenant agrees to pay the property taxes based
on such separate assessment before such taxes become delinquent and to keep the
Leased Premises free from any lien or attachment. If a separate assessment is
not obtained, then Redbird shall provide Tenant with evidence, satisfactory to
Tenant, of the portion of the Redbird's property taxes which result from
inclusion of Tenant's personal property, equipment, inventory, furniture, or
fixtures placed by Tenant in the Leased Premises, including copies of property
tax bills and other information and documentation as Tenant shall require to
determine its liability. Redbird agrees to timely provide Tenant with all
appraisals and notices of assessment to enable Tenant to properly contest the
appraised and assessed values of property. Redbird will provide to Tenant
documents evidencing Redbird's payment of the tax bills. Not later than ninety
(90) days after receipt of such evidence Tenant shall pay to Redbird that
portion of the real property taxes which result from inclusion of Tenant's
personal property. Tenant hereby indemnities and holds Redbird harmless from
claims or demands made upon Redbird for the failure of Tenant to pay Tenant's
personal property tax obligations. Redbird hereby indemnities and holds Tenant
harmless from any claims or demands made upon Tenant for the failure of Redbird
to pay its property tax obligations.
XXI. WAIVER OF BREACH
A. The waiver by either Redbird or Tenant of any breach of any
provision of this Lease Agreement shall not constitute a continuing waiver of
any subsequent breach of the same or a different provision of this Lease
Agreement.
B. Time is of the essence in construing all terms of this Lease
Agreement.
XXII. NOTICE
Any notice, request, demand, instruction or other communication to be
given to either party shall be in uniting, and shall be (1) deemed to be
delivered, whether actually received or not, upon deposit in a regularly
maintained official depository of the United States Postal Service and sent by
registered or certified mail, postage prepaid, return receipt requested, or (2)
hand delivered with a signed receipt, to:
DALLAS REDBIRD LEASE AGREEMENT - PAGE 10
<PAGE> 11
REDBIRD: REDBIRD DEVELOPMENT, INC.
5305 Challenger, LB 8
Dallas, Texas 75237
Attention: Mr. Tennell Atkins
TENANT: TRI-STAR AIRCRAFT SERVICES,INC.
700 N. Pearl St., Ste. 2170
Dallas, Texas 75247
Attention: Mr. Lee Sanders
The address for receiving written notice may be changed by either party by
giving notice of such change of address to the other party in the manner
provided herein, except that actual receipt by the receiver is required;
provided, however, if one party attempts to deliver such notice and the other
party refuses or fails to accept delivery or for some other reason (other than
the fault of the sender) such notice is not delivered, then proof that such
delivery has been attempted by the sender shall be deemed sufficient notice of
the change of the sender's address. Unless and until such written notice of
change of address is actually received (or proof is provided by the sender that
attempted delivery of such notice has been made), the address stated herein
shall continue in effect for all purposes.
XXIII. FIRST RIGHT OF REFUSAL TO LEASE HANGAR #2
Redbird agrees to offer to Tri-Star Aircraft Services, Inc. a first
right of refusal option, beginning on execution of this Lease Agreement until
July 31, 1999, to exercise the option and execute a Lease within thirty (30)
days after notification by Redbird of any bona-fide written offer to lease
hangar #2 (5225 Voyager).
XXIV. ENFORCEABILITY
In case any one or more of the provisions contained in this Lease
Agreement shall for any reason be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provision, and this Lease Agreement shall be construed and
enforced as if such invalid, illegal, or unenforceable provision had never been
contained herein.
XXV. MISCELLANEOUS
This Lease Agreement may only be modified or amended by a written
agreement executed by Tri-Star and Redbird. Any alleged modification or
amendment that is not so documented shall not be effective. Nothing contained
in this Lease Agreement is intended to create any partnership, joint venture or
association between Redbird and Tenant, and any inferences to the contrary are
hereby expressly negated.
IN THE EVENT THAT A DISPUTE ARISES HEREUNDER, IT IS SPECIFICALLY
STIPULATED THAT THE RIGHTS AND DUTIES OF THE PARTIES HERETO AND THE VALIDITY,
CONSTRUCTION AND THE ENFORCEMENT OF THIS AGREEMENT SHALL BE INTERPRETED AND
CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF TEXAS, AND THE PARTIES HERETO
IRREVOCABLY CONSENT AND AGREE IN ADVANCE THAT VENUE FOR ANY SUCH DISPUTE SHALL
LIE IN ANY COURT OF COMPETENT JURISDICTION IN DALLAS COUNTY, TEXAS.
DALLAS REDBIRD LEASE AGREEMENT - PAGE 11
<PAGE> 12
EXECUTED this the 18th day of September 1996, to be effective as of
August 1, 1996.
REDBIRD DEVELOPMENT, INC.
By: /s/ TENNELL ATKINS
-----------------------------------
Tennell Atkins, President
TRI-STAR AIRCRAFT SERVICES, INC.
By: /s/ LEE SANDERS
-----------------------------------
Lee Sanders, Chairman
DALLAS REDBIRD LEASE AGREEMENT - PAGE 12
<PAGE> 1
EXHIBIT 10.8
UNITED STATES OF AMERICA
STATE OF LOUISIANA
PARISH OF IBERIA
LEASE AND OPERATING AGREEMENT BETWEEN IBERIA PARISH AIRPORT
AUTHORITY AND PRIDE AVIATION, INCORPORATED TO ESTABLISH AND
OPERATE AS A HEAVY AIRCRAFT MAINTENANCE OPERATOR AT ACADIANA
REGIONAL AIRPORT, IBERIA PARISH, LOUISIANA
This agreement, made in the City of New Iberia and Parish of Iberia,
State of Louisiana and entered into this 28th day of December 1994.
By and Between
The IBERIA PARISH AIRPORT AUTHORITY, a political subdivision duly
created, organized and existing under and by virtue of a resolution of the
Police Jury of Iberia Parish, Louisiana on January 26, 1966, Resolution Number
6, hereinafter called "LESSOR" and represented by and acting through WILTZ P.
SEGURA, its Chairman, duly authorized by a Resolution of the Iberia Parish
Airport Authority (a copy of which is attached hereto), having 1213 Ember
Drive, New Iberia LA 70560, as its permanent mailing address, and PRIDE
AVIATION, INCORPORATED, an Oklahoma corporation, herein represented by and
acting through FRANK RICE, its President, hereinafter called "LESSEE", duly
authorized by a Resolution of the Directors of said corporation (a copy of
which is attached hereto), having 1218 Hangar Drive, as its permanent mailing
address,
WITNESSETH
WHEREAS, the Lessor now operates a public airport certified under FAA
Part 139 designated as Acadiana Regional Airport, located in Iberia Parish,
Louisiana, hereinafter referred to as Airport; and
WHEREAS, the Lessee desires to locate its heavy maintenance operation
on the Airport, and was awarded a contract to lease available land with certain
buildings and improvements and assignment of Common Aircraft Ramp Areas.
WHEREAS, in reliance on Lessee's bid and subsequent award, Lessor has
determined to make the site available to Lessee to be used for heavy aircraft
maintenance operations, therewith defined under IRS 2:135.1(G).
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NOW, THEREFORE, for and in consideration of the premises and mutual
undertakings, agreements and covenants hereinafter set forth, the parties
hereto agree as follows:
ARTICLE I. PREMISES LEASED, PURPOSE, OBJECTS, RIGHTS AND PRIVILEGES
A. Leased Premises
1.00 Upon payment by Lessee of the considerations provided, and
upon the observance and performance of all the covenants, terms and conditions
on Lessee's part to be observed and performed, Lessee shall peaceably and
quietly hold and enjoy the leased premises for the term or terms hereby
stipulated without hindrance or interruption by Lessor or any other person or
persons lawfully or equitably claiming by, through or under Lessor.
1.02 Lessor does hereby lease to Lessee and Lessee does hereby
accept and lease from Lessor the land, buildings and improvements of the
airport, more particularly described as follows:
A. AIRCRAFT MAINTENANCE HANGAR 88-C COMPLEX
The real estate,, buildings and improvements located at the Acadiana
Regional Airport, Iberia Parish, Louisiana, being more particularly
described as follows:
TRACT D
A certain tract of land, with all improvements, located and being situated at
the old U.S. Naval Auxiliary Air Station, Iberia Parish, Louisiana, measuring
and containing 4.348 superficial acres of land, and being more particularly
described as follows:
Beginning at a Point on the western right-of-way line of Hangar Drive, said
Point being designated as Point "S" and having USNAAS coordinates of
y=40,399.7 and x=51,728.2; said Point "S" being the POINT OF BEGINNING; thence,
along the western right-of-way line of Hangar Drive S12 degrees 27'E 426.00' to
a Point in the center of a concrete driveway and Point "A" and corner; thence,
leaving said western right-of-way line of Hangar Drive and along the center
line of the concrete driveway S77 degrees 30'W 365.19' to Point "V" and corner;
thence, leaving said concrete driveway and extension thereof S12 degrees 30'E
24.O' to a point on the northern edge of the concrete ramp and Point "U" and
corner; thence, along the northern edge of the concrete ramp S77 degrees 30'W
75.0 to Point "T" and corner; thence, leaving said concrete ramp N12 degrees
30'W 450.0' to Point "K" and corner; thence, N77 degrees 30'E 440.57' to Point
"S" and corner, said Point "S" being the POINT OF BEGINNING.
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Said tract of land is depicted and set forth on a Plat of Survey by G.K. Pratt
Munson, R.L.S. No. 2794, dated June 7, 1990, revised February 27, 1993, and is
shown on said Plat as TRACT D, "SAVUTKS", and containing 4.348 superficial
acres of land.
AIRCRAFT RAMP
1.03 Lessee is assigned and shall have and enjoy, in common with
the general public, the use of the adjoining aircraft ramp areas which are
depicted and designated as Aircraft Ramp Area on the above referenced survey
plat and may also perform routine fueling and maintenance operations therein.
1.04 Lessee is not granted the exclusive use of the common aircraft
ramp areas but Lessor delegates and assigns to Lessee authority to oversee the
safe flow of traffic through these areas. Lessee shall have and enjoy the right
of ingress and egress to and from the leased premises, the aircraft ramp areas
and the landing areas for airplanes. The runway and taxiways shall be used
jointly with other tenants, operators and other designated users at the
airport, and except as may be necessary to protect the safe flow shall not
interfere with the rights and privileges of other persons or firms using said
facilities. Lessor reserves the right to designate, assign and delegate
authority over any and all aircraft ramp areas and, as may be necessary,
change, alter, or adjust said areas to enhance public use and availability, and
to protect the safe flow of all traffic, personnel, aircraft and equipment
thereon. Lessor shall act reasonably in the delegation, designation,
assignment, change, alteration and/or adjustment of said areas to substantially
comply with the assignment of aircraft ramp areas provided. Lessor will not
restrict the aircraft ramp area to prevent Lessee's use of hangar facilities.
B. Purposes, Objects, Rights and Privileges
1.05 This agreement vests Lessee with the right and privilege to
operate as a heavy aircraft maintenance operator on the airport and the leased
premises shall be used by Lessee solely for said purposes, as defined by the
Federal Aviation Act of 1958 as amended and the Minimum Standards and
Requirements for the Conduct of Commercial Aeronautical Services and Activities
at Acadiana Regional Airport adopted November 7, 1979, as amended on August 30,
1989, where applicable.
1.06 Lessee agrees to provide, and is herein required to provide
the aforementioned and described services and the right and privileges to
operate as a heavy aircraft maintenance operator hereby granted shall exist so
long as the character of the facilities operated or services furnished shall be
consistent with the requirements of the Federal Aviation Act of 1958, as
amended, and the Minimum Standards
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and Requirements for the Conduct of Commercial Aeronautical Services and
Activities at Acadiana Regional Airport adopted November 7, 1979, as amended on
August 30, 1989, where applicable.
1.07 Lessee shall not engage in those aircraft and aviation
services customerly rendered by a Fixed Based Operator (FBO) under the
Airport Minimum Standards. Any such activity is considered a breach of this
lease, and at its option, Lessor may impose a civil penalty of not more than
$5,000.00 for each violation. Lessee agrees not to engage in such activity and
acknowledges notice of Lessor's rights to enforcement by termination of this
lease or the imposition of civil penalties.
ARTICLE II. TERM OF LEASE, EXTENSIONS AND OPTIONS TO
EXTEND; LESSOR/LESSEE CONSTRUCTION; INDEPENDENT
CONTRACTOR STATUS
A. Term of Lease, Extensions and Options to Extend
2.00 This lease shall be for a primary term of thirty (30) years
from the effective date hereof designated as the 1st day of October, 1993.
2.01 The term of this lease may be extended for an additional
period not to exceed twenty-five years without advertising or competitive
bidding in accordance with the provisions of Louisiana Revised Statutes, Title
II, Section 135.1(G).
B. Lessor's Construction
2.02 Lessor may provide additional improvements to the leased
premises during the terms and extensions of this lease but is not obligated to
do so.
2.03 Lessor may employ all efforts necessary to apply for and
obtain local, state and federal grants, loans and other aids to improve the
runways, taxiways, landing fields, air traffic control and other facilities on
the airport but is not obligated to do so.
C. Lessee's Construction
2.04 Lessee may construct buildings and improvements on the leased
premises to facilitate its operations and to conduct its activities and
services.
2.05 All improvements shall be made in accordance with plans and
specifications provided by the Lessee. Engineering or architectural expertise
required for these improvements shall be provided by duly licensed professional
engineers or architects. All engineering or architectural fees associated with
these improvements shall be the responsibility of the Lessee.
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2.06 All plans and specifications for proposed construction shall
be submitted to the Airport Authority and approved by same prior to the
commencement of construction. Lessee shall demand or provide 100% performance
and lien insurance on all such construction and name Lessor as co-obligee,
additional insured, named insured or third party beneficiary.
2.07 All aviation hangars and buildings constructed by Lessee shall
be constructed of building materials commonly employed in aviation hangar
construction and of similar in architectural design to the present facilities
at Acadiana Regional Airport and contain sufficient area to conduct minimum
services therefrom.
2.08 All buildings and improvements constructed at Lessee's expense
shall, upon completion, be free and clear of all laborers, mechanics,
materialism, contractor, surveyor and architectural liens, privileges,
judgments and obligations excepting valid and approved mortgages for
construction or operations.
2.09 Lessee shall provide adequate adjacent hard surfaced parking
to its buildings and improvements to accommodate aircraft, employees, guests,
and business invitees.
2.10 Upon completion of any such improvements, Lessee shall present
to Lessor a statement of the "Construction and/or Alteration Costs" which shall
include all monies paid by Lessee for actual demolition, construction or
alterations, including architectural, engineering costs and other pertinent
fees and charges.
2.11 All such improvements shall be and remain the property of
Lessor at the termination of the lease upon Lessee's fault or abandonment by
Lessee of the leased premises, without any cost to Lessor. If termination of
the lease occurs without fault or neglect on the part of Lessee, any right or
claim to compensation for improvements shall not be affected by Lessor's rights
under this section.
2.12 Lessee shall at all times keep these improvements in good
operating condition and shall be returned to the Airport Authority in good
operating condition at the end of the lease period, normal wear and tear
accepted.
D. Independent Contractor Status
2.13 Lessor and Lessee agree that Lessee will maintain independent
contractor status during the term of this lease and will not be an agent of the
Lessor. It is agreed and understood that, as an independent contractor, such
status will not constitute any liability of any nature on the part of the
Lessor for Lessee's operation and activities.
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ARTICLE III. RENTALS AND OTHER CONSIDERATIONS
A. Rentals
3.00 Lessee, in consideration of the possession and use of the
premises shall be obligated to pay rental, in advance, monthly. Monthly rental
shall be paid in installments equal to one-twelfth (1/12) of the annual rental
due and payable on the first day of each and every month. The first payment is
due the first day of the fifth (5th) month after occupancy of the facility by
Lessee. The date of occupancy is hereby established as October 1, 1993.
In the event that the date of occupancy occurs after the first day of the
month, the first rental payment shall include rental on a prorated formula
calculated on a thirty (30) day month. Thereafter, rental will be due on
the first day of each month.
3.01 Commencing with and continuing throughout the primary term of
this lease and any and all extensions thereof, Lessee shall pay Lessor rentals,
in cash, annually or monthly, in advance, as follows:
(a) The first five (5) years, beginning on the effective date of
the lease, an annual rental of ONE HUNDRED FIFTY-EIGHT
THOUSAND ONE HUNDRED AND NO/100 ($158,100.00) DOLLARS payable
in monthly installments equal to one-twelfth (1/12th) of the
annual rental, or THIRTEEN THOUSAND ONE-HUNDRED SEVENTY-FIVE
AND NO/100 ($13,175.00) DOLLARS per month; and, in addition,
(b) For each successive five year period after the effective date
of the lease, and to include the original term and any
extensions thereof, the annual rental shall increase by a
compound rate of TEN (10%) PER CENTUM of the base rental. No
rate of increase shall apply during the first five years of
this lease. At the beginning of the sixth (6th) year the
annual rental shall be calculated by adding 10% of $158,100.00
(or $15,810.00) to the previous annual rental amount yielding
an annual rental of $173,910.00; at the beginning of the tenth
(10th) year the annual rental shall be calculated by adding
10% of $173,910.00 (or $17,391.00) to the previous annual
rental amount yielding an rental of $191,301.00; and at the
beginning of the sixteenth (16th) year the annual rental shall
be calculated by adding 10% of $191,301.00 (or $19,301.00) to
the previous annual rental amount yielding an annual rental of
$210,431.00.
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B. Fuel Flowage
3.02 The parties agree that in consideration of Lessee receiving
fuel and lubricating oil for resale at Acadiana Regional Airport for aircraft,
it shall pay to the Airport Authority fuel flowage fees as follows:
(a) an amount equal to four percent (4%) of the operator's
invoiced cost of fuel, never less than three ($0.03) per
gallon, for aviation operations at Acadiana Regional Airport:
and
(b) twelve percent (12%) of the operator's invoiced cost of oil
and lubricants, never less than nine ($0.09) per gallon, for
aviation operations at Acadiana Regional Airport.
3.03 Fuel flowage fees are due and payable by Lessee to Lessor, in
cash, monthly on or before the tenth (10th) day of each month. Payments are
from fuel and oil pumped from the previous month. All payments of fuel flowage
fees shall be accompanied by a statement or invoice from the wholesaler or
retail fuel and lubricant distributor.
3.04 In the event that Lessee chooses to install fuel tanks on the
leased premises, it must first secure written approval from Lessor to do so. If
approval is granted by the Authority, then Lessee shall install the tanks in
accordance with rules, regulations and specifications of the Louisiana State
Fire Marshall, Louisiana Department of Environmental Quality (DEQ) and the U.S.
Environmental Protection Agency (EPA) presently in effect and as may be amended
during the term or terms of this lease.
C. Delinquency and Default
3.05 Lessee shall be deemed in default of this lease and agreement
if Lessee fails to remit to Lessor the monthly rental installment (one-twelfth
(1/12) of the annual rental) TEN (10) days after the due date.
3.06 All monthly rental installments due and owing, but unpaid,
more than THIRTY (30) days beyond the due date shall be deemed delinquent and
shall be assessed a delinquency charge of one (1%) percent per month or twelve
(12%) percent per annum on the unpaid balance.
3.07 In the event a dispute arises as to the correct amount of rent
due, Lessor may accept the sum tendered by Lessee under protest, and if a
deficiency is subsequently determined, the delinquency charge shall apply to
any deficiency.
3.08 Should Lessee at any time violate any of the conditions of
this lease requiring the payment of rent, fuel flowage or other monetary
obligations, as stipulated, or upon
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the filing of a bankruptcy, receivership or respite petition by or against
Lessee, or upon Lessee's suspension, failure or insolvency, the rent for the
whole unexpired term of this lease shall, without demand or putting Lessee in
default, become due and payable and Lessor, at its option, has the right to
cancel the lease, or re-enter and lease said premises for such price and on
such terms as may be immediately obtainable, and apply the net amount realized
to the payment of the rent. In the event the premises are re-leased, Lessee
would be liable for all Lessor's expenses, including but not limited to loss of
rent and collection expenses.
3.09 Should the premises be vacated or abandoned by Lessee because
of ejectment for breach hereof, or otherwise, or should the Lessee begin to
remove personal property or goods to the prejudice of the Lessor's privilege,
then the rent for the unexpired term, with attorney fees, shall at once become
due and exigible and Lessor, at its option, has the right to cancel the lease,
or re-enter and lease said premises for such price and on such terms as may be
immediately obtainable, and apply the net amount realized to the payment of the
rent. In the event the premises are released, Lessee would be liable for all
Lessor's expenses, including but not limited to loss of rent and collection
expenses.
3.10 The failure of the tenant to pay the rent punctually, or
thirty (30) days beyond the due date, shall be, ipso facto and without demand
or putting in default, grounds to terminate and cancel the lease. In such
event, the Lessor may take such legal steps as are necessary and appropriate
under the law to cancel the lease, to evict the Lessee or sublessees refusing
to leave the grounds leased and to recover monies due the Lessor for past due
rentals and damages for lost rentals occasioned by them. Improvements placed on
the property leased shall be subject to seizure and sale by the Lessor in order
to satisfy the Lessor's claim for monies and/or damages owed.
3.11 At the expiration of this lease, or its termination for
failure to pay the rent and fuel flowage fees, Lessee is obligated to
immediately surrender possession, and should Lessee fail to do so, it consents
to pay as liquidated damages five times the rent per day, with attorney fees
and costs. Lessee also expressly waives any notice to vacate at the expiration
of this lease and all legal delays, and hereby confesses judgement with costs,
placing Lessor in possession to be executed at once. Should Lessor allow or
permit Lessee to remain in the leased premises after the expiration of this
lease, this shall not be constructed as a reconduction of this lease.
3.12 Failure to strictly and promptly enforce these conditions
shall not operate as a waiver of Lessor's rights, Lessor expressly reserving
the right to always enforce prompt payment of rent, or to cancel this lease,
regardless of any indulgences or extensions previously granted. Failure to
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comply with any condition or obligation of this lease will make Lessee liable
for any loss or damage sustained by Lessor.
3.13 In case suit shall be brought, or an attorney shall be
employed, for recovery of the leased premises, for the recovery of rent or any
other amounts due under the provisions of this lease, or for the enforcement
of, or because of the breach of, any covenant herein contained on the part of
Lessee to be kept or performed, and a breach shall be established, Lessee shall
pay to Lessor all costs and expenses incurred, including a reasonable
attorney's fee.
3.14 Rental payments shall be made payable to the:
Iberia Parish Airport Authority
1213 Ember Drive
New Iberia, LA 70560
or to such other department or address as may be specified by Lessor in writing
from time to time.
ARTICLE IV. UTILITIES
4.00 Lessee agrees to make its own arrangements for all utility
extensions, modification and services and to pay for such services and deposits
on its leased premises. No waste shall be committed or damage done to the
property of the Lessor in the establishment of said utility services.
ARTICLE V. SIGNS
5.00 Lessee is authorized to erect and install signs and
advertisements promoting its name and/or services it may offer subject to
Lessor's prior written consent, provided that such consent will not be
unreasonably withheld.
ARTICLE VI. ALTERATIONS, FURNITURE AND FURNISHING
A. Alterations
6.00 Lessee shall not construct or install any additional buildings
or structures on the leased premises nor otherwise alter or modify the leased
premises without first obtaining the written consent of Lessor. Lessor's
consent will not be unreasonably withheld.
6.01 Lessee shall not remove, alter, modify or make any structural
changes in any of the buildings or structures placed thereon without first
obtaining the written consent of Lessor, Lessor's consent will not be
unreasonably withheld.
6.02 Lessee shall not modify or make any additions to the plumbing,
electrical or other utilities therein without first obtaining the written
consent of Lessor. Lessor's consent will not be unreasonably withheld.
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6.03 For the purpose of this paragraph, any penetration of the
roof, exterior walls, floor and foundation shall be considered a structural
change.
6.04 In the event Lessee makes alterations or improvements to the
leased premises, then the use thereof shall be enjoyed by Lessee during the
remaining term of the lease without the payment of additional rental and such
alterations or improvements shall become the property of Lessor at the
termination of this lease.
B. Furniture or Furnishings
6.05 Lessee agrees to install the necessary furniture, furnishings,
equipment and fixtures necessary for the conduct of its operations with the
Minimum Standards.
ARTICLE VII. MAINTENANCE
7.00 The Lessor shall maintain the roof, walls and foundations and
all concrete or pavement of the premises in good condition.
7.01 Lessor shall at all times maintain design load limits on all
concrete and paving surfaces of the leased premises and shall not allow
overloading of any concrete or paved surface of the leased area.
7.02 Utility line maintenance outside the Lessee's delineated
property boundary shall be the Lessor's responsibility.
7.03 Lessor will not be responsible for damage caused by leaks in
the roof, by bursting of pipes, by freezing or otherwise, or by any vice or
defects of the leased property or the consequences thereof except in the case
of positive neglect or failure to take action toward the remedying of such
defects within reasonable time after having written notice from Lessee of such
defects and the damage caused thereby. Should Lessee fail to promptly so notify
Lessor, in writing, of any such defect, Lessee will become responsible for any
damage resulting to Lessor or other parties.
7.04 Lessee shall maintain interior plumbing fixtures, outlets, and
drains and keep them free from foreign objects and obstructions; maintain the
heating and air conditioning system, including cleaning and removal of filters
and general maintenance; and maintain the electrical system including
replacement of fixtures and lamps. Lessee shall maintain inside and
outside of premises in accordance with Airport Authority standards. Lessee
shall be responsible for major repairs to the hangar doors, the central heating
and air conditioning system, such as replacement of compressors, and major
plumbing repairs, such as replacement of fixtures or corroded sewer lines
within the boundary of the leased premises.
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7.05 All major repairs to electrical and mechanical equipment
contained on the leased premises shall be made by licensed personnel. Other
repairs shall be made by skilled craftsmen performing such work regularly as a
trade. Lessee shall be responsible for maintaining electrical loads within the
designed capacity of the system as installed or modified.
7.06 Subject to the foregoing, Lessee shall maintain the leased
premises in good repair, ordinary wear and tear accepted. Lessee shall maintain
the leased premises and the assigned aircraft ramp areas in a neat and sightly
condition and shall not permit the accumulation of waste, trash or debris on
airport property.
7.07 Collection and on site storage of wrecked or derelict aircraft
or equipment not under repair shall be prohibited under the terms and
conditions of this lease.
7.08 Lessee will not allow any waste, trash, debris, fuels,
lubricants or any other material whatsoever to be discharged onto the leased
premises. Lessee shall dispose or contract with an EPA and/or DEQ approved
operator for the removal and proper disposal of expended lubricating oil,
solvents, fuels, chemical and other products that may accumulate as a result of
the Lessee's use of the leased premises. The Lessor may remove any waste,
trash, fuel, lubricants, or other materials discharged or otherwise placed on
said leased premises by Lessee, its employees, agents, representative,
licenses, invitees, patrons or customers and charge Lessee for such cost
including testing, clean up including labor and material.
ARTICLE VIII. PAYMENT OF TAXES
8.00 Lessee shall be liable for any and all taxes, penalties and
interest thereon assessed, levied or charged by any governmental agency against
Lessee's tangible personal property (inventory, equipment, machinery,
furnishings and other movable assets) situated on the leased premises and
against any interest acquired under this agreement.
8.01 No exemption or waive from taxes on personal or business
property insures to the benefit of Lessee by association, contract or other
relationship to the Lessor as a public body.
ARTICLE IX. COMPLIANCE WITH LAW
9.00 Lessee while exercising rights granted herein, shall observe
and comply with, and at its own cost and expense, requirements of Federal,
State or local statutes, ordinances, regulations and standards applicable to
Lessee or its use of the leased premises, including but not limited to Exhibit
"A", (Minimum Standards and Requirements for the Conduct of Commercial
Aeronautical Services and Activities at Acadiana Regional Airport adopted
November 7, 1979, as amended on
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August 30, 1989) other rules and regulations promulgated from time to time by
the Iberia Parish Airport Authority and the Iberia Parish Council for
administration of the airport.
9.01 Lessee shall procure and maintain during the term of the
agreement, all licenses, permits and similar authorizations required for the
conduct of its business operations.
ARTICLE X. AIRPORT SECURITY
10.00 Lessee agrees that it will, at its own cost and expense,
enroll and participate in the airport security program during the term of this
agreement.
ARTICLE XI. RIGHT OF ENTRY, INSPECTION AND ACCOMPLISHMENT OF OBLIGATIONS
11.00 The Lessor reserves the right to inspect the premises, within
reasonable time periods and upon advance notice and shall be permitted to enter
and view the premises or equipment on the leased premises. Lessor shall at all
reasonable times have the right to enter the premises accompanied by Lessee for
the purpose of inspecting and of making such, if any, repairs that Lessor may
be bound or elect to make.
ARTICLE XII. WAIVER OF LIABILITY, INDEMNITY AND INSURANCE
A. Indemnity
12.00 Lessee assumes full responsibility for the condition of the
leased premises, and all buildings, improvements, fixtures and equipment
thereon, and for all of Lessee's operations but does not assume any
responsibility for lessor's negligence or the negligence of lessor's agents,
officers, or employees. In the event of any suit, claim or action by Lessee,
its agents, employees, invitees or third persons is brought against Lessor or
the Iberia Parish Council to recover for, or on account of any injury to person
or property (including death) caused by any vice or defect in or upon said
leased premises, including the buildings, improvements, fixtures and equipments
thereon, or on account of Lessee's operations, Lessee agrees to appear, defend,
adjust and settle said action or claim at its sole cost and expense and to pay
and satisfy any adverse judgment that may be entered on final determination.
12.01 Lessee will indemnify Lessor and save it harmless from and
against any and all claims, actions, loss, cost (including attorney's fees),
damages, expenses, and liability (including statutory liability and liability
under workers' compensation laws) in connection with loss of life, personal
injury and/or damage to property arising from or out of any occurrence in, upon
or at the leased premises, or the occupancy or use by Lessee of the leased
premises or any part
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thereof, and any activities of the Lessee in the parking areas and common
service areas sustained by Lessee and all other persons which are occasioned
wholly or in partly by any act or omission of Lessee, Lessee's partners,
agents, sublessees, contractors, subcontractors, invitees, customers,
employees, servants, or concessionaires. In case Lessor and the Iberia Parish
Council, its individual members, the Parish President and the Airport Director
and their employees and agents shall, without fault on its part, be made a
party to any litigation commenced by or against Lessee, then Lessee shall
protect and hold Lessor harmless and shall pay all costs, expenses, and
reasonable attorney's fees incurred or paid by Lessee in connection with such
litigation.
B. Insurance
12.02 Lessee agrees to provide, at its expense, for the duration of
this lease and any extensions hereof, tenants liability insurance, and to
furnish Lessor a certificate of such insurance, with limits of no less than
$100,00.00 for injury to any other person and $300,00.00 for injuries sustained
in any one accident, and with property damage limits of $25,000.00 which policy
shall provide, as a condition precedent to cancellation, ten (10) days advance
written notice to Lessor and shall name as additional insured, the Lessor, and
the Iberia Parish Council.
12.03 In addition to the above, Lessee shall provide the minimum
insurance requirements as listed below:
(a) Comprehensive Public Liability and Property Damage;
(i) Bodily Injury (each accident) $25,000,000.00 any one
offense and aggregate annually;
(ii) General Liability and Property Damage: $50,000,000.00
combined single limit, any one occurrence/offence and
annual aggregate including products, grounding and
completed operations;
(c) Motor Vehicle Liability: $1,000,000.00 combined single limit;
(d) Workman's Compensation and Employer's Liability:
Up to Statutory Limit
(e) Hangar Keepers Liability Coverage: $15,000,000.00 any one
aircraft, $30,000,000.00 any one occurrence subject to
$15,000.00 deductible each and every loss;
(f) Fire and Extended Coverage on all buildings and improvements
located on the leased premises in an amount of 80% of
replacement cost of the improvements. Replacement cost is
defined as cost to replace the buildings and improvements with
like materials and like configuration, but in no case less
than $2,300,000.00. The Lessee shall be allowed to determine
the deductible on this all risk coverage, but Lessee shall be
fully
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responsible for the payment of any and all deductibles,
whatever they may be. Flood and earthquake coverage shall not
be a requirement of this section. Said policy shall provide,
as a condition for cancellation,, ten (10) days advance
written notice to Lessor and shall name Lessor and the Iberia
Parish Council as additional insureds under the policy.
12.04 If through no fault, neglect or design of Lessee, the premises
are destroyed by fire or other casualty, and provided that at the time of such
damage or destruction there exists no incurred default by Lessee under this
lease, the following obligation to repair and/or reconstruct shall apply:
(a) If the cost to repair the damage, including
architect's fees, surety bond, etc., does not exceed the sum determined and
payable by an insurance underwriter under coverage for fire and extended
coverage, as estimated by an architect licensed in the' State of Louisiana
selected by Lessor and any bid, acceptable to Lessor, Lessor shall repair the
damage as expeditiously as possible;
(b) In the event that repair and/or reconstruction of the
damage shall be undertaken, this lease shall not be cancelled, and Lessee shall
be entitled to a proportionate reduction or remission of the rent until such
damage has been repaired;
(c) Lessor may, at its option, terminate or cancel this
lease if the cost of repair exceeds sums payable under insurance coverage. In
the event the lease is terminated by Lessor under these provisions, the Lessor
shall fairly apportion the insurance award between Lessor and Lessee, if such
insurance award is made specifically for loss of improvements made to the
leased premises by Lessee.
12.05 Lessee shall cause any and all policies of insurance obtained
by it, including bailee coverage, covering movable property (including
aircraft) located on the leased premises or on the adjoining aircraft apron
areas or used in connection with Lessee's operations conducted thereon and
therefrom to contain a waiver of subrogation, (excepting negligence) against
Lessor, the Iberia Parish Council, their individual members, the Airport
Director and their employees and agents.
12.06 In the event Lessee fails to procure any of the insurance
required hereunder, Lessor may, at its option, cause such insurance to be
issued at the cost and expense of Lessee, and all sums advanced for such
purpose shall be due Lessor as charges and expenses plus 15% service charge,
payable on or before the first day of the month following written notice
thereof to Lessee.
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ARTICLE XIII. NON-DISCRIMINATION
13.00 The Lessee, in exercising any of the rights or privileges
herein granted to it, shall not, on the grounds of age, race, color, creed,
sex, national origin or physical condition, discriminate or permit
discrimination against any person or group of persons in any manner prohibited
by Part 21 of the Regulations of the Secretary of Transportation. The Lessor is
hereby granted the right to take such actions to correct same, anything to the
contrary herein notwithstanding, as the United States may direct, to enforce
this nondiscrimination covenant.
13.01 Lessee, as a heavy aircraft maintenance operator, will 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 charge discriminatory prices for each unit or service;
PROVIDED, THAT the Lessee may be allowed to make reasonable and
non-discriminatory discounts, rebates or other similar type of price reductions
to volume purchasers.
13.02 Lessee shall make its accommodations and/or services available
to the public on fair and reasonable terms without unjust discrimination on the
basis of age, race, creed, color, sex, national origin or physical condition.
13.03 Lessee 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 age, race, color, creed, national origin, sex or
physical condition, be excluded from participating in any employment activities
covered in 14 CFR Part 152, Subpart E. The Lessee assures that no person shall
be excluded on these grounds from participating in or receiving the services or
benefits of any program or activity covered by this Subpart. The Lessee assures
that it will require that its covered suborganizations provide assurances to
the Lessee that they similarly will undertake affirmative action programs and
that they will require assurances from their sub-organizations, as required by
14 CFR Part 152, Subpart E, to the same effect.
13.04 The Lessor is granted the right to take such actions to
correct violations, anything to the contrary herein notwithstanding, as the
United States may direct, to enforce this non-discrimination covenant.
Noncompliance of the above non-discrimination provisions shall constitute a
material breach and subject the lease to immediate termination.
13.05 Non-compliance with paragraphs 13.00, 13.01, 13.02, 13.03
and 13.04, shall constitute a material breach thereof and, in the event of such
non-compliance, Lessor shall have the right, subject to the provisions of
Article XIX hereof, to terminate this lease and operating agreement and the
estate hereby created, without liability therefor, or at the election of
Lessor, or the United States, either or both said
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governments, shall have the right to judicially enforce said paragraphs 13.00,
13.01, 13,02, 13.03 and 13.04.
13.06 Lessee agrees to insert the five (5) preceding provisions,
namely paragraphs 13.00, 13.01, 13.02, 13.03 and 13.04 of Article XIII, in any
lease, agreement or contract, by which Lessee grants a right or privilege to
any person, firm or corporation, to render accommodations and/or services to
the public, on the premises herein leased.
ARTICLE XIV. LESSOR'S RESERVED RIGHTS AND LESSEE'S PROTECTION
14.00 Lessor reserves the right to take any action it considers
necessary to protect the aerial approaches to the Airport against obstructions,
together with the right to prevent Lessee from erecting or permitting to be
erected, any building or other structure, including signs and lighting
fixtures, on the Airport which, in the opinion of Lessor, would limit the
usefulness of the Airport or constitute a hazard to aircraft.
14.01 During the time of war or national emergency, Lessor shall
have the right to lease the Airport or any part thereof to the United States
Government for military or naval use, and if any such lease is executed, the
provisions of this instrument insofar as they are inconsistent with the lease
to the government shall be suspended, and in that event a just and
proportionate part of the rent hereunder shall be abated. Lessee shall have no
claim against the Lessor for the value of any unexpired term of this lease.
Lessee is not prohibited from asserting any claim or claims for loss of
improvements to the leased premises, leasehold advantages and/or loss of
business opportunity against the United States.
14.02 Any other provisions of this lease notwithstanding, this lease
shall be subordinate to the provisions of any existing or future agreement
between Lessor and the United States, relative to the operation or maintenance
of the Airport, the terms and execution of which has been or may be required as
a condition precedent to the expenditure or reimbursement to Lessor of federal
funds for the development of the Airport or reverter clause in the deed of
trust and/or conveyance to the Parish of Iberia executed by the United States
of America, on the 6th day of May, 1969 filed for record on the 9th day of May,
1969 and recorded at conveyance book 539, folio 119, entry no.146092, records
of Iberia Parish, Louisiana.
ARTICLE XV. NOTICES, CONSENTS AND APPROVALS
15.00 Notices or other communications to Lessor pursuant to the
provisions hereof shall be sufficient if sent by registered or certified United
States mail, postage prepaid, addressed to the:
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IBERIA PARISH AIRPORT AUTHORITY
1213 EMBER DRIVE
NEW IBERIA, LOUISIANA 70560
and to Lessee as follows:
PRIDE AVIATION, INCORPORATED
1218 HANGAR DRIVE
NEW IBERIA, LA. 70560
ARTICLE XVI. COVENANT TO BIND LESSOR AND LESSEE
16.00 This lease and operating agreement and all of the covenants
and conditions contained herein shall be binding upon Lessor and Lessee and
upon their respective heirs, executors, administrators, successors and assigns.
ARTICLE XVII. SUBLETTING, ASSIGNMENT AND MORTGAGE
A. Subletting and Assignment
17.00 Any transfer, sublease or assignment (hereinafter in this
lease referred to as "transfer") of Lessee's interest in the leased premises,
or any portion thereof, must be approved by Lessor, in advance of its
consummation or execution. If Lessee grants a transfer, without obtaining prior
approval from Lessor, such act shall constitute a material breach of this lease
and grounds for its termination.
17.01 In the event Lessor consents to a transfer, such consent shall
not constitute a waiver of any other condition, term and covenant of this
lease. All such terms, conditions, or covenants shall apply to each and every
transferor, assignee, transferee, subtenant, or other person acquiring rights
and/or interests through Lessee.
17.02 Any document to transfer, sublet or assign the premises or any
part thereof, shall incorporate, directly or by reference, all provisions of
this lease.
17.03 Occupancy of the premises by a prospective transferor,
transferee, sublessee, assignee, or assignor, prior to approval of the
transfer, sublease or assignment by Lessor, shall be deemed an unauthorized
activity and shall constitute a breach of this lease.
17.04 In the event Lessee fails to cease, remove or prohibit an
unauthorized activity, after notice by Lessor, such failure shall constitute a
material breach of this lease and shall be grounds for termination.
17.05 Lessor agrees that it will not arbitrarily or unreasonably
withhold consent to a transfer.
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17.06 An application fee of $500.00 shall accompany all requests to
transfer, assign or sublease. This application fee is not refundable.
17.07 Lessor may reasonably withhold its consent to any transfer, if
any of the following conditions exist:
1. Lessee, or any of its successors or assigns, is in
default as to any term, covenant, or condition of
this lease, whether notice of default has or has not
been given by Lessee;
2. The prospective transferor or transferee has not
agreed, in writing, to keep, perform, and be bound by
all terms, covenants and conditions of this lease;
3. All terms, covenants and conditions of the transfer,
including the consideration therefor, of any and
every kind, has not been revealed, in writing, to
Lessor;
4. Any member of the local, state or federal government,
or any resident Commissioner of Lessor be admitted to
any share or part of this agreement or to any benefit
that may arise hereunder. This provision shall not
be constructed to extend to agreements make with a
corporation for the general benefit of any such
party.
17.08 In no event shall Lessor's consent to a tranfer, sublease or
assignment release Lessee from the obligations of this lease.
B. MORTGAGE
17.09 Any mortgage, pledge, hypothecation, encumbrance or
subordination (hereinafter in this lease referred to as "mortgage") of Lessee's
leasehold interest in the leased premises, or any portion thereof, must be
approved by Lessor, in advance of its execution. If Lessee grants a mortgage,
without obtaining prior approval from Lessor, such act shall constitute a
material breach of this lease and grounds for its termination.
17.10 No mortgage, pledge, hypothecation or encumbrance shall bear
against immovable property owned by the Lessor or Iberia Parish, Louisiana.
Lessee does not have, nor does this lease and operating agreement grant to it,
the authority, right, or privilege to mortgage lands, buildings or improvements
owned by Lessor or Iberia Parish, Louisiana. A mortgage, not approved by
Lessor, shall be deemed void and shall not effect Lessor's rights hereunder.
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17.11 Notwithstanding the provisions of Article XVII, paragraph
17.09, Lessor agrees, upon written request by Lessee, to execute its written
consent to a mortgage of Lessee interests in this leasehold to secure the
beneficial interest of a lender for the purpose of financing construction,
development, or operations on the airport upon and subject to the following
covenants and conditions:
1. Upon application for approval of a mortgage, Lessee
shall furnish Lessor a complete copy of the mortgage
and note to be secured thereby, together with the
name and address of the proposed holder thereof;
2. Said lender and all rights acquired by said lender
under said mortgage shall be subject to each and
every covenant, condition, and restriction set forth
in this lease and to all the rights and interests of
Lessor thereunder, except as otherwise provided;
3. In the event of any conflict between the provisions
of this lease and the provisions of any such
mortgage, the provisions of this lease shall govern
and control; and
4. Upon and immediately after the recording of a
mortgage affecting the leasehold interest, Lessee, at
its expense, shall cause to be recorded in the Office
of the Clerk of Court, Iberia Parish, Louisiana, a
written request by Lessor for notice of default or
any notice of seizure and/or sale under the mortgage
as provided by the statutes of the State of Louisiana
relating thereto.
17.12 Lessor agrees that it will not terminate this lease on default
or breach on the part of Lessee, if the lender under any mortgage to which
Lessor has given its consent, within sixty (60) days after service of written
notice on the lender by Lessor of its intention to terminate this lease for
such default or breach, shall:
1. Cure such default or breach, if the same can cured by
the payment or expenditure of money required to be
paid under the terms of this lease; and
2. Keep and perform all of the covenants and conditions
of this lease requiring the payment of an expenditure
of money by Lessee until such time as the security
shall be sold upon foreclosure pursuant to the
mortgage or shall be released or reconveyed
thereunder; provided, however, that if the lender
shall fail or refuse to comply with any or all of the
provisions of
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this paragraph, then and thereupon, Lessor shall be
released from its covenant of forebearance.
17.13 In the event of default not curable as aforementioned, lender
shall commence steps and proceedings for the exercise of the power of seizure
and sale under and pursuant to the mortgage and in the manner provided by law,
but assignee will first offer and Lessor shall have the option to purchase, all
rights, titles and interests in the security encumbered under said mortgage
directly from lender and without public sale for the outstanding balance due on
the note or notes secured by said mortgage.
17.14 In the event Lessor does not exercise its option to purchase
from the lender as provided above, then the prior written consent of Lessor
shall not be required and transfer or conveyance may occur under the following
conditions:
a. The transfer of the security at foreclosure sale
pursuant to judicial foreclosure or by an assignment
in lieu of foreclosure; or,
b. To any subsequent transfer by the lender if the
lender is an established bank, savings and loan
association or insurance company, and is the
purchaser at such foreclosure sale, provided that in
such event, the lender forthwith gives notice to
Lessor in writing of any such transfer, setting forth
the name and the express agreement(s) with the
transferee or transferor, the effective date of such
transfer, and the express agreement of the transferee
transferor assuming and agreeing to perform all of
the obligations under this lease, and submits to
Lessor a copy of the document or transfer.
17.15 Lessee, for itself, its subsidiaries, affiliates, associates,
representatives, successors, and assigns, as a part of the consideration of
this lease, hereby covenant and agree, as a covenant running with the land,
that:
1. No person on the grounds of race, color, creed, age,
sex, national origin or physical condition shall be
excluded from participation, denied the benefits or
be otherwise subjected to discrimination in the use
of said facilities:
2. That, in furnishing of services thereon, no person on
the grounds of race, color, creed, age, sex, national
origin or physical condition shall be excluded from
participation in, denied the benefits of, or
otherwise be subjected to discrimination:
3. That, Lessee shall use the premises in compliance
with all other requirements imposed by and pursuant
to Title 49, Code of Federal
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Regulations of the Department of Transportation and
the Civil Rights Act of 1964, as may be amended; and
4. That, in the event of a breach of any of the
non-discrimination covenants, Lessor shall have the
right to terminate the lease and to re-enter and
repossess said land and the facilities thereon, and
hold the same as if said lease had never been made or
issued.
ARTICLE XVIII. RIGHTS OF THE UNITED STATES GOVERNMENT
18.00 This lease shall be subordinate to the provisions and
requirements of any existing agreement between Lessor and the United States
relative to the development and maintenance of the airport.
(a) In the event any agreement between Lessor and the
United States relative to the development and maintenance of the airport
results in a total condemnation or expropriation of the leased premises for
public use or purpose, the term of this lease shall cease and terminate as of
the date title vests in the condemnor and all rentals and other payments shall
be paid up to that date, and Lessee shall have no claim against the Lessor for
the value of any unexpired term of this lease. Lessee is not prohibited from
asserting any claim or claims for loss of improvements to the leased premises,
leasehold advantages and/or loss of business opportunity against the United
States.
(b) In the event any agreement between Lessor and the
United States relative to the development and maintenance of the airport
results in a partial condemnation or expropriation of the leased premises for
public use or purpose, then Lessor and Lessee shall each have the right to
terminate this lease upon written notice to the other given at least thirty
(30) days prior to the date title vests in the condemnor and all rentals and
other payment shall be paid up to that date. Lessee shall have no claim against
Lessor for the value of any unexpired term of this lease. Lessee is not
prohibited from asserting any claim or claims for loss or improvements to the
leased premises, leasehold advantages and/or loss of business opportunity
against the United States.
(c) In the event that neither party shall elect to so
terminate this lease, Lessor, to the extent of the condemnation award, if any,
shall repair and restore the portion not affected by the taking so as to
constitute the remaining premises a complete architectural unit. Thereafter,
the rental to be paid by Lessee shall be adjusted according to the ratio that
the square footage of interior and exterior area remaining in the leased
premises bears to the former area, and all of the other terms of this lease
shall remain in full force and effect.
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18.01 Lessee agrees to comply with the notification of and review
requirements covered in Part 77 of the Federal Aviation Regulations in the
event any future structure or building is planned or alteration of any present
or future building or structure situated on the premises.
18.02 It is understood and agreed that nothing herein shall be
construed to grant or authorize the granting of an exclusive right within the
meaning of Section 308 of the Federal Aviation Act of 1958.
18.03 There is hereby reserved by Lessor, its successors and
assigns, for the use and benefit of the public, a right of flight for passage
of aircraft in the airspace above the surface of the premises hereby leased
together with the right to cause in said airspace such noise as may be inherent
in the operation of aircraft, now known or hereafter used for navigation of or
flight in the air, using said airspace for landing at, taking off from or
operating on the Airport, subject to applicable controlling flight
restrictions.
18.04 Lessee by accepting this lease expressly agrees for itself,
its successors and assigns, that it will not erect nor permit the erection of
any structure or object or permit the growth of any tree on the land leased
hereunder above a mean sea level elevation of 70 feet. In the event the
aforesaid covenant is breached, Lessor reserves the right to enter upon the
land leased hereunder and remove the offending tree or structure, all of which
shall be at the total expense of Lessee.
18.05 Lessee, by accepting this lease, expressly 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, Lessor reserves the right to enter upon the premises
hereby leased and cause the abatement of such interference at the total expense
of Lessee.
18.06 This lease and all 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, operations and regulation of said Airport.
18.07 The Lessee and any sublessee, transferee, subtenant,
subsidiary, affiliate, associate, successor or assign for whom consent to
acquire an interest in this leasehold, leased premises and/or privilege under
this operating agreement, is required by the Lessor, shall comply with the
Affirmative Action Plan Program requirements, if it maintains a business
located within Iberia Parish, Louisiana, and uses such business location in any
manner connected with his lease.
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18.08 This lease shall be subordinate to and subject to the terms,
conditions, restrictions, and other provisions of any existing permit, lease
and/or agreement between the Lessor and the United States of America and/or any
other local, state or federal agency, relative to the control, operation or
maintenance of the Airport, the execution of which has been or will be required
as a condition precedent to the operation or control of, or to the expenditure
of Federal funds for the Airport. Lessee agrees to be bound by such terms,
conditions, restrictions or provisions.
18.09 Lessee warrants that no improvements shall be erected, placed
upon, operated nor maintained within the premised, nor any business or other
activity conducted or carried on therein or therefrom, in violation of the
terms of this lease, or of any regulation, order of law, statute, bylaw, or
ordinance of a governmental agency having jurisdiction and any breach of said
warranty shall constitute a breach of this lease.
ARTICLE XIX. TERMINATION BY LESSOR AND WAIVER OF BREACH
19.00 In the event that Lessee shall fail to perform, keep and
observe any of the terms, covenants or conditions herein, Lessor may give
written notice to Lessee to use due diligence to correct such condition or
default, and if Lessee fails to correct such condition or fails to commence
action to correct within Thirty (30) days after receipt of such notice, or
fails to diligently pursue such action to correct after same has been commence,
Lessor may terminate this agreement by giving ten (10) days notice thereof.
19.01 No default on the part of the Lessee shall be deemed to
continue so long as Lessee shall have taken action to correct the same and
shall be diligently prosecuting such action.
19.02 In any case where Lessor shall be entitled hereunder to
terminate this lease agreement for failure of the Lessee to correct or cure a
default after due notice, Lessor may, as an alternative to termination of the
lease agreement, pay or perform the obligation imposed under this lease and
operating agreement for the account of and at the total expense of the Lessee
and the same shall be paid by Lessee as additional charges due under the lease.
19.03 Lessor may terminate this agreement and all of its obligations
hereunder by giving Lessee ten (10) days written notice upon or after filing by
Lessee of a voluntary petition in bankruptcy.
19.04 Lessor may terminate this agreement and all of its obligations
hereunder by giving Lessee sixty (60) days written notice upon or after failure
of Lessee to vacate or set aside the following:
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a. If involuntary proceedings in bankruptcy be
instituted against the Lessee and the Lessee is
thereafter adjudicated a bankrupt pursuant to such
proceedings;
b. If a court shall take jurisdiction of the Lessee
pursuant to proceedings brought under the provisions
of any Federal Reorganization Act; or
c. If a receiver of Lessee's assets be appointed.
19.05 Lessor may terminate this agreement and all of its obligations
hereunder by giving Lessee ten (10) days written notice upon the happening of
either or both of the following events:
a. If Lessee voluntarily abandons and
discontinue the conduct and operation of its service
at the Airport for a continuous period of
30 days; or
b. If Lessee abandons any of the premises leased to it
hereunder at any time, except when such abandonment
be caused by fire, flood, earthquake, war, strike or
other calamity beyond Lessee's control.
B. WAIVER OF BREACH
19.06 No waiver by Lessor of any of the terms, covenants,
or conditions hereof to be performed, kept or observed by Lessee, shall be
construed to be, or act as a waiver of any subsequent default of the terms,
covenants and conditions. The acceptance of rental by Lessor for any period or
periods after default of any of the terms, conditions, or covenants shall not
be deemed a waiver of any right on the part of the Lessor to cancel this
agreement for failure by Lessee to perform, keep or observe any of the terms,
covenants or conditions of this agreement.
ARTICLE XX. ENVIRONMENTAL MATTERS
Authority's Environmental Representations and Warranties.
20.00 Lessor represents and warrants to Lessee, to the best of its
knowledge, as follows:
a. That the Lessor has duly complied with, and the
premises is in compliance with the provisions of federal, state and local
environmental, health and safety laws, codes, ordinances, rules and/or
regulations promulgated thereunder, except as disclosed in the attached
environmental site analysis and report dated February 22, 1993 and annexed
hereto as Exhibit "B".
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b. That the Lessor has not received any notice, does not
know nor suspect, any facts which might constitute violations of any federal,
state or local environmental, health or safety laws, codes, ordinances, rules
and/or regulations promulgated thereunder, which relate to the use, ownership
or occupancy of the premises and is not in violation of any covenants,
conditions, easements, rights of way or restrictions affecting the premises or
any rights appurtenant thereto, except as disclosed in the attached
environmental site analysis report.
c. No emission, spill, release or discharge has occurred
except in accordance with a valid governmental permit, license, certificate or
approval, whether on the premises, or sites adjacent to the premises into or
upon (i) the air, (ii) soils or improvements, (iii) surface water or ground
water, or (iv) the sewer, septic system or waste treatment, storage or disposal
system servicing the premises, involving any toxic or hazardous substances or
wastes used, stored, generated, treated or disposed on or from the premises,
except as disclosed in the attached environmental site analysis report.
d. No complaint, order, directive, claim, citation or
notice has been filed by any governmental authority or any other person or
entity with respect to (i) air emissions, (ii) spills, releases or discharges
to soils or any improvements located thereon, surface water, ground water or
the sewer, septic system or waste treatment, storage or disposal systems
servicing the premises, (iii) noise emissions, (iv) solid or liquid waste
disposal, (v) the use, generation, storage, transportation or disposal of
environmental, health or safety matters affecting Lessor, the premises, and any
improvements located thereon, except as disclosed in the attached environmental
site analysis report.
e. Prior to the execution of this Lease, or occupancy of
the premises, whichever is later, no reported occurrence of any hazardous
discharge (as defined in Section 20.03 of this Lease Agreement) except in
accordance with a valid governmental permit, license, certificate or approval
or an environmental complaint (as defined in Section 20.04 of this Lease
Agreement), except as disclosed in the attached environmental site analysis
report.
f. Lessor has provided Lessee with true, accurate and
complete information pertaining to the environmental history of the premises.
Throughout the term of this Lease, Lessor shall promptly furnish to Lessee
true, accurate and complete copies of all sampling and test results obtained
from all environmental and/or health samples and tests taken at and around the
premises including all sampling and tests results taken by any and all prior
occupants of the premises.
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20.01 Lessee's Environmental Indemnification of the Lessor. Lessee
agrees to defend, indemnify and hold harmless Lessor from and against any and
all claims, suits, demands, losses, liabilities, damages, and/or judgments,
costs and expenses (including, without limitation, any and all testing and
cleanup costs and attorneys' and consultants' fees) (hereinafter referred to as
"claims") arising directly or indirectly by reason of a hazardous discharge or
environmental complaint or any violation of an environmental protection, health
or safety law regulation, or requirement governing Lessee, its business
operations, assets or equipment, including without limitation any claims:
a. arising directly or indirectly out of, or relating to, any
investigatory, removal or remedial action involving Lessee's facility or any
governmental authority having jurisdiction under any law; or
b. arising directly or indirectly on account of, or in connection
with, any claim or injury or actual injury to any person or property, relating,
regarding, or in any way pertaining to:
(1) any of Lessee's obligations under the provisions of
this lease,
(2) the existence, treatment, storage, disposal, release,
spill, generation, removal, manufacture or other handling of any hazardous
substances or hazardous wastes on the premises by Lessee caused by or the
result of actions or operations of Lessee, or arising in the course of or
relating to Lessee's business, during the lease term provided that the
foregoing indemnity shall not apply to any hazardous discharge or environmental
complaint caused by or related to the Lessor, prior owners, prior operators,
prior occupants or prior tenants of the premises, or which cannot be shown to
have been caused by or the result of actions or operations of Lessee or arising
in the course of or relating to Lessee's business or Lessee's use of the
premises.
20.02 In case any action shall be brought against or commenced
against the Lessor, and in which Lessee may be required to indemnify the Lessor
in whole or in part pursuant to Section 20.01, the Lessor shall have the right
to assume the defense thereof, including the employment of counsel. In cases
in which the Lessor chooses not to exercise its right to assume its own
defense, the Lessor shall have the right to approve Lessee's choice of counsel,
which approval shall not be unreasonably withheld. In the event that Lessee
assumes the defense of the Lessor subsequent to the Lessor's engagement of
defense counsel (it being understood and agreed that the Lessor shall give
Lessee ten (10) days prior notice before it engages defense counsel), then
Lessee shall, upon demand of the Lessor, immediately reimburse the Lessor for
all reasonable legal fees, costs and disbursements expended or incurred by the
Lessor prior to the date Lessee assumed the
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defense thereof.
20.03 For purposes of this indemnification, the term "Hazardous
Discharge" shall include any emission, seepage, leakage, spill, discharge,
release or threatened release of any toxic or hazardous substances (as defined
in 42 U.S.C. 9601 et seq.) or hazardous wastes (as defined in 40 C.F.R. 260)
at or from the premises into or upon (i) the air, (ii) surface and subsurface
soils or any improvements located thereon, (iii) surface water or groundwater,
or (iv) the sewer, septic system or waste treatment, storage or disposal system
servicing the premises.
20.04 For purposes of this indemnification, the term "Environmental
Complaint" shall include any complaint, order, directive, claim, citation or
notice by any governmental authority or agency or any person or entity with
respect to (i) air emissions, (ii) spills, releases, or discharges to surface
and subsurface soils or improvements located thereon, surface water,
groundwater, or the sewer, septic system or waste treatment, storage or
disposal systems servicing the premises, (iii) noise emissions, (iv) solid or
liquid waste disposal, (v) use, generation, storage, transportation or disposal
of toxic or hazardous substances or hazardous wastes (as both said terms are
defined hereinabove) or (vi) other environmental, health or safety matters
affecting Lessee's or its operations that occur after the commencement of
Lessee's use of the premises.
20.05 Lessee agrees that the Lessor may at its discretion,
conduct such environmental inspections, audits and test (including soil borings
and/or ground water tests) as it shall deem necessary or desirable in order to
evaluate the environmental status of the premises as it exists. Any and all
reports of said inspections, audits and tests conducted by the Lessor, prior to
execution of this Lease and Agreement, shall define the Environmental Baseline.
20.06 Without limiting any of Lessee's obligations, Lessee
agrees specifically with respect to any contaminants and levels of
contamination identified in the Environmental Baseline as defined in Section
20.05, Lessee will take appropriate steps, at Lessee's sole cost and expense,
to accomplish any necessary removal, decontamination, site remediation,
restoration work, containment and/or monitoring under any requirement of any
governmental entity having jurisdiction over the premises now or at any time
during the lease term.
20.07 Without limiting any of Lessee's obligations, Lessee agrees
specifically with respect to any contaminants and levels of contamination in
excess of those identified in the Environmental Baseline as defined in Section
20.05 and caused by or as a result of actions or operations of Lessee or
arising in the use of or relating to Lessee's business during the lease term,
Lessee will take appropriate steps, at
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Lessee's sole cost and expense, to accomplish any necessary removal,
decontamination, site remediation, restoration work, containment and/or
monitoring under any requirement of any governmental entity having jurisdiction
over the premises. The aforementioned indemnity provisions shall service until
all such matters included or referred to herein have been determined to have
prescribed by law.
20.08 Environmental Representations and Warranties.
The Lessor represents and warrants to the Lessee, to the best of its
information, knowledge and belief, as follows:
a. The Lessor acknowledges that it has received a final report of
the Site Survey and Assessment for the Iberia Parish Airport Authority dated
February 22, 1993 and has examined same. The Lessor shall furnish Lessee the
report of Subra Company Environmental Consultants. The Lessor acknowledges that
it may exercise its rights to conduct additional sampling, tests, studies and
examinations as contemplated by Section 20.05 hereof. The Lessor shall fully
inform Lessee of the results of such sampling tests, studies and examination.
c. Throughout the lease term, Lessee shall not undertake or
permit any environmental activity other than (i) in compliance with all
applicable laws, (ii) in such a manner as not to present a significant present
or potential health risk to the Lessor. Lessee shall immediately and fully
inform the Lessor of any such breach. If Lessee shall breach the
representation provided in this section, then, in addition to any other rights
and remedies which may be available to the Lessor under this lease or otherwise
at law or in equity, Lessor may require Lessee to take all actions, or to
reimburse the Lessor for the costs of any and all action taken by the Lessor as
are necessary to comply with all applicable laws and to abate any significant
present or potential health risk with respect to any environmental activity
conducted or permitted or any Hazardous Substances or Hazardous Wastes (as both
said terms are defined hereinabove) present at the premises. Lessee's
obligation under this section shall survive the expiration or earlier
termination of this Lease.
20.09 No portion of the premises may be used for the subsurface
disposal or storage of radioactive material and/or for the disposal or
subsurface storage of hazardous materials as such term may be defined by the
regulations of the U.S. Environmental Protection Agency, or any local or state
authority. Any and all hazardous material handled or temporarily stored at or
on the premises shall be contained and used in accordance with all applicable
laws and regulations.
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ARTICLE XXI. SURRENDER OF PREMISES
21.00 Lessee agrees, that upon the expiration of the terms of this
agreement or cancellation thereof, to vacate the leased premises. All buildings
and improvements thereon will be delivered to the Lessor in good condition,
reasonable wear and tear accepted.
21.01 Lessee shall be allowed to remove improvements and fixtures
not of a permanent nature so long as the leased premises is not damaged or
defaced by said removal.
21.02 If Lessee fails to remove fixtures and improvements more than
thirty (30) days after the expiration of the lease, Lessor shall remove same at
Lessee's cost.
21.03 All improvements of a permanent nature made by Lessee during
the primary term of the lease or any extension thereof shall become property of
the Lessor at the expiration of the lease and at no cost to Lessor.
ARTICLE XXII. PRIOR AGREEMENTS AND AMENDMENTS
22.00 Lessor and Lessee agree that this lease and operating
agreement contains all that is applicable to operation of a heavy aircraft
maintenance operator at Acadiana Regional Airport and that all other prior
agreements relative thereto are ineffective.
ARTICLE XXIII. CAPTIONS
23.00 Lessor and Lessee agree that all headings in this lease and
operating agreement are used solely for convenience and shall be disregarded in
the construction of the agreement.
ARTICLE XXIV. COVENANTS AND CONDITIONS
24.00 Lessor and Lessee agree that each provision of this lease and
operating agreement which is performable by the Lessee and Lessor is herewith
deemed a covenant and a condition of this lease and operating agreement.
ARTICLE XXV. VENUE
25.00 Both parties agree that this agreement shall be construed
pursuant to the laws of the State of Louisiana and the venue for returns at law
or equity upon or affecting this lease and agreement shall be: Iberia Parish,
Louisiana.
ARTICLE XXVI. PARTIAL INVALIDITY
26.00 If any section, clause, sentence, word, or provisions of this
lease or the application thereof to any party or circumstances shall, to any
extent, be or become invalid or illegal, and such provision shall thereby
become null and void, the remainder of this lease shall not be
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affected thereby, and each remaining provision of this lease shall be valid and
enforceable to the fullest extent permitted by law.
THIS DONE AND SIGNED at New Iberia, Louisiana on this 28th day of December
1994.
WITNESSES: IBERIA PARISH AIRPORT AUTHORITY
/s/ M. I. LASSERRY /s/ WILTZ P. SEGURA
- ------------------------ ----------------------------------
/s/ GLADYS G. LANDRY BY: WILTZ P. SEGURA, CHAIRMAN
- ------------------------
PRIDE AVIATION, INCORPORATED
/s/ M. I. LASSERRY /s/ FRANK RICE
- ------------------------ ----------------------------------
/s/ GLADYS G. LANDRY BY: FRANK RICE, CHAIRMAN
- ------------------------
30
<PAGE> 1
EXHIBIT 10.9
UNITED STATES OF AMERICA
STATE OF LOUISIANA
PARISH OF IBERIA
LEASE AND OPERATING AGREEMENT BETWEEN IBERIA PARISH AIRPORT
AUTHORITY AND PRIDE AVIATION, INCORPORATED TO ESTABLISH AND
OPERATE AS A SPECIALIZED AVIATION OPERATOR AT ACADIANA
REGIONAL AIRPORT, IBERIA PARISH, LOUISIANA
This agreement, made in the City of New Iberia and Parish of Iberia,
State of Louisiana and entered into this _____ day of ____________, 1990.
By and Between
The IBERIA PARISH AIRPORT AUTHORITY, a political subdivision duly
created, organized and existng under and by virtue of a resolution of the
Police Jury of Iberia Parish, Louisiana on January 26, 1966, Resolution Number
6, hereinafter called "LESSOR" and represented by and acting through WILTZ P.
SEGURA, its Chairman, duly authorized by a Resolution of the Iberia Parish
Airport Authority (a copy of which is attached hereto), having 510 Avenue "C",
New Iberia LA 70560, as its permanent mailing address, and PRIDE AVIATION,
INCORPORATED, an Oklahoma corporation, herein represented by and acting through
FRANK RICE, its Chairman, hereinafter called "LESSEE" duly authorized by a
Resolution of the Directors of said corporation (a copy of which is attached
hereto), having 3725 Hangar Drive, as its permanent mailing address,
WITNESSETH
WHEREAS, the Lessor now operates a public airport certified under FAA
Part 139 designated as Acadiana Regional Airport, located in Iberia Parish,
Louisiana, hereinafter referred to as Airport; and
WHEREAS, the Lessee desires to locate its specialized aviation
operation on the Airport, and has bid and was awarded a contract to lease
available land with certain buildings and improvements and assignment of the
Common Aircraft Ramp Areas "A" and "B",
WHEREAS, in reliance on Lessee's bid and subsequent award, Lessor has
determined to make the site available to Lessee to be used for specialized
aviation operations, therewith.
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NOW, THEREFORE, for and in consideration of the premises and mutual
undertakings, agreements and covenants hereinafter set forth, the parties
hereto agree as follows:
ARTICLE I. PREMISES LEASED, PURPOSE, OBJECTS, RIGHTS AND PRIVILEGES
A. Leased Premises
1.00 Upon payment by Lessee of the considerations provided, and
upon the observance and performance of all the covenants, terms and conditions
on Lessee's part to be observed and performed, lessee shall peaceably and
quietly hold and enjoy the leased premises for the term or terms hereby
stipulated without hindrance or interruption by Lessor or any other person or
persons lawfully or equitably claiming by, through or under Lessor.
1.02 Lessor does hereby lease to Lessee and Lessee does hereby
accept and lease from Lessor the land, buildings and improvements of the
airport, more particularly described as follows:
A. AIRCRAFT MAINTENANCE HANGAR 88 COMPLEX COMPLETION CENTER WITH
CORPORATE OFFICES
The real estate, buildings and improvements located at the Acadiana
Regional Airport, Iberia Parish, Louisiana, being more particularly
described as follows:
TRACT A
"ABCDEFGHIJKLA"
A certain tract of parcel of land, lying and being situated at
Acadiana Regional Airport, Iberia Parish, Louisiana, measuring and
containing 684,506 square feet of area (15,714 superficial acres) and
being more particularly described as follows:
Beginning at a point on the western right-of-way line of Hangar Drive,
said point having USNAAS coordinates of y=40,093.1' and x=51,795.9';
and being designated as Point A on attached plat; thence, along the
western right-of-way line of Hangar Drive S 12` 27` E, 263.46' to
Point B and corner; thence, N 77` 30' E 9.91' to Point C and corner;
thence, S12` 40' E 417.48' to Point D and corner; thence, leaving said
Hangar Drive right-of-way S 77` 30' W 155.51' to Point E and corner;
thence, N 12` 30' W 100.38' to Point F and corner; thence, S 77` 30' W
799.62' to Point G and corner; thence, N 12` 30' W 444.53' to the edge
of the concrete apron N 77` 30' E 174.38' to Point I and corner;
thence, leaving said concrete apron N 12` 30' W 450.0' to Point J and
corner; thence, N 77` 30' E 450.0' to Point K and corner; thence, S
12` 30' E 314.06' to
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Point L and corner; thence, N 77` 30' E 319.87 to Point A, the point
of beginning.
Said tract of land contains 684,506 square feet of area (15.714
superficial acres) and is more particularly shown and delineated on
plat of survey titled "Hangar 88 Complex, Acadiana Regional Airport,
Iberia Parish, Louisiana" by G. K. Pratt Munson, Registered Land
Surveyor No. 2794, dated June 7, 1990, attached hereto and made part
hereof.
B. TRACT B "MNOPM"
A certain tract or parcel of land, lying and being situated at
Acadiana Regional Airport, Iberia Parish, Louisiana, measuring and
containing 146,758 square feet of area (3.369 superficial acres) and
being more particularly described as follows:
From a point on the western right-of-way line of Hangar Drive, said
point having USNAAS coordinates of y=40,093.1' and x=51,795.9', and
being designated as Point A on attached plat; go N 49` 21' E 90,73' to
Point M and corner; said Point M lying on the eastern right-of-way
line of Hangar Drive, and being the point of beginning; thence, N 77`
30' E 334.3' to Point N and corner; thence, S 12` 28' E 439.0' to
Point 0 and corner; thence, S 77` 30' W 334.3' to the eastern
right-of-way line of Hangar Drive and Point P and corner; thence,
along the eastern right-of-way line N 12` 28' W 439.0' to Point M, the
point of beginning.
Said tract of land contains 146,758 square feet of area (3.369
superficial acres) and is more particularly shown and delineated on
plat of survey titled "Hangar 88 Complex, Acadiana Regional Airport,
Iberia Parish, Louisiana" by G.K. Pratt Munson, Registered Land
Surveyor No. 2794, dated June 7,1990, attached hereto and made part
hereof.
AIRCRAFT RAMP
1.03 Lessee is assigned and shall have and enjoy, in common with
the general public, the use of the adjoining aircraft ramp areas which are
depicted and designated as Aircraft Ramp Areas "A" and "B" on the above
referenced survey plat and may also perform routine fueling and maintenance
operations therein. Lessee agrees that the southerly 70.3 feet of Common
Aircraft Ramp Area "A" and a portion of the Common Aircraft Ramp Area "B" shall
be maintained as a public aircraft passage, and shall be kept open by Lessee at
all times for use as an aircraft passageway and for use of emergency vehicles.
Lessee further agrees that as the Airport Authority determines a need for
permanent aircraft access
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adjoining the south side of common Aircraft Ramp Area "B", the portion of the
Common Aircraft Ramp Area "B" that lies southerly of a line projected easterly
from the south line of Tract A shall also be designated as a public aircraft
passage and shall be kept opened by Lessee at all times for use as an aircraft
passageway and for use as an aircraft passageway and for use of emergency
vehicles.
1.04 Lessee is not granted the exclusive use of the common aircraft
ramp areas but Lessor delegates and assigns to Lessee authority to oversee the
safe flow of traffic through these areas. Lessee shall have and enjoy the right
of ingress and egress to and from the leased premises, the aircraft ramp areas
and the landing areas for airplanes upon the taxiways shall be used jointly
with other tenants, operators and other designated users at the airport, and
except as may be necessary to protect the safe flow shall not interfere with
the rights and privileges of other persons or firms using said facilities.
Lessor reserves the right to designate, assign and delegate authority over any
and all aircraft ramp areas and, as may be necessary, change, alter, or adjust
said areas to enhance public use and availability, and to protect the safe flow
of all traffic, personnel, aircraft and equipment thereon. Lessor shall act
reasonably in the delegation, designation, assignment, change, alteration
and/or adjustment of said areas to substantially comply with the assignment of
aircraft ramp areas provided. LESSOR WILL NOT RESTRICT AIRCRAFT RAMP TO PREVENT
LESSEE'S USE OF HANGAR FACILITIES.
B. Purposes, Objects, Rights and Privileges
1.05 This agreement vests Lessee with the right and privilege to
operate as a Specialized Aviation Operator on the airport and the leased
premises shall be used by Lessee solely for said purposes, as defined by the
Federal Aviation Act of 1958 as amended and Specialized Aviation Operator,
Section III of the Minimum Standards and Requirements for the Conduct of
Commercial Aeronautical Services and Activities at Acadiana Regional Airport
adopted November 7, 1979, as amended on August 30, 1989, where applicable.
1.06 Lessee agrees to provide, and is herein required to provide
the aforementioned and described services and the right and privileges to
operate as a Specialized Aviation Operator hereby granted shall exist so long
as the character of the facilities operated or services furnished shall be
consistent with the requirements of the Federal Aviation Act of 1958, as
amended, and Specialized Aviation Operator, Section III of the Minimum
Standards and Requirements for the Conduct of Commercial Aeronautical Services
and Activities at Acadiana Regional Airport adopted November 7, 1979, as
amended on August 30, 1989, where applicable.
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1.07 Lessee shall not engage in those aircraft and aviation
services customerly rendered by a Fixed Based Operator (FBO) under the
Airport Minimum Standards. Any such activity is considered a breach of this
lease, or at its option, Lessor may impose a civil penalty of not more than
$500.00 for each violation. Lessor agrees not to engage in such activity and
acknowledges notice of Lessor's rights to enforcement by termination of this
lease or the imposition of civil penalties.
ARTICLE II. TERM OF LEASE, EXTENSIONS AND OPTIONS TO EXTEND;
LESSOR/LESSEE CONSTRUCTION; INDEPENDENT CONTRACTOR STATUS
A. Term of Lease, Extensions and options to Extend
2.00 This lease shall be for a primary term of ten (10) years from
the effective date hereof designated as the lst day of August, 1990.
2.01 The term of this lease may be extended, at the option of the
Lessor, if Lessee adds or contracts for permanent improvements to be
constructed or placed on or made to the land in accordance with the provisions
of Louisiana Revised Statutes, Title II, Section 135.1(B).
2.02 (A) Concurrent with the execution of this lease and operating
agreement, Lessor and Lessee will execute an Option Contract granting to Lessee
the right, exercisable within two (2) years, to lease thirteen (13) acres of
unimproved land adjacent to the leased premises.
2.02 (B) In the event Lessee exercises the aforementioned option
and adds or constructs improvements on or to the land, at its own expense, it
is the intention of the Lessor and/or Lessee to request and/or extend the
primary term of this lease and operating agreement and the primary term of
the lease and operating agreement affecting the improved (or optioned) land for
concurrent period or periods permitted under the provisions Louisiana Revised
Statutes, Title II, Section 135.1(B).
B. Lessor's Construction
2.03 Lessor may provide additional improvements to the leased
premises during the terms and extensions of this lease but is not obligated to
do so.
2.04 Lessor shall employ all efforts necessary to apply for and
obtain local, state and federal grants, loans and other aids to improve the
runways, taxiways, landing fields, air traffic control and other facilities on
the airport.
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2.05 Not later than sixty (60) days from execution of this lease and
operating agreement, Lessor shall complete and submit all documents necessary
for application to the Federal Aviation Administration (FAA) to obtain
re-certification for the highest weight classification necessary to accommodate
traffic in wide-body and narrow-body jet aircraft upon the runways, taxiways,
landing fields, and other facilities on the airport.
C. Lessee's Construction
2.06 Lessee shall make the following improvements to the interior
of the shop building (88-A) within the first twelve (12) months of the lease as
follows:
a. Repainting and clean-up of all office areas including
floors and floor repairs.
b. Installation of heating, ventilation and air
conditioning (HVAC) equipment.
2.07 All improvements shall be made in accordance with plans and
specifications provided by the Airport Authority. Engineering expertise
required for these improvements shall be provided by a duly licensed mechanical
engineer. All engineering fees associated with these improvements shall be the
responsibility of the Lessee.
2.08 The Lessee may have the use and enjoyment of the above ground
Fuel Tank Farm located on Tract "A" of the leased property. The Lessee may be
required to comply, at their expense, with all laws, regulations, rules and
orders of the Environmental Protection Agency of the United States and the
Louisiana State Department of Environmental Quality (DEQ) concerning the use,
operation and function of the above ground Fuel Tank Farm located on the leased
property. LESSOR ASSUMES LIABILITY FOR COMPLIANCE WITH ALL DEQ OR EPA ORDERS
AND REQUIREMENTS WHICH MAY BE PENDING OR OCCURED PRIOR TO LESSEE'S USE OF THE
FUEL TANK FARM. HOWEVER, LESSEE WILL BE RESPONSIBLE FOR MAKING ANY IMPROVEMENTS
TO THE FUEL TANK FARM TO PLACE SAME IN OPERATIONS UNDER DEQ & EPA REGULATIONS,
IF REQUIRED.
2.09 Lessee may construct buildings and improvements on the leased
premises to facilitate its operations and to conduct its activities and
services.
2.10 All plans and specifications for proposed construction shall
be submitted to the Authority and approved by same prior to the commencement of
construction. Lessee shall demand or provide 100% performance and lien
insurance on all such construction and name Lessor as co-obligee, additional
insured, named insured or third party beneficiary.
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2.11 All aviation hangars and buildings constructed by Lessee shall
be constructed of building materials commonly employed in aviation hangar
construction and of similar in architectural design to the present facilities
at Acadiana Regional Airport and contain sufficient area to conduct minimum
services therefrom.
2.12 All buildings and improvements constructed at Lessee's expense
shall, upon completion, be free and clear of all laborers, mechanics,
materialism, contractor, surveyor and architectural liens, privileges,
judgments and obligations excepting valid and approved mortgages for
construction or operations.
2.13 Lessee may provide adequate adjacent hard surfaced parking to
its buildings and improvements to accomodate aircraft, employees, quests, and
business invitees.
2.14 All plans and specifications for proposed construction
improvements shall be furnished by a duly licensed architect or engineer and
approved by Lessor in advance of any construction or renovation.
2.15 Upon completion of any such improvements, Lessee shall present
to Lessor a statement of the "Construction and/or Alteration Costs" which shall
include all monies paid by Lessee for actual demolition, construction or
alterations, including architectural, engineering costs and other pertinent
fees and charges.
2.16 All such improvements shall be and remain the property of
Lessor at the termination OF THE LEASE UPON LESSEE'S FAULT or abandonment by
Lessee of the leased premises, without any cost to Lessor. IF TERMINATION OF
THE LEASE OCCURS WITHOUT FAULT OR NEGLECT ON THE PART OF LESSEE, ANY RIGHT OR
CLAIM TO COMPENSATION FOR IMPROVEMENTS SHALL NOT BE AFFECTED BY LESSOR'S RIGHTS
UNDER THIS SECTION.
2.17 Lessee may have, during the life of the lease, the use and
enjoyment of the following improvements located within the leased buildings:
a. one (1) Air Compressor Package
b. one (1) Ten (10) Ton Overhead Electric Crane
2.18 Lessee shall at all times keep these items in good operating
conditon and shall be returned to the Airport Authority in good operating
condition at the end of the lease period, normal wear and tear accepted.
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D. Independent Contractor Status
2.19 Lessor and Lessee agree that Lessee will maintain independent
contractor status during the term of this lease and will not be an agent of
the Lessor. It is agreed and understood that, as an independent contractor,
such status will not constitute any liability of any nature on the part of the
Lessor for Lessee's operation and activities.
ARTICLE III. RENTALS AND OTHER CONSIDERATIONS
A. Rentals
3.00 Lessee, in consideration of the possession and use of the
premises shall be obligated to pay rental, in advance, monthly. Monthly rental
shall be paid in installments equal to one-twelfth (1/12) of the annual rental
due and payable on the lst day of each and every month.
3.01 Commencing with and continuing throughout the primary term of
this lease and any and all extensions thereof, Lessee shall pay Lessor rentals,
in cash, annually or monthly, in advance, as follows:
(a) The first five (5) years, beginning on the effective date of
the lease, an annual rental of ONE HUNDRED THOUSAND AND
No/100 ($100,000.00) DOLLARS payable in monthly installments
equal to one-twelfth (1/12th) of the annual rental, or EIGHT
THOUSAND THREE HUNDRED THIRTY-THREE AND 33/100 ($8,333.33)
DOLLARS each; and, in addition,
(b) For each successive five year period after the effective date
of the lease, and to include the original term and any
extensions thereof, the annual rental shall increase by a
compound rate of TEN (10%) PER CENT. No rate of increase shall
apply during the first five years of this lease. At the
beginning of the sixth (6th) year the annual rental shall be
calculated by adding 10% of $100,000.00 (or $10,000.00) to the
previous annual rental amount yielding an annual rental of
$110,000.00; at the beginning of the tenth (10th) year the
annual rental shall be calculated by adding 10% of $110,000.00
(or $11,000.00) to the previous annual rental amount yielding
a rental of $121,000.00; and at the beginning of the sixteenth
(16th) year the annual rental shall be calculated by adding
10% of $121,000.00 (or $12,100.00) to the previous annual
rental amount yielding an annual rental of $133,100.00.
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B. Fuel Flowage
3.02 The parties agree that in consideration of Lessee receiving
fuel and lubricating oil at Acadiana Regional Airport for aircraft, it shall
pay to the Airport Authority fuel flowage fees as follows:
(a) an amount equal to four percent (4%) of the operator's
(cost of fuel, never less than three ($0.03) per gallon, for
aviation operations at Acadiana Regional Airport: and
(b) twelve percent (12%) of the operators cost of oil and
lubricants, never less than nine ($0.09) per gallon, for
aviation operations at Acadiana Regional Airport.
3.03 Fuel flowage fees are due and payable by Lessee to Lessor, in
cash, monthly on or before the tenth (10th) day of each month. All payments of
fuel flowage fees shall be accompanied by a statement or invoice from the
wholesaler or retail fuel and lubricant distributor.
3.04 In the event that Lessee chooses to install additional fuel
tanks on the leased premises, it must first secure written approval from Lessor
to do so. If approval is granted by the Authority, then Lessee shall install
the tanks in accordance with rules, regulations and specifications of the
Louisiana State Fire Marshall, Department of Environmental Quality (DEQ) and
the U.S. Environmental Protection Agency (EPA) presently in effect and as may
be amended during the term or terms of this lease.
C. Delinquency and Default
3.05 Lessee shall be deemed in default of this lease and agreement
if Lessee fails to remit to Lessor the monthly rental installment (one-twelfth
(1/12) of the annual rental) TEN (10) days after the due date.
3.06 All monthly rental installments due and owing, but unpaid,
more than THIRTY (30) days beyond the due date shall be deemed delinquent and
shall be assessed a delinquency charge of one (1%) percent per month or twelve
(12%) percent per annum on the unpaid balance.
3.07 In the event a dispute arises as to the correct amount of rent
due, Lessor may accept the sum tendered by Lessee under protest, and if a
deficiency is subsequently determined, the delinquency charge shall apply to
any deficiency.
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3.08 Should Lessee at any time violate any of the conditions of
this lease requiring the payment of rent, fuel flowage or other monetary
obligations, as stipulated, or upon the filing of a bankruptcy, receivership or
respite petition by or against Lessee, or upon Lessee's suspension, failure or
insolvency, the rent for the whole unexpired term of this lease shall, without
demand or putting Lessee in default, become due and payable and Lessor, at its
option, has the right to cancel the lease, or re-enter and lease said premises
for such price and on such terms as may be immediately obtainable, and apply
the net amount realized to the payment of the rent. In the event the premises
are re-leased, Lessee would be liable for all Lessor's expenses, including but
not limited to loss of rent and collection expenses.
3.09 Should the premises be vacated or abandoned by Lessee because
of ejectment for breach hereof, or otherwise, or should the Lessee begin to
remove personal property or goods to the prejudice of the Lessor's privilege,
then the rent for the unexpired term, with attorney fees, shall at once become
due and exigible and Lessor, at its option, has the right to cancel the lease,
or re-enter and lease said premises for such price and on such terms as may be
immediately obtainable, and apply the net amount realized to the payment of
the rent. In the event the premises are released, Lessee would be liable for
all Lessor's expenses, including but not limited to loss of rent and
collection expenses.
3.10 The failure of the tenant to pay the rent punctually, or
thirty (30) days beyond the due date, shall be, ipso facto and without demand
or putting in default, grounds to terminate and cancel the lease. In such
event, the Lessor may take such legal steps as are necessary and appropriate
under the law to cancel the lease, to evict the Lessee or sublessees refusing
to leave the grounds leased and to recover monies due the Lessor for past due
rentals and damages for lost rentals occasioned by them. Improvements placed on
the property leased shall be subject to seizure and sale by the Lessor in order
to satisfy the Lessor's claim for monies and/or damages owed.
3.11 At the expiration of this lease, or its termination for
failure to pay the rent and fuel flowage fees, Lessee is obligated to
immediately surrender possession, and should Lessee fail to do so, it consents
to pay as liquidated damages five times the rent per day, with attorney fees
and costs. Lessee also expressly waives any notice to vacate at the expiration
of this lease and all legal delays, and hereby confesses judgement with costs,
placing Lessor in possession to be executed at once. Should Lessor allow or
permit Lessee to remain in the leased premises after the expiration of this
lease, this shall not be constructed as a reconduction of this lease.
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3.12 Failure to strictly and promptly enforce these conditions
shall not operate as a waiver of Lessor's rights, Lessor expressly reserving
the right to always enforce prompt payment of rent, or to cancel this lease,
regardless of any indulgences or extensions previously granted. Failure to
comply with any condition or obligation of this lease will make Lessee liable
for any loss or damage sustained by Lessor.
3.13 In case suit shall be brought, or an attorney shall be
employed, for recovery of the leased premises, for the recovery of rent or any
other amounts due under the provisions of this lease, or for the enforcement
of, or because of the breach of, any covenant herein contained on the part of
Lessee to be kept or performed, and a breach shall be established, Lessee shall
pay to Lessor all costs and expenses incurred, including a reasonable
attorney's fee.
3.14 Rental payments shall be made payable to the:
Iberia Parish Airport Authority
510 Avenue "C"
New Iberia, LA 70560
or to such other department or address as may be specified by Lessor in writing
from time to time.
3.15 Lessee agrees to reimburse the Lessor for advertising and
survey expenses in connection with this lease and bid in the sum of ONE
THOUSAND ONE HUNDRED THIRTY-SIX AND 67/100 ($1,136.67) DOLLARS within thirty
(30) days of the execution of this agreement.
3.16 Concurrently with the execution hereof, Lessee acknowledges
that the Lessor is in possession of cashier's check number 139434 in the sum of
THIRTY-TWO THOUSAND AND No/100 ($32,000.00) DOLLARS dated July 17, 1990, drawn
on the American Bank & Trust Company, Tulsa, Oklahoma, delivered to the Iberia
Parish Airport Authority as Lessee's bid security in the full and true sum of
TWENTY-FIVE THOUSAND AND NO/100 ($25,000.00) DOLLARS for its bid on this lease
and that said bid security is acceptable to and held, interest free by Lessor
for one (1) year as performance security for the faithful performance by Lessee
of all obligations contained in this lease. This performance security is not
intended by Lessor or Lessee, nor shall at any time be constructed to be, an
advance payment of any rental or other sums due hereunder, but is intended by
both parties to be performance security only, and shall be returned by Lessor
to Lessee at the end of the first year of the lease period, interest free,
following the satisfactory discharge by Lessee of all obligations incumbent
upon it.
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ARTICLE IV. UTILITIES
4.00 Lessee agrees to make its own arrangements for all utility
extensions, modification and services and to pay for such services and deposits
on its leased premises. No waste shall be committed or damage done to the
property of the Lessor in the establishment of said utility services.
ARTICLE V. SIGNS
5.00 Lessee is authorized to erect and install signs and
advertisements promoting its name and/or services it may offer subject to
Lessor's prior written consent, provided that such consent will not be
unreasonably withheld.
ARTICLE VI. ALTERATIONS, FURNITURE AND FURNISHING
A. Alterations
6.00 Lessee shall not construct or install any additional buildings
or structures on the leased premises nor otherwise alter or modify the leased
premises without first obtaining the written consent of Lessor. Lessor's
consent will not be unreasonably withheld.
6.01 Lessee shall not remove, alter, modify or make any structural
changes in any of the buildings or structures placed thereon without first
obtaining the written consent of Lessor, Lessor's consent will not be
unreasonably withheld.
6.02 Lessee shall not modify or make any additions to the plumbing,
electrical or other utilities therein without first obtaining the written
consent of Lessor. Lessor's consent will not be unreasonably withheld.
6.03 For the purpose of this paragraph, any penetration of the
roof, exterior walls, floor and foundation shall be considered a structural
change.
6.04 In the event Lessee makes alterations or improvements to the
leased premises, then the use thereof shall be enjoyed by Lessee during the
remaining term of the lease without the payment of additional rental and such
alterations or improvements shall become the property of Lessor at the
termination of this lease.
B. Furniture or Furnishings
6.05 Lessee agrees to install the necessary furniture, furnishings,
equipment and fixtures necessary for the conduct of its operations with the
Minimum Standards.
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ARTICLE VII. MAINTENANCE
7.00 The Lessor shall maintain the roof, walls and foundations and
all concrete or pavement of the premises in good condition.
7.01 Utility line maintenance outside the Lessee's delineated property
boundary shall be the Lessor's responsibility.
7.02 Lessor will not be responsible for damage caused by leaks in
the roof, by bursting of pipes, by freezing or otherwise, or by any vice or
defects of the leased property or the consequences thereof except in the case
of positive neglect or failure to take action toward the remedying of such
defects within reasonable time after having written notice from Lessee of such
defects and the damage caused thereby. Should Lessee fail to promptly so notify
Lessor, in writing, of any such defect, Lessee will become responsible for any
damage resulting to Lessor or other parties.
7.03 Lessee shall maintain interior plumbing fixtures, outlets, and
drains and keep them free from foreign objects and obstructions; maintain the
heating and air conditioning system, including cleaning and removal of filters
and general maintenance; and maintain the electrical system including
replacement of fixtures and lamps. Lessee shall maintain inside and
outside of premises in accordance with Airport Authority standards. Lessee
shall be responsible for major repairs to the hangar doors, the central heating
and air conditioning system, such as replacement of compressors, and major
plumbing repairs, such as replacement of fixtures or corroded sewer lines
within the boundary of the leased premises.
7.04 All major repairs to electrical and mechanical equipment
contained on the leased premises shall be made by licensed personnel. Other
repairs shall be made by skilled craftsmen performing such work regularly as a
trade. Lessee shall be responsible for maintaining electrical loads within the
designed capacity of the system as installed or modified.
7.05 Subject to the foregoing, Lessee shall maintain the leased
premises in good repair, ordinary wear and tear accepted. Lessee shall maintain
the leased premises and the assigned aircraft ramp areas in a neat and sightly
condition and shall not permit the accumulation of waste, trash or debris on
airport property.
7.06 Collection and on site storage of wrecked or derelict aircraft
or equipment not under repair shall be prohibited under the terms and
conditions of this lease.
7.07 Lessee will not allow any waste, trash, debris, fuels,
lubricants or any other material whatsoever to be discharged onto the leased
premises. Lessee shall dispose or
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contract with an EPA and/or DEQ approved operator for the removal and proper
disposal of expended lubricating oil, solvents, fuels, chemical and other
products that may accumulate as a result of the Lessee's use of the leased
premises. The Lessor may remove any waste, trash, fuel, lubricants, or other
materials discharged or otherwise placed on said leased premises by Lessee, its
employees, agents, representative, licenses, invitees, patrons or customers and
charge Lessee for such cost including testing, clean up including labor and
material.
ARTICLE VIII. PAYMENT OF TAXES
8.00 Lessee shall be liable for any and all taxes, penalties and
interest thereon assessed, levied or charged by any governmental agency against
Lessee's tangible personal property (inventory, equipment, machinery,
furnishings and other movable assets) situated on the leased premises and
against any interest acquired under this agreement.
8.01 No exemption or waive from taxes on personal or business
property insures to the benefit of Lessee by association, contract or other
relationship to the Lessor as a public body.
ARTICLE IX. COMPLIANCE WITH LAW
9.00 Lessee while exercising rights granted herein, shall observe
and comply with, and at its own cost and expense, requirements of Federal,
State or local statutes, ordinances, regulations and standards applicable to
Lessee or its use of the leased premises, including but not limited to Exhibit
"A", other rules and regulations promulgated from time to time by the Iberia
Parish Airport Authority and the Iberia Parish Council for administration of
the airport.
9.01 Lessee shall procure and maintain during the term of the
agreement, all licenses, permits and similar authorizations required for the
conduct of its business operations.
ARTICLE X. AIRPORT SECURITY
10.00 Lessee agrees that it will, at its own cost and expense,
enroll and participate in the airport security program during the term of this
agreement.
ARTICLE XI. RIGHT OF ENTRY, INSPECTION AND ACCOMPLISHMENT OF OBLIGATIONS
11.00 The Lessor reserves the right to inspect the premises, within
reasonable time periods and upon advance notice and shall be permitted to enter
and view the premises or equipment on the leased premises. Lessor shall at all
reasonable times have the right to enter the premises accompanied by Lessee for
the purpose of inspecting and of
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making such, if any, repairs that Lessor may be bound or elect to make.
ARTICLE XII. WAIVER OF LIABILITY, INDEMNITY AND INSURANCE
A. Indemnity
12.00 Lessee assumes full responsibility for the condition of the
leased premises, and all buildings, improvements, fixtures and equipment
thereon, and for all of Lessee's operations BUT DOES NOT ASSUME ANY
RESPONSIBILITY FOR LESSOR'S NEGLIGENCE OR THE NEGLIGENCE OF LESSOR'S AGENTS,
OFFICERS, OR EMPLOYEES. In the event of any suit, claim or action by Lessee,
its agents, employees, invitees or third persons is brought against Lessor or
the Iberia Parish Council to recover for, or on account of any injury to person
or property (including death) caused by any vice or defect in or upon said
leased premises, including the buildings, improvements, fixtures and equipments
thereon, or on account of Lessee's operations, Lessee agrees to appear,
defend, adjust and settle said action or claim at its sole cost and expense
and to pay satisfy any adverse judgment that may be entered on final and
determination.
12.01 Lessee will indemnify Lessor and save it harmless from and
against any and all claims, actions, loss, cost (including attorney's fees),
damages, expenses, and liability (including statutory liability and liability
under workers' compensation laws) in connection with loss of life, personal
injury and/or damage to property arising from or out of any occurrence in, upon
or at the leased premises, or the occupancy or use by Lessee of the leased
premises or any part thereof, and any activities of the Lessee in the parking
areas and common service areas sustained by Lessee and all other persons which
are occasioned wholly or in partly by any act or ommission of Lessee, Lessee's
partners, agents, sublessees, contractors, subcontractors, invitees, customers,
employees, servants, or concessionaries. In case Lessor and the Iberia Parish
Council, its individual members, the Parish President and the Airport Director
and their employees and agents shall, without fault on its part, be made a
party to any litigation commenced by or against Lessee, then Lessee shall
protect and hold Lessor harmless and shall pay all costs, expenses, and
reasonable attorney's fees incurred or paid by Lessee in connection with such
litigation.
B. Insurance
12.02 Lessee agrees to provide, at its expense, tenants liability
insurance, and to furnish Lessor a certificate of such insurance, with limits
of no less than $100,00.00 for injury to any other person and $300,00.00 for
injuries sustained in any one accident, and with property damage limits of
$25,000.00 which policy shall provide, as a condition precedent to
cancellation, for ten (10) days advance written notice to Lessor and shall name
as additional insured, the
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Lessor, and the Iberia Parish Council.
12.03 In addition to the above, Lessee shall provide the minimum
insurance requirements as listed below:
(a) Comprehensive Public Liability and Property Damage;
(i) Bodily Injury (each accident) $25,000,000.00 one offense
and any aggregate annually;
(ii) General Liability and Property Damage: General
$50,000,000.00 combined single limit, any one
occurrence/offence and annual aggregate including
products, grounding and completed operations;
(c) Motor Vehicle Liability: $1,000,000.00 combined single limit;
(d) Workman's Compensation and Employer's Liability: Up to
Statutory Limit
(e) Hangar Keepers Liability Coverage: $15,000,000.00 any one
aircraft, $30,000,000.00 any one occurrence subject to
$15,000,000.00 deductible each and every loss;
(f) Fire and Extended Coverage on all buildings and
improvements located on the leased premises in an amount of
80% of replacement cost of the improvements. Replacement cost
is defined as cost to replace the buildings and improvements
with like materials and like configuration, but in no case
less than $1,500,000.00. The Lessee shall be allowed to
determine the deductible on this all risk coverage, but Lessee
shall be fully responsible for the payment of any and all
deductibles, whatever they may be. Flood and earthquake
coverage shall not be a requirement of this section. Said
policy shall provide, as a condition for cancellation, ten
(10) days advance written notice to Lessor and shall name
Lessor and the Iberia Parish Council as additional insureds
under the policy.
12.04 If through no fault, neglect or design of Lessee,
the premises are destroyed by fire or other casualty, and provided that at the
time of such damage or destruction there exists no incured default by Lessee
under this lease, the following obligation to repair and/or reconstruct shall
apply:
(a) If the cost to repair the damage, including
architect's fees, surety bond, etc., does not exceed the sum determined and
payable by insurance underwriter under coverage for fire and extended
coverage, as estimated by an architect licensed in the State of Louisiana
selected by Lessor and any bid, acceptable to Lessor, shall be equal to or less
than the amount of the award received from insurance provided by Lessee, Lessor
shall repair the damage as expeditiously as possible.
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(b) In the event the lease is terminated by Lessor under
these provisions, the Lessor shall fairly apportion the insurance award between
Lessor and Lessee, if such insurance award is made specifically for loss of
improvements made to the leased premises by Lessee.
(c) In the event that repair and/or reconstruction of the
damage shall be undertaken, this lease shall not be cancelled, and Lessee shall
be entitled to a proportionate reduction or remission of the rent until such
damage has been repaired.
12.05 Lessee shall cause any and all policies of insurance obtained
by it, including bailee coverage, covering movable property (including
aircraft) located on the leased premises or on the adjoining aircraft apron
areas or used in connection with Lessee's operations conducted thereon and
therefrom to contain a waiver of subrogation, (excepting negligence) against
Lessor, the Iberia Parish Council, their individual members, the Airport
Director and their employees and agents.
12.06 In the event Lessee fails to procure any of the insurance
required hereunder, Lessor may, at its option, cause such insurance to be
issued at the cost and expense of Lessee, and all sums advanced for such
purpose shall be due Lessor as charges and expenses, payable on or before the
first day of the month following written notice thereof to Lessee.
ARTICLE XIII. NON-DISCRIMINATION
13.00 The Lessee, in exercising any of the rights or privileges
herein granted to it, shall not, on the grounds of age, race, color, creed,
sex, national origin or physical condition, discriminate or permit
discrimination against any person or group of persons in any manner prohibited
by Part 21 of the Regulations of the Secretary of Transportation. The Lessor is
hereby granted the right to take such actions to correct same, anything to the
contrary herein notwithstanding, as the United States may direct, to enforce
this nondiscrimination covenant.
13.01 Lessee, as a Specialized Aviation Operator, will 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 charge discriminatory prices for each unit or service; PROVIDED, THAT
the Lessee may be allowed to make reasonable and nondiscriminatory discounts,
rebates or other similar type of price reductions to volume purchasers.
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13.02 Lessee shall make its accommodations and/or services available
to the public on fair and reasonable terms without unjust discrimination on
the basis of age, race, creed, color, sex, national origin or physical
condition.
13.03 Lessee 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 age, race, color, creed, national origin, sex or
physical condition, be excluded from participating in any employment activities
covered in 14 CFR Part 152, Subpart E. The lessee assures that no person shall
be excluded on these grounds from participating in or receiving the services or
benefits of any program or activity covered by this Subpart. The Lessee assures
that it will require that its covered sub-organizations provide assurances to
the Lessee that they similarly will undertake affirmative action programs and
that they will require assurances from their sub-organizations, as required by
14 CFR Part 152, Subpart E, to the same effect.
13.04 The Lessor is granted the right to take such actions to
correct violations, anything to the contrary herein notwithstanding, as the
United States may direct, to enforce this non-discrimination covenant.
Noncompliance of the above non-discrimination provisions shall constitute a
material breach and subject the lease to immediate termination.
13.05 Non-compliance with paragraphs 13.00, 13.01, 13.02, 13.03
and 13.04, shall constitute a material breach thereof and, in the event of such
non-compliance, Lessor shall have the right, subject to the provisions of
Article XIX hereof, to terminate this lease and operating agreement and the
estate hereby created, without liability therefor, or at the election of
Lessor, or the United States, either or both said governments, shall have the
right to judicially enforce said paragraphs 13.00, 13.01, 13,02, 13.03 and
13.04.
13.06 Lessee agrees to insert the five (5) preceding provisions,
namely paragraphs 13.00, 13.01, 13.02, 13.03 and 13.04 of Article XIII, in any
lease, agreement or contract, by which Lessee grants a right or privilege to
any person, firm or corporation, to render accommodations and/or services to
the public, on the premises herein leased.
ARTICLE XIV. LESSOR'S RESERVED RIGHTS AND LESSEE'S PROTECTION
14.00 Lessor reserves the right to take any action it considers
necessary to protect the aerial approaches to the Airport against obstructions,
together with the right to prevent Lessee from erecting or permitting to be
erected, any building (or other structure, including signs and lighting
fixtures, on the Airport which, in the opinion of Lessor, would limit the
usefulness of the Airport or constitute a hazard to aircraft.
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14.01 During the time of war or national emergency, Lessor shall
have the right to lease the Airport or any part thereof to the United States
Government for military or naval use, and if any such lease is executed, the
provisions of this instrument insofar as they are inconsistent with the lease
to the government shall be suspended, and in that event a just and
proportionate part of the rent hereunder shall be abated. LESSEE SHALL HAVE NO
CLAIM AGAINST THE LESSOR FOR THE VALUE OF ANY UNEXPIRED TERM OF THIS LEASE.
LESSEE IS NOT PROHIBITED FROM ASSERTING ANY CLAIM OR CLAIMS FOR LOSS OF
IMPROVEMENTS TO THE LEASED PREMISES, LEASEHOLD ADVANTAGES AND/OR LOSS OF
BUSINESS OPPORTUNITY AGAINST THE UNITED STATES.
14.02 Any other provisions of this lease notwithstanding, this lease
shall be subordinate to the provisions of any existing or future agreement
between Lessor and the United States, relative to the operation or maintenance
of the Airport, the terms and execution of which has been or may be required as
a condition precedent to the expenditure or reimbursement to Lessor of federal
funds for the development of the Airport or reverter clause in the deed of
trust and/or conveyance to the Parish of Iberia executed by the United States
of America, on the 6th day of May, 1969 filed for record on the 9th day of May,
1969 and recorded at conveyance book 539, folio 119, entry no. 146092, records
of Iberia Parish, Louisiana.
ARTICLE XV. NOTICES, CONSENTS AND APPROVALS
15.00 Notices or other communications to Lessor pursuant to the
provisions hereof shall be sufficient if sent by registered or certified United
States mail, postage prepaid, addressed to the:
IBERIA PARISH AIRPORT AUTHORITY
510 AVENUE C
NEW IBERIA, LOUISIANA 70560
and to Lessee as follows:
PRIDE AVIATION, INCORPORATED
3725 HANGAR DRIVE
NEW IBERIA, LA. 70560
ARTICLE XVI. COVENANT TO BIND LESSOR AND LESSEE
16.00 This lease and operating agreement and all of the covenants
and conditions contained herein shall be binding upon Lessor and Lessee and
upon their respective heirs, executors, administrators, successors and assigns.
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ARTICLE XVII. SUBLETTING, ASSIGNMENT AND MORTGAGE
A. Subletting and Assignment
17.00 Any transfer, sublease or assignment (hereinafter in this
lease referred to as "transfer") of Lessee's B interest in the leased premises,
or any portion thereof, must be approved by Lessor, in advance of its
consummation or execution. If Lessee grants a transfer, without obtaining
prior approval from Lessor, such act shall constitute a material breach of this
lease and grounds for its termination.
17.01 In the event Lessor consents to a transfer, such consent shall
not constitute a waiver of any other condition, term and covenant of this
lease. All such terms, conditions, or covenants shall apply to each and every
transferor, assignee, transferee, subtenant, or other person acquiring rights
and/or interests through Lessee.
17.02 Any document to transfer, sublet or assign the premises or any
part thereof, shall incorporate, directly or by reference, all provisions of
this lease.
17.03 Occupancy of the premises by a prospective transferor,
transferee, sublessee, assignee, or assignor, prior to approval of the
transfer, sublease or assignment by Lessor, shall be deemed an unauthorized
activity and shall constitute a breach of this lease.
17.04 In the event Lessee fails to cease, remove or prohibit an
unauthorized activity, after notice by Lessor, such failure shall constitute a
material breach of this lease and shall be grounds for termination.
17.05 Lessor agrees that it will not arbitrarily or unreasonably
withhold consent to a transfer.
17.06 An application fee of $500.00 shall accompany all requests to
transfer, assign or sublease. This application fee is not refundable.
17.07 Lessor may reasonably withhold its consent to any transfer, if
any of the following conditions exist:
1. Lessee, or any of its successors or assigns, is in default
as to any term, covenant, or condition of this lease,
whether notice of default has or has not been given by
Lessee;
2. The prospective transferor or transferee has not agreed,
in writing, to keep, perform, and be bound by all terms,
covenants and conditions of this lease;
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3. All terms, covenants and conditions of the transfer,
including the consideration therefor, of any and every
kind, has not been revealed, in writing, to Lessor;
4. Any member of the local, state or federal government, or
any resident Commissioner of Lessor be admitted to any
share or part of this agreement or to any benefit that may
arise hereunder. This provision shall not be constructed to
extend to agreements make with a corporation for the
general benefit of any such party.
17.08 In no event shall Lessor's consent to a tranfer, sublease or
assignment release Lessee from the obligations of this lease.
B. MORTGAGE
17.09 Any mortgage, pledge, hypothecation or encumbrance
(hereinafter in this lease referred to as "mortgage") of Lessee's interest in
the leased premises, or any portion thereof, must be approved by Lessor, in
advance of its consummation or execution. If Lessee grants a mortgage, without
obtaining prior approval from Lessor, such act shall constitute a material
breach of this lease and grounds for its termination.
17.10 No mortgage, pledge, hypothecation or encumbrance shall bear
against immovable property owned by the Lessor or Iberia Parish, Louisiana.
Lessee does not have, nor does this lease and operating agreement grant to it,
authority, right, or privilege to mortgage lands, buildings or improvements
owned by Lessor or Iberia Parish, Louisiana. A mortgage, not approved by
Lessor, shall be deemed void and shall have not effect Lessor's rights
hereunder.
17.11 Notwithstanding the provisions of Article XVII, paragraph
17.09, Lessor agrees, upon written request by Lessee, to execute its written
consent to a mortgage of Lessee interests in this leasehold to secure the
beneficial interest of a lender for the purpose of financing construction,
development, or operations on the airport upon and subject to the following
covenants and conditions:
1. Upon application for approval of a mortgage, Lessee
shall furnish Lessor a complete copy of the mortgage
to be secured thereby, together with the name and
address of the proposed holder thereof;
2. Said lender and all rights acquired by said lender
under said mortgage shall be subject to each and every
covenent, condition, and restriction set forth in
this lease and to all
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the rights and interests of Lessor thereunder, except
as otherwise provided;
3. In the event of any conflict between the provisions
of this lease and the provisions of any such
mortgage, the provisions of this lease shall govern
and control; and
4. Upon and immediately after the recording of a
mortgage affecting the premises, Lessee, at Lessee's
expense, shall cause to be recorded in the Office of
the Clerk of Court, Iberia Parish, Louisiana, a
written request by Lessor for notice of default or
any notice of seizure and/or sale under the mortgage
as provided by the statutes of the State of Louisiana
relating thereto.
17.12 Lessor agrees that it will not terminate this lease on default
or breach on the part of Lessee, if the lender under any mortgage to which
Lessor has given its consent, within sixty (60) days after service of written
notice on the lender by Lessor of its intention to terminate this lease for
such default or breach, shall:
1. Cure such default or breach, if the same can cured by
the payment or expenditure of money required to be
paid under the terms of this lease; and
2. Keep and perform all of the covenants and conditions
of this lease requiring the payment of an expenditure
of money by Lessee until such time as the security
shall be sold upon foreclosure pursuant to the
mortgage or shall be released or reconveyed
thereunder; provided, however, that if the lender
shall fail or refuse to comply with any or all of the
provisions of this paragraph, then and thereupon,
Lessor shall be released from its covenant of
forebearance.
17.13 In the event of default not curable as aforementioned, lender
shall commence steps and proceedings for the exercise of the power of seizure
and sale under and pursuant to the mortgage and in the manner provided by law,
but assignee will first offer and Lessor shall have the option to purchase, all
rights, titles and interests in the security encumbered under said mortgage
directly from lender and without public sale for the outstanding balance due on
the note or notes secured by said mortgage.
17.14 In the event Lessor does not exercise its option to purchase
from the lender as provided above, then the prior written consent of Lessor
shall not be required and transfer or conveyance may occur under the following
conditions:
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a. The transfer of the security at foreclosure sale pursuant
to a mortgage by judicial foreclosure or by an assignment
in lieu of foreclosure; or,
b. To any subsequent transfer by the lender if the lender is
an established bank, savings and loan association or
insurance company, and is the purchaser at such
foreclosure sale, provided that in such event, the lender
forthwith gives notice to Lessor in writing of any such
transfer, setting forth the name and the express
agreement(s) with the transferee or transferor, the
effective date of such transfer, and the express agreement
of the transferee transferor assuming and agreeing to
perform all of the obligations under this lease, and
submits to Lessor a copy of the document or transfer.
17.15 Lessee, for itself, its subsidiaries, affiliates, associates,
representatives, successors, and assigns, as a part of the consideration of
this lease, hereby covenant and agree, as a covenant running with the land,
that:
1. No person on the grounds of race, color, creed, age,
sex, national origin or physical condition shall be
excluded from participation, denied the benefits or
be otherwise subjected to discrimination in the use
of said facilities:
2. That, in furnishing of services thereon, no person on
the grounds of race, color, creed, age, sex, national
origin or physical condition shall be excluded from
participation in, denied the benefits of, or
otherwise be subjected to discrimination:
3. That, Lessee shall use the premises in compliance
with all other requirements imposed by and pursuant
to Title 49, Code of Federal Regulations of the
Department of Transportation and the Civil Rights Act
of 1964, as may be amended; and
4. That, in the event of a breach of any of the
non-discrimination covenants, Lessor shall have the
right to terminate the lease and to re-enter and
repossess said land and the facilities thereon, and
hold the same as if said lease had never been made or
issued.
ARTICLE XVIII. RIGHTS OF THE UNITED STATES GOVERNMENT
18.00 This lease shall be subordinate to the provisions and
requirements of any existing agreement between Lessor and the United States
relative to the development and maintenance of the airport.
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(a) In the event any agreement between Lessor and the
United States relative to the development and maintenance of the airport
results in a total condemnation or expropriation of the leased premises for
public use or purpose, the term of this lease shall cease and terminate as of
the date title vests in the condemnor and all rentals and other payments shall
be paid up to that date, and Lessee shall have no claim against the Lessor for
the value of any unexpired term of this lease. Lessee is not prohibited from
asserting any claim or claims for loss of improvements to the leased premises,
leasehold advantages and/or loss of business opportunity against the United
States.
(b) In the event any agreement between Lessor and the
United States relative to the development and maintenance of the airport
results in a partial condemnation or expropriation of the leased premises for
public use or purpose, then Lessor and Lessee shall each have the right to
terminate this lease upon written notice to the other given at least thirty
(30) days prior to the date title vests in the condemnor and all rentals and
other payment shall be paid up to that date. Lessee shall have no claim against
Lessor for the value of any unexpired term of this lease. Lessee is not
prohibited from asserting any claim or claims for loss or improvements to the
leased premises, leasehold advantages and/or loss of business opportunity
against the United States.
(c) In the event that neither party shall elect to so
terminate this lease, Lessor, to the extent of the condemnation award, if any,
shall repair and restore the portion not affected by the taking so as to
constitute the remaining premises a complete architectural unit. Thereafter,
the rental to be paid by Lessee shall be adjusted according to the ratio that
the square footage of interior and exterior area remaining in the leased
premises bears to the former area, and all of the other terms of this lease
shall remain in full force and effect.
18.01 Lessee agrees to comply with the notification of and review
requirements covered in Part 77 of the Federal Aviation Regulations in the
event any future structure or building is planned or alteration of any present
or future building or structure situated on the premises.
18.02 It is understood and agreed that nothing herein shall be
construed to grant or authorize the granting of an exclusive right within the
meaning of Section 308 of the Federal Aviation Act of 1958.
18.03 There is hereby reserved by Lessor, its successors and
assigns, for the use and benefit of the public, a right of flight for passage
of aircraft in the airspace above the surface of the premises hereby leased
together with the right to cause in said airspace such noise as may be inherent
in the operation of aircraft, now known or hereafter used for navigation of or
flight in the air, using said airspace for
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landing at, taking off from or operating on the Airport, subject to applicable
controlling flight restrictions.
18.04 Lessee by accepting this lease expressly agrees for itself,
its successors and assigns, that it will not erect nor permit the erection of
any structure or object or permit the growth of any tree on the land leased
hereunder above a mean sea level elevation of 70 feet. In the event the
aforesaid covenant is breached, Lessor reserves the right to enter upon the
land leased hereunder and remove the offending tree or structure, all of which
shall be at the expense of Lessee.
18.05 Lessee, by accepting this lease, expressly 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, Lessor reserves the right to enter upon the premises
hereby leased and cause the abatement of such interference at the expense of
Lessee.
18.06 This lease and all 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, operations and regulation of said Airport.
18.07 The Lessee and any sublessee, transferee, subtenant,
subsidiary, affiliate, associate, successor or assign for whom consent to
acquire an interest in this leasehold, leased premises and/or privilege under
this operating agreement, is required by the Lessor, shall comply with the
Affirmative Action Plan Program requirements, if it maintains a business
located within Iberia Parish, Louisiana, and uses such business location in any
manner connected with this lease.
18.08 This lease shall be subordinate to and subject to the terms,
conditions, restrictions, and other provisions of any existing permit, lease
and/or agreement between the Lessor and the United States of America and/or any
other local, state or federal agency, relative to the control, operation or
maintenance of the Airport, the execution of which has been or will be required
as a condition precedent to the operation or control of, or to the expenditure
of Federal funds for the Airport. Lessee agrees to be bound by such terms,
conditions, restrictions or provisions.
18.09 Lessee warrants that no improvements shall be erected, placed
upon, operated nor maintained within the premised, nor any business or other
activity conducted or carried on therein or therefrom, in violation of the
terms of this lease, or of any regulation, order of law, statute, bylaw, or
ordinance of a governmental agency having jurisdiction and any breach of said
warranty shall constitute a breach of this lease.
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<PAGE> 26
ARTICLE XIX. TERMINATION BY LESSOR AND WAIVER OF BREACH
19.00 In the event that Lessee shall fail to perform, keep and
observe any of the terms, covenants or conditions herein, Lessor may give
written notice to Lessee to use due diligence to correct such condition or
default, and if Lessee fails to correct such condition or fails to commence
action to correct within THIRTY (30) days after receipt of such notice, or
fails to diligently pursue such action to correct after same has been commence,
Lessor may terminate this agreement by giving ten (10) days notice thereof.
19.01 No default on the part of the Lessee shall be deemed to
continue so long as Lessee shall have taken action to correct the same and
shall be diligently prosecuting such action.
19.02 In any case where Lessor shall be entitled hereunder to
terminate this lease agreement for failure of the Lessee to correct or cure a
default after due notice, Lessor may, as an alternative to termination of the
lease agreement, perform the obligation imposed under this lease and operating
agreement for the account of and at the expense of the Lessee and the same
shall be paid by Lessee as additional charges due under the lease.
19.03 Lessor may terminate this agreement and all of its obligations
hereunder by giving Lessee ten (10) days written notice upon or after filing by
Lessee of a voluntary petition in bankruptcy.
19.04 Lessor may terminate this agreement and all of its obligations
hereunder by giving Lessee sixty (60) days written notice upon or after failure
of Lessee to vacate or set aside the following:
a. If involuntary proceedings in bankruptcy be
instituted against the Lessee and the Lessee is
thereafter adjudicated a bankrupt pursuant to such
proceedings;
b. If a court shall take jurisdiction of the Lessee
pursuant to proceedings brought under the provisions
of any Federal Reorganization Act; or
c. If a receiver of Lessee's assets be appointed.
19.05 Lessor may terminate this agreement and all of its obligations
hereunder by giving Lessee ten (10) days written notice upon the happening of
either or both of the following events:
26
<PAGE> 27
a. If Lessee voluntarily abandons and
discontinues the conduct and operation of its
service at the Airport for a continuous
period of 30 days; or
b. If Lessee abandons any of the premises leased
to it hereunder at any time, except when such
abandonment be caused by fire, flood,
earthquake, war, strike or other calamity
beyond Lessee's control.
B. WAIVER OF BREACH
19.06 No waiver by Lessor of any of the terms, covenants,
or conditions hereof to be performed, kept or observed by Lessee, shall be
construed to be, or act as a waiver of any subsequent default of the terms,
covenants and conditions. The acceptance of rental by Lessor for any period or
periods after default of any of the terms, conditions, or covenants shall not
be deemed a waiver of any right on the part of the Lessor to cancel this
agreement for failure by Lessee to perform, keep or observe any of the terms,
covenants or conditions of this agreement.
ARTICLE XX. SURRENDER OF PREMISES
20.00 Lessee agrees, that upon the expiration of the terms of this
agreement or cancellation thereof, to vacate the leased premises. All buildings
and improvements thereon will be delivered to the Lessor in good condition,
reasonable wear and tear accepted.
20.01 Lessee shall be allowed to remove improvements and fixtures
not of a permanent nature so long as the leased premises is not damaged or
defaced by said removal.
20.02 If Lessee fails to remove fixtures and improvements more than
ninety (90) days after the expiration of the lease, Lessor shall remove same at
Lessee's cost.
20.03 All improvements of a permanent nature made by Lessee during
the primary term of the lease or any extension thereof shall become property of
the Lessor at the expiration of the lease.
ARTICLE XXI. PRIOR AGREEMENTS AND AMENDMENTS
21.00 Lessor and Lessee agree that this lease and operating
agreement contains all that is applicable to operation of a Specialized
Aviation Operator at Acadiana Regional Airport and that all other prior
agreements relative thereto are ineffective.
27
<PAGE> 28
ARTICLE XXII. CAPTIONS
22.00 Lessor and Lessee agree that all headings in this lease and
operating agreement are used solely for convenience and shall be disregarded in
the construction of the agreement.
ARTICLE XXIII. COVENANTS AND CONDITIONS
23.00 Lessor and Lessee agree that each provision of this lease and
operating agreement which is performable by the Lessee and Lessor is herewith
deemed a covenant and a condition of this lease and operating agreement.
ARTICLE XXIV. VENUE
24.00 Both parties agree that this agreement shall be construed
pursuant to the laws of the State of Louisiana and the venue for returns at law
or equity upon or affecting this lease and agreement shall be: Iberia Parish,
Louisiana.
ARTICLE XXV. PARTIAL INVALIDITY
25.00 If any section, clause, sentence, word, or provisions of this
lease or the application thereof to any party or circumstances shall, to any
extent, be or become invalid or illegal, and such provision shall thereby
become null and void, the remainder of this lease shall not be affected
thereby, and each remaining provision of this lease shall be valid
and enforceable to the fullest extent permitted by law.
THIS DONE AND SIGNED at New Iberia, Louisiana on this 23rd day July, 1991.
WITNESSES: IBERIA PARISH AIRPORT AUTHORITY
/s/ M.I. LASSERRY, JR. /s/ WILTZ P. SEGURA
----------------------- ------------------------------------
By: WILTZ P. SEGURA, CHAIRMAN
/s/ GLADYS G. LANDRY
-----------------------
PRIDE AVIATION, INCORPORATED
/s/ M.I. LASSERRY, JR. /s/ FRANK RICE
----------------------- ---------------------------
By: FRANK RICE, CHAIRMAN
[ILLEGIBLE]
-----------------------
28
<PAGE> 29
AGREEMENT
State of Louisiana
Parish of Iberia
BE IT KNOWN, that on this 12th day of December l992 in the
presence of the undersigned competent witnesses, there personally came and
appeared, IBERIA PARISH AIRPORT AUTHORITY, herein represented by and acting
through WILTZ P. SEGURA, its Chairman, duly authorized (hereafter referred to
as LESSOR) and PRIDE AVIATION, INCORPORATED, herein represented by an acting
through FRANK RICE, its President, duly authorized (hereafter referred to as
LESSEE) witnesseth that:
Pride Aviation, Incorporated, has executed a lease and
operating agreement with the Iberia Parish Airport Authority on July 23, 1991,
and filed for record in the Iberia Parish Clerk of Court office on July 25,
1991 in conveyance book 1015, entry no. 91-4896 for the lease of Hangar No.
88/88A at Acadiana Regional Airport and option to lease 13.544 acres dated this
same date; and
WHEREAS, the Iberia Parish Airport Authority has secured
sufficient funding in the amount of $2,366,758 to build a hangar expansion
State project no. 50-N018-91B-1 to be leased back to Pride Aviation,
Incorporated; and
In consideration of this construction, Pride Aviation,
Incorporated hereby agrees to the following:
(a) Execute any and all documents or reformations,
amendments and/or recission of leases or new leases to secure the occupancy of
the land and improvements known as "The Hangar Expansion Project."
(b) Pay an annual rental of $158,100 or $13,175
monthly with 10% escalation every fifth (5) year
This rental shall be due on the first day of every month and
shall be payable on or before the 10th day of every month.
<PAGE> 30
Rental payments shall start 120 days after substantial
completion of the hangar has been granted by the Iberia Parish Airport
Authority.
THUS DONE, PASSED AND EXECUTED, at Iberia Parish, Louisiana,
on the date first above written in the presence of the competent witnesses,
after a full reading of the foregoing in its entirety.
WITNESSES: IBERIA PARISH AIRPORT AUTHORITY
/s/ M.I. LASSERRY, JR. By: /s/ WILTZ P. SEGURA
--------------------- --------------------------------
/s/ GLADYS G. LANDRY Wiltz P. Segura, Chairman
---------------------
PRIDE AVIATION, INCORPORATED
/s/ M.I. LASSERRY, JR. By: /s/ FRANK RICE
---------------------- --------------------------------
/s/ GLADYS G. LANDRY Frank Rice, President
----------------------
[ILLEGIBLE]
------------------------
Notary Public
<PAGE> 31
STATE OF LOUISIANA
PARISH OF IBERIA
I hereby certify that the above and foregoing is a true and correct copy of
the original filed for record on 12-10-92 at 3:10 PM and duly recorded in
Conv. Book 1044 at folio____Entry No. 92-8907 of the records of Iberia Parish,
Louisiana.
IN FAITH WHEREOF WITNESS MY OFFICIAL HAND AND SEAL
OF OFFICE ON THIS 10TH DAY OF DECEMBER, 1992
/s/ ANITA D. McCOY
- -----------------------------------------
Deputy Clerk of Court, Iberia Parish, LA.
<PAGE> 1
EXHIBIT 10.10
STATE OF LOUISIANA
PARISH OF IBERIA
LEASE AND OPERATING AGREEMENT TO ESTABLISH AND OPERATE
AS A SPECIALTY AVIATION OPERATOR AT
ACADIANA REGIONAL AIRPORT, IBERIA PARISH, LOUISIANA
This agreement, made in the City of New Iberia and Parish of Iberia,
State of Louisiana and entered into this 2nd day of October, 1991,
By and Between
The IBERIA PARISH AIRPORT AUTHORITY, a political subdivision duly
created, organized and existing under and by virtue of a resolution of the
Police Jury of Iberia Parish, Louisiana on January 26, 1966, being Resolution
Number 6, hereinafter called "LESSOR" and represented by and acting through
WILTZ P. SEGURA, its Chairman, duly authorized, having 510 Avenue "C", New
Iberia, LA 70560, as its permanent mailing address, and PRIDE AVIATION,
INCORPORATED, a corporation, herein represented by and acting through FRANK
RICE, its President and Chief Executive officer, hereinafter called "LESSEE",
duly authorized by a Resolution of the Directors of said corporation, a copy of
which is attached hereto, having 3725 Hangar Drive, New Iberia, LA 70560 as its
permanent mailing address,
WITNESSETH
WHEREAS, the Lessor now operates a public airport certified under FAA
Part 139 designated as Acadiana Regional Airport, located in Iberia Parish,
Louisiana, hereinafter referred to as Airport; and
WHEREAS, the Lessee desires to locate its specialty aviation operation
on the Airport, and pursuant to State of Louisiana Revised Statutes 2:135.1(I),
wherein, leases of airport operational space, facilities, equipment and other
airport land and improvements at ARA may be entered into without advertising or
competitive bidding with persons engaged in the manufacture, storage,
maintenance, retrofitting, repair, and maintenance of aircraft in excess of one
hundred fifty thousand pounds. Lessor has determined to make the site available
to Lessee to be used for aviation specialty shop operations, therewith.
WHEREAS, the Iberia Parish Airport Authority has determined that Pride
Aviation, Inc., meets all requirements of LRS 2:135.1 (I) and is in possession
of FAA Repair Station Certification No. PHPR948K.
<PAGE> 2
NOW, THEREFORE, for and in consideration of the premises and mutual
undertakings, agreements and covenants hereinafter set forth, the parties
hereto agree as follows:
ARTICLE I. PREMISES LEASED AND PURPOSE, OBJECTS, RIGHTS AND PRIVILEGES
A. Leased Premises
1.00 Lessor does hereby lease to Lessee and Lessee does hereby
accept and lease from Lessor the land, buildings and improvements of the
airport, more particularly described as follows:
TRACT NO.1
Beginning at an iron rod on the western edge of a 50' wide concrete slab known
as Industrial Drive, said rod having USNAAS coordinates of Y=47,483.06' and
X=50,228.55'; thence, along the western edge of said Industrial Drive S10'53'W
90.00' to an iron rod; thence, leaving said Industrial Drive N79'07'W 110.28'
to an iron rod; thence, N10'53'E 90.00' to an iron rod; thence, S79'07'E 110.28
to the point of beginning. Said tract of land contains 0.227 superficial acres.
TRACT NO. 2
From an iron rod on the western edge of a 50' wide concrete slab known as
Industrial Drive, said rod having USNAAS coordinates of Y=47,483.06' and
X=50,228.55'; go along the western edge of Industrial Drive S10'53'W 426.84' to
an iron rod having USNAAS coordinates of Y=47,063.89' and X=50,147.95', said
point being the point of beginning; thence, continuing along the western edge
of Industrial Drive S10'53'W 493.62' to the Point of Curvature of a curve;
thence, on a curve to the right, (said curve having a deflection angle of
117'00', and a radius of 25.00'), a distance of 51.05' to the Point of
Tangency; thence, S37'53'W 1.15' to a point on the northeastern edge of a 50'
wide concrete taxiway; thence, along the northeastern edge of a 50' wide
concrete taxiway N52'07'W 484.98' to a point; thence, leaving said taxiway
N10'42'E 296.75' to a point; thence, S79'07'E 469.95' to the point of
beginning. Said tract of land contains 4.469 superficial acres.
Both tracts of land are more particularly shown and delineated on a Plat of
Survey by G.K. Pratt Munson, Registered Land Surveyor #2794, dated June 9,
1988, attached hereto and made a part hereof.
2
<PAGE> 3
Tract No.1 is subject to a right-of-way for Industrial Drive.
Tract No. 2 is subject to a right-of-way for Industrial Drive and to a Public
Aircraft Passage, all as shown on said plat.
These passage areas shall be maintained as a public aircraft passage,
and shall be kept open by Lessee at all times for use as an aircraft passageway
and for use of emergency vehicles.
Lessee is not granted the exclusive use of the common aircraft ramp
areas but Lessor delegates and assigns to Lessee authority to oversee the safe
flow of traffic through these areas and the Lessee shall have and enjoy the
right of ingress and egress to and from the leased premises, the aircraft ramp
areas and the landing areas for airplanes upon the taxiways and roadways of
Lessor. Lessor's roadways, aircraft ramp areas and taxiways shall be used
jointly with other tenants, operators and other designated users at the
airport, and except as may be necessary to protect the safe flow of traffic and
the safety of personnel, aircraft and equipment, Lessee shall not interfere
with the rights and privileges of other persons or firms using said facilities.
Lessor reserves the right to designate, assign and delegate authority over any
and all aircraft ramp areas and, as may be necessary, change, alter, or adjust
said areas to enhance public use and availability, and to protect the safe flow
of all traffic, personnel, aircraft and equipment thereon. Lessor shall act
reasonably in the delegation, designation, assignment, change, alteration
and/or adjustment of said areas to substantially comply with the assignment of
aircraft ramp areas provided.
B. Purpose, Objects, Rights and Privileges
1.01 This agreement vests Lessee with the right and privilege to
operate as a specialized aviation operator on the airport and the leased
premises shall be used by Lessee solely for said purposes, as defined by the
Federal Aviation Act of 1958 as amended and the Minimum Standards and
Requirements for the Conduct of Commercial Aeronautical Services and Activities
at Acadiana Regional Airport adopted November 7, 1979, as amended on August 30,
1989, where applicable.
3
<PAGE> 4
1.02 Lessee agrees to provide, and is herein required to provide
the aforementioned and described services and the right and privilege to
operate as an Aviation Specialty Shop hereby granted shall exist so long as the
character of the facilities operated or services furnished shall be consistent
with the requirements of the Federal Aviation Act of 1958, as amended.
1.03 Lessee shall not engage in those aircraft and aviation
services customerly rendered by an FBO under the airport Minimum Standards. Any
such activity is considered a breach of this lease, or at its option, Lessor
may impose a civil penalty of not more than $500.00 for each violation. Lessor
agrees not to engage in such activity and acknowledges notice of Lessor's
rights to enforcement by termination of this lease or the imposition of civil
penalties.
ARTICLE II. TERM OF LEASE, EXTENSIONS AND OPTIONS TO EXTEND; LESSOR/LESSEE
CONSTRUCTION; INDEPENDENT CONTRACTOR STATUS
A. Term of Lease, Extensions and Options to Extend
2.00 This lease shall be for a primary term of ten (10) years from
the effective date hereof designated as the lst day of February, 1991.
2.01 The term of this lease may be extended, at the option of the
Lessor, if, within the primary term, Lessee adds or contracts for permanent
improvements to be constructed or placed on or made to the land in the amount
of not less than twenty (20) thousand dollars.
2.02 The option to extend the term of this lease must be exercised
by the Lessee giving written notification to the Lessor and upon a proper
showing that such improvements have, in fact, been made or contracted in
accordance with the provisions of Louisiana Revised Statutes, Title II, Section
135.1(B).
B. Lessor's Construction
2.03 Lessor may provide additional improvements to the leased
premises during the terms and extensions of this lease but is not obligated to
do so.
C. Lessee's Construction
2.04 It may be necessary for the Lessee to make certain
improvements to the exterior of the hangar area within the first twelve (12)
months of the lease as follows:
Modifications to the hangar doors in order to widen the hangar
door openings to 80'.
4
<PAGE> 5
2.05 Engineering expertise required for these improvements shall be
provided by a duly licensed engineer. All engineering fees associated with
these improvements shall be the responsibility of the Lessee.
2.06 Lessee may construct buildings and improvements on the leased
premises to facilitate its operations and to conduct its activities and
services.
2.07 All plans and specifications for proposed construction shall
be submitted to the Authority and approved by same prior to the commencement of
construction. Lessee shall demand or provide 100% performance and lien
insurance on all such construction and name Lessor as co-obligee, additional
insured, named insured or third party beneficiary.
2.08 All aviation hangars and buildings that may be constructed by
Lessee shall be of pre-engineered metal construction, similar in architectural
design to the present facilities at Acadiana Regional Airport and contain
sufficient area to conduct minimum services therefrom.
2.09 The buildings and improvements shall be constructed at
Lessee's expense and shall, upon completion, be free and clear of all laborers,
mechanics, materialman, contractor, surveyor and architectural liens,
privileges, judgments and obligations excepting valid and approved mortgages
for construction or operations.
2.10 Lessee may provide adequate adjacent hard surfaced parking to
its buildings and improvements to accommodate employees, guests and business
invitees.
2.11 All plans and specifications for proposed construction
improvements shall be furnished by a duly licensed architect or engineer and
approved by Lessor in advance of any construction or renovation.
2.12 Upon completion of any such improvements, Lessee shall present
to Lessor a statement of the "Construction and/or Alteration Costs" which shall
include all monies paid by Lessee for actual demolition, construction or
alterations, including architectural, engineering costs and other pertinent
fees and charges.
2.13 All such improvements shall be and remain the property of
Lessor at the termination or abandonment by Lessee of the leased premises,
without any cost to Lessor, but the use thereof shall be enjoyed by Lessee
during the remaining term of the lease, or any extension thereof, without the
payment by Lessee of additional rental.
5
<PAGE> 6
D. Independent Contractor Status
2.14 Lessor and Lessee agree that Lessee will maintain independent
contractor status during the term of this lease and will not be an agent of the
Lessor. It is agreed and understood that, as an independent contractor, such
status will not constitute any liability of any nature on the part of the
Lessor for Lessee's operations and activities.
ARTICLE III. RENTALS AND OTHER CONSIDERATIONS
A. Rentals
3.00 Lessee, in consideration of the possession and use of the
premises shall be obligated to pay an annual rental of $16,190.00. The annual
rental shall be due and payable on January 1, of each and every year. The
annual rental may be paid in monthly installments equal to one-twelfth (1/12)
of the annual rental due and payable on the 1st day of each and every month.
3.01 Commencing with and continuing throughout the primary term of
this lease and any and all extensions thereof, Lessee shall pay Lessor rentals,
in cash, annually or monthly, in advance, as follows:
(a) The first five (5) years, an annual rental of $16,190.00 or
monthly installments equal to one-twelfth (1/12) of the annual rental or
$1,350.00; and
(b) Each successive five year period the annual rental shall
increase by 10% of the original annual amount of the lease compounded every
five (5) years reckoning from the date of commencement of the lease and to
include the original lease term and any extensions thereof.
B. Fees On Aircraft Ramp
3.02 Lessee shall pay to Lessor for the privilege of use and
occupancy of the above described aircraft ramp areas royalty fees.
The royalty fees have been included in the annual rental
computation in accordance with the minimum standards and are not listed
separately in this agreement.
C. Fuel Flowage
3.03 The parties agree that in consideration of Lessee receiving
fuel and lubricating oil at Acadiana Regional Airport for aircraft, it shall
pay to the Airport Authority fuel flowage fees as follows:
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<PAGE> 7
(a) an amount equal to four percent (4%) on operator's invoiced
cost of fuel, never less than three cents ($0.03) per gallon, intended for into
plane operations at Acadiana Regional Airport, and
(b) twelve percent (12%) of operator's invoiced cost of oil and
lubricants, never less than nine cents ($0.09) per gallon, delivered to
Acadiana Regional Airport.
3.04 Fuel flowage fees are due and payable by Lessee to Authority,
in cash, monthly on or before the tenth (10th) day of each month. It is
understood that all payments of fuel flowage fees shall be accompanied by a
statement or invoice from the wholesaler or retail fuel and lubricant
distributor who delivered said fuel, oil and/or lubricants to Lessee.
3.05 In the event that Lessee chooses to install additional fuel
tanks on the leased premises, it must first secure written approval from
Authority to do so. If approval is granted by the Authority, then Lessee shall
install the tanks in accordance with rules, regulations and specifications of
the Louisiana State Fire Marshall, Department of Environmental Quality (DEQ)
and the U.S. Environmental Protection Agency (EPA) presently in effect and as
may be amended during the terms of this lease.
D. Delinquency and Default
3.06 In the event, Lessee fails to remit to Authority, in cash, the
advance annual rental (or advance monthly installments equal to one-twelfth
(1/12) of the annual rental) more than 30 days beyond the due date, Lessee
shall be deemed in default of this lease and agreement.
3.07 All annual rental payments (or monthly installments equal to
one-twelfth of the annual rental) due and owing, but unpaid more than 30 days
beyond the due date shall be deemed delinquent and shall be assessed a
delinquency charge of one (1%) percent per month or twelve (12%) percent per
annum.
3.08 In the event dispute arises as to the correct amount of rent
due, Authority shall accept the sum tendered by Lessee under protest, and if a
deficiency is subsequently determined, the delinquency charge shall apply only
to the amount of the actual deficiency.
3.09 Should Lessee at any time violate any of the conditions of
this lease requiring the payment of rentals, fuel flowage or other monetary
considerations, or fail to comply with any of its obligations, as stipulated or
upon the filing of a bankruptcy, receivership or respite petition by or against
Lessee, or upon Lessee's suspension, failure or insolvency, the rent for the
whole unexpired term of this lease shall, without demand or putting
7
<PAGE> 8
Lessee in default, become due and payable and Lessor, at its option, has the
right to cancel the lease, or re-enter and lease said premises for such price
and on such terms as may be immediately obtainable, and apply the net amount
realized to the payment of the rent. In the event the premises are re-leased,
Lessee would be liable for all Lessor's expenses, including but not limited to
loss of rent and collection expenses.
3.10 Should the premises be vacated or abandoned by Lessee because
of ejectment for breach hereof, or otherwise, or should the Lessee begin to
remove personal property or goods to the prejudice of the Lessor's privilege,
then the rent for the unexpired term, with attorney fees, shall at once become
due and exigible and Lessor, at its option, has the right to cancel the lease,
or re-enter and lease said premises for such price and on such terms as may be
immediately obtainable, and apply the net amount realized to the payment of the
rent. In the event the premises are released, Lessee would be liable for all
Lessor's expenses, including but not limited to loss of rent and collection
expenses.
3.11 The failure of the tenant to pay the rent punctually or before
the date upon which the rental falls due, shall ipso facto and without demand
or putting in default, terminate and cancel the lease. In such event, the
Lessor may take such legal steps as are necessary and appropriate under the law
to cancel the lease, to evict the tenant or tenants refusing to leave the
grounds leased and to recover monies due the Lessor for past due rentals and
damages for lost rentals occasioned by the tenants. Improvements placed on the
property leased shall be subject to seizure and sale by the Lessor in order to
satisfy the Lessor's claim for monies and/or damages owed by delinquent
tenants.
3.12 At the expiration of this lease, or its termination for other
causes, Lessee is obligated to immediately surrender possession, and should
Lessee fail to do so, he consents to pay as liquidated damages five times the
rent per day, with attorney fees and costs. Lessee also expressly waives any
notice to vacate at the expiration of this lease and all legal delays, and
hereby confesses judgment with costs, placing Lessor in possession to be
executed at once. Should Lessor allow or permit Lessee to remain in the leased
premises after the expiration of this lease, this shall not be construed as a
reconduction of this lease.
3.13 Failure to strictly and promptly enforce these conditions
shall not operate as a waiver of Lessor's rights, Lessor expressly reserving
the right to always enforce prompt payment of rent, or to cancel this lease,
regardless of any indulgences or extensions previously granted. Failure to
comply with any condition or obligation of this lease will make Lessee liable
for any loss or damage sustained by Lessor.
8
<PAGE> 9
3.14 In the event it becomes necessary to employ an attorney at law
for the purpose of collecting rental under this lease, by suit or otherwise,
Lessee obligates itself to pay the fees of the attorney so employed which fees
are hereby fixed at the sum of fifteen (15%) per cent of the amount placed in
said attorney's hands for collection, provided that in no event shall said fees
be less than $500.00. If it should become necessary for Lessor to employ an
attorney for the purpose of cancelling the lease because of Lessee's violation
of any other term, Lessee obligates itself to pay the reasonable fees of the
attorney so employed and all costs of said proceedings.
3.15 Rental payments as aforesaid shall be made payable to the:
Iberia Parish Airport Authority
510 Avenue "C"
New Iberia, LA 70560
or to such other department or address as may be specified by Authority in
writing from time to time.
ARTICLE IV. UTILITIES
4.00 Lessee agrees to make its own arrangements for all utility
extensions, modification and services and to pay for such services and deposits
on its leased premises. No waste shall be committed or damage done to the
property of the Lessor in the establishment of said utility services.
ARTICLE V. SIGNS
5.00 Lessee is authorized to erect and install signs and
advertisements promoting its name and/or services it may offer subject to
Lessor's prior written consent, provided that such consent will not be
unreasonably withheld.
ARTICLE VI. ALTERATIONS, FURNITURE AND FURNISHINGS
A. Alterations
6.00 Lessee shall not construct or install any additional buildings
or structures on the leased premises nor otherwise alter or modify the lease
premises without first obtaining the written consent of Lessor. Lessor's
consent will not be unreasonably withheld.
6.01 Lessee shall not remove, alter, modify or make any structural
changes in any of the buildings or structures placed thereon without first
obtaining the written consent of Lessor. Lessor's consent will not be
unreasonably withheld.
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6.02 Lessee shall not modify or make any additions to the plumbing,
electrical or other utilities therein without first obtaining the written
consent of Lessor. Lessor's consent will not be unreasonably withheld.
6.03 For the purpose of this paragraph, any penetration of the
roof, exterior walls, floor and foundation shall be considered a structural
change.
6.04 In the event Lessee makes alterations or improvements to the
leased premises, then the use thereof shall be enjoyed by Lessee during the
remaining term of the lease without the payment of additional rental and such
alterations or improvements shall become the property of Lessor at the
termination of this lease.
B. Furniture or Furnishings
6.05 Lessee agrees to install the necessary furniture, furnishings,
equipment and fixtures necessary for the conduct of its operations in
accordance with the Minimum Standards.
ARTICLE VII. MAINTENANCE
7.00 The Lessor shall maintain the roof, walls and foundations of
the premises in good condition.
7.01 Utility line maintenance outside the Lessee's delineated
property boundary shall be the Authority's responsibility.
7.02 Lessor will not be responsible for damage caused by leaks in
the roof, by bursting of pipes, by freezing or otherwise, or by any vice or
defects of the leased property or the consequences thereof except in the case
of positive neglect or failure to take action toward the remedying of such
defects within reasonable time after having written notice from Lessee of such
defects and the damage caused thereby. Should Lessee fail to promptly so notify
Lessor in writing of any such defect, Lessee will become responsible for any
damage resulting to Lessor or other parties.
7.03 Lessee shall maintain interior plumbing fixtures, outlets, and
drains and keep them free from foreign objects and obstructions; maintain the
heating and air conditioning system, including cleaning and removal of filters
and general maintenance; and maintain the electrical system including
replacement of fixtures and lights. Lessee shall maintain inside and outside of
premises up to normal standards. Lessee shall be responsible for major repairs
to the hangar doors, the heating and air conditioning system and major plumbing
repairs.
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7.04 All major repairs to electrical and mechanical equipment
contained on the leased premises shall be made by licensed personnel. Other
repairs shall be made by skilled craftsmen performing such work regularly as a
trade. Lessee shall be responsible for maintaining electric loads within the
designed capacity of the system as installed or modified.
7.05 Subject to the foregoing, Lessee shall maintain the leased
premises in good repair, ordinary wear and tear accepted. Lessee shall maintain
the leased premises and the assigned aircraft ramp areas in a neat and sightly
condition and shall not permit the accumulation of waste, trash or debris on
airport property.
7.06 Collection and on site storage of wrecked or derelict aircraft
and related items shall be prohibited under the terms and conditions of this
lease. However, Lessee may store for repair or maintenance such aircraft on a
limited basis not to exceed twelve (12) months.
7.07 Lessee will not allow any waste, trash, debris, fuels,
lubricants or any other material whatsoever to be discharged onto the leased
premises. Lessee shall dispose or contract with a DEQ approved operator for the
removal and proper disposal of expended lubricating oil, solvents, fuels,
chemicals and other products that may accumulate as a result of the Lessee's
use of the leased premises. The Authority may remove any waste, trash, fuel,
lubricants, or other materials discharged or otherwise placed on said leased
premises by Lessee, its employees, agents, representative, licenses, invitees,
patrons or customers and charge Lessee for such cost including testing and
clean up including labor and material.
ARTICLE VIII. PAYMENT OF TAXES
8.00 Lessee shall be liable for any and all taxes, penalties and
interest thereon assessed, levied or charged by any governmental agency against
Lessee's tangible personal property (inventory, equipment, machinery,
furnishings and other movable assets) situated on the leased premises and
against any interest acquired under this agreement.
8.01 No exemption or waive from taxes on personal or business
property inures to the benefit of Lessee by association, contract or other
relationship to the Airport Authority as a public body.
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ARTICLE IX. COMPLIANCE WITH LAW
9.00 Lessee while exercising rights granted herein, shall observe
and comply with, and at its own cost and expense, requirements of Federal,
State or local statutes, ordinances, regulations and standards applicable to
Lessee or its use of the leased premises, including but not limited to Exhibit
"A", other rules and regulations promulgated from time to time by the Iberia
Parish Airport Authority and the Iberia Parish Council for administration of
the airport.
9.01 Lessee shall procure and maintain during the term of the
agreement, all licenses, permits and similar authorizations required for the
conduct of its business operations.
ARTICLE X. AIRPORT SECURITY
10.00 Lessee agrees that it will, at its own cost and expense,
enroll and participate in the airport security program during the term of this
agreement.
ARTICLE XI. RIGHT OF ENTRY, INSPECTION AND ACCOMPLISHMENT OF OBLIGATIONS
11.00 The Lessor reserves the right to inspect the premises and
shall be permitted to enter and view the premises or equipment on the leased
premises. Lessor shall at all reasonable times have the right to enter the
premises accompanied by Lessee for the purpose of inspecting and of making
such, if any, repairs that Lessor may be bound or elect to make.
ARTICLE XII. WAIVER OF LIABILITY, INDEMNITY AND INSURANCE
A. Indemnity
12.00 Lessee assumes full responsibility for the condition of the
leased premises, and all buildings, improvements, fixtures and equipment
thereon, and for all of Lessee's operations BUT DOES NOT ASSUME ANY
RESPONSIBILITY FOR LESSOR'S NEGLIGENCE OR THE NEGLIGENCE OF LESSOR'S AGENTS,
OFFICERS, OR EMPLOYEES. In the event of any suit, claim or action by Lessee,
his agents, employees, invitees or third persons brought against Lessor or the
Iberia Parish Council to recover for or on account of any injury to property or
persons (including death) caused by any vice or defect in or upon said leased
premises, including the buildings, improvements, fixtures and equipments
thereon, or on account of Lessee's operations, Lessee agrees to appear and
adjust, settle or defend said action or claim at its sole cost and expense and
to pay and satisfy any adverse judgment that may be entered on final
determination.
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12.01 Lessee agrees that if Lessor is involuntarily made a party
defendant to any litigation concerning this lease property, not due to any act
or omission of Lessor, Lessee will hold Lessor free and harmless from any
expenses reasonably incurred in defending such action. Lessor shall, at all
times during the term of this lease, be held free and harmless by Lessee from
all liability for damages by reason of any injury to any person or property
while in or upon the leased premises; and Lessee shall, at its own expense
during the term of the lease, carry in full force and effect public liability
insurance covering the Lessor as well as Lessee.
B. Insurance
12.02 Lessee agrees to provide, at its expense, tenants liability
insurance, and to furnish Lessor a certificate of such insurance, with limits
of $100,000.00 for injury to any one person and $300,000.00 for injuries
sustained in any one accident, and with property damage limits of $25,000.00,
which policy shall provide, as a condition for cancellation, for ten (10) days
advance written notice to Lessor and shall name as additional insured, the
Lessor, and the Iberia Parish Council.
12.03 In addition to the above, Lessee shall provide the minimum
insurance requirements as listed below:
(a) Comprehensive Public Liability and Property Damage:
(i) Bodily Injury (each accident) $25,000,000.00 any one
offense and aggregate annually;
(ii) General Liability and Property Damage: $50,000,000.00
combined single limit, any one occurrence/offense and
annual aggregate including products, grounding and
completed operations;
(b) Motor Vehicle Liability: $1,000,000.00 combined single limit;
(c) Workmen's Compensation and Employer's Liability: Up to
Statutory Limit
(d) Hangar Keepers Liability Coverage: $15,000,000.00 any one
aircraft, $30,000,000.00 any one occurrence subject to
$15,000,000.00 deductible each and every loss;
(e) Fire and Extended Coverage on all buildings and improvements
located on the leased premises in an amount of 80% of
replacement cost of the improvements. Replacement cost is
defined as cost to replace the buildings and
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improvements with like materials and like configuration, but
in no case less than $250,000.00. The Lessee shall be allowed
to determine the deductible on this all risk coverage, but
Lessee shall be fully responsible for the payment of any and
all deductibles, whatever they may be. Flood and earthquake
coverage shall not be a requirement of this section. Said
policy shall provide, as a condition for cancellation, ten
(10) days advance written notice to Lessor and shall name
Lessor and the Iberia Parish Council as additional insureds
under the policy.
12.04 In the event the said leased premises or any part thereof are
damaged or destroyed by fire, tornado, or other casualty, so as to render the
same untenantable and said premises cannot be repaired or restored by the
Lessor within ninety (90) days after the happening of such event, then this
lease contract shall terminate and rent shall be paid only to the date of such
damage or destruction.
12.05 In the event said premises can be repaired or restored by
Lessor within ninety (90) days then the Lessor shall immediately repair said
damage at its costs and this lease shall not terminate, but rent shall abate
while said premises are being repaired or restored.
12.06 In the event said premises are damaged by fire, tornado or
other casualty, but not rendered wholly untenantable thereby, this lease shall
not terminate, but the Lessor shall immediately repair the damage at its own
costs and rent shall abate as to that portion of the premises which are
rendered untenantable from the date of such damage until said premises are
restored and rendered satisfactory for occupancy by the Lessee.
12.07 Lessee shall cause any and all policies of insurance obtained
by it, including bailee coverage, covering movable property (including
aircraft) located on the leased premises or on the adjoining aircraft apron
areas or used in connection with Lessee's operations conducted thereon and
therefrom to contain a waiver of subrogation, (excepting negligence) against
Lessor and the Iberia Parish Council, their individual members, the Airport
Director and their employees and agents.
12.08 In the event Lessee fails to procure any of the insurance
required hereunder, Lessor may, at its option, cause such insurance to be
issued at the cost and expense of Lessee, and all sums advanced for such
purpose shall be due Lessor as charges and expenses, payable on or before the
first day of the month following written notice thereof to Lessee.
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ARTICLE XIII. NON-DISCRIMINATION
13.00 The Lessee, in exercising any of the right or privileges
herein granted to it shall not on the grounds of age, race, color, creed, sex,
national origin or physical condition discriminate or permit discrimination
against any person or group of persons in any manner prohibited by Part 21 of
the Regulations of the Secretary of Transportation. The Lessor is hereby
granted the right to take such actions to correct anything to the contrary
herein notwithstanding, as the United States may direct to enforce this
non-discrimination covenant.
13.01 Lessee, as an Aviation Specialty Shop operator, will 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 charge discriminatory prices for each unit or service;
PROVIDED, THAT the Lessee may be allowed to make reasonable and
non-discriminatory discounts, rebates or other similar type of price reductions
to volume purchasers.
13.02 Lessee shall make its accommodations and/or services available
to the public on fair and reasonable terms without unjust discrimination on the
basis of age, race, creed, color, sex, national origin or physical condition.
13.03 Lessee 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 age, race, color, creed, national origin, or sex be
excluded from participating in any employment activities covered in 14 CFR Part
152, Subpart E. The Lessee assures that no person shall be excluded on these
grounds from participating in or receiving the services or benefits of any
program or activity covered by this Subpart. The Lessee assures that it will
require that its covered sub-organizations provide assurances to the Lessee
that they similarly will undertake affirmative action program and that they
will require assurances from their sub-organizations, as required by 14 CFR
Part 152, Subpart E, to the same effect.
13.04 The Lessor is granted the right to take such actions to
correct anything to the contrary herein notwithstanding, as the United States
may direct to enforce this non-discrimination covenant. Non-compliance of the
above non-discrimination provisions shall constitute a material breach and
subject the lease to immediate termination.
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13.05 Non-compliance with paragraphs 13.00, 13.01, 13.02, 13.03 and
13.04, above shall constitute a material breach thereof and in the event of
such non-compliance, Lessor shall have the right, subject to the provisions of
Article XIX hereof, to terminate this lease and operating agreement and the
estate hereby created without liability therefor, or at the election of Lessor
or the United States, either or both said governments shall have the right to
judicially enforce said paragraphs 13.00, 13.01, 13.02, 13.03 and 13.04.
13.06 Lessee agrees to insert the above five provisions namely
paragraphs 13.00, 13.01, 13.02, 13.03 and 13.04 of this Article XIII, in any
lease, agreement or contract, by which said Lessee grants a right or privilege
to any person, firm or corporation to render accommodations and/or services to
the public on the premises herein leased.
ARTICLE XIV. LESSOR'S RESERVED RIGHTS AND LESSEE'S PROTECTION
14.00 Lessor reserves the right to further develop or improve the
aircraft operating areas of the Airport as it sees fit and to take any action
it considers necessary to protect the aerial approaches to the Airport against
obstructions, together with the right to prevent Lessee from erecting or
permitting to be erected, any building or other structure, including signs and
lighting fixtures, on the Airport which, in the opinion of Lessor, would limit
the usefulness of the Airport or constitute a hazard to aircraft.
14.01 During the time of war or national emergency, Lessor shall
have the right to lease the Airport or any part thereof to the United States
Government for military or naval use, and if any such lease is executed, the
provisions of this instrument insofar as they are inconsistent with the lease
to the government shall be suspended, and in that event a just and
proportionate part of the rent hereunder shall be abated.
14.02 Any other provisions of this lease notwithstanding, this lease
shall be subordinate to the provisions of any existing or future agreement
between Lessor and the United States, relative to the operation or maintenance
of the Airport, the terms and execution of which has been or may be required as
a condition precedent to the expenditure or reimbursement to Lessor of Federal
funds for the development of the Airport.
14.03 The Lessor reserves the right, but shall not be obligated to
the Lessee, 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 the Lessee in this regard.
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14.04 In the event Lessor's exercise of the rights reserved under
Article XIV shall render it impossible or impracticable for Lessee to conduct
business as an Aviation Specialty Shop Operator at the leased premises as
contemplated hereunder, Lessee shall have the option, exercisable by giving 90
days written notice to Lessor, of terminating this lease.
ARTICLE XV. NOTICES, CONSENTS AND APPROVALS
15.00 Notices or other communications to Lessor pursuant to the
provisions hereof shall be sufficient if sent by registered or certified United
States mail, postage prepaid, addressed to the:
IBERIA PARISH AIRPORT AUTHORITY
510 AVENUE C
NEW IBERIA, LOUISIANA 70560
and to Lessee as follows:
PRIDE AVIATION, INC.
3725 HANGAR DRIVE
NEW IBERIA, LA 70560
ARTICLE XVI. COVENANT TO BIND LESSOR AND LESSEE
16.00 This lease and operating agreement and all of the covenants
and conditions contained herein shall be binding upon Lessor and Lessee and
upon their respective heirs, executors, administrators, successors and assigns.
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ARTICLE XVII. SUBLETTING, ASSIGNMENT AND MORTGAGE
17.00 Any mortgage, pledge, hypothecation, encumbrance, transfer,
sublease or assignment (hereinafter in this lease referred to collectively as
"encumbrance") of Lessee's interest in the premises or any portion thereof must
first be approved in writing by the Authority. If Lessee grants an encumbrance
without first obtaining approval of the Lessor, such act shall constitute a
material breach of this lease and Lessor may terminate this lease.
17.01 No mortgage, pledge, hypothecation or encumbrance shall bear
against immovable property owned or operated by the Authority. Lessee does not
have authority, right, or privilege to mortgage lands, buildings or
improvements existing prior to the effective day of the lease. An encumbrance
which has not received prior approval by Authority in writing as aforesaid
shall be void and of no force and effect.
17.02 Any mortgage, pledge, hypothecation, encumbrance, deed of
trust or instrument offering such land and/or buildings for security without
obtaining the prior written consent of said agency is null and void and shall
have no force or effect.
17.03 Should Authority consent to any encumbrance, such consent
shall not constitute a waiver of any of the condition, terms and covenants of
this lease. Such terms, covenants, or conditions shall apply to each and every
encumbrance hereunder and shall be severally binding upon each and every
encumbrancer, assignee, transferee, subtenant, or other successor in interest
of Lessee.
17.04 Any document to transfer, sublet, assign or encumber the
premises or any part thereof shall incorporate directly or by reference all the
provisions of this lease.
17.05 Occupancy of the premises by a prospective transferee,
sublessee, assignee, assignment or encumbrancer before approval of the
transfer, sublease, assignment or encumbrance by Authority is deemed an
unauthorized activity and shall constitute a breach of this lease. Failure of
Lessee to cease, remove or prohibit an unauthorized activity after notification
by Lessor in writing shall constitute a material breach of this lease and shall
be grounds for termination.
17.06 Authority agrees that it will not arbitrarily withhold consent
to any encumbrance, but Authority may withhold consent at its discretion if any
of the following conditions exist:
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1. Lessee or any of his successors or assigns is in
default as to any term, covenant, or condition of this lease, whether notice
of default has or has not been given by Authority;
2. The prospective encumbrancer has not agreed in
writing to keep, perform, and be bound by all the terms, covenants and
conditions of this lease;
3. All the terms, covenants and conditions of the
encumbrance including the consideration therefor of any and every kind have not
been revealed in writing to Authority;
4. In any event, Lessee shall not be released from the
obligations of this lease;
5. The nonrefundable processing fee of $500.00 required
by Lessor has not been paid to Lessor; or
6. Any member of the local, state or Federal government,
or any resident Commissioner of the Lessor be admitted to any share or part of
this agreement or to any benefit that may arise hereunder. This provision shall
not be construed to extend to agreements made with a corporation for the
general benefit of any such party.
17.07 An application fee of $500.00 shall be paid to Authority for
processing a request to mortgage, pledge, hypothecate, encumber, assign,
transfer or sublease. This application fee shall be due upon application and
shall not be refundable.
17.08 Notwithstanding the provisions of Article XVI, Authority
agrees upon written request by Lessee to execute its written consent to an
assignment of this lease to an assignee to secure the beneficial interest of a
lender for the purpose of financing, construction, development, or operations
on the airport upon and subject to the following covenants and conditions:
1. Upon application for approval of an encumbrance,
Lessee shall furnish Authority a complete copy of the encumbrance and note to
be secured thereby, together with the name and address of the proposed holder
hereof;
2. Said assignee and all rights acquired by said
assignee under said encumbrance shall be subject to each and every covenant,
condition and restriction set forth in this lease and to all the rights and
interests of Authority, thereunder except as herein otherwise provided;
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3. In the event of any conflict between the provisions
of this lease and the provisions of any such encumbrance, the provisions of
this lease shall govern and control; and
4. Upon and immediately after the recording of an
encumbrance affecting the premises, Lessee, at Lessee's expense, shall cause
to be recorded in the Office of the Clerk of Court, Iberia Parish, Louisiana, a
written request by Authority for notice of default and of any notice of seizure
and/or sale under the encumbrance as provided by the statutes of the State of
Louisiana relating thereto.
17.09 Authority agrees that it will not terminate this lease because
of a default or breach on the part of Lessee if the assignee under any
encumbrance to which Authority has given its consent, within sixty (60) days
after service of written notice on the assignee by Authority of its intention
to terminate this lease for such default or breach, shall:
1. Cure such default or breach if the same can be cured
by the payment or expenditure of money required to be paid under the terms of
this lease; and
2. Keep and perform all of the covenants and conditions
of this lease requiring the payment of expenditure of money by Lessee until
such time as the security shall be sold upon foreclosure pursuant to the
encumbrance or shall be released or reconveyed thereunder; provided, however,
that if the assignee shall fail or refuse to comply with any or all of the
provisions of this paragraph, then and thereupon, Authority shall be released
from its covenant of forbearance.
17.10 In the event of default not curable as aforementioned,
assignee shall commence steps and proceedings for the exercise of the power of
seizure and sale under and pursuant to the encumbrance and in the manner
provided by law, but assignee will first offer and Authority shall have the
option to purchase, all rights, titles, and interests in the security
encumbered under said encumbrance directly from assignee and without public
sale for the then outstanding balance due on the note or notes secured by said
encumbrance.
17.11 In the event Authority does not exercise its option to
purchase from the assignee as provided above, then the prior written consent of
Authority shall not be required and transfer or conveyance may occur under the
following conditions:
a. The transfer of the security at foreclosure sale
pursuant to an encumbrance by judicial foreclosure or by an assignment in lieu
of foreclosure; or,
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b. To any subsequent transfer by the assignee if the
assignee is an established bank, savings and loan association or insurance
company, and is the purchaser at such foreclosure sale, provided that in such
event, the assignee forthwith gives notice to Authority in writing of any such
transfer, setting forth the name and address of the transferee, the effective
date of such transfer, and the express agreement of the transferee assuming and
agreeing to perform all of the obligations under this lease, and submits to
Authority a copy of the document or transfer.
17.12 Lessee for itself, its representatives, successors in
interest, and assigns, as a part of the consideration hereby covenant and agree
as a covenant running with the land, that:
1. No person on the grounds of race, color, creed, age,
sex, national origin or physical condition shall be excluded from
participation, denied the benefits of, or be otherwise subjected to
discrimination in the use of said facilities;
2. That in the furnishing of services thereon, no person
on the grounds of race, color, creed, age, sex, national origin or physical
condition shall be excluded from participation in, denied the benefits of, or
otherwise be subjected to discrimination;
3. That Lessee shall use the premises in compliance
with all other requirements imposed by pursuant to Title 49, Code of Federal
Regulations of the Department of Transportation, Subtitle VI of the Civil
Rights Act of 1964, and as said regulations may be amended; and
4. That in the event of a breach of any of the above
non-discrimination covenants, Authority shall have the right to terminate the
lease and to re-enter and repossess said land and the facilities thereon, and
hold the same as if said lease had never been made or issued.
17.13 Authority reserves the right to further develop or improve the
landing area of the Airport as it sees fit, regardless of the desire or view of
the Lessee, but without unreasonable interference or hinderance to Lessee.
17.14 Authority reserves the right, but shall not be obligated to
Lessee to maintain and keep in repair the landing area of the Airport and all
publicly owned facilities of the Airport, together with all the right to direct
and control all activities of Lessee in this regard.
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ARTICLE XVIII. RIGHTS OF THE UNITED STATES GOVERNMENT
18.00 This lease shall be subordinate to the provisions and
requirements of any existing agreement between Authority and the United States
relative to the development and maintenance of the Airport. In the event
Lessor's exercise of the rights reserved here under shall render it impossible
or impracticable for Lessee to conduct business as an Aviation Specialty Shop
at the leased premises as contemplated hereunder, Lessee shall have the option,
exercisable by giving 90 days written notice to Lessor, of terminating this
lease.
18.01 Lessee agrees to comply with the notification of and review
requirements covered in Part 77 of the Federal Aviation Regulations in the
event any future structure or building is planned or alteration of any present
or future building or structure situated on the premises.
18.02 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 308 of the Federal Aviation Act of 1958.
18.03 There is hereby reserved by Authority, its successors and
assigns, for the use and benefit of the public, a right of flight for passage
of aircraft in the airspace above the surface of the premises hereby leased
together with the right to cause in said airspace such noise as may be inherent
in the operation of aircraft, now known or hereafter used for navigation of or
flight in the air, using said airspace for landing at, taking off from or
operating on the Airport, subject to applicable controlling flight
restrictions.
18.04 Lessee by accepting this lease expressly agrees for itself,
its successors and assigns that it will not erect nor permit the erection of
any structure or object or permit the growth of any tree on the land leased
hereunder above a mean sea level elevation of 59 feet. In the event the
aforesaid covenant is breached, Lessor reserves the right to enter upon the
land leased hereunder and remove the offending tree or structure, all of which
shall be at the expense of Lessee.
18.05 Lessee by accepting this lease expressly 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, Lessor reserves the right to enter upon the premises
hereby leased and cause the abatement of such interference at the expense of
Lessee.
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18.06 This lease and all 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, operations and regulation of said Airport.
18.07 The Lessee and any sublessees/assignees for whom a "Consent to
Sublease" is required by the Authority, maintaining a business located within
Iberia Parish and using such business location in any manner connected with
this lease, shall comply with the Affirmative Action Plan Program requirements.
18.08 This lease shall be subordinate to and subject to the terms,
conditions, restrictions, and other provisions of any existing permit, lease
and/or agreement between the Authority and the United States of America and/or
any other local, State or Federal agency, relative to the control, operation or
maintenance of the Airport, the execution of which has been or will be required
as a condition precedent to the operation or control of, or to the expenditure
of Federal funds for the Airport. Lessee agrees to be bound by such terms,
conditions, restrictions or provisions.
18.09 Lessee warrants that no improvements shall be erected, placed
upon, operated nor maintained within the premises, nor any business or other
activity conducted or carried on therein or therefrom, in violation of the
terms of this lease, or of any regulation, order of law, statute, by-law, or
ordinance of a governmental agency having jurisdiction and any breach of said
warranty shall constitute a breach of this lease.
ARTICLE XIX. TERMINATION BY LESSOR AND WAIVER OF BREACH
A. Termination by Lessor
19.00 In the event that Lessee shall fail to perform, keep and
observe any of the terms, covenants or conditions herein contained, Lessor may
give written notice to Lessee to use due diligence to correct such condition or
default, and if Lessee fails to correct such condition or default within thirty
(30) days after receipt of such notice, Lessor may terminate this agreement by
giving ten (10) days notice thereof.
19.01 No default on the part of the Lessee shall be deemed to
continue so long as Lessee shall have taken action to correct the same and
shall be diligently prosecuting such action.
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19.02 In any case, where Lessor shall be entitled hereunder to
terminate this lease agreement for failure of the Lessee to correct or cure a
default after due notice, Lessor may, as an alternative to termination of the
lease agreement, perform the obligation imposed under this lease and operating
agreement for the account of and at the expense of the Lessee and the same
shall be paid by Lessee as additional charges due under the lease.
19.03 Lessor may terminate this agreement and all of its obligations
hereunder by giving Lessee ten (10) days written notice upon or after filing by
Lessee of a voluntary petition in bankruptcy.
19.04 Lessor may terminate this agreement and all of its obligations
hereunder by giving Lessee sixty (60) days written notice upon or after failure
of Lessee to vacate or set aside the following:
a. If involuntary proceedings in bankruptcy be
instituted against the Lessee and the Lessee
is thereafter adjudicated a bankrupt pursuant
to such proceedings;
b. If a court shall take jurisdiction of the
Lessee pursuant to proceedings brought under
the provisions of any Federal Reorganization
Act; or
C. If a receiver of Lessee's assets be appointed.
19.05 Lessor may terminate this agreement and all of its obligations
hereunder by giving Lessee ten (10) days written notice upon the happening of
either or both of the following events:
a. If Lessee shall voluntarily abandon and
discontinue the conduct and operation of its
service at the Airport for a continuous
period of 30 days; or
b. If Lessee shall abandon any of the premises
leased to it hereunder at any time, except
when such abandonment be caused by fire,
flood, earthquake, war, strike or other
calamity beyond Lessee's control.
24
<PAGE> 25
B. Waiver of Breach
19.06 No waiver by Lessor of any of the terms, covenants, or
conditions hereof to be performed, kept or observed by Lessee shall be
construed to be or act as a waiver of any subsequent default of the terms,
covenants, and conditions. The acceptance of rental by Lessor for any period or
periods after default of any of the terms, conditions, or covenants shall not
be deemed a waiver of any right on the part of the Lessor to cancel this
agreement for failure by Lessee to perform, keep or observe any of the terms,
covenants or conditions of this agreement.
ARTICLE XX. SURRENDER OF PREMISES
20.00 Lessee agrees, that upon the expiration of the terms of this
agreement or sooner cancellation thereof, to vacate the leased premises. All
buildings and improvements thereon will be delivered to the Lessor in good
condition reasonable wear and tear accepted.
20.01 Lessee shall be allowed to remove trade and fixtures not of a
permanent nature so long as the leased premises is not damaged or defaced by
said removal.
20.02 If Lessee fails to remove fixtures and improvements more than
ninety (90) days after the expiration of the lease, Lessor shall remove same at
the cost of the Lessee.
20.03 All improvements of a permanent nature made by Lessee during
the term of the lease or any extension thereof shall become property of the
Lessor at the expiration of the lease.
ARTICLE XXI. PRIOR AGREEMENTS AND AMENDMENTS
21.00 Lessor and Lessee agree that this lease and operating
agreement contains all that is applicable to Lessee's operation of an Aviation
Specialty Shop operator at Acadiana Regional Airport and that all other prior
agreements relative thereto are ineffective.
ARTICLE XXII. CAPTIONS
22.00 Lessor and Lessee agree that all headings in this lease and
operating agreement are used solely for convenience and shall be disregarded in
the construction of the agreement.
ARTICLE XXIII. COVENANTS AND CONDITIONS
23.00 Lessor and Lessee agree that each provision of this lease and
operating agreement which is performable by the Lessee and Lessor is herewith
deemed a covenant and a condition of this lease and operating agreement.
25
<PAGE> 26
ARTICLE XXIV. VENUE
24.00 Both parties agree that this agreement shall be construed
pursuant to the laws of the State of Louisiana and the venue for returns at law
or equity upon or affecting this lease and agreement shall be Iberia Parish,
Louisiana.
ARTICLE XXV. PARTIAL INVALIDITY
25.00 If any section, clause, sentence, word, or provisions of this
lease or the application thereof to any party or circumstances shall, to any
extent, be or become invalid or illegal, and such provision shall thereby
become null and void, the remainder of this lease shall not be affected
thereby, and each remaining provision of this lease shall be valid and
enforceable to the fullest extent permitted by law.
THIS DONE AND SIGNED at New Iberia, Louisiana on this 2nd day of Oct, 1991.
WITNESSES IBERIA PARISH AIRPORT AUTHORITY
/s/ M.I. LASSERRY, JR. By: /s/ WILTZ P. SEGURA
- ------------------------------ ---------------------------------
Wiltz P. Segura, Chairman
/s/ GLADYS G. LANDRY
- ------------------------------ PRIDE AVIATION, INC.
/s/ M.I. LASSERRY, JR. By: /s/ FRANK RICE
- ------------------------------ ---------------------------------
Frank Rice, President and
/s/ GLADYS G. LANDRY Chief Executive Officer
- ------------------------------
26
<PAGE> 1
EXHIBIT 10.11
REVOLVING CREDIT NOTE
$250,000.00 Dallas, Texas September 30, 1995
FOR VALUE RECEIVED, the undersigned, THE SANDERS COMPANIES, INC.
("Maker"), hereby unconditionally promises to pay to the order of EQUITABLE
BANK ("Payee") at 17218 Preston Road, Dallas, Dallas County, Texas 75252, or at
such other address given to Maker by Payee, the principal sum of TWO HUNDRED
FIFTY THOUSAND AND NO/100 DOLLARS ($250,000.00), or so much as advanced
hereunder in lawful money of the United States of America, together with
interest (calculated on the basis of a 365 day year) on the unpaid principal
balance from day-to-day remaining, computed from the date of advance until
maturity at the rate per annum which shall be equal to the lesser of (a) the
Maximum Rate, or (b) the Floating Base Rate in effect plus two percent (2.00%).
The interest rate as the date of this Revolving Credit Note is ELEVEN PERCENT
(11.00%) per annum. The change of rate of interest herein shall take effect on
the first calendar day of each calendar quarter following the date of this
Revolving Credit Note and shall continue to fluctuate effective the first day
of each calendar quarter thereafter. If at any time and from time to time the
rate of interest calculated pursuant to item (b) above would exceed the Maximum
Rate, thereby causing the interest payable hereon to be limited to the Maximum
Rate, then any subsequent reduction in the rate specified in item (b) above
shall note reduce the rate of interest hereon below the Maximum Rate until the
total amount of interest accrued hereon from and after the date of the first
advance hereunder equals the amount of interest which would have accrued hereon
if the rate specified in item (b) above had at all times been in effect.
Principal and interest are due and payable upon demand, or if not demanded as
follows: Accrued interest shall be due and payable monthly, beginning October
30, 1995 and continuing on the same day of each month thereafter until
September 30, 1996, at which time all unpaid principal and accrued interest
shall be due and payable.
The term "Maximum Rate," as used herein, shall mean, with respect to
the holder hereof, the maximum nonusurious interest rate, if any, that at any
time, or from time to time, may under applicable law be contracted for, taken,
reserved, charged or received on the indebtedness evidenced by this Note.
Payee hereby notifies and discloses to Maker that, for purposes of Tex. Rev.
Stat. Ann. art. 5069-1.04 as it may from time to time be amended, the
"applicable rate ceiling" shall be the "indicated rate ceiling" referred to in
Article 5069-1.04(a)(1) from time to time in effect, as limited by Article
5069-1.04(b); provided, however, that to the extent permitted by applicable
law, Payee reserves the right to change the "applicable rate ceiling" from time
to time by further notice and disclosure to Maker; and, provided, further that
the "Maximum Rate" for purposes of this Note shall not be limited to the
applicable rate ceiling under Article 5069-1.04 if Federal laws or other state
laws now or hereafter in effect and applicable to this Revolving Credit Note
(the "Note") (and the interest contracted for, charged and collected hereunder)
shall permit a higher rate of interest.
1
<PAGE> 2
contracted for, charged, or received by the holder thereof to exceed the
maximum amount of interest permissible under applicable law, the excessive
interest shall be applied to the reduction of the unpaid principal balance
hereof and not to the payment of interest, or if such excessive interest
exceeds the unpaid principal balance hereof such excess shall be refunded to
Maker. All interest paid or agreed to be paid to the holder hereof shall, to
the extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full period until payment in full of the principal
(including the period of any renewal or extension hereof) so that the interest
hereon for such full period shall not exceed the maximum amount permitted by
applicable law.
Maker may borrow, repay and reborrow funds under this Note during the
term of this Note so long as outstanding principal does not exceed the lesser
of the Borrowing Base as defined in the Revolving Loan and Security Agreement
dated September 30, 1994 or $250,000.00; except as such reborrowing and
borrowing is otherwise restricted pursuant to the terms of the Revolving Loan
and Security Agreement and the other loan documents now or hereafter executed
in connection with this Note.
This Note has been executed and delivered pursuant to, and is subject
to certain terms and conditions set forth in, that certain Revolving Loan and
Security Agreement between Maker and Payee, executed as of September 30, 1994,
and is the "Note" referred to therein. The Holder of this Note shall be
entitled to the benefits provided in the Revolving Loan and Security Agreement.
Reference is made to the Revolving Loan and Security Agreement for a Statement
of any obligation of Payee to advance funds hereunder and the additional events
upon which the maturity of this Note may be accelerated.
Upon the failure of the Maker to pay any portion of this Note, Payee is
hereby authorized at any time and from time to time, without notice to Maker
(any such notice beting expressly waived by each such Maker), to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held, and other indebtedness at any time owing, by the Payee
to or for the credit or the account of any Maker, against any and all
obligations of such Maker now or hereafter existing under this Note,
irrespective or whether or not Payee shall have made demand under this Note and
although such obligations may be contingent and unmatured. The rights of the
Payee under this section are in addition to all other rights and remedies
(including, without limitation, other rights of offset which Payee may have
hereunder or under any applicable law).
This Note is given in renewal and extension and as a supplemental
promissory note to that certain promissory Note dated September 30, 1994 in the
orignal face amount of $200,000.00, which has been increased to $250,000.00 as
evidenced by Modification of Promissory Note effective, August 29, 1995
evidencing the participation of the U.S. Small Business Administration in SBA
Loan No. GP-GRN-750,200,30-01-DAL.
This Note is being executed and delivered, in Dallas County, Texas.
All obligations, covenants, and terms of payment are expressly performable
solely in Dallas County, Texas.
<PAGE> 3
The substantive laws of the State of Texas shall govern the validity,
construction, enforcement and interpretation of this Note. In the event of a
dispute involving this Note or any other instruments executed in connection
herewith the undersigned irrevocably agrees that venue for such dispute shall
lie in any court or competent jurisdiction in Dallas County, Texas.
THE SANDERS COMPANIES, INC.
By: /s/ LEE B. SANDERS
-------------------------
Lee B. Sanders, Chairman
<PAGE> 4
[SBA LOGO]
U.S. SMALL BUSINESS ADMINISTRATION
DALLAS/FORT WORTH DISTRICT OFFICE
4300 AMON CARTER BLVD., SUITE 114
FORT WORTH, TEXAS 76155
AUTHORIZATION AND LOAN AGREEMENT
CAS-GREEN LINE GUARANTY LOANS
LOAN NUMBER GP-GRN-750,200-30-01-DAL
EQUITABLE BANK
17218 PRESTON ROAD
DALLAS, TEXAS 75252
Your request dated July 31, 1994, for SBA to Guarantee 75% of a Revolving Line
of Credit Loan in the amount of $200,000,00 to be made by lender to
<TABLE>
<CAPTION>
CURRENT MAILING ADDRESS: BUSINESS LOCATION:
- ------------------------ ------------------
<S> <C>
THE SANDERS COMPANIES, INC.
1327 EMPIRE CENTRAL, SUITE 266 SAME
DALLAS, TEXAS 75247
</TABLE>
is hereby approved pursuant to Section 7(a) of the Small Business Act as
amended.
1. THE FOLLOWING FORMS ARE HEREWITH ENCLOSED:
a. The original copy of this Authorization shall be executed at
the time of first disbursement and retained in loan file by
the Lender. (A copy of the Authorization and all documents
should be given to the Borrower.) Please return one signed
copy of the Authorization to this office.
b. SBA Note (Form 147 only). The original must be retained by you
and a certified copy must be sent to SBA immediately after
first disbursement.
c. Copies of the SBA Settlement Sheet, Form 1050, are to be
completed and executed by Lender and Borrower to reflect each
disbursement. Prompt reporting of disbursements is necessary.
Return the yellow copy only to SBA Multiple disbursements may
be included on one Settlement Sheet using a second page (bond
paper) if necessary.
d. Compensation Agreements, Form 159, shall be executed by
Borrower, his representative and Lender and returned to SBA if
Borrower has employed an attorney, accountant or other
representative, or if Borrower is charged fees for services by
Lender or an associate of Lender. If no such fees have been
charged, please write "None" and return the original form,
executed by the Lender and the Borrower, to SBA.
SBA FORM 529G-CAS (DALLAS D/O REVISED 6/28/93) PAGE 1
(PREV. EDITIONS OBSOLETE)
<PAGE> 5
ADDITIONAL FORMS NEEDED
GUARANTY, SBA 148 - A SAMPLE TO USE IN COMPLETING THIS FORM IS ALSO
ENCLOSED. ALL BLANKS MUST BE COMPLETED PROPERLY. THIS IS A VERY
IMPORTANT DOCUMENT FOR THE COLLATERALIZATION OF THE LOAN. RETURN ONE
EXECUTED COPY.
RESOLUTION OF BOARD OF DIRECTORS, SBA 160 - RETURN EXECUTED ORIGINAL
TO SBA.
COPIES OF THE FOLLOWING DOCUMENTS ARE NOT REQUIRED BY SBA AT THIS
TIME. THE ORIGINAL OF EACH MUST BE RETAINED IN YOUR COLLATERAL FILE;
AND IN THE EVENT OF A REQUEST FOR SBA TO PURCHASE ITS GUARANTY AT A
LATER DATE, THE PROPERLY EXECUTED ORIGINALS WILL BE REQUIRED.
(1) LESSOR'S AGREEMENT, DAL VI FORM 66, OR FORM SATISFACTORY TO LENDER
THAT CONTAINS A LANDLORD'S WAIVER.
GUARANTY FEE
SBA's Guaranty fee is 2% of guaranteed loan amount, or $3,000.00. This fee must
be paid by the Lender within 90 days of the date of this Authorization in order
to prevent jeopardizing the SBA guaranty. Lender may charge the Borrower for
such fee only after Lender has paid the fee and an initial disbursement has
been made. Such fee may be deducted from the loan proceeds.
2. THIS AUTHORIZATION IS SUBJECT TO:
(a) Provisions of the Agreement (Form 750 or 750B, as applicable)
between Lender and SBA dated 5/12/87.
(b) First disbursement of the Revolving Line of Credit being made
not later than six (6) months, and no disbursement being made later
than nine (9) months from the date of the Revolving Line of Credit
Note, unless such time is extended pursuant to prior written consent
by SBA.
(c) Receipt by Lender of evidence that there has been no
unremedied adverse change since the date of the Application, or since
any of the preceding disbursements, in the financial or any other
condition of Borrower, which would warrant withholding or not making
any such disbursement or any further disbursement.
(d) The representations made by Borrower in its loan application,
the requirements or conditions set forth in Lender's application form,
including the supporting documents thereto, the conditions set forth
herein and any future conditions imposed by Lender (with prior SBA
approval).
3. TERMS OF LOAN:
(a) Repayment term, interest rate(s), and maturity,
(1) This Revolving Line of Credit shall commence with
date of Master Note and shall expire sixty (60)
SBA FORM 529G-CAS (DALLAS D/O REVISED 6/28/93) PAGE 2
(PREV. EDITIONS OBSOLETE)
<PAGE> 6
months thereafter. Disbursement of funds beyond the expiration
date is not authorized.
(2) Master Note on SBA Form 147 in the amount of
$200,000.00, payable sixty months (60) from date of Note;
(3) Initial interest rate shall be nine and one quarter
percent (9.25%);
(4) Interest rate shall vary each quarter and shall not
exceed prime lending rate plus two percent (2.0%).
(5) Upon approval of Equitable Bank any principal balance
remaining outstanding at maturity will be amortized over a
period not to exceed twelve (12) months. It is further provided
that each said installment shall be applied first to interest
accrued to the date of receipt of said installment, and the
balance, if any, to said principal.
(6) ANY ADVANCE UNDER THE MASTER NOTE OR LENDER'S
SUPPLEMENTAL NOTES WILL HAVE A SPECIFIC REPAYMENT DATE TO BE
SET, BASED ON THE PAYMENT SCHEDULE OF THE CONTRACT, INVENTORY
TURNOVER, RECEIVABLE COLLECTION AND THE LIKE.
(7) The Current Asset Supported Green Line permits a
Lender to charge an extraordinary servicing fee of two percent
(2.0%) per annum (may not exceed 2%) on the outstanding
principal balance, payable monthly.
(b) Use of Proceeds:
(1) Approximately $180,000.00 for working capital to be
disbursed by Lender as deemed necessary.
(4) Approximately $20,000.00 to pay existing short term
loans for operating capital purposes, as follows:
(a) First Texas Bank, approximately $20,000.00.
TOTAL LOAN AMOUNT $200,000.00
(c) Collateral:
(1) If any of the collateral pledged as security for this
loan is sold in bulk or outside the normal course of business,
the entire debt shall become due and payable at the option of
the lender.
(2) First Lien evidenced by Security Agreement(s) and
UCC-1 filing(s) on inventory and accounts receivable now owned
and hereafter acquired, including proceeds.
(3) Prior to first disbursement, the appropriate UCC lien
searches must be made to determine Lender's priority of lien.
Certificate of Search must be obtained from County Clerk and
Secretary of State, including search of the Federal Tax Lien
Records, State Tax Lien Records, and Judgement Lien Records.
(4) Pledge to Lender by Lee B. Sanders of all shares of
stock in The Sanders Companies, Inc. Lender is to retain stock
certificates in its possession until pledge is reassigned or
released.
(5) Personal guaranty on SBA Form 148 executed by Lee B.
Sanders.
SBA FORM 529G-CAS (DALLAS D/O REVISED 6/28/93) PAGE 3
(PREV. EDITIONS OBSOLETE)
<PAGE> 7
(6) Corporate guaranty on SBA Form 148 executed by
Tri-Star Aircraft Services, Inc., along with appropriate
specific resolution authorizing such guaranty.
(7) Corporate guaranty on SBA Form 148 executed by
Tri-Star Airline Services, Inc., along with appropriate
specific resolution authorizing such guaranty.
4. To further induce Lender to make and SBA to guaranty this Loan, Lender
and SBA impose the following conditions:
(a) Execution of all documents required in Item 1 above.
(b) Reimbursable Expenses. Borrower will, on demand, reimburse
Lender for any and all expenses incurred, or which may be hereafter
incurred, by Lender from time to time in connection with or by reason
of Borrower's application for, and the making and administration of
the Loan.
(c) Books, Records, and Reports. Borrower will at all times keep
proper books of account in a manner satisfactory to Lender and/or SBA.
Borrower hereby authorizes Lender or SBA to make or cause to be made,
at Borrower's expense and in such manner and at such times as Lender or
SBA may require, (a) inspections and audits of any books, records and
papers in the custody or control of Borrower or others, relating to
Borrower's financial or business conditions, including the making of
copies thereof and extracts therefrom and (b) inspections and
appraisals of any of Borrower's assets. Borrower will furnish to Lender
and SBA for the six month period ending June 30, 1994 and quarterly
thereafter (no later than 2 months following the expiration of any such
period) and at such other times and in such form as Lender may
prescribe, Borrower's financial and operating statements. Borrower
hereby authorizes all Federal, State and municipal authorities to
furnish reports of examinations, records, and other information
relating to the conditions and affairs of Borrower and any desired
information from reports, returns, files and records of such
authorities upon request therefor by Lender or SBA.
ANNUAL PERSONAL FINANCIAL STATEMENT AND TAX RETURN FOR LEE B. SANDERS
TO BE FURNISHED TO LENDER.
(d) Borrower shall not execute any contracts for management
consulting services without prior approval of Lender and SBA.
(e) Dilutions and Compensation. Borrower will not, without the
prior written consent of Lender or SBA (a) if Borrower is a
corporation, declare or pay any dividend or make any distribution upon
its capital stock, or purchase or retire any of its capital stock, or
consolidate, or merge with any other company, or give any preferential
treatment, make any advance, directly or indirectly, by way of loan,
gift, bonus, or otherwise, to any company directly or indirectly
controlling or affiliated with or controlled by Borrower, or any other
company, or to any officer, director or employee of Borrower, or of
any such company, (b) if Borrower is a partnership or individual make
any distribution of assets of the business of Borrower, other than
reasonable compensation for services, or give any preferential
treatment, make any advance directly or indirectly, by way of loan,
gift bonus, or otherwise, to any partner or any of its employees or to
any company directly or indirectly controlling or affiliated with or
controlled by Borrower, or any other company.
SBA FORM 529G-CAS (DALLAS D/O REVISED 6/28/93) PAGE 4
(PREV. EDITIONS OBSOLETE)
<PAGE> 8
(f) Other Provisions:
(1) Prior to any disbursement, all collateral required
above must be pledged and any liens perfected and lien searches
obtained showing Lender in the required position.
(2) Note (SBA Form 147) and all loan documents to be
executed by corporate officers authorized in a Resolution of
Board of Directors.
(3) Assignment of life insurance on Lee B. Sanders in the
amount of $200,000.00. Disbursement must be made upon receipt
of evidence from insurance company or its agent that the named
insured has applied for insurance in at least the indicated
amount and has paid the first month premium.
(4) Hazard insurance must be obtained by the Borrower in
an amount sufficient to protect Lender's interest in
collateral with Lender shown as Loss Payee.
(5) The Borrower agrees to obtain Federal Flood Insurance
if any proceeds of this loan will be used to improve property
located, or to be located, in a presently classified Special
Flood Hazard Area or if any collateral securing this loan is
located or is to be located in such area. The amount of
required flood insurance is the lesser of (1) the insurable
value of the property, or (2) the maximum amount of insurance
available.
(6) Written subordination of landlord's lien on premises
located at 1327 Empire Central, Suite 266, Dallas, Texas and
5225 Voyager Drive at Redbird Airport, Dallas, Texas.
(7) Prior to first disbursement, Borrower must furnish to
Lender an executed copy of lease indicating a term for at
least the term of the loan (options for renewal are
acceptable).
(8) Lender to have received, and provided copy to SBA,
evidence of corporate good standing with Texas Secretary of
State's Office.
(9) Prior to first disbursement, Borrower shall furnish
to Lender an Employer Identification Number issued by Internal
Revenue Service.
(10) Borrower represents, warrants and acknowledges that:
(a) At the time it submitted its loan application
it was and shall continue to be in compliance
with all local state, and federal laws and
regulations pertaining to hazardous
substances;
(b) Borrower has no knowledge of any
contamination from hazardous substances of
any real or personal property pledged as
collateral for this loan which is in
violation of any such laws and regulations;
(c) Borrower assumes full responsibility for all
costs incurred in any clean-up involving
hazardous substances and agrees to indemnify
Lender and SBA against payment of any such
costs, and further agrees to execute a
separate indemnification agreement if
demanded by Lender or SBA;
(d) Until full repayment of the loan, Borrower
shall promptly notify Lender and SBA if it
knows, suspects or believes there may be any
hazardous substance in or around the real
property securing this loan or if Borrower
and/or such property are subject to any
investigation by any
SBA FORM 529G-CAS (DALLAS D/O REVISED 6/28/93) PAGE 5
(PREV. EDITIONS OBSOLETE)
<PAGE> 9
Governmental agency pertaining to any
hazardous substance.
(11) Prior to disbursement, Lender will make reasonable
inquiry to insure that Borrower is current on all Federal and
State taxes, including, but not limited to, income taxes,
payroll taxes, real estate taxes and sales taxes. Borrower to
execute an affidavit certifying that all taxes are current and
future taxes will be paid when due.
(12) Lender agrees that, in the event of a default by the
Borrower, it will execute any right of off-set available to
it. All funds received are to be placed against the outstanding
loan balance prior to the bank requesting that SBA honor its
guaranty.
(13) By execution of this Agreement, Borrower certifies
that the financial information contained in the Loan
Application upon which this Authorization and Loan Agreement
is predicated, represents an accurate statement of its assets
and liabilities as of this date. Those persons executing this
Agreement acknowledge both in their representative capacity
and as individual obligors that the Lender and SBA's approval
of this loan is given in reasonable reliance on the accuracy
of all financial information contained in said Application.
(g) Green Line Provisions:
(1) BORROWER SHALL SUBMIT TO LENDER, IN FORM AND
SUBSTANCE SATISFACTORY TO LENDER, THE FOLLOWING:
1. Prior to initial disbursement:
a. Satisfactory evidence that all taxes
are current and that a depository plan for
the payment of future withholding taxes is in
place.
b. Detailed cash flow projection by
month for the next twelve month period.
2. Prior to each disbursement, documentation in
support of the advance being requested
(account receivable invoice, purchase order,
contract, etc.). A physical inventory may be
required by Lender/SBA.
3. Prior to initial disbursement and Monthly
thereafter:
a. A listing and aging of accounts
receivable and payable.
b. A description of its inventory and a
certification of inventory values,
conforming to generally accepted
accounting principles. A physical
inventory many be required by
Lender/SBA at periodic intervals.
c. A report of net sales and total
collections.
4. Annually: A detailed cash flow projection, by
the month, for the twelve month period
commencing with the date of submission of the
application.
(2) For as long as any balance on the GREEN LINE is
outstanding, Borrower agrees not to borrow any
SBA FORM 529G-CAS (DALLAS D/O REVISED 6/28/93) PAGE 6
(PREV. EDITIONS OBSOLETE)
<PAGE> 10
additional funds without the prior written consent of the
Lender.
(3) Such other conditions as Lender may deem appropriate
and desirable, and which are not inconsistent with this
Authorization and Loan Agreement or with the Loan Guaranty
Agreement (SBA Form 750B), provided, however, that such
conditions do not establish any preference in favor of Lender.
(4) UNTIL THE GREEN LINE GUARANTY OBLIGATION OF SBA TO
LENDER HAS TERMINATED, LENDER SHALL SERVICE AND MAINTAIN THE
GREEN LINE IN A PRUDENT MANNER. LENDER ALSO SHALL:
1. Monthly:
a. Review Borrower's descriptions and
certifications as to inventories to
assess salability.
b. Review Borrower's listing and aging
of accounts receivable to determine
trade accounts receivable arising
within 90 days prior to any advance.
c. Review and analyze Borrower's
projected cash flow statements and
inventory/accounts receivable
reports to ascertain financial
viability of Borrower's operations.
d. Be able to show that the
advance/disbursement formula has not
been exceeded. At no time will
advances that are collateralized by
trade receivables and inventory
exceed 70% of the trade receivables
due within 60 days, plus 50% of the
inventory that is considered readily
saleable.
2. Semi-annually:
a. Lender agrees to file a FUNDS
DISBURSEMENT REPORT as of December
31st and June 30th of each year, 30
days after the close of each
six-month period, which lists the
Borrower's name, the loan number,
and the number and amount of dollars
that were disbursed by Lender to
Borrower during that previous six-
month period.
3. Annually:
a. Submit to SBA, within 120 days after
the close of annual period, a report
and analysis of the Borrower's
annual cash flow statements,
inventory, and accounts receivable
and payable.
4. Supplement the procedures identified above
with such examinations of Borrower records,
inspections of Borrower's inventories,
confirmations of Borrower's receivables, and
such other analytic and financial tests as
prudent lending practice may require.
5. Maintain the information and documents
arising in connection with the foregoing
procedures and make it available to SBA
during normal banking hours.
6. Lender shall promptly advise SBA of any
Borrower default or delinquency in regard to
this Green Line loan or other Borrower
financial obligations of which the Lender has
knowledge.
(5) Lender, in the case of default, will exercise any
right of offset available to it. All funds received by
SBA FORM 529G-CAS (DALLAS D/O REVISED 6/28/93) PAGE 7
(PREV. EDITIONS OBSOLETE)
<PAGE> 11
offset are to be applied to the outstanding loan balance prior
to requesting that SBA honor its guaranty.
(6) Borrower understands they may borrow, repay, and
reborrow on a revolving basis pursuant to the Note, but the
outstanding principal balance will never exceed the face
amount of the Note. Holder has no obligation to advance the
face amount of the Note, and any and all advances are in the
discretion of the holder. Borrower further understands if an
installment payment or other payment is not received within
thirty days of the due date, no further advances may be made
until the Note is brought current.
SBA FORM 529G-CAS (DALLAS D/O REVISED 6/28/93) PAGE 8
(PREV. EDITIONS OBSOLETE)
<PAGE> 12
5. PARTIES AFFECTED. This Agreement shall be binding upon Borrower and
Borrower's successors and assigns. No provision stated herein shall be waived
without the prior written consent of SBA. The Loan shall be administered as
provided in the Guaranty Agreement.
THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN AND AMONG THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS. THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN AND AMONG THE PARTIES.
ERSKINE B. BOWLES, Administrator
BY: /s/ JAMES S. REED AUG. 22, 1994
--------------------------------------------------------------------
James S. Reed, District Director Date of Authorization
Borrower hereby agrees to the conditions imposed herein, and further
acknowledges that this Authorization and Loan Agreement does not create a
commitment by Lender to disburse any funds pursuant hereto:
ATTEST: THE SANDERS COMPANIES, INC.
/s/ LEE SANDERS 9-30-94 BY: /s/ LEE B. SANDERS 9-30-94
- ------------------------ ---------------------------------------
, Secretary Date Lee B. Sanders, Chairman and CEO Date
In consideration of SBA's guarantee of the loan to be made by Lender to
Borrower, Lender hereby acknowledges acceptance of the conditions imposed
herein.
ATTEST: EQUITABLE BANK
BY: /s/ ROBERTA J. MIKULA, S.V.P. 9-30-94
- ------------------------ ---------------------------------------
Roberta J. Mikula, Date
Senior Vice President
NOTE: CORPORATE BORROWERS MUST EXECUTE THIS AUTHORIZATION, IN CORPORATE NAME
BY DULY AUTHORIZED OFFICER INDICATING OFFICE HELD; PARTNERSHIP
BORROWERS MUST EXECUTE IN FIRM NAME, TOGETHER WITH SIGNATURE OF ALL
GENERAL PARTNERS.
SBA FORM 529G-CAS (DALLAS D/O REVISED 6/28/93) PAGE 9
(PREV. EDITIONS OBSOLETE)
<PAGE> 1
EXHIBIT 10.12
AMENDED AND RESTATED PROMISSORY NOTE
Amount: $407,689.77
Baton Rouge, Louisiana
March 1,1996
For value received, I, WE OR EITHER OF US, the makers, endorsers,
guarantors, sureties, and all other parties hereto (singularly referred to as
an "Obligor" and collectively as the "Obligors"), each of us, in solido,
promise to pay to the order of LOUISIANA ECONOMIC DEVELOPMENT CORPORATION
(referred to, together with all future holders hereof, as "Holder") at 101
France Street, Baton Rouge, Louisiana 70802, the full sum of FOUR HUNDRED SEVEN
THOUSAND SIX HUNDRED EIGHTY-NINE AND 77/100 DOLLARS ($407,689.77), together
with interest at the rate of Seven and 38/100 percent (7.38%) per annum from
date until paid, and, in the event that this Amended and Restated Promissory
Note (this "Note") or any installment thereof, or any portion of any
installment thereof, or the interest thereon, is not paid when due and
according to its tenor, and is placed in the hands of an attorney at law for
collection, or is sued, twenty percent (20%) additional on the amount of
principal and interest due as attorneys' fees.
1. Payments. This Note shall be payable in sixty (60)
consecutive monthly installments of principal and interest as follows: (a) the
initial fifty-nine (59) installments in the amount of THREE THOUSAND SEVEN
HUNDRED FIFTY- ONE AND 58/100 DOLLARS ($3,751.58) each shall be due and payable
on the 1st day of March, 1996, and on the 1st day of each and every month
thereafter; and (b) one final installment shall be due and payable on March 1,
2001 in the amount of the unpaid balance of principal and accrued interest
under this Note. Payments, as received, shall be imputed first to payment of
interest and thereafter to principal until payment of the entire obligation.
Default in the payment of any single installment shall, at the option of
Holder, without notice of default, mature the entire obligation. Obligors
reserve the right to pre-pay all or any part of this Note without penalty.
Each Obligor hereby severally waives presentment for payment, demand, protest,
notice of protest for nonpayment and all pleas of division and discussion and
agree that payment hereof may be extended without notice thereof.
2. Secured Status of Holder. This Note is secured by, and the
Holder shall also be entitled to the benefits of, (a) that certain Pledge
Agreement dated of even date herewith (the "Pledge Agreement") executed by
Aviation Group, Inc., a Texas corporation (the "Company"), pursuant to which
the Company has pledged certain shares of the common stock of Pride Aviation,
Inc., an Oklahoma corporation ("Pride"); (b) Security Agreement from Pride in
favor of Holder granting a security interest in all accounts, inventory and
equipment of Pride; and (c) personal guaranty of Frank B. Rice. In the event
of a default hereunder, Holder may, at its option, in addition to any other
rights and remedies, exercise any of its rights and remedies under such
security documents.
3. Exchange Rights. The indebtedness evidenced by this Note is
exchangeable for shares of Common Stock, par value $.01, of the Company
pursuant to the terms of that certain
<PAGE> 2
Exchange Agreement (the "Exchange Agreement") of even date herewith by and
between Holder and the Company. Any transfer of this Note shall also
constitute a transfer of Holder's rights under the Exchange Agreement.
4. Miscellaneous.
a. Prior to receiving notice of any transfer of this
Note, the Company may treat the then current Holder, as reflected on the
records of the Company, as the person exclusively entitled to receive notices
and otherwise to exercise rights under the Exchange Agreement.
b. It is agreed that at the maturity of any installment,
or any day thereafter, this Note may be charged to the account of any one or
more or all of the parties herewith with any bank where it is placed for
collection, or if the amount to the credit of any or all of their accounts is
not sufficient to pay this Note in full, whatever amount stands to the credit
of any or all Obligors on the books of any such bank may be applied to its
payment, but a failure to so apply such funds shall in no way affect this Note
or release any of the Obligors, nor shall any bank ever be held liable to
Holder or any Obligor on account of its failure or refusal to apply any of said
funds.
5. Replacement of Existing Note. This Note amends, restates and
replaces in its entirety the Negotiable Instrument/Promissory Note dated March
15, 1995 (the "Prior Note") made by Pride Aviation, Inc. payable to the order
of Holder in the original principal amount of $584,335.77. This Note does not
constitute a novation of the original obligation evidenced by the Prior Note.
WITNESSES: PRIDE AVIATION, INC., an Oklahoma corporation
/s/ DARYL B. ROBERTSON By: /s/ PAUL LUBOMIRSKI
- -------------------------- -----------------------------------------
Name: Paul Lubomirski
---------------------------------------
/s/ [ILLEGIBLE] Title: President/General Manager
- -------------------------- ---------------------------------------
-2-
<PAGE> 1
EXHIBIT 10.13
PLEDGE AGREEMENT
March 1, 1996
In consideration of the extension and refinancing of the obligations
of Pride Aviation, Inc., an Oklahoma corporation ("Debtor"), to Louisiana
Economic Development Corporation ("Secured Party"), Aviation Group, Inc., a
Texas corporation ("Owner"), hereby pledges and assigns to Secured Party, and
grants a security interest to Secured Party in, the property described below
belonging to (or an interest in which belongs to) Owner:
1. Certificate No. 22 representing 5,015 shares of the
voting common stock of Pride Aviation, Inc., an Oklahoma corporation ("Pride"),
being approximately 50.15% of the capital stock of Pride that is issued and
outstanding; and
2. All dividends and distributions on or other rights in
connection with such property, and all proceeds from the sale of such property.
Collectively all such stock and other assets hereinafter are called the
"Collateral". The stock certificate listed above hereby is delivered to
Secured Party, along with a corresponding stock power appropriately executed in
blank.
The security interests granted herein are to secure the following (all
of which is hereinafter called the "Obligations"):
(a) All debts and obligations of Debtor to Secured Party
evidenced by that certain Amended and Restated Promissory Note in the original
principal amount of $407,689.77 made payable to the order of Secured Party by
Debtor together with any and all renewals, extensions, and refinancings of, and
modifications and additions to, the foregoing (the "Note"); and
(b) All costs incurred by Secured Party to obtain,
preserve, perfect and enforce the security interests herein granted, collect
the Obligations, and maintain, preserve, collect and enforce the Collateral,
and including but not limited to reasonable attorneys' fees and expenses of
sale.
Cash dividends on any of the Collateral shall continue to be paid to
the Owner unless Debtor defaults in the payment of any Obligations, in which
event Secured Party is authorized to collect and apply such cash dividends in
reduction of the Obligations. Any liquidating distributions and any additional
securities or other property issued or distributed with respect to any of the
Collateral, including all or any dividends, exchanges, or substitutions, shall
be pledged as additional collateral hereunder, shall be delivered to Secured
Party, and shall constitute "Collateral" as that term is defined herein.
<PAGE> 2
Upon the occurrence of a default under the Note (after any notice and
cure period specified therein), Secured Party is entitled to foreclose on the
Collateral and in such event Secured Party shall have:
(1) All remedies and rights available under the Texas
Business and Commerce Code and other applicable laws; and
(2) All remedies and rights under the Note.
Unless the property pledged hereunder threatens to decline speedily in
value or is of a type customarily sold on a recognized market, Secured Party
will give Owner reasonable notice of the time and place of any public sale
thereof or of the time after which any private sale or any other intended
disposition thereof is to be made. The requirements of reasonable notice shall
be met if such notice is mailed, postage prepaid, to the address of Owner shown
at the end of this Agreement at least ten (10) days before the time of the sale
or disposition. The proceeds of any such sale shall be applied, first, to the
payment of all costs and expenses of collection, storage, custody, and the sale
and delivery of the Collateral, including Secured Party's reasonable attorneys'
fees and expenses in connection therewith, and next to the payment of such of
the Obligations and in such order of application as Secured Party may from time
to time elect. Any remaining surplus may be retained by Secured Party as
security hereunder until all the Obligations shall have terminated.
If, in the opinion of Secured Party, there is any question that a
public or semipublic sale or distribution of any Collateral will violate any
state or federal securities law, Secured Party in its discretion (a) may offer
and sell securities privately to purchasers who will agree to take them for
investment purposes and not with a view to distribution and who will agree to
imposition of restrictive legends on the certificates representing the
security, or (b) may sell such securities in an intrastate offering under
Section 3(a)(11) of the Securities Act of 1933, as amended, and no sale so made
in good faith by Secured Party shall be deemed to be not "commercially
reasonable" because so made. Owner shall cooperate fully with Secured Party in
all respects in selling or realizing upon all or any part of the Collateral.
Secured Party acknowledges and agrees that Owner may grant a second
priority security interest in the Collateral to Frank and Carol Rice to secure
a 10% Convertible Note made by Owner payable to Frank and Carol Rice in the
original principal amount of $507,250, which security interest shall in all
events be subject and subordinate to the security interest of Secured Party
granted herein.
No delay on the part of Secured Party in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise by
Secured Party of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy. No action of Secured
Party permitted hereunder shall impair or affect the rights of Secured Party in
and to the Collateral. This Agreement shall inure to the benefit of Secured
Party and its successors and assigns.
-2-
<PAGE> 3
This Agreement shall be governed by the laws of the State of Texas,
including the version of the Uniform Commercial Code adopted in such state.
OWNER:
Witnesses: AVIATION GROUP, INC.
/s/ TOM HUSSEY By: /s/ LEE SANDERS
- ----------------------------- -----------------------------------
Name: Lee Sanders
---------------------------------
/s/ T M SANDER Title: President
- ----------------------------- --------------------------------
Address:
1327 Empire Central, Suite 260
Dallas, Texas 75247
SECURED PARTY:
Witnesses: LOUISIANA ECONOMIC DEVELOPMENT
CORPORATION
/s/ LAURA B. WALKER By: /s/ KEVIN P. REILLY, SR.
- ----------------------------- -----------------------------------
Name: Kevin P. Reilly, Sr.
---------------------------------
/s/ [ILLEGIBLE] Title: President
- ----------------------------- --------------------------------
Louisiana Economic Development
Corporation
Address:
101 France Street
Baton Rouge, Louisiana 70802
-3-
<PAGE> 1
EXHIBIT 10.14
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT is made and entered into this 1st day of
March, 1996, by and among Aviation Group, Inc., a Texas corporation (the
"Company"), and Louisiana Economic Development Corporation ("LEDC").
W I T N E S S E T H:
WHEREAS, LEDC has loaned $407,689.77 to Pride Aviation, Inc., an
Oklahoma corporation ("Pride"), as evidenced by that certain Amended and
Restated Promissory Note (the "Note") of even date herewith made by Pride and
payable to the order of LEDC in the original principal amount of $407,689.77;
and
WHEREAS, the Company desires to grant to LEDC the right to exchange
the indebtedness represented by the Note for shares of Common Stock, $0.01 par
value per share, of the Company (the "Stock"); and
WHEREAS, LEDC and the Company are entering into this Exchange
Agreement for the purpose of setting forth the terms and conditions upon which
LEDC may exchange the indebtedness evidenced by the Note for the Stock;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto do hereby agree as follows:
1. Exchange Rights.
a. Terms. The holder of the Note ("Holder")
shall have the right from time to time to exchange any or all of the unpaid
indebtedness thereof (including accrued but unpaid interest) for shares of the
Stock at an exchange rate of Four and 50/100 Dollars ($4.50) of indebtedness
per share of the Stock. Such exchange right may be exercised at any time prior
to the maturity date of the Note. To effect such exchange, Holder must tender
the Note to the Company at its offices in Dallas, Texas, together with a
written notice of exercise of such exchange right stating the amount thereof
being exchanged. Upon the giving of the notice of exchange and receipt of the
Note by the Company as hereinabove provided, no further interest shall accrue
upon the exchanged indebtedness thereof, the amount of the exchanged
indebtedness shall be deemed canceled, and the Company shall issue to Holder a
certificate evidencing the shares of the Stock to which Holder is entitled in
proper form. The Company will pay any documentary stamp taxes attributable to
the initial issuance of shares of the Stock upon the exchange of any debt
represented by the Note.
b. Adjustments. In the event of any stock dividend,
split, combination or reclassification directly affecting the then outstanding
shares of the Stock, the then effective
<PAGE> 2
exchange rate at which the indebtedness of the Note may be exchanged for shares
of the Stock shall be proportionately adjusted, upward or downward, to prevent
dilution or enlargement of the rights of Holder, effective at the close of
business on the date of such dividend, split, combination or reclassification.
In the event the Stock shall be changed into another kind of capital stock or
debt (otherwise then through a stock dividend, split, combination or
reclassification) or shall represent the right to receive some other security
or property, as a result of any capital reorganization or any merger or
consolidation with another corporation in which the Company is not the
surviving corporation, or any sale of all or substantially all of the assets of
the Company to another corporation, such debt shall (subject to further
adjustment in the exchange price as herein provided) thereafter entitle Holder
to acquire upon exchange thereof the kind and number of shares of stock or
other securities or property to which Holder would have been entitled if it had
the Stock issuable upon the exchange of the debt evidenced by the Note
immediately prior to such capital reorganization, merger, consolidation or sale
of assets.
c. Securities Laws and Transfers. Holder acknowledges
that the Company has no obligation to register the shares of Stock to be issued
upon exchange of the Note under applicable securities laws or to provide a
prospectus for any offer or transfer thereof by Holder. The shares of the
Stock to be issued upon exchange of the Note shall not be registered pursuant
to the Securities Act of 1933 or any state securities law or regulation. The
certificates evidencing such shares shall bear an appropriate legend to the
effect that such shares have not been registered under the Securities Act of
1933 nor under the securities laws of any state and that such shares may not be
sold within the United States of America unless so registered or unless the
Company shall receive an opinion of counsel satisfactory to it that such
registration is unnecessary.
d. No Fractional Shares. No fractional shares of the
Stock shall be issued upon exchange of the Note. Instead of any fractional
share which would otherwise be issuable upon such exchange, the Company will
pay a cash adjustment with respect to such fractional share in an amount equal
to the same fraction of the then effective exchange rate.
e. Rules of Procedure. The Board of Directors of the
Company, or a committee established by it, shall have the right from time to
time to adopt specific rules of procedure to carry out the full intent of the
exchange provisions of this Exchange Agreement and to do all reasonable acts
therefor; provided that such rules and acts shall not violate the specific
terms of this Exchange Agreement or the Note.
2. Recognition of Holder. Prior to receiving notice of any
transfer of the Note, the Company may treat the then current Holder, as
reflected on the records of the Company, as the person exclusively entitled to
receive notices and otherwise to exercise rights hereunder.
<PAGE> 3
3. Miscellaneous.
a. The Company shall at all times reserve and hold
available sufficient shares of the Stock to satisfy all exchange rights of this
Exchange Agreement and the Note. Shares deliverable upon the exchange of the
Note shall, at delivery, be fully paid and nonassessable, free from all taxes,
liens and charges arising out of their issuance. In the case of the exchange of
less than all of the indebtedness of the Note, the Company shall cause Pride to
cancel the Note and execute and deliver a new promissory note of like tenor and
date for the balance of the unpaid and unexchanged indebtedness.
b. This Exchange Agreement does not entitle Holder to
any voting rights or other rights as a shareholder of the Company, or to any
other rights whatsoever except the rights herein expressed. No dividends are
payable or will accrue on the shares of the Stock into which the principal
amount thereof may be exchanged until, and except to the extent that, the
exchange right granted in this Exchange Agreement is exercised.
c. The Note is not subject to redemption. No
provisions of this Exchange Agreement or the Note restrict any declaration of
dividends by the Company, require the maintenance by the Company of any
reserves or any minimum financial condition, or restrict the incurrence of
additional debt or the issuance of additional securities by the Company.
d. This Exchange Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
assigns. No provision hereof shall be construed to create any right in any
person not a party hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Exchange
Agreement on the day and year first above written.
WITNESSES: AVIATION GROUP, INC., a Texas
corporation
/s/ TOM HUSSEY By: /s/ LEE SANDERS
- ---------------------------- ---------------------------------
Name: Lee Sanders
-------------------------------
/s/ T M SANDERS Title: President
- ---------------------------- ------------------------------
LOUISIANA ECONOMIC DEVELOPMENT
CORPORATION
/s/ LAURA B. WALKER By: /s/ KEVIN P. REILLY, SR.
- ---------------------------- ---------------------------------
Name: Kevin P. Reilly, Sr.
-------------------------------
/s/ [ILLEGIBLE] Title: President
- ---------------------------- ------------------------------
Louisiana Economic Development
Corporation
-3-
<PAGE> 1
EXHIBIT 10.16
PLEDGE AGREEMENT
January __, 1996
In consideration of the loan contemporaneously granted to Aviation
Group, Inc., a Texas corporation ("Debtor"), by _____________________________
("Secured Party"), __________________________ ("Owner") hereby pledges and
assigns to Secured Party, and grants a security interest to Secured Party in,
the property described below belonging to (or an interest in which belongs to)
Owner:
1. Certificate No. _______ representing ________ shares of the
voting common stock of Pride Aviation, Inc., an Oklahoma corporation ("Pride"),
being approximately _____% of the capital stock of Pride that is issued and
outstanding; and
2. All dividends and distributions on or other rights in
connection with such property, and all proceeds from the sale of such property.
Collectively all such stock and other assets hereinafter are called the
"Collateral". The stock certificate listed above hereby is delivered to
Secured Party, along with a corresponding stock power appropriately executed in
blank.
The security interests granted herein are to secure the following (all
of which is hereinafter called the "Obligations"):
(a) All debts and obligations of Debtor to Secured Party
evidenced by that certain 10% Convertible Note in the original principal amount
of $__________ made payable to the order of Secured Party by Debtor together
with any and all renewals, extensions, and refinancings of, and modifications
and additions to, the foregoing (the "Note"); and
(b) All costs incurred by Secured Party to obtain,
preserve, perfect and enforce the security interests herein granted, collect
the Obligations, and maintain, preserve, collect and enforce the Collateral,
and including but not limited to reasonable attorneys' fees and expenses of
sale.
Cash dividends on any of the Collateral shall continue to be paid to
the Owner unless Debtor defaults in the payment of any Obligations, in which
event Secured Party is authorized to collect and apply such cash dividends in
reduction of the Obligations. Any liquidating distributions and any additional
securities or other property issued or distributed with respect to any of the
Collateral, including all or any dividends, exchanges, or substitutions, shall
be pledged as additional collateral hereunder, shall be delivered to Secured
Party, and shall constitute "Collateral" as that term is defined herein.
<PAGE> 2
Upon the occurrence of a default under the Note (after any notice and
cure period specified therein), Secured Party is entitled to foreclose on the
Collateral and in such event Secured Party shall have:
(1) All remedies and rights available under the Texas
Business and Commerce Code and other applicable laws; and
(2) All remedies and rights under the Note.
Unless the property pledged hereunder threatens to decline speedily in
value or is of a type customarily sold on a recognized market, Secured Party
will give Owner reasonable notice of the time and place of any public sale
thereof or of the time after which any private sale or any other intended
disposition thereof is to be made. The requirements of reasonable notice shall
be met if such notice is mailed, postage prepaid, to the address of Owner shown
at the end of this Agreement at least ten (10) days before the time of the sale
or disposition. The proceeds of any such sale shall be applied, first, to the
payment of all costs and expenses of collection, storage, custody, and the sale
and delivery of the Collateral, including Secured Party's reasonable attorneys'
fees and expenses in connection therewith, and next to the payment of such of
the Obligations and in such order of application as Secured Party may from time
to time elect. Any remaining surplus may be retained by Secured Party as
security hereunder until all the Obligations shall have terminated.
If, in the opinion of Secured Party, there is any question that a
public or semipublic sale or distribution of any Collateral will violate any
state or federal securities law, Secured Party in its discretion (a) may offer
and sell securities privately to purchasers who will agree to take them for
investment purposes and not with a view to distribution and who will agree to
imposition of restrictive legends on the certificates representing the
security, or (b) may sell such securities in an intrastate offering under
Section 3(a)(11) of the Securities Act of 1933, as amended, and no sale so made
in good faith by Secured Party shall be deemed to be not "commercially
reasonable" because so made. Owner shall cooperate fully with Secured Party in
all respects in selling or realizing upon all or any part of the Collateral.
No delay on the part of Secured Party in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise by
Secured Party of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy. No action of Secured
Party permitted hereunder shall impair or affect the rights of Secured Party in
and to the Collateral. This Agreement shall inure to the benefit of Secured
Party and its successors and assigns.
-2-
<PAGE> 3
This Agreement shall be governed by the laws of the State of Texas, including
the version of the Uniform Commercial Code adopted in such state.
OWNER:
Address:
----------------------------------------
- -------------------------------
By:
- ------------------------------- --------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
SECURED PARTY:
Address:
----------------------------------------
- -------------------------------
By:
- ------------------------------- --------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
-3-
<PAGE> 1
EXHIBIT 10.17
STOCK PURCHASE AGREEMENT
by and among
AVIATION GROUP, INC.
PRIDE AVIATION, INC.,
SUNBELT BUSINESS CAPITAL INCORPORATED,
SUNBELT BUSINESS CAPITAL, L.L.C.
and
ALL OF THE STOCKHOLDERS OF
PRIDE AVIATION, INC. AND
SUNBELT BUSINESS CAPITAL INCORPORATED
dated as of
February 21, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.3 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II THE TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 Purchase and Sale of Pride Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Purchase and Sale of Sunbelt Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Transfer of Pride's Alexandria Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4 Conversion of LLC Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III PAYMENT OF CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 Pride Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Sunbelt Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Method of Payment of Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 Effect of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV REPRESENTATIONS AND WARRANTIES AS TO PRIDE . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1 Existence and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Capitalization of Pride . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Authorization and Validity of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 Consents and Approvals; No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.5 Receivables and Payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 Financial Statements; No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . 11
4.7 Warranty Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.8 Title to Properties; Encumbrances; Condition . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.9 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.10 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.11 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.12 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.14 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.15 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.16 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.17 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.18 Employment Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.19 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.20 Environmental Laws and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.21 Interests in Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.22 Compensation of Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.23 Suppliers and Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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4.24 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.25 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.26 Broker's or Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.27 Government Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.28 Copies of Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.29 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.30 Representations by LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE V REPRESENTATIONS AND WARRANTIES AS TO SUNBELT . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 Existence and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Capitalization of Sunbelt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.3 Authorization and Validity of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.4 Consents and Approvals; No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.5 Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.7 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.8 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.9 Broker's or Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.10 Copies of Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI SECURITIES REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.1 Authorization and Validity of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.2 Securities Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.3 Accredited Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.4 Knowledge and Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.5 Investment Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.6 Holding Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.7 Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.8 LLC Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1 Existence and Good Standing; Power and Authority . . . . . . . . . . . . . . . . . . . . . . . 23
7.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.3 No Violations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.4 Broker's or Finder's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.5 Receivables and Payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.6 Financial Statements; No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . 24
7.7 Warranty Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.8 Title to Properties; Encumbrances; Condition . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.9 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.10 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.11 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.12 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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7.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.14 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.15 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.16 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.17 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.18 Employment Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.19 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.20 Environmental Laws and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.21 Interests in Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.22 Compensation of Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.23 Suppliers and Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.24 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.25 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.26 Government Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.27 Copies of Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.28 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VIII CONDITIONS TO THE OBLIGATIONS OF
PRIDE, SUNBELT, LLC AND THE SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1 Truth of Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.2 Performance of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.3 No Litigation Threatened. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.4 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.5 Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.6 Legal Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE IX CONDITIONS TO GROUP'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.1 Truth of Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.2 Performance of Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.3 No Litigation Threatened. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.4 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.5 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.6 Due Diligence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.7 Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.8 Legal Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.9 Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.10 Alexandria Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.11 Partial Extinguishment of Pride's Indebtedness to LLC. . . . . . . . . . . . . . . . . . . . . 33
ARTICLE X COVENANTS OF PRIDE, SUNBELT, LLC AND
THE SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.1 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.2 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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10.3 Negative Covenants of Pride and the Pride Shareholders . . . . . . . . . . . . . . . . . . . . 34
10.4 Negative Covenants of Sunbelt and LLC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.5 Exclusive Dealing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.6 Review of the Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.7 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.8 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE XI COVENANTS OF GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.1 Cooperation by Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.2 Books and Records; Personnel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.3 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.4 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE XII THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12.1 Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12.2 Obligations of Pride, Sunbelt and the Shareholders . . . . . . . . . . . . . . . . . . . . . . 37
12.3 Group's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE XIII TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
13.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
13.2 Remedies Upon Default or Failure to Close. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
13.3 Effect on Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE XIV SURVIVAL AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
14.1 Indemnification of the Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
14.2 Indemnification of Group by Pride Shareholders . . . . . . . . . . . . . . . . . . . . . . . . 41
14.3 Indemnification of Group by Sunbelt Shareholders . . . . . . . . . . . . . . . . . . . . . . . 41
14.4 Indemnification of Pride . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.5 Demands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.6 Right to Contest and Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.7 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.8 Right to Participate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.9 Payment of Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.10 Right of Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.11 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE XV LLC AND PRIDE DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
15.1 Representations Regarding Pride Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
15.2 Closing Transactions Relating to Pride Debt. . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE XVI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.2 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
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16.3 Entire Agreement; Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
16.4 Binding Effect and Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
16.5 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
16.6 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
16.7 Execution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
16.8 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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SCHEDULES
Schedule 2.3 Alexandria Operations
Pride Schedules
Schedule 4.2 Pride Stock
Schedule 4.4 Consents and Approvals
Schedule 4.5 Receivables and Payables
Schedule 4.6 Material Adverse Change
Schedule 4.7 Warranty Claims
Schedule 4.8 Title to Properties
Schedule 4.10 Leases
Schedule 4.11 Contracts
Schedule 4.12 Permits
Schedule 4.13 Litigation
Schedule 4.14 Taxes
Schedule 4.15 Insurance
Schedule 4.16 Intellectual Property
Schedule 4.20 Environmental
Schedule 4.21 Interests in Customers and Suppliers
Schedule 4.22 Employees
Schedule 4.23 Suppliers and Customers
Schedule 4.24 Absence of Changes
Schedule 4.27 Government Contracts
Sunbelt Schedules
Schedule 5.2 Sunbelt Stock
Schedule 5.4 Consents and Approvals
Schedule 5.5 Liabilities
Schedule 5.6 Litigation
Schedule 5.7 Taxes
Group Schedules
Schedule 7.5 Receivables and Payables
Schedule 7.6 No Material Adverse Change
Schedule 7.7 Warranty Claims
Schedule 7.8 Title to Properties
Schedule 7.10 Leases
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Schedule 7.11 Contracts
Schedule 7.12 Permits
Schedule 7.13 Litigation
Schedule 7.14 Taxes
Schedule 7.15 Insurance
Schedule 7.16 Intellectual Property
Schedule 7.20 Environmental
Schedule 7.21 Interests in Customers and Suppliers
Schedule 7.22 Employees
Schedule 7.23 Suppliers and Customers
Schedule 7.24 Absence of Changes
Schedule 7.26 Government Contracts
EXHIBITS
Exhibit A Convertible Note
Exhibit B Pledge Agreement
Exhibit C-1 Employment Agreement - Sanders
Exhibit C-2 Employment Agreement - Lubomirski
Exhibit D-1 Consulting Agreement - Rice (1 year)
Exhibit D-2 Consulting Agreement - Weed (2 years)
Exhibit E Opinion to be delivered by Bracewell & Patterson,
L.L.P.
Exhibit F Opinions to be delivered by Schober, Reynolds &
Antee, Cestia & Landry and Frederick Parker, Jr.
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement together with the Exhibits and Schedules
referenced herein and attached hereto ("Agreement"), dated as of February 21,
1996, is by and among Aviation Group, Inc., a Texas corporation ("Group"),
Pride Aviation, Inc., an Oklahoma corporation ("Pride"), Frank B. Rice, Carol
B. Rice (Frank and Carol Rice are collectively referred to herein as "Rice"),
Dan Thompson ("Thompson"), Paul Lubomirski ("Lubomirski"), Sunbelt Business
Capital Incorporated, a Florida corporation ("Sunbelt"), Sunbelt Business
Capital, L.L.C., a Louisiana limited liability company ("LLC"), and the
shareholders of Sunbelt listed on Schedule 5.2 to this Agreement (each a
"Sunbelt Shareholder" and collectively the "Sunbelt Shareholders"). (Rice,
Thompson, Lubomirski and Sunbelt are sometimes referred to herein individually
as a "Pride Shareholder" and collectively as the "Pride Shareholders".)
W I T N E S S E T H:
WHEREAS, the Pride Shareholders own all of the issued and outstanding
shares of capital stock of Pride (the "Pride Stock") and the Sunbelt
Shareholders own all of the issued and outstanding shares of capital stock of
Sunbelt (the "Sunbelt Stock"); and
WHEREAS, the Pride Shareholders (other than Sunbelt) desire to sell to
Group, and Group desires to purchase from such Pride Shareholders, the Pride
Stock (other than the Pride Stock owned by Sunbelt), all in accordance with the
terms and conditions set forth herein; and
WHEREAS, the Sunbelt Stockholders desire to sell to Group, and Group
desires to purchase from the Sunbelt Stockholders, the Sunbelt Stock, all in
accordance with the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
promises and covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used herein, the following terms have the
meanings set forth below:
"Affiliate": with respect to any Person, any other Person directly or
indirectly controlling (including but not limited to all directors and officers
of such Person), controlled by, or under direct or indirect common control with
such Person.
<PAGE> 10
"Agreement": this Stock Purchase Agreement, as amended from time to
time as provided herein, and all exhibits, schedules and ancillary documents
hereto, except where the context clearly indicates otherwise.
"Alexandria Operations": the operations, assets and liabilities of
Pride relating to its business in Alexandria, Louisiana.
"Books and Records": all books, records, books of account, files and
data (including customer and supplier lists), catalogs, brochures, sales
literature, promotional material, certificates and other documents used in or
associated with the conduct of the Business or the ownership of the assets of
Pride, including personnel records and files.
"Business": the aircraft and airline maintenance and service
operations, the headquarters of which are in New Iberia, Louisiana, including
without limitation (i) aircraft stripping and painting services, and (ii)
aircraft light maintenance services, currently conducted by Pride. The
Business shall not include the Alexandria Operations.
"Business Day": any day excluding Saturday, Sunday and any day on
which banks in Houston, Texas are authorized or required by law or other
governmental action to close.
"Claim": as defined in Section 14.5.
"Closing": as defined in Section 12.1.
"Closing Date": as defined in Section 12.1.
"Code": the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated and rulings issued thereunder. Section
references to the Code are to the Code as in effect at the date of this
Agreement and any subsequent provisions of the Code amendatory thereof,
supplemental thereto or substituted therefor.
"Consulting Agreements": the Consulting Agreements, to be executed by
the parties thereto at Closing, in the forms attached as Exhibit D-1 and D-2
hereto, the first between Pride and Rice, containing a non-competition
agreement for five years from the Closing, and the second between Group and
Weed.
"Contract": any written or oral contract, agreement or instrument
relating to the Business, including, without limitation, supply contracts,
customer agreements, any mortgages, leases of personal property, deeds of
trust, notes or guarantees, pledges, liens, or conditional sales agreements to
which the Person referred to is a party or by which any of its assets may be
bound, but excluding Leases and Employee Benefit Plans.
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"Convertible Notes": the 10% convertible secured promissory notes
made by Group in favor of Rice, Thompson and each of the Sunbelt Shareholders,
respectively, in the form attached as Exhibit A hereto, to be executed by Group
at the Closing.
"Damages": as defined in Section 14.1.
"Employee Benefit Plans": any employee benefit plans, policies,
programs and arrangements and all related contracts, agreements and other
descriptions thereof with respect to the employee benefits provided to the
employees of Pride prior to the Closing Date.
"Employment Agreements": the two Employment Agreements, in the form
attached as Exhibit C-1 and C-2 hereto, between Group and each of Lee Sanders
and Lubomirski, respectively, to be executed by the parties thereto at Closing,
and containing non-competition agreements for three years beyond the
termination thereof.
"Encumbrances": liens, security interests, pledges, proxies,
shareholder agreements, voting agreements or trusts, options, rights of first
refusal, easements, mortgages, deeds of trust, rights-of-way, restrictions,
encroachments, licenses, leases, or any other encumbrances, claims and other
restrictions or limitations on the use or ownership of real or personal
property or irregularities in title thereto.
"Environmental Claim": any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violations, investigations or proceedings relating in any way
to any Environmental Law or any permit issued under any such Environmental Law
(cumulatively and for purposes of this definition, "Environmental Claims"),
including without limitation (i) any and all Environmental Claims by
governmental authorities for enforcement, cleanup, removal, remedial or other
actions or damages pursuant to any applicable Environmental Law, and (ii) any
and all Environmental Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief relating to
Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
"Environmental Law": any federal, state or local statute, law, rule,
regulation, ordinance, code, policy or rule of common law and in each case as
amended and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree or judgment, relating to
Hazardous Materials, the environment or health relating to or arising from
environmental conditions, including without limitation the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended 42
U.S.C. Section 9601 et seq.; the Hazardous Materials Transportation Act, as
amended, 49 U.S.C. Section 5101 et seq.; the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. Section 6901 et seq.; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.; the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Clean Air
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Act, 42 U.S.C. Section 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
Section 300f et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701
et seq.; and relevant state and local laws.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to ERISA are to ERISA as in effect at the date
of this Agreement and any subsequent provisions of ERISA amendatory thereof,
supplemental thereto or substituted therefor.
"Exchange Agreement": as defined in the preamble of this Agreement.
"FAA": the Federal Aviation Administration.
"Final Termination Date": as defined in Section 13.1.2.
"GAAP": generally accepted accounting principles consistently applied
(as such term is used in the American Institute of Certified Public Accountants
Professional Standards) as of the date of any applicable financial statement or
calculation.
"Group": as defined in the preamble of this Agreement.
"Group Balance Sheet": as defined in Section 7.6.
"Group Balance Sheet Data": as defined in Section 7.6.
"Group Financial Statements": as defined in Section 7.6.
"Group Indemnitees": as defined in Section 14.2.
"Group Stock": as defined in the preamble of this Agreement.
"Hazardous Materials": any chemicals, materials or substances defined
as or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," "contaminants," "pollutants,"
"regulated substances" or words of similar import under any applicable
Environmental Law, including but not limited to any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, radon gas and urea formaldehyde foam insulation, transformers or other
equipment that contain dielectric fluid containing levels of polychlorinated
biphenyls.
"Intellectual Property": domestic and foreign patents, patent
applications, registered and unregistered trademarks, service marks, trade
names and logos, registered and unregistered copyrights, computer programs,
data bases, trade secrets, methods, designs, processes, procedures,
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proprietary information and any other intangible property used in or associated
with the conduct of a business and the ownership of any assets of a Person,
including all rights to any such property which is owned by and licensed from
others.
"Inventory": all merchandise, supplies, stock in trade and other such
assets of a Person held for sale or lease in the ordinary course of its
business or to be furnished under contracts of service or held as work in
process or to be used or consumed in its business.
"LEDC": the Louisiana Economic Development Corporation.
"LLC": as defined in the preamble of this Agreement.
"Leases": any and all written and oral contracts, agreements, and
commitments regarding the lease of real property.
"Lubomirski": as defined in the preamble of this Agreement.
"Material Adverse Effect": a material adverse effect, determined in
accordance with GAAP, on the assets, liabilities, business, condition
(financial or otherwise), results of operations or prospects of Pride or
Sunbelt. Without limiting the foregoing, any event or series of events that
constitutes a material adverse financial impact on Pride of $50,000 or more for
any single event or $100,000 or more in the aggregate, shall be deemed to
constitute a Material Adverse Effect.
"Offering": The private offering of securities by Group under the
Placement Agreement.
"Permits": any license, permit, franchise, consent, approval or
authority granted by any Person.
"Permitted Encumbrances": (i) Encumbrances consisting of easements,
permits and other restrictions or limitations on the use of real property or
irregularities in title thereto that do not materially detract from the value
of, or materially impair the use of, such property by Pride in the operation of
the Business, or (ii) Encumbrances for current taxes, assessments or
governmental charges or levies on property not yet due and payable.
"Person": any individual, partnership, joint venture, corporation,
trust, unincorporated organization, government or other department or agency
thereof or any other legally recognized entity.
"Placement Agreement": that certain letter agreement dated November
20, 1995 by and among Group and RAS Securities, Inc., as placement agent, with
respect to a "best efforts" private offering of securities of Group.
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"Pledge Agreements": The Pledge Agreements made by Group in favor of
Rice, Thompson and each of the Sunbelt Shareholders, respectively, in the form
attached as Exhibit B hereto, to be executed by Group (or Sunbelt as to the
Sunbelt Shareholders) at the Closing.
"Pride": as defined in the preamble of this Agreement.
"Pride Balance Sheet": as defined in Section 4.6.
"Pride Balance Sheet Date": as defined in Section 4.6.
"Pride Debt": the indebtedness of Pride to LLC evidenced by the Pride
Note.
"Pride Financial Statements": as defined in Section 4.6.
"Pride Indemnitees": as defined in Section 14.4 of this Agreement.
"Pride Loan Documents": the Pride Note, the Loan Agreement dated
February 15, 1993 and the Commercial Security Agreement dated February 15,
1993, all as between Pride and Sunbelt, the Continuing Guaranty dated February
15, 1993 from Rice to Sunbelt, and the Assignment dated January 17, 1996 from
Sunbelt to LLC of all of its rights under such agreements and instruments.
"Pride Note": the promissory note dated May 17, 1993 originally
payable to the order of Sunbelt in the original principal amount of $400,000
and now held by LLC.
"Pride Purchase Price": as defined in Section 3.1.
"Pride Shareholders": as defined in the preamble of this Agreement.
"Pride Stock": as defined in the recitals of this Agreement.
"RAS": RAS Securities, Inc.
"RAS Warrant": the Warrant to Purchase Aviation Group, Inc. Common
Stock to be issued to RAS Securities, Inc., pursuant to the Placement
Agreement.
"Rice": as defined in the preamble of this Agreement.
"Sanders": as defined in the preamble of this Agreement.
"Schedules": the schedules of the parties in the context and as
referenced throughout this Agreement.
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"Shareholders": the Pride Shareholders and Sunbelt Shareholders.
"Shareholder Indemnitees": as defined in Section 14.1.
"Stock Offering Price": the price per share at which Group offers to
sell its Common Stock in the Offering.
"Sunbelt": as defined in the preamble of this Agreement.
"Sunbelt Purchase Price": as defined in Section 3.2.
"Sunbelt Stock": as defined in the recitals of this Agreement.
"Sunbelt Shareholders": as defined in the preamble of this Agreement.
"Tax": any net income, alternative or add-on minimum tax, advance,
corporation, gross income, gross receipts, sales, use, ad valorem, franchise,
profits, license, value added, withholding, payroll, employment, excise, stamp
or occupation tax, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or any penalty imposed by any
governmental authority with respect thereto, and any liability for such amounts
as a result either of being a member of an affiliated group or of a contractual
obligation to indemnify any other entity.
"Thompson": as defined in the preamble of this Agreement.
"Weed": as defined in the preamble of this Agreement.
1.2 Other Terms. Other terms may be defined elsewhere in the text
of this Agreement.
1.3 Other Definitional Provisions.
1.3.1 The words "hereof," "herein" and "hereunder," and
words of similar import, when used in this Agreement, shall refer to
this Agreement as a whole and not any particular provision of this
Agreement.
1.3.2 The terms defined in the singular shall have a
comparable meaning when used in the plural, and vice versa.
1.3.3 The terms defined in the neuter or masculine gender
shall include the feminine, neuter and masculine genders, unless the
context clearly indicates otherwise.
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1.3.4 Reference to the "best knowledge" of a Person or
words of similar import shall mean the actual or constructive best
knowledge of such Person after reasonable due diligence by such Person
as to the facts and circumstances addressed.
ARTICLE II
THE TRANSACTIONS
2.1 Purchase and Sale of Pride Stock. Subject to the terms and
conditions of this Agreement, Group agrees to purchase from the Pride
Shareholders (other than Sunbelt), and the Pride Shareholders (other than
Sunbelt) agree to sell, convey, transfer, assign and deliver to Group, the
Pride Stock (other than the Pride Stock owned by Sunbelt), free and clear of
all Encumbrances, on the Closing Date against the receipt by the Pride
Shareholders (other than Sunbelt) of the Pride Purchase Price, as detailed
below.
2.2 Purchase and Sale of Sunbelt Stock. Subject to the terms and
conditions of this Agreement, Group agrees to purchase from the Sunbelt
Shareholders, and the Sunbelt Shareholders agree to sell, convey, transfer,
assign and deliver to Group, the Sunbelt Stock, free and clear of all
Encumbrances, on the Closing Date against the receipt by the Sunbelt
Shareholders of the Sunbelt Purchase Price, as detailed below.
2.3 Transfer of Pride's Alexandria Operations. Rice and Pride
agree to cause the sale, conveyance, transfer, assignment and delivery to Rice
or to any person designated by him, prior to the Closing but no later than
January 20, 1996, of all of the assets and liabilities relating to the
Alexandria Operations in exchange for Rice's cancellation of $200,000 of
Pride's indebtedness to Rice, effective for all purposes as of September 30,
1995. The assets that constitute the Alexandria Operations are listed on
Schedule 2.3. Rice (or the designated assignee) shall assume all liabilities
relating to the Alexandria Operations, including without limitation those
liabilities listed in Schedule 2.3. Rice shall cause Pride to be released from
liability on its lease of facilities at the former England Air Force Base.
Group and its legal counsel shall have the right to review and approve all
documents relating to the foregoing transactions with respect to the Alexandria
Operations, prior to their execution and delivery.
2.4 Conversion of LLC Debt. Contemporaneously with the Closing,
LLC agrees to cancel $168,000 of the outstanding principal amount of the Pride
Debt in exchange for the issuance by Group to LLC of the number of shares of
Group Stock equal to $168,000 divided by the Stock Offering Price. The holders
of such Group Stock will have the same registration rights as the holders of
the Group Stock issued pursuant to the Offering.
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ARTICLE III
PAYMENT OF CONSIDERATION
3.1 Pride Purchase Price. At the Closing, Group shall pay and
deliver to the following Pride Shareholders the following consideration as
payment for the Pride Stock sale contemplated herein (the "Pride Purchase
Price"):
3.1.1 To Rice, cash in the amount of $245,000 and a $507,250
principal amount Convertible Note;
3.1.2 To Thompson, cash in the amount of $5,000 and a $10,000
principal amount Convertible Note; and
3.1.3 To Lubomirski, the number of shares of Group Stock
equal to $132,750 divided by the Stock Offering Price.
3.2 Sunbelt Purchase Price. At the Closing, Group shall pay and
deliver to the Sunbelt Shareholders the following consideration as payment for
the Sunbelt Stock sale contemplated herein (the "Sunbelt Purchase Price"): an
aggregate of $250,000 in cash and an aggregate of $350,000 in principal amount
of Convertible Notes. Each item of the Sunbelt Purchase Price shall be
allocated and paid or delivered to the Sunbelt Shareholders in amounts that are
pro rata based on their respective ownership of the Sunbelt Stock.
3.3 Method of Payment of Cash. The cash payments to each of the
Sunbelt Shareholders, Rice and Thompson shall be paid by wire transfer of
immediately available funds to an account designated in writing by each of them
to Group not later than three (3) business days prior to the Closing Date. If
such designation is not timely made by a payee, such cash payment to the payee
may be made by Group's check.
3.4 Effect of Payment. Each of the Shareholders agrees that
delivery of the Pride Purchase Price and Sunbelt Purchase Price pursuant to
this Article III shall constitute the complete consideration for the Pride
Stock and Sunbelt Stock and shall be in full satisfaction of all of such
Shareholder's rights (including, without limitation, any associated preemptive
rights) in or to any of the Pride Stock or Sunbelt Stock.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES AS TO PRIDE
Pride, LLC and each of the Pride Shareholders (other than Sunbelt)
hereby represent and warrant, jointly and severally, to Group as follows:
4.1 Existence and Good Standing. Pride is a corporation duly
organized and validly existing under the laws of the State of Oklahoma. Pride
has the power and authority to own, lease and operate its property and to carry
on its business as now being conducted and to own or lease the assets owned or
leased by it. Pride is duly qualified or licensed to do business in each
jurisdiction in which the character or location of the properties owned or
leased by Pride or the nature of the business conducted by Pride makes such
qualification necessary and the absence of which would have a Material Adverse
Effect.
4.2 Capitalization of Pride.
4.2.1 The entire authorized capital stock of Pride consists
of 50,000 shares of common stock, par value $1.00 per share, of which
10,000 shares are issued and outstanding, fully paid and nonassessable
and held beneficially and of record by the Pride Shareholders as set
forth on Schedule 4.2. Except as set forth on Schedule 4.2, such
outstanding shares are owned beneficially and of record by the Pride
Shareholders, free and clear of all Encumbrances and rights of others.
4.2.2 The shares of Pride Stock held beneficially and of
record by the Pride Shareholders represent all of the issued and
outstanding capital stock of Pride. There are no outstanding
subscriptions, options, convertible securities, indebtedness
convertible into equity securities, warrants, calls or rights of any
kind (issued, contracted for, granted by, or binding upon Pride) to
purchase or otherwise acquire any security of or equity interest in
Pride. The Pride Shareholders have full legal right to transfer the
Pride Stock pursuant to the terms of this Agreement and will, upon
delivery of the Pride Stock to Group pursuant to the terms hereof,
transfer to Group good and valid title to the Pride Stock free and
clear of all liens, security interests, claims, charges, Encumbrances,
rights, options to purchase, voting trusts or other voting agreements
and calls and commitments of every kind affecting the Pride Stock.
4.3 Authorization and Validity of Agreement. Pride has full
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by Pride,
and the consummation of the transactions contemplated hereby, have been duly
authorized and approved by the Board of Directors of Pride and no other action
on the part of Pride is necessary to authorize the execution, delivery and
performance of this Agreement by Pride and the
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consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Pride and is a valid and binding obligation of
Pride enforceable against Pride in accordance with its terms, except to the
extent that its enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
4.4 Consents and Approvals; No Violations. The execution,
delivery and performance of this Agreement by Pride and the Pride Shareholders
and the consummation by Pride and the Pride Shareholders of the transactions
contemplated hereby will not, with or without the giving of notice or the lapse
of time or both: (i) violate, conflict with, or result in a breach or default
under any provision of the charter or bylaws of Pride; (ii) violate any
statute, ordinance, rule, regulation, order, judgment or decree of any court or
of any governmental or regulatory body, agency or authority applicable to Pride
or by which any of its properties or assets may be bound; (iii) require any
filing by Pride with, or require Pride to obtain any permit, consent or
approval of, or require Pride or the Pride Shareholders to give any notice to,
any governmental or regulatory body, agency or authority or any third party
other than as set forth on Schedule 4.4 attached hereto; or (iv) other than as
set forth on Schedule 4.4 attached hereto, result in a violation or breach by
Pride of, conflict with, constitute (with or without due notice or lapse of
time or both) a default by Pride (or give rise to any right of termination,
cancellation, payment or acceleration) under or result in the creation of any
Encumbrance upon any of the properties or assets of Pride under any of the
terms, conditions, or provisions of any note, bond, mortgage, indenture,
license, franchise, Permit, Contract, Lease, franchise agreement or other
instrument or obligation to which Pride is a party, or by which it or any of
its properties or assets may be bound.
4.5 Receivables and Payables. Schedule 4.5 lists all notes
receivable, notes payable, accounts receivable and accounts payable of Pride.
Except as reflected on Schedule 4.5, all notes receivable and accounts
receivable of Pride are, and such notes and accounts receivable at the Closing
Date will be, (i) bona fide claims against debtors for debts, sales, work
performed or other charges, (ii) to the best knowledge of Pride and the Pride
Shareholders, subject to no defenses, set-offs or counterclaims, and (iii) to
the best knowledge of Pride and the Pride Shareholders, collectible. Except as
reflected on Schedule 4.5, all notes payable and accounts payable of Pride are,
and such notes and accounts payable at the Closing Date will be, bona fide
claims by creditors for debts, sales, work performed, or other expenses
incurred by Pride.
4.6 Financial Statements; No Material Adverse Change. Pride has
heretofore furnished Group or its representatives with the audited financial
statements of Pride as of September 30, 1995, in the form of a balance sheet
(the "Pride Balance Sheet"), and an income statement and statement of cash
flows for the twelve-month period then ended relating to the audited balance
sheet (together with the Balance Sheet, the "Pride Financial Statements"). The
Pride Financial Statements have been prepared in accordance with GAAP and
fairly present in all material respects the financial position of Pride at the
dates thereof and the results of operations and cash flow of Pride for the
period
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indicated. Except as set forth on Schedule 4.6 attached hereto or for changes
that would not have a Material Adverse Effect, since September 30, 1995 (the
"Pride Balance Sheet Date"), there has been no change in the assets or
liabilities, or in the business or condition, financial or otherwise, or in the
results of operations, of Pride.
4.7 Warranty Claims. Except as set forth on Schedule 4.7 attached
hereto, as of the date hereof, there are no warranty claims relating to
products at any time sold or services at any time performed by Pride pending
or, to the best knowledge of Pride and the Pride Shareholders, threatened,
which would have a Material Adverse Effect.
4.8 Title to Properties; Encumbrances; Condition. Except as set
forth on Schedule 4.8 or on any of the other Schedules hereto and except for
properties and assets reflected in the Pride Financial Statements or acquired
since the Pride Balance Sheet Date which have been sold or otherwise disposed
of in the ordinary course of business, Pride owns outright, and has, and shall
at the Closing have, full legal and beneficial title to all of its assets, in
each case subject to no Encumbrances except for Permitted Encumbrances. The
assets of Pride consist of all properties and assets necessary to operate the
Business in the manner it has been operated prior to the date hereof. Except
as set forth on Schedule 4.8, each asset of Pride is in good operating
condition and repair, subject to ordinary wear and tear, and, to the best
knowledge of Pride and the Pride Shareholders, has been maintained in
accordance with the manufacturers' specifications, and each asset is, to the
best knowledge of Pride and the Pride Shareholders, in compliance with all
applicable federal and state laws and regulations. Pride's Inventory consists
of items of a quality and quantity usable or saleable in the regular course of
business of Pride.
4.9 Real Property. Pride owns no real property. All of the
buildings, structures and real property appurtenances leased by Pride or used
in connection with the operation of the Business (the "Pride Operating
Facilities") are in good operating condition, and in a state of good
maintenance and repair, subject to ordinary wear and tear, except where such
condition or maintenance would not have a Material Adverse Effect. The Pride
Operating Facilities have adequate rights of ingress and egress for operation
of the Business in the ordinary course. No condemnation or similar proceeding
is pending or, to the best knowledge of Pride and the Pride Shareholders,
threatened, which would preclude or impair the use of the Pride Operating
Facilities as used in the prior operation of the Business.
4.10 Leases. Schedule 4.10 attached hereto contains an accurate
and complete list of all Leases to which Pride is a party (as lessee or
lessor). Each Lease set forth on Schedule 4.10 is, to the best knowledge of
Pride and the Pride Shareholders, in full force and effect; there is no
existing default under any of such Leases on the part of Pride or, to the best
of Pride's and the Pride Shareholders' knowledge, any other party thereto.
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4.11 Contracts and Commitments. Except as specifically identified
on Schedule 4.11:
4.11.1 Pride is not a party to or bound by any loan, credit
or similar agreement or any indenture, trust agreement or other
instrument relating to any issue of bonds, debentures, notes or other
evidences of indebtedness or creating any lien, encumbrance or charge
on any of Pride's assets;
4.11.2 There are no bonus, pension, profit sharing,
retirement, stock option, stock purchase, deferred compensation,
hospitalization or insurance plans, or vacation or severance pay
plans, or any other plans or arrangements providing benefits to
officers, agents or employees of Pride;
4.11.3 Pride does not have any collective bargaining
agreement with any labor union or association or any employment
contract or other binding agreement relating to the employment of any
of its employees;
4.11.4 Pride is not a party to any joint venture agreement
or other agreement involving the sharing of profits relating to the
Business and/or its assets;
4.11.5 Pride is not a party to any (i) contracts or
commitments for capital expenditures outside the ordinary course of
business or involving obligations on the part of Pride in amounts
inconsistent with those incurred by Pride in the ordinary course of
business in accordance with Pride's prior operation of the Business,
(ii) lease under which personal property is leased to or from Pride
and which is not cancelable by Pride without penalty upon notice of
thirty days or less or pursuant to which rentals payable by or to
Pride, either individually or in the aggregate, substantially exceed
amounts previously incurred by Pride in the ordinary course of
business, (iii) continuing contract for the future purchase of
Inventory or other materials, supplies, machinery or equipment in
excess of the requirements of the Business conducted in the ordinary
course, (iv) other contract or agreement which involves an obligation
on the part of Pride, either individually or in the aggregate, in
excess of amounts previously incurred by Pride in the ordinary course
of business or, (v) agreement not made in the ordinary course of
business;
4.11.6 There are no agreements, notes, mortgages, leases,
franchises, permits, orders, judgments or decrees to which Pride is a
party or by which Pride or any of its assets are bound, which contain
any provision which would (i) be violated or contravened by, (ii)
cause acceleration of any obligation of Pride as a result of, or (iii)
cause or permit the forfeiture of any right or benefit of Pride by
reason of, the execution or performance of this Agreement;
4.11.7 Pride is not party to any Contract limiting the
freedom of Pride to engage in any line of business or to compete with
any Person;
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4.11.8 Pride is not a party to any agreement which involves
$50,000 or more and is not cancelable without penalty within thirty
days; and
4.11.9 There are no persons holding powers of attorney from,
or otherwise authorized to act on behalf of, Pride with respect to the
Business or Pride's assets except for its respective officers and
other management personnel regularly performing their assigned
business functions.
Except as specifically identified on Schedule 4.11, Pride and the
Pride Shareholders have no knowledge that any Contract, Lease, or other
obligation to which Pride is bound, individually or in the aggregate: (i) will
result in a material loss to Pride after the Closing Date; (ii) cannot readily
be performed or fulfilled on time without undue or unusual expenditure of money
or effort by Pride after the Closing Date, or (iii) is not in full force and
effect and under which there exists a default or event of default or event,
occurrence, condition or act which, with the giving of notice, the lapse of
time or the happening of any other event or condition, would become a default
or event of default thereunder, except where such default or event would not
cause a Material Adverse Effect. Also set forth on Schedule 4.11 is a list of
all proposals, except proposals made by Pride's sales people in the ordinary
course of business, submitted by Pride to any third party that, if accepted by
such third party, would require disclosure on Schedule 4.11.
A true copy of each written Contract and Lease as well as all other
documents evidencing any commitment of Pride required to be set forth on any
Schedule hereto has been or will be delivered to Group by Pride no later than
five (5) days after execution of this Agreement.
4.12 Permits. All Permits required in connection with the use,
operation or ownership of Pride's assets and the conduct of the Business as
currently conducted are listed on Schedule 4.12.
4.13 Litigation. Except as set forth on Schedule 4.13, there is no
action, suit, proceeding at law or in equity, arbitration or administrative or
other proceeding by or before (or any investigation by) any governmental or
other instrumentality or agency, pending, or, to the best knowledge of Pride
and the Pride Shareholders, threatened, against or affecting Pride or its
properties or rights, and Pride and the Pride Shareholders do not know of any
valid basis for any such action, proceeding or investigation. There are no
such suits, actions, claims, proceedings or investigations pending or to the
best knowledge of Pride and the Pride Shareholders, threatened, seeking to
prevent or challenge the transactions contemplated by this Agreement. Without
exception as to materiality or otherwise, Schedule 4.13 lists all claims, if
any, that have ever been filed with the FAA with respect to Pride and/or the
operation of the Business.
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4.14 Taxes. All federal, state, county, local and other Taxes
which are due or will be due and payable by Pride on or before the Closing Date
have been paid timely, including, without limitation, all estimated Taxes. All
Tax returns and reports required to be filed with all Taxing authorities, and
all deposits required by law to be made with respect to (i) Pride's employees'
withholding taxes, and (ii) the operations of Pride have been timely made.
There are no agreements for the extension of time for the assessment or payment
of any amounts of Tax except as set forth on Schedule 4.14 attached hereto and
Pride has not been requested to enter into any such agreement or waiver.
Except as set forth on Schedule 4.14, no assessments of Tax deficiencies have
been made against Pride and no examination is pending by the Internal Revenue
Service or any other Taxing authority with respect to any of such Tax returns
or reports. The Pride Balance Sheet reflects and includes adequate provisions
determined in accordance with generally accepted accounting principles
consistently applied for the payment in full of any and all Taxes of Pride for
the period covered thereby and all prior periods. Pride is not now nor has it
ever been a party to any Tax allocation or sharing agreement that could result
in any liability to Pride.
4.15 Insurance. Set forth on Schedule 4.15 is a complete list of
insurance policies that Pride maintains with respect to its respective
businesses, properties or employees. Such policies are in full force and
effect and are free from any right of termination on the part of the insurance
carriers. In the judgment of Pride and the Pride Shareholders, such policies,
with respect to their amounts and types of coverage, are adequate to insure
against risks to which Pride and its property and assets are normally exposed
in the operation of the Business, subject to customary deductibles and policy
limits.
4.16 Intellectual Property. Schedule 4.16 sets forth all
Intellectual Property owned by Pride. The operation of the Business as
currently operated requires no rights under Intellectual Property other than
rights under Intellectual Property listed on Schedule 4.16 and rights granted
to Pride pursuant to agreements listed on Schedule 4.16. Except as otherwise
set forth on Schedule 4.16, Pride owns all right, title and interest in the
Intellectual Property. No claim has been made and no litigation is pending or,
to the best knowledge of Pride and the Pride Shareholders, threatened wherein
Pride has been or is accused of infringing or otherwise violating the
intellectual property rights of another, or of breaching a contract conveying
intellectual property rights.
4.17 Compliance with Laws. Pride is in compliance with all
applicable laws, regulations, orders, judgments and decrees applicable to the
Business, except where any noncompliance would not have a Material Adverse
Effect.
4.18 Employment Relations. Pride is not engaged in any unfair
labor practice. Pride has not been notified of any grievance and no arbitration
proceeding arising out of or under any collective bargaining agreement is
pending. No collective bargaining agreement is currently being negotiated by
Pride.
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4.19 Employee Benefit Plans. None of the Employee Benefit Plans
are subject to Title IV of ERISA or the minimum funding obligations of Section
412 of the Code, and Pride and any entity required to be aggregated therewith
pursuant to Section 414(b) or (c) of the Code have no liability under Title IV
of ERISA or under Section 412(f) or 412(n) of the Code.
4.20 Environmental Laws and Regulations. Except as set forth on
Schedule 4.20, (i) Hazardous Materials have not been generated, used, treated
or stored on, or transported to or from, the real property owned, leased or
used by Pride, its authorized agents or its independent contractors (including
suppliers) or any property adjoining such real property, (ii) Hazardous
Materials have not been disposed, discharged, injected, spilled, leaked,
leached, dumped, emitted, escaped, emptied, allowed to seep, placed and the
like, into or upon any land or water or air, or otherwise allowed to enter into
the environment (collectively, "Releases") by Pride, its authorized agents or
its independent contractors (including suppliers) on such real property or any
other property, (iii) Pride is, to the best knowledge of Pride and the Pride
Shareholders, in compliance with all applicable Environmental Laws and the
requirements of any Permits issued under such Environmental Laws with respect
to such real property and to Pride's operations conducted thereon, (iv) there
are no pending or, to the best knowledge of Pride and the Pride Shareholders,
threatened Environmental Claims against Pride or involving such real property,
(v) there are no facts or present or past circumstances, conditions or
occurrences on such real property known to Pride or the Pride Shareholders that
reasonably could be anticipated (A) to form the basis of an Environmental Claim
against Pride or any owner or operator of such real property, or (B) to cause
such real property to be subject to any restrictions on the ownership,
occupancy, use or transferability of such real property under any Environmental
Law, (vi) there are not now and, to the best knowledge of Pride and the
Shareholders, there never have been any underground storage tanks located on
such real property, and (vii) Pride has not in the ordinary course of business
transported, treated, disposed of or stored Hazardous Materials.
4.21 Interests in Customers and Suppliers. Except as set forth on
Schedule 4.21 attached hereto, Pride does not possess, directly or indirectly,
any financial interest in, nor is any Person associated with Pride a director,
officer or employee of, any corporation, firm, association or business
organization which is a supplier, customer, lessor, lessee, or competitor of
Pride.
4.22 Compensation of Employees. Set forth on Schedule 4.22 is a
complete list of all employees of Pride showing (i) such individuals' total
compensation from Pride for the fiscal year ended on the Pride Balance Sheet
Date and (ii) compensation and salary rates for the current fiscal year.
Except as set forth on Schedule 4.22, no employee of Pride has been promised a
bonus or an increase in salary to take effect subsequent to the date hereof.
4.23 Suppliers and Customers. The relationship of Pride with each
of such suppliers and customers as of the date of this Agreement is, to the
best knowledge of Pride and the Pride Shareholders, a good commercial working
relationship, and except as set forth on Schedule 4.23, no significant supplier
or customer has cancelled or otherwise terminated or, to the best knowledge of
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Pride and the Pride Shareholders, threatened to cancel or otherwise terminate
its relationship with Pride since the beginning of the latest full fiscal year
of Pride.
4.24 Absence of Changes. Except as set forth on Schedule 4.24,
since the Balance Sheet Date there has not been any:
4.24.1 sale, assignment, pledge, hypothecation or other
transfer of any of Pride's assets or properties except in the ordinary
course of business as conducted since that date;
4.24.2 any Material Adverse Effect or any condition or
contingency that might reasonably be expected to result in any
Material Adverse Effect;
4.24.3 termination of or material amendment to any Contract
or Lease except as reflected by any applicable Schedule;
4.24.4 increase in compensation payable or paid to, or any
employment, bonus or compensation agreement entered into with, any
officer, director, employee, agent or independent contractor of Pride
other than in the ordinary course of business;
4.24.5 declaration or making, or agreement to declare or
make, any payment of dividends or distributions of any assets of any
kind or purchase, redemption or other acquisition, or agreement to
purchase, redeem or otherwise acquire, directly or indirectly, any of
Pride's outstanding capital stock; or merger, consolidation or
agreement to merge or consolidate with any other entity;
4.24.6 agreement or arrangement creating any preferential
rights to purchase any of Pride's capital stock or assets or requiring
the consent of any party to the transfer or assignment of any of
Pride's capital stock or assets;
4.24.7 other than in the ordinary course of business, a
material change in the amount of all notes and accounts receivable of
Pride or other fees or debts due to Pride or the allowances with
respect thereto, or the payables of Pride to trade accounts and other
creditors by Pride, from that reflected in the Balance Sheet;
4.24.8 other Contract or transaction entered into or agreed
to by Pride other than in the ordinary course of business; or
4.24.9 agreement by Pride to do any of the things described
in the preceding Sections 4.24.1 through 4.24.8, except as
contemplated in this Agreement.
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<PAGE> 26
4.25 Disclosure. This Agreement, the Financial Statements, any
Schedule, Exhibit or certificate attached hereto or delivered by Pride or the
Pride Shareholders in accordance with the terms hereof do not contain any
untrue statement of a material fact the existence of which results or
reasonably could be expected to result in a Material Adverse Effect.
4.26 Broker's or Finder's Fees. No Person acting on behalf of
Pride or the Pride Shareholders is, or will be, entitled to any fee, commission
or broker's or finder's fees in connection with this Agreement or any of the
transactions contemplated hereby.
4.27 Government Contracts. Except as set forth on Schedule 4.27,
Pride does not have any Contracts with any agency of the Government of the
United States or supply any services to any of the military services of the
United States or the Department of Defense or have a facility security
clearance under the Department of Defense Industrial Security Program.
4.28 Copies of Documents. Pride and the Pride Shareholders have
made available for inspection and copying by Group and its advisers, true,
complete and correct copies of all documents referred to in this Article IV or
in any Schedule attached hereto.
4.29 Subsidiaries. Pride has only one subsidiary. Such subsidiary
has no assets or liabilities and has never conducted any business.
4.30 Representations by LLC. To the extent the foregoing
representations and warranties are given by LLC, such representations and
warranties are limited to the best knowledge of LLC.
ARTICLE V
REPRESENTATIONS AND WARRANTIES AS TO SUNBELT
Sunbelt and each of the Sunbelt Shareholders hereby represent and
warrant, jointly and severally, to Group as follows:
5.1 Existence and Good Standing. Sunbelt is a corporation duly
organized and validly existing under the laws of the State of Florida. Sunbelt
has the power and authority to own, lease and operate its property and to carry
on its business as now being conducted and to own or lease the assets owned or
leased by it. Sunbelt is duly qualified or licensed to do business in each
jurisdiction in which the character or location of the properties owned or
leased by Sunbelt or the nature of the business conducted by Sunbelt makes such
qualification necessary and the absence of which would have a Material Adverse
Effect.
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5.2 Capitalization of Sunbelt.
5.2.1 The entire authorized capital stock of Sunbelt consists
of 10,000,000 shares of common stock, par value $.001 per share, of
which 2,101,867 shares are issued and outstanding, fully paid and
nonassessable and held beneficially and of record by the Sunbelt
Shareholders as set forth on Schedule 5.2. Such outstanding shares
are owned beneficially and of record by the Sunbelt Shareholders, free
and clear of all Encumbrances and rights of others. An additional
5,351,867 shares of common stock are issued and held by Sunbelt as
treasury stock.
5.2.2 The shares of Sunbelt Stock held beneficially and of
record by the Sunbelt Shareholders represent all of the issued and
outstanding capital stock of Sunbelt. There are no outstanding
subscriptions, options, convertible securities, indebtedness
convertible into equity securities, warrants, calls or rights of any
kind (issued, contracted for, granted by, or binding upon Sunbelt) to
purchase or otherwise acquire any security of or equity interest in
Sunbelt. The Sunbelt Stock owned by Jesswalt, Inc. is subject to a
voting trust agreement which will be terminated prior to Closing. The
Sunbelt Shareholders have full legal right to transfer the Sunbelt
Stock pursuant to the terms of this Agreement and will, upon delivery
of the Sunbelt Stock to Group pursuant to the terms hereof, transfer
to Group good and valid title to the Sunbelt Stock free and clear of
all liens, security interests, claims, charges, Encumbrances, rights,
options to purchase, voting trusts or other voting agreements and
calls and commitments of every kind affecting the Sunbelt Stock.
5.3 Authorization and Validity of Agreement. Sunbelt has full
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by Sunbelt
and the consummation of the transactions contemplated hereby, have been duly
authorized and approved by the Board of Directors of Sunbelt and no other
action on the part of Sunbelt is necessary to authorize the execution, delivery
and performance of this Agreement by Sunbelt and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Sunbelt and is a valid and binding obligation of Sunbelt
enforceable against Sunbelt in accordance with its terms, except to the extent
that its enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
5.4 Consents and Approvals; No Violations. The execution,
delivery and performance of this Agreement by Sunbelt and the Sunbelt
Shareholders and the consummation by Sunbelt and the Sunbelt Shareholders of
the transactions contemplated hereby will not, with or without the giving of
notice or the lapse of time or both: (i) violate, conflict with, or result in
a breach or default under any provision of the charter or bylaws of Sunbelt;
(ii) violate any statute, ordinance, rule, regulation, order, judgment or
decree of any court or of any governmental or regulatory body, agency or
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authority applicable to Sunbelt or by which any of its properties or assets may
be bound; (iii) require any filing by Sunbelt with, or require Sunbelt to
obtain any Permit of, or require Sunbelt or the Sunbelt Shareholders to give
any notice to, any governmental or regulatory body, agency or authority; or
(iv) other than as set forth on Schedule 5.4 attached hereto, result in a
violation or breach by Sunbelt of, conflict with, constitute (with or without
due notice or lapse of time or both) a default by Sunbelt (or give rise to any
right of termination, cancellation, payment or acceleration) under or result in
the creation of any Encumbrance upon any of the properties or assets of Sunbelt
under any of the terms, conditions, or provisions of any note, bond, mortgage,
indenture, license, franchise, Permit, Contract, Lease, franchise agreement or
other instrument or obligation to which Sunbelt is a party, or by which it or
any of its properties or assets may be bound.
5.5 Assets and Liabilities. The sole asset of Sunbelt is its Pride
Stock as listed on Schedule 4.2. Sunbelt has no liabilities or obligations of
any kind or nature, contingent, matured or otherwise, except as listed on
Schedule 5.5 attached hereto. The primary responsibility for payment of such
listed liabilities has been assumed by LLC prior to the date of this Agreement,
and LLC has agreed to indemnify and hold harmless Sunbelt from any liability or
loss arising from such liabilities. Except as specifically identified on
Schedule 5.5, Sunbelt is not a party to or bound by any agreement, contract or
other instrument of any kind or nature. Since the date of this Agreement,
there has not been any sale, assignment or other transfer of any of Sunbelt's
assets, any Material Adverse Effect to Sunbelt or any contingency or condition
that might reasonably be expected to result in a Material Adverse Effect to
Sunbelt, any acquisition, creation, incurrence or assumption of any other
asset, liability or obligation on the part of Sunbelt, or other Contract or
transaction entered into or agreed to by Sunbelt other than as contemplated
herein.
5.6 Litigation. Except as set forth on Schedule 5.6, there is no
action, suit, proceeding at law or in equity, arbitration or administrative or
other proceeding by or before (or any investigation by) any governmental or
other instrumentality or agency, pending, or, to the best knowledge of Sunbelt
and the Sunbelt Shareholders, threatened, against or affecting Sunbelt or its
properties or rights, and Sunbelt and the Sunbelt Shareholders do not know of
any valid basis for any such action, proceeding or investigation. There are no
such suits, actions, claims, proceedings or investigations pending or to the
best knowledge of Sunbelt and the Sunbelt Shareholders, threatened, seeking to
prevent or challenge the transactions contemplated by this Agreement.
5.7 Taxes. All federal, state, county, local and other Taxes
which are due or will be due and payable by Sunbelt on or before the Closing
Date have been paid timely, including, without limitation, all estimated Taxes.
All Tax returns and reports required to be filed with all Taxing authorities,
and all deposits required by law to be made with respect to (i) Sunbelt's
employees' withholding taxes, and (ii) the operations of Sunbelt have been
timely made. There are no agreements for the extension of time for the
assessment or payment of any amounts of Tax except as set forth on Schedule
5.14 attached hereto and Sunbelt has not been requested to enter into any such
agreement or waiver. Except as set forth on Schedule 5.14, no assessments of
Tax deficiencies have been made
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against Sunbelt and no examination is pending by the Internal Revenue Service
or any other Taxing authority with respect to any of such Tax returns or
reports. The Balance Sheet reflects and includes adequate provisions
determined in accordance with generally accepted accounting principles
consistently applied for the payment in full of any and all Taxes of Sunbelt
for the period covered thereby and all prior periods. Sunbelt is not now nor
has it ever been a party to any Tax allocation or sharing agreement that could
result in any liability to Sunbelt.
5.8 Disclosure. This Agreement, any Schedule, Exhibit or
certificate attached hereto or delivered by Sunbelt or the Sunbelt Shareholders
in accordance with the terms hereof do not contain any untrue statement of a
material fact the existence of which results or reasonably could be expected to
result in a Material Adverse Effect.
5.9 Broker's or Finder's Fees. No Person acting on behalf of
Sunbelt or the Sunbelt Shareholders is, or will be, entitled to any fee,
commission or broker's or finder's fees in connection with this Agreement or
any of the transactions contemplated hereby.
5.10 Copies of Documents. Sunbelt and the Sunbelt Shareholders
have made available for inspection and copying by Group and its advisers, true,
complete and correct copies of all documents referred to in this Article V or
in any Schedule attached hereto.
ARTICLE VI
SECURITIES REPRESENTATIONS AND WARRANTIES
Each Shareholder represents and warrants to Group, severally and not
jointly, as follows:
6.1 Authorization and Validity of Agreement. The Shareholder has
full legal capacity to execute and deliver this Agreement, to perform his or
its obligations hereunder and to consummate the transactions contemplated
hereby. Each corporate Shareholder has full corporate power and authority to
make, execute, deliver and perform this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by the Shareholder and
the consummation of the transactions contemplated hereby, have been duly
authorized and approved by the Shareholder or by its Board of Directors, and no
other action on the part of the Shareholder is necessary to authorize the
execution, delivery and performance of this Agreement by the Shareholder and
the consummation of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by the Shareholder and is a valid and binding
obligation of the Shareholder enforceable against the Shareholder in accordance
with its terms, except to the extent that its enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles.
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6.2 Securities Laws. The Shareholder acknowledges that the Group
Stock and the Convertible Notes to be issued by Group hereunder constitute
securities under the Securities Act of 1933, as amended ("Securities Act"), and
the applicable state securities laws (collectively, "Acts") and have not been
registered under the Securities Act or the Acts in reliance on available
exemptions from the registration requirements thereof.
6.3 Accredited Investor. The Shareholder is an "accredited
investor" as that term is defined in Section 501 of Regulation D promulgated
under the Securities Act.
6.4 Knowledge and Experience. The Shareholder has such knowledge
and experience in financial and business matters that such Shareholder is
capable of evaluating the merits and risks of such Shareholder's participation
in the transactions contemplated hereby. The Shareholder has had access to and
an opportunity to inspect all relevant information relating to Group sufficient
to enable the Shareholder to evaluate the merits and risks of the Shareholder's
participation in such transactions. The Shareholder also has had adequate
opportunity to ask questions and receive answers respecting, and to obtain such
additional information as the Shareholder has desired regarding, the business,
financial condition and affairs of Group.
6.5 Investment Purpose. The Shareholder's acquisition of
securities of Group issued hereunder is for the Shareholder's own account, is
for investment purposes, and is without a view to, or for offer or sale for
Group in connection with, any distribution of securities of Group. The
Shareholder is not participating and does not have a participation in any such
distribution or the underwriting of any such distribution.
6.6 Holding Period. The Shareholder understands that the
securities of Group to be issued hereunder must be held for an indefinite
period of time and cannot be sold or transferred unless such securities are
subsequently registered under the Acts or exemptions from the registration
requirements thereof are available.
6.7 Legend. The Shareholder acknowledges that Group will place on
the certificates representing securities to be issued by Group hereunder a
legend stating that such securities have not been registered under the Acts and
setting forth or referring to the restrictions on the transferability and sale
thereof.
6.8 LLC Distribution. Each Sunbelt Shareholder and LLC confirms
and agrees that the foregoing representations and warranties in this Article VI
apply to the Group Stock to be issued by Group to LLC at the Closing and
thereafter to be distributed by LLC to its members, who are the Sunbelt
Shareholders. LLC shall be deemed to be a Shareholder for purposes of the
foregoing representations and warranties and confirms the accuracy of such
representations and warranties as to it, with the exception that it intends to
immediately distribute the Group Stock received by it to its members.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF GROUP
Group hereby represents and warrants to each of the Shareholders as
follows:
7.1 Existence and Good Standing; Power and Authority. Group is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Texas. Group has full corporate power and authority to
make, execute, deliver and perform this Agreement, to perform its respective
obligations hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized and approved
by all required corporate action of Group. This Agreement has been duly
executed and delivered by Group and is a valid and binding obligation of Group
enforceable against Group, in accordance with its terms, except to the extent
that its enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
7.2 Capitalization. The authorized capital stock of Group
consists of 15,000,000 shares of capital stock, of which 10,000,000 shares are
common stock, par value $0.01 per share, and 5,000,000 are preferred stock, par
value $0.01 per share. Group currently has 1,000,000 shares of common stock
that are issued and outstanding and held by The Sanders Companies, Inc. Except
as contemplated by the terms of this Agreement and except for the RAS Warrant,
Group has no options, securities, warrants or other equity or debt instruments
convertible or exercisable into any equity interest in Group. When issued and
paid for in accordance with the terms of this Agreement, the shares of Group
Stock to be issued to the Shareholders shall be fully paid and nonassessable.
7.3 No Violations. The execution, delivery and performance of
this Agreement by Group and the consummation by Group of the transactions
contemplated hereby will not, with or without the giving of notice or the lapse
of time or both, (i) violate, conflict with, or result in a breach or default
under any provision of the charter or bylaws of Group; (ii) to the best
knowledge of Group, violate any statute, ordinance, rule, regulation, order,
judgment or decree of any court or of any governmental or regulatory body,
agency or authority applicable to Group or by which any of its properties or
assets may be bound; (iii) to the best knowledge of Group, require any filing
by Group with, or require Group to obtain any permit, consent or approval of,
or require Group to give any notice to, any governmental or regulatory body,
agency or authority or any third party; or (iv) result in a violation or breach
by Group of, conflict with, constitute (with or without due notice or lapse of
time or both) a default by Group (or give rise to any right of termination,
cancellation, payment or acceleration) under, or result in the creation of any
Encumbrance upon any of the properties or assets of Group pursuant to, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, franchise, permit, agreement, lease, franchise agreement or other
instrument or obligation to which Group is a party, or by which Group or any of
its properties or assets may be
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<PAGE> 32
bound, except in the case of clauses (ii), (iii) and (iv) of this Section 6.3
for such violations, consents, breaches, defaults, terminations and
accelerations which in the aggregate would not have a Material Adverse Effect.
7.4 Broker's or Finder's Fees. Except for RAS, no Person acting
on behalf of Group is, or will be, entitled to any fee, commission or broker's
or finder's fee in connection with this Agreement or any of the transactions
contemplated hereby. Group has agreed to pay certain commissions and expense
allowances to RAS and to issue to RAS the RAS Warrant as payment for the
performance of the services contemplated under the Placement Agreement.
7.5 Receivables and Payables. Schedule 7.5 lists all notes
receivable, notes payable, accounts receivable and accounts payable of Group.
Except as reflected on Schedule 7.5, all notes receivable and accounts
receivable of Group are, and such notes and accounts receivable at the Closing
Date will be, (i) bona fide claims against debtors for debts, sales, work
performed or other charges, (ii) to the best knowledge of Group and the Group
Shareholders, subject to no defenses, set-offs or counterclaims, and (iii) to
the best knowledge of Group and the Group Shareholders, collectible. Except as
reflected on Schedule 7.5, all notes payable and accounts payable of Group are,
and such notes and accounts payable at the Closing Date will be, bona fide
claims by creditors for debts, sales, work performed, other expenses incurred
by Group.
7.6 Financial Statements; No Material Adverse Change. Group has
heretofore furnished Pride or its representatives with the audited financial
statements of Group as of September 30, 1995, in the form of a balance sheet
(the "Group Balance Sheet"), and an income statement and statement of cash
flows for the twelve-month period then ended relating to the audited balance
sheet (together with the Balance Sheet, the "Group Financial Statements"). The
Group Financial Statements have been prepared in accordance with GAAP and
fairly present in all material respects the financial position of Group at the
dates thereof and the results of operations and cash flow of Group for the
period indicated. Except as set forth on Schedule 7.6 attached hereto or for
changes that would not have a Material Adverse Effect, since September 30, 1995
(the "Group Balance Sheet Date"), there has been no change in the assets or
liabilities, or in the business or condition, financial or otherwise, or in the
results of operations, of Group.
7.7 Warranty Claims. Except as set forth on Schedule 7.7 attached
hereto, as of the date hereof, there are no warranty claims relating to
products at any time sold or services at any time performed by Group pending
or, to the best knowledge of Group, threatened, which would have a Material
Adverse Effect.
7.8 Title to Properties; Encumbrances; Condition. Except as set
forth on Schedule 7.8 or on any of the other Schedules hereto and except for
properties and assets reflected in the Group Financial Statements or acquired
since the Group Balance Sheet Date which have been sold or otherwise disposed
of in the ordinary course of business, Group owns outright, and has, and shall
at
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the Closing have, full legal and beneficial title to all of its assets, in each
case subject to no Encumbrances except for Permitted Encumbrances. The assets
of Group consist of all properties and assets necessary to operate the Business
in the manner it has been operated prior to the date hereof. Except as set
forth on Schedule 7.8, each asset of Group is in good operating condition and
repair, subject to ordinary wear and tear, and, to the best knowledge of Group,
has been maintained in accordance with the manufacturers' specifications, and
each asset is, to the best knowledge of Group, in compliance with all
applicable federal and state laws and regulations. Group's Inventory consists
of items of a quality and quantity usable or saleable in the regular course of
business of Group.
7.9 Real Property. Group owns no real property. All of the
buildings, structures and real property appurtenances leased by Group or used
in connection with the operation of its business (the "Group Operating
Facilities") are in good operating condition, and in a state of good
maintenance and repair, subject to ordinary wear and tear, except where such
condition or maintenance would not have a Material Adverse Effect. The Group
Operating Facilities have adequate rights of ingress and egress for operation
of Group's business in the ordinary course. No condemnation or similar
proceeding is pending or, to the best knowledge of Group, threatened, which
would preclude or impair the use of the Group Operating Facilities as used in
the prior operation of its business.
7.10 Leases. Schedule 7.10 attached hereto contains an accurate
and complete list of all Leases to which Group is a party (as lessee or
lessor). Each Lease set forth on Schedule 7.10 is, to the best knowledge of
Group, in full force and effect; there is no existing default under any of such
Leases on the part of Group or, to the best of Group's knowledge, any other
party thereto.
7.11 Contracts and Commitments. Except as specifically identified
on Schedule 7.11:
7.11.1 Group is not a party to or bound by any loan, credit
or similar agreement or any indenture, trust agreement or other
instrument relating to any issue of bonds, debentures, notes or other
evidences of indebtedness or creating any lien, encumbrance or charge
on any of Group's assets;
7.11.2 There are no bonus, pension, profit sharing,
retirement, stock option, stock purchase, deferred compensation,
hospitalization or insurance plans, or vacation or severance pay
plans, or any other plans or arrangements providing benefits to
officers, agents or employees of Group;
7.11.3 Group does not have any collective bargaining
agreement with any labor union or association or any employment
contract or other binding agreement relating to the employment of any
of its employees;
7.11.4 Group is not a party to any joint venture agreement
or other agreement involving the sharing of profits relating to its
business and/or its assets;
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<PAGE> 34
7.11.5 Group is not a party to any (i) contracts or
commitments for capital expenditures outside the ordinary course of
business or involving obligations on the part of Group in amounts
inconsistent with those incurred by Group in the ordinary course of
business in accordance with Group's prior operation of its business,
(ii) lease under which personal property is leased to or from Group
and which is not cancelable by Group without penalty upon notice of
thirty days or less or pursuant to which rentals payable by or to
Group, either individually or in the aggregate, substantially exceed
amounts previously incurred by Group in the ordinary course of
business, (iii) continuing contract for the future purchase of
Inventory or other materials, supplies, machinery or equipment in
excess of the requirements of its business conducted in the ordinary
course, (iv) other contract or agreement which involves an obligation
on the part of Group, either individually or in the aggregate, in
excess of amounts previously incurred by Group in the ordinary course
of business or, (v) agreement not made in the ordinary course of
business;
7.11.6 There are no agreements, notes, mortgages, leases,
franchises, permits, orders, judgments or decrees to which Group is a
party or by which Group or any of its assets are bound, which contain
any provision which would (i) be violated or contravened by, (ii)
cause acceleration of any obligation of Group as a result of, or (iii)
cause or permit the forfeiture of any right or benefit of Group by
reason of, the execution or performance of this Agreement;
7.11.7 Group is not party to any Contract limiting the
freedom of Group to engage in any line of business or to compete with
any Person;
7.11.8 Group is not a party to any agreement which involves
$50,000 or more and is not cancelable without penalty within thirty
days; and
7.11.9 There are no persons holding powers of attorney from,
or otherwise authorized to act on behalf of, Group with respect to its
business or Group's assets except for its respective officers and
other management personnel regularly performing their assigned
business functions.
Except as specifically identified on Schedule 7.11, Group has no
knowledge that any Contract, Lease, or other obligation to which Group is
bound, individually or in the aggregate: (i) will result in a material loss to
Group after the Closing Date; (ii) cannot readily be performed or fulfilled on
time without undue or unusual expenditure of money or effort by Group after the
Closing Date, or (iii) is not in full force and effect and under which there
exists a default or event of default or event, occurrence, condition or act
which, with the giving of notice, the lapse of time or the happening of any
other event or condition, would become a default or event of default
thereunder, except where such default or event would not cause a Material
Adverse Effect. Also set forth on Schedule 7.11 is a list of all proposals,
except proposals made by Group's sales people in the ordinary course of
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business, submitted by Group to any third party that, if accepted by such third
party, would require disclosure on Schedule 7.11.
A true copy of each written Contract and Lease as well as all other
documents evidencing any commitment of Group required to be set forth on any
Schedule hereto has been or will be delivered to Pride by Group no later than
five (5) days after execution of this Agreement.
7.12 Permits. All Permits required in connection with the use,
operation or ownership of Group's assets and the conduct of its business as
currently conducted are listed on Schedule 7.12.
7.13 Litigation. Except as set forth on Schedule 7.13, there is no
action, suit, proceeding at law or in equity, arbitration or administrative or
other proceeding by or before (or any investigation by) any governmental or
other instrumentality or agency, pending, or, to the best knowledge of Group,
threatened, against or affecting Group or its properties or rights, and Group
do not know of any valid basis for any such action, proceeding or
investigation. There are no such suits, actions, claims, proceedings or
investigations pending or to the best knowledge of Group, threatened, seeking
to prevent or challenge the transactions contemplated by this Agreement.
Without exception as to materiality or otherwise, Schedule 7.13 lists all
claims, if any, that have ever been filed with the FAA with respect to Group
and/or the operation of the Business.
7.14 Taxes. All federal, state, county, local and other Taxes
which are due or will be due and payable by Group on or before the Closing Date
have been paid timely, including, without limitation, all estimated Taxes. All
Tax returns and reports required to be filed with all Taxing authorities, and
all deposits required by law to be made with respect to (i) Group's employees'
withholding taxes, and (ii) the operations of Group have been timely made.
There are no agreements for the extension of time for the assessment or payment
of any amounts of Tax except as set forth on Schedule 7.14 attached hereto and
Group has not been requested to enter into any such agreement or waiver.
Except as set forth on Schedule 7.14, no assessments of Tax deficiencies have
been made against Group and no examination is pending by the Internal Revenue
Service or any other Taxing authority with respect to any of such Tax returns
or reports. The Group Balance Sheet reflects and includes adequate provisions
determined in accordance with generally accepted accounting principles
consistently applied for the payment in full of any and all Taxes of Group for
the period covered thereby and all prior periods. Group is not now nor has it
ever been a party to any Tax allocation or sharing agreement that could result
in any liability to Group.
7.15 Insurance. Set forth on Schedule 7.15 is a complete list of
insurance policies that Group maintains with respect to its respective
businesses, properties or employees. Such policies are in full force and
effect and are free from any right of termination on the part of the insurance
carriers. In the judgment of Group, such policies, with respect to their
amounts and types of coverage, are adequate to insure against risks to which
Group and its property and assets are normally exposed in the operation of its
business, subject to customary deductibles and policy limits.
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7.16 Intellectual Property. Schedule 7.16 sets forth all
Intellectual Property owned by Group. The operation of its business as
currently operated requires no rights under Intellectual Property other than
rights under Intellectual Property listed on Schedule 7.16 and rights granted
to Group pursuant to agreements listed on Schedule 7.16. Except as otherwise
set forth on Schedule 7.16, Group owns all right, title and interest in the
Intellectual Property. No claim has been made and no litigation is pending or,
to the best knowledge of Group, threatened wherein Group has been or is accused
of infringing or otherwise violating the intellectual property rights of
another, or of breaching a contract conveying intellectual property rights.
7.17 Compliance with Laws. Pride is in compliance with all
applicable laws, regulations, orders, judgments and decrees applicable to its
business, except where any noncompliance would not have a Material Adverse
Effect.
7.18 Employment Relations. Group is not engaged in any unfair
labor practice. Group has not been notified of any grievance and no arbitration
proceeding arising out of or under any collective bargaining agreement is
pending. No collective bargaining agreement is currently being negotiated by
Group.
7.19 Employee Benefit Plans. None of the Employee Benefit Plans
are subject to Title IV of ERISA or the minimum funding obligations of Section
412 of the Code, and Group and any entity required to be aggregated therewith
pursuant to Section 414(b) or (c) of the Code have no liability under Title IV
of ERISA or under Section 412(f) or 412(n) of the Code.
7.20 Environmental Laws and Regulations. Except as set forth on
Schedule 7.20, (i) Hazardous Materials have not been generated, used, treated
or stored on, or transported to or from, the real property owned, leased or
used by Group, its authorized agents or its independent contractors (including
suppliers) or any property adjoining such real property, (ii) Hazardous
Materials have not been disposed, discharged, injected, spilled, leaked,
leached, dumped, emitted, escaped, emptied, allowed to seep, placed and the
like, into or upon any land or water or air, or otherwise allowed to enter into
the environment (collectively, "Releases") by Group, its authorized agents or
its independent contractors (including suppliers) on such real property or any
other property, (iii) Group is, to the best knowledge of Group, in compliance
with all applicable Environmental Laws and the requirements of any Permits
issued under such Environmental Laws with respect to such real property and to
Group's operations conducted thereon, (iv) there are no pending or, to the best
knowledge of Group, threatened Environmental Claims against Group or involving
such real property, (v) there are no facts or present or past circumstances,
conditions or occurrences on such real property known to Group that reasonably
could be anticipated (A) to form the basis of an Environmental Claim against
Group or any owner or operator of such real property, or (B) to cause such real
property to be subject to any restrictions on the ownership, occupancy, use or
transferability of such real property under any Environmental Law, (vi) there
are not now and, to the best knowledge of Group, there never have been any
underground storage tanks located on such real
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property, and (vii) Group has not in the ordinary course of business
transported, treated, disposed of or stored Hazardous Materials.
7.21 Interests in Customers and Suppliers. Except as set forth on
Schedule 7.21 attached hereto, Group does not possess, directly or indirectly,
any financial interest in, nor is any Person associated with Group a director,
officer or employee of, any corporation, firm, association or business
organization which is a supplier, customer, lessor, lessee, or competitor of
Group.
7.22 Compensation of Employees. Set forth on Schedule 7.22 is a
complete list of all employees of Group showing (i) such individuals' total
compensation from Group for the fiscal year ended on the Group Balance Sheet
Date and (ii) compensation and salary rates for the current fiscal year.
Except as set forth on Schedule 7.22, no employee of Group has been promised a
bonus or an increase in salary to take effect subsequent to the date hereof.
7.23 Suppliers and Customers. The relationship of Group with each
of such suppliers and customers as of the date of this Agreement is, to the
best knowledge of Group, a good commercial working relationship, and except as
set forth on Schedule 7.23, no significant supplier or customer has cancelled
or otherwise terminated or, to the best knowledge of Group, threatened to
cancel or otherwise terminate its relationship with Group since the beginning
of the latest full fiscal year of Group.
7.24 Absence of Changes. Except as set forth on Schedule 7.24,
since the Group Balance Sheet Date there has not been any:
7.24.1 sale, assignment, pledge, hypothecation or other
transfer of any of Group's assets or properties except in the ordinary
course of business as conducted since that date;
7.24.2 any Material Adverse Effect or any condition or
contingency that might reasonably be expected to result in any
Material Adverse Effect;
7.24.3 termination of or material amendment to any Contract
or Lease except as reflected by any applicable Schedule;
7.24.4 increase in compensation payable or paid to, or any
employment, bonus or compensation agreement entered into with, any
officer, director, employee, agent or independent contractor of Group
other than in the ordinary course of business;
7.24.5 declaration or making, or agreement to declare or
make, any payment of dividends or distributions of any assets of any
kind or purchase, redemption or other acquisition, or agreement to
purchase, redeem or otherwise acquire, directly or indirectly, any
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of Group's outstanding capital stock; or merger, consolidation or
agreement to merge or consolidate with any other entity;
7.24.6 agreement or arrangement creating any preferential
rights to purchase any of Group's capital stock or assets or requiring
the consent of any party to the transfer or assignment of any of
Group's capital stock or assets;
7.24.7 other than in the ordinary course of business, a
material change in the amount of all notes and accounts receivable of
Group or other fees or debts due to Group or the allowances with
respect thereto, or the payables of Group to trade accounts and other
creditors by Group, from that reflected in the Group Balance Sheet;
7.24.8 other Contract or transaction entered into or agreed
to by Group other than in the ordinary course of business; or
7.24.9 agreement by Group to do any of the things described
in the preceding Sections 7.24.1 through 7.24.8, except as
contemplated in this Agreement.
7.25 Disclosure. This Agreement, the Group Financial Statements,
any Schedule, Exhibit or certificate attached hereto or delivered by Group in
accordance with the terms hereof do not contain any untrue statement of a
material fact the existence of which results or reasonably could be expected to
result in a Material Adverse Effect.
7.26 Government Contracts. Except as set forth on Schedule 7.26,
Group does not have any Contracts with any agency of the Government of the
United States or supply any services to any of the military services of the
United States or the Department of Defense or have a facility security
clearance under the Department of Defense Industrial Security Program.
7.27 Copies of Documents. Group has made available for inspection
and copying by Pride and its advisers, true, complete and correct copies of all
documents referred to in this Article VII or in any Schedule attached hereto.
7.28 Subsidiaries. Group has only two subsidiaries, Tri-Star
Airlines Services, Inc. and Tri-Star Aircraft Services, Inc.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF
PRIDE, SUNBELT, LLC AND THE SHAREHOLDERS
The obligations of Sunbelt, Pride, LLC and the Shareholders under this
Agreement to consummate the transactions contemplated hereby shall be subject
to the satisfaction (or waiver by
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Sunbelt, Pride, LLC and the Shareholders) on or prior to the Closing Date of
all of the following conditions:
8.1 Truth of Representations and Warranties. The representations
and warranties of Group contained in this Agreement shall be true and correct
in all material respects on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of the
Closing Date, and Group shall have delivered to Pride and Sunbelt on the
Closing Date a certificate of an authorized officer of Group, dated the Closing
Date, to such effect.
8.2 Performance of Agreements. Each and all of the agreements and
covenants of Group to be performed on or before the Closing Date pursuant to
the terms hereof, including all deliveries and obligations at Closing, shall
have been duly performed in all material respects, and Group shall have
delivered to Pride and Sunbelt a certificate of an authorized officer of Group,
dated the Closing Date, to such effect and evidencing the incumbency of all
officers executing any documents in connection with the Closing.
8.3 No Litigation Threatened. No action or proceedings shall have
been instituted before a court or other governmental body or by any public
authority to restrain or prohibit any of the transactions contemplated hereby,
and Group shall have delivered to Pride and Sunbelt a certificate of an
authorized officer of Group, dated the Closing Date, to such effect to the best
knowledge of such officer.
8.4 Consents. All governmental and third party consents and
approvals necessary to permit the consummation of the transactions contemplated
by this Agreement shall have been received.
8.5 Proceedings. All proceedings to be taken in connection with
the transactions contemplated by this Agreement and all documents incident
thereto shall be reasonably satisfactory in form and substance to Pride and
Sunbelt and their respective counsel, and Pride and Sunbelt shall have received
copies of all such documents and other evidence as they or their respective
counsel may reasonably request in order to establish the consummation of such
transactions and the taking of all proceedings in connection therewith.
8.6 Legal Opinion. Group shall have delivered to Pride and
Sunbelt the opinion of Bracewell & Patterson, L.L.P., counsel to Group,
addressing the matters set forth in Exhibit E attached hereto, which opinion
shall be acceptable to Pride and Sunbelt and their respective counsel.
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ARTICLE IX
CONDITIONS TO GROUP'S OBLIGATIONS
The obligations of Group under this Agreement to consummate the
transactions contemplated hereby shall be subject to the satisfaction (or
waiver by Group) on or prior to the Closing Date of all of the following
conditions:
9.1 Truth of Representations and Warranties. The representations
and warranties of Pride, Sunbelt and the Shareholders contained herein shall
be true and correct in all material respects on and as of the Closing Date with
the same effect as though such representations and warranties had been made on
and as of the Closing Date. The Shareholders, Sunbelt and Pride shall have
delivered to Group on the Closing Date a certificate executed by each of the
Shareholders, an authorized officer of Sunbelt and an authorized officer of
Pride, respectively, dated the Closing Date, to such effect.
9.2 Performance of Agreements. Each and all of the agreements and
covenants of Pride, Sunbelt and the Shareholders to be performed on or before
the Closing Date pursuant to the terms hereof, including all deliveries and
obligations at Closing, shall have been duly performed in all material
respects. The Shareholders, Sunbelt and Pride shall have delivered to Group a
certificate of each of the Shareholders, an authorized officer of Sunbelt and
an authorized officer of Pride, respectively, dated the Closing Date, to such
effect. The certificates of Sunbelt and Pride shall also evidence the
incumbency of all officers of Sunbelt and Pride executing any documents in
connection with the Closing.
9.3 No Litigation Threatened. No action or proceedings shall have
been instituted before a court or other governmental body or by any public
authority to restrain or prohibit any of the transactions contemplated hereby.
The Shareholders, Sunbelt and Pride shall have delivered to Group a certificate
of each of the Shareholders, an authorized officer of Sunbelt and an authorized
officer of Pride, respectively, dated the Closing Date, to such effect to the
best knowledge of such officer.
9.4 Consents. All governmental and third party consents and
approvals necessary to permit the consummation of the transactions contemplated
by this Agreement shall have been received.
9.5 Consents. Each of the consents referred to on Schedules 4.4
and 5.4 attached hereto shall have been obtained. Group shall have received
the approval of its Board of Directors to consummate the transactions
contemplated hereby.
9.6 Due Diligence. Group, through its officers and directors and
its legal and other representatives, shall have concluded a due diligence
review of Pride satisfactory to Group in its sole discretion.
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9.7 Financing. Group shall have received $900,000 of the
financing contemplated under the Placement Agreement and the subscription
escrow for such funds can be broken at the discretion of Group.
9.8 Legal Opinion. Pride, Sunbelt and the Shareholders shall have
delivered to Group the opinions of Cestia & Landry, counsel to Pride, Schober,
Reynolds & Antee, counsel to Sunbelt and the Sunbelt Shareholders, and
Frederick Parker, Jr., counsel to LLC, addressing the matters set forth in
Exhibit F attached hereto, which opinions shall be acceptable to Group and its
counsel.
9.9 Proceedings. All proceedings to be taken in connection with
the transactions contemplated by this Agreement and all documents incident
thereto shall be reasonably satisfactory in form and substance to Group and its
counsel, and Group shall have received copies of all such documents and other
evidence as it or its counsel may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
9.10 Alexandria Operations. The transfer to and assumption by Rice
(or his designee) from Pride of the Alexandria Operations shall have been
effected in accordance with documentation previously approved by Group.
9.11 Partial Extinguishment of Pride's Indebtedness to LLC. On the
Closing Date, LLC shall extinguish $168,000 of the principal amount of the
Pride Debt as consideration for the issuance by Group to LLC of the number of
shares of Group Stock equal to $168,000 divided by the Stock Offering Price.
ARTICLE X
COVENANTS OF PRIDE, SUNBELT, LLC AND THE SHAREHOLDERS
Pride, Sunbelt, LLC and the Shareholders hereby covenant and agree
with Group as follows:
10.1 Cooperation. Pride, Sunbelt, LLC and the Shareholders shall
use their reasonable best efforts to cooperate with Group to secure all
necessary consents, approvals, authorizations, exemptions and waivers from
third parties as shall be required in order to enable Pride, Sunbelt, LLC and
the Shareholders to effect the transactions contemplated hereby, including
without limitation the assignment and assumption of the Alexandria Operations.
Pride, Sunbelt, LLC and the Shareholders shall otherwise use their reasonable
best efforts to cause the consummation of such transactions in accordance with
the terms and conditions hereof and to cause all conditions contained in this
Agreement over which they have control to be satisfied. Pride, Sunbelt, LLC
and the Shareholders further agree to deliver to Group prompt written notice of
any event or condition known to or discovered by Pride, Sunbelt, LLC or the
Shareholders, which if it existed on the date of this Agreement or on the
Closing Date, would result in any of the representations and warranties of
Pride, Sunbelt, LLC or the Shareholders contained herein being untrue in any
material respect.
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10.2 Conduct of Business. Except as Group may otherwise consent to
in writing, between the date hereof and the Closing Date, Pride and Sunbelt
shall (i) conduct the Business and Sunbelt's business only in the ordinary
course, (ii) use their reasonable efforts to keep available the services of
Pride's employees and maintain Pride's current relationships with licensors,
suppliers, lessors, distributors, customers, clients and others, (iii)
maintain, consistent with past practice and good business judgment, all of
Pride's assets in customary repair, order and condition, ordinary wear and tear
excepted, and insurance upon all of its assets used in the conduct of the
Business in such amounts and of such kinds comparable to that in effect on the
date hereof, to the extent available at current premiums, and (iv) maintain
their Books and Records in the usual, regular and ordinary manner, on a basis
consistent with past practice.
10.3 Negative Covenants of Pride and the Pride Shareholders. From
and after September 30, 1995 and through the Closing Date and except with the
specific prior written consent of Group, Pride and the Shareholders covenant
and agree as follows:
10.3.1 Other than the transfer by Pride of the Alexandria
Operations to Rice, Pride shall not sell, transfer or dispose of any
of its assets other than in the ordinary course of business; provided,
however, that any sale, transfer or disposition of any of its assets
in the ordinary course of business shall not exceed assets valued at
more than $10,000 in the aggregate and shall not be made to any of the
Shareholders.
10.3.2 Pride shall not make any distributions or dividends
of cash or other property to the Shareholders.
10.3.3 Pride shall not make, declare or pay any bonuses to
any of the officers or directors of Pride or Sunbelt or other payments
to such persons not in the ordinary course of business.
10.3.4 Pride shall not grant an Encumbrance (except a
Permitted Encumbrance) on any of the assets of Pride or allow any such
Encumbrance (except a Permitted Encumbrance) to occur or to be
created.
10.3.5 Except in the ordinary course of business, Pride
shall not acquire any tangible properties or assets.
10.3.6 Except in the ordinary course of business, Pride
shall not enter into any employment and/or any independent contractor
agreements relating to services to be rendered in connection with the
Business or any of their assets.
10.3.7 Except in the ordinary course of business, Pride
shall not amend, modify or terminate any of its Contracts, Leases or
other agreements.
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10.3.8 Pride shall not enter into any undertaking with
respect to the operation of its assets or the Business except in the
ordinary course of business and consistent with past practices.
10.3.9 The Shareholders shall not sell, transfer or dispose
of any of the Pride Stock or the Sunbelt Stock or grant or allow an
Encumbrance thereon.
10.4 Negative Covenants of Sunbelt and LLC. From and after the
date hereof and through the Closing Date, and except with the specific prior
written consent of Group, Sunbelt and LLC covenant and agree as follows:
10.4.1 LLC shall not sell, transfer or dispose of the Pride
Note or Pride Loan Documents or any interest therein, grant or permit
to exist an Encumbrance on the Pride Note or Pride Loan Documents or
the proceeds thereof, or amend or modify any of the Pride Note or
Pride Loan Documents.
10.4.2 Sunbelt shall not acquire any tangible or intangible
properties or assets or incur any liabilities or obligations of any
kind or nature.
10.4.3 Sunbelt shall not enter into any agreements or
contracts of any kind or nature.
10.4.4 Sunbelt shall not sell, transfer or dispose of any of
the Pride Stock or grant or allow an Encumbrance thereon.
10.5 Exclusive Dealing. During the period from the date of this
Agreement to February 15, 1996, Pride, Sunbelt and the Shareholders shall not
take any action to, directly or indirectly, encourage, initiate or engage in
discussions or negotiations with, or provide any information to any Person
other than Group, concerning (i) the sale, transfer or disposal of all or any
material part of the assets of Pride or Sunbelt, (ii) a merger of Pride or
Sunbelt, (iii) the sale, transfer or disposal of any of the Pride Stock or
Sunbelt Stock, or (iv) any similar transaction involving Pride, Sunbelt or the
Shareholders (collectively, a "Prohibited Transaction"). Pride, Sunbelt and
the Shareholders shall immediately notify Group of any inquiries or proposals
made by any Person other than Group with respect to a Prohibited Transaction.
Prior to March 1, 1996, Pride, Sunbelt and the Shareholders shall not enter
into any definitive agreements with respect to any Prohibited Transaction.
10.6 Review of the Assets. Pride, Sunbelt and the Shareholders
agree that Group may, prior to the Closing Date, through its representatives,
review (i) the assets and liabilities of Pride and Sunbelt, (ii) the complete
working papers of the certified public accountants of Pride and Sunbelt used in
their preparation of financial statements for Pride and Sunbelt, and (iii) the
Books and Records of Pride and Sunbelt and otherwise review the financial and
legal condition of Pride and Sunbelt as Group or its representatives deem
necessary or advisable to familiarize itself or themselves
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with the Business, Sunbelt's business and related matters; such review shall
not, however, affect the representations and warranties made by Pride and
Sunbelt and the Shareholders hereunder or the remedies of Group for breaches of
those representations and warranties. Such review and inspection shall occur
only during normal business hours upon reasonable notice by Group. Pride and
Sunbelt shall permit Group and its representatives to have, after the execution
of this Agreement, full access to those employees of Pride who can furnish
Group with financial and operating data and other information with respect to
the Business as Group shall from time to time reasonably request.
10.7 Consents. Pride, Sunbelt, LLC and the Shareholders covenant
to obtain as soon as practicable after execution of this Agreement all
governmental and third party consents and approvals necessary to permit the
performance of their respective obligations to consummate the transactions
contemplated by this Agreement.
10.8 Further Assurances. At any time or from time to time after
the Closing Date, Pride, Sunbelt, LLC and the Shareholders shall, at the
reasonable request of Group and at Group's expense, execute and deliver any
further instruments or documents and take all such further action as Group may
reasonably request in order to consummate and make effective the transactions
contemplated by this Agreement.
ARTICLE XI
COVENANTS OF GROUP
Group hereby covenants and agrees with Pride, Sunbelt and the
Shareholders as follows:
11.1 Cooperation by Group. Group will use its reasonable best
efforts, and will cooperate with Pride, Sunbelt and the Shareholders, to secure
all necessary consents, approvals, authorizations, exemptions and waivers from
third parties as shall be required in order to enable Group to effect the
transactions contemplated on its part hereby, and Group will otherwise use its
reasonable best efforts to cause and consummation of such transactions in
accordance with the terms and conditions hereof and to cause all conditions
contained in this Agreement over which it has control to be satisfied.
11.2 Books and Records; Personnel. At all times after the Closing
Date, Group shall allow the Shareholders, upon reasonable advance notice to
Group, access to all Books and Records of Pride and Sunbelt, to the extent
necessary or desirable in anticipation of, or preparation for, existing or
future litigation, tax returns or audits, or reports to or filings with
governmental agencies, during normal working hours at Group's principal place
of business or at any location where such Books and Records are stored, and the
Shareholders shall have the right, at the Shareholders' sole cost, to make
copies of any such Books and Records.
11.3 Further Assurances. At any time or from time to time after
the Closing Date, Group shall, at the request of the Shareholders and at the
Shareholders' expense, execute and deliver any
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further instruments or documents and take all such further action as the
Shareholders may reasonably request in order to consummate and make effective
the transactions contemplated by this Agreement.
11.4 Consents. Group covenants to obtain as soon as practicable
after the execution of this Agreement all governmental and third party consents
and approvals necessary to permit the performance of its obligation to
consummate the transactions contemplated by this Agreement.
ARTICLE XII
THE CLOSING
12.1 Time and Place. The closing of the transactions contemplated
by this Agreement (the "Closing") will take place at 9:00 a.m. at the offices
of Bracewell & Patterson, L.L.P. located at 500 N. Akard Street, Suite 4000,
Dallas, Texas 75201, on or before March 1, 1996, or at such other time, at such
other place or on such other date as the parties hereto may mutually agree.
The date on which the Closing occurs is herein referred to as the "Closing
Date."
12.2 Obligations of Pride, Sunbelt and the Shareholders. At the
Closing, Pride, Sunbelt and the Shareholders, as applicable, shall execute (as
applicable) and deliver to Group, against Group's execution (as applicable) and
delivery of the items specified in Section 12.3, the following:
12.2.1 the Employment Agreements;
12.2.2 the Consulting Agreements;
12.2.3 the Pledge Agreement;
12.2.4 the Pride Stock and the Sunbelt Stock together with
stock powers duly endorsed by the Shareholders;
12.2.5 certified copies of the Articles of Incorporation,
Bylaws and Good Standing and Existence Certificates of Pride and
Sunbelt;
12.2.6 all Books and Records, memoranda, data and other
documents related to the assets of Pride, Sunbelt and the Business,
including all Contracts and Leases of Pride;
12.2.7 the certificates required by Sections 9.1, 9.2 and
9.3;
12.2.8 any consents to assignment of the Contracts and
Leases required by Sections 4.4 and 5.4;
12.2.9 the legal opinion as required by Section 9.8;
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12.2.10 evidence of any necessary governmental or third party
consents or approvals as required by Section 10.7;
12.2.11 resignations of existing directors of Pride and
Sunbelt;
12.2.12 such other instruments, documents and certificates in
form and substance reasonably satisfactory to Group, as Group shall
have reasonably required.
12.3 Group's Obligations. At the Closing, Group shall execute (as
applicable) and deliver to the Shareholders, Sunbelt, LLC and Pride, as
applicable, against execution (as applicable) and delivery by the Shareholders,
as applicable, and Pride of the items specified in Section 12.2, the following:
12.3.1 a wire transfer or bank cashier's or certified check,
as applicable, for the cash portion of the Pride Purchase Price and
Sunbelt Purchase Price, as they may be adjusted, pursuant to Article
III;
12.3.2 certificates representing the shares of Group Stock
to be issued to LLC and Lubomirski in accordance with Sections 2.4 and
3.1.3 hereof;
12.3.3 the Convertible Notes;
12.3.4 the Employment Agreements;
12.3.5 the Consulting Agreements;
12.3.6 the Pledge Agreements;
12.3.7 evidence of any necessary governmental or third party
consents or approvals as required by Section 11.4;
12.3.8 the certificates required by Sections 8.1, 8.2 and
8.3; and
12.3.9 the legal opinion required by Section 8.6.
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ARTICLE XIII
TERMINATION
13.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date as follows:
13.1.1 by the mutual written consent of Group, Pride and
Sunbelt;
13.1.2 unilaterally by Group, on one hand, or by Pride and
Sunbelt, on the other hand, in writing, without liability on the part
of the terminating party on account of such termination (provided the
terminating party is not otherwise in material default or breach of
this Agreement, or has failed or refused to close without
justification hereunder), if the Closing Date shall not have occurred
on or before 5:00 p.m. Central Standard Time on February 15, 1996
("Final Termination Date"); provided, however, that if all necessary
consents and approvals have not been obtained by February 15, 1996,
the Final Termination Date automatically shall be extended to a date
six business days after the date on which all such consents and
approvals have been obtained but in no event later than March 1, 1996;
13.1.3 unilaterally by Group, on one hand, or by Pride and
Sunbelt, on the other hand, in writing, without prejudice to other
rights and remedies which the terminating party may have (provided the
terminating party is not otherwise in material default or breach of
this Agreement, or has failed or refused to close without
justification hereunder), if the other party shall (i) materially fail
to perform its covenants or agreements contained herein required to be
performed prior to the Closing Date, or (ii) materially breach or have
breached any of its representations or warranties contained herein.
13.2 Remedies Upon Default or Failure to Close.
13.2.1 If Group shall default in the performance of its
obligations under this Agreement, and shall for this reason be unable
to consummate this Agreement on the Closing Date in accordance with
the terms hereof, and provided that neither Pride, Sunbelt nor any of
the Shareholders are not then in material default of any of their
respective obligations hereunder, Pride, Sunbelt and the Shareholders
shall be entitled (i) to waive any such default by Group and to
require Group through specific performance (which Group acknowledges
to be an appropriate remedy) to consummate the sale in accordance with
the terms of this Agreement, or (ii) to terminate this Agreement by
written notice to Group; provided, however, that Group shall have a
period of ten (10) days following written notice from Pride, Sunbelt
and the Shareholders to cure any breach of this Agreement, if such
breach is curable. The availability of specific performance shall be
in addition to any other remedies or claims for damages Pride, Sunbelt
or the Shareholders may have at law or in equity for breaches or
defaults by Group of its obligations hereunder.
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<PAGE> 48
13.2.2 If Pride, Sunbelt or any of the Shareholders shall
default in the performance of their respective obligations under this
Agreement and shall for that reason be unable to consummate this
Agreement on the Closing Date in accordance with the terms hereof, and
if Group is not then in material default of any of its obligations
hereunder, Group shall be entitled either (i) to waive any such
defaults by Pride, Sunbelt or the Shareholders and to require Pride,
Sunbelt and the Shareholders through specific performance (which
Pride, Sunbelt and the Shareholders acknowledge to be an appropriate
remedy) to consummate the sale in accordance with the terms of this
Agreement, or (ii) to terminate this Agreement by written notice to
Pride, Sunbelt and the Shareholders; provided, however, that Pride,
Sunbelt and the Shareholders shall have a period of ten (10) days
following written notice from Group to cure any breach of this
Agreement, if such breach is curable. The availability of specific
performance shall be in addition to any other remedies or claims for
damages Group may have at law or in equity for breaches or defaults by
Pride, Sunbelt or the Shareholders of their respective obligations
hereunder.
13.3 Effect on Obligations. Termination of this Agreement pursuant
to this Article shall terminate all obligations of the parties hereunder,
except for (i) the obligations under Section 13.2 hereof and (ii) the
obligations set forth in the next succeeding sentence of this Section 13.3.
Upon any termination of this Agreement, each party hereto will redeliver all
documents, work papers and other materials of any other party relating to the
transactions contemplated hereby, and all copies of such materials, whether so
obtained before or after the execution hereof, to the party furnishing the
same.
ARTICLE XIV
SURVIVAL AND INDEMNIFICATION
14.1 Indemnification of the Shareholders. Group shall indemnify
and hold the Shareholders and their Affiliates (the "Shareholder Indemnitees")
harmless from and against any and all damages, including exemplary damages and
penalties, losses, deficiencies, costs, expenses, obligations, fines,
expenditures, claims and liabilities, including reasonable counsel fees and
reasonable expenses of investigation, defending and prosecuting litigation
(collectively, the "Damages"), suffered by the Shareholder Indemnitees as a
result of, caused by, arising out of, or in any way relating to (i) any
misrepresentation, breach of warranty, or nonfulfillment of any agreement or
covenant on the part of Group under this Agreement or any misrepresentation in
or omission from any list, schedule, certificate, or other instrument furnished
or to be furnished to Pride or the Shareholders by Group pursuant to the terms
of this Agreement, or (ii) any liability or obligation (other than those for
which the Group Indemnitees are being indemnified for under Sections 14.2 and
14.3 hereof) which pertains to the ownership, operation or conduct of the
Business or assets of Pride, other than the Alexandria Operations or the assets
used in the Alexandria Operations, arising from any acts, omissions, events,
conditions or circumstances occurring on or after the Closing Date. Group also
agrees to indemnify
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<PAGE> 49
and hold Rice harmless from and against any Damages arising out of his personal
guaranty of the indebtedness owed by Pride to the LEDC.
14.2 Indemnification of Group by Pride Shareholders. The Pride
Shareholders (except Sunbelt) and LLC, jointly and severally, shall indemnify
and hold Group and its Affiliates (the "Group Indemnitees") harmless from and
against any and all Damages suffered by the Group Indemnitees as a result of,
caused by, arising out of, or in any way relating to (i) any misrepresentation,
breach of warranty, nonfulfillment of any agreement or covenant on the part of
Pride or the Pride Shareholders under this Agreement, or any misrepresentation
in or omission from any list, schedule, certificate or other instrument
furnished or to be furnished to Group by Pride or the Pride Shareholders
pursuant to the terms of this Agreement, or (ii) any liability or obligation
(other than those for which the Shareholder Indemnitees are being indemnified
for under Section 14.1 hereof) which pertains to the ownership, operation or
conduct of the Business or the assets of Pride arising from any acts,
omissions, events, conditions or circumstances occurring before the Closing
Date. Notwithstanding the foregoing, the sole remedy of Group and its
Affiliates against LLC under this Section 14.2 shall be to reduce and offset
the Pride Debt to the extent of the Damages, but in no event more than $70,000
in the aggregate, and LLC shall have no personal liability for payment of such
Damages.
14.3 Indemnification of Group by Sunbelt Shareholders. The Sunbelt
Shareholders, jointly and severally, shall indemnify and hold the Group
Indemnitees harmless from and against any and all Damages suffered by the Group
Indemnitees as a result of, caused by, arising out of, or in any way related to
(i) any misrepresentation, breach of warranty, nonfulfillment of any agreement
or covenant on the part of Sunbelt or the Sunbelt Shareholders under this
Agreement, or any misrepresentation in or omission from any list, schedule,
certificate or other instrument furnished or to be furnished to Group by
Sunbelt or the Sunbelt Shareholders pursuant to the terms of this Agreement,
(ii) any liability or obligation (other than those for which the Shareholder
Indemnitees are being indemnified for under Section 14.1 hereof), which
pertains to the ownership, operation or conduct of the business or assets of
Sunbelt arising from any acts, omissions, events, conditions or circumstances
occurring before the Closing Date, or (iii) any of the liabilities identified
on Schedule 5.5 hereto.
14.4 Indemnification of Pride. Rice shall indemnify and hold Pride
and its Affiliates (the "Pride Indemnitees") harmless from and against any and
all Damages suffered by the Pride Indemnitees as a result of, caused by,
arising out of, or in any way relating to (i) any liability or obligation which
pertains to the ownership, operation or conduct of the Alexandria Operations or
the assets used in the Alexandria Operations, or (ii) any of the liabilities
identified on Schedule 2.3 hereto.
14.5 Demands. Each indemnified party hereunder agrees that
promptly upon its discovery of facts giving rise to a claim for indemnity under
the provisions of this Agreement, including receipt by it of notice of any
demand, assertion, claim, action or proceeding, judicial or otherwise, by any
third party (such third party actions being collectively referred to herein as
the "Claim"), with respect to any matter as to which it claims to be entitled
to indemnity under the provisions of this Agreement,
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<PAGE> 50
it will give prompt notice thereof in writing to the indemnifying party,
together with a statement of such information respecting any of the foregoing
as it shall have. Such notice shall include a formal demand for
indemnification under this Agreement. The indemnifying party shall not be
obligated to indemnify the indemnified party with respect to any Claim if the
indemnified party knowingly failed to notify the indemnifying party thereof in
accordance with the provisions of this Agreement in sufficient time to permit
the indemnifying party or its counsel to defend against such matter and to make
a timely response thereto including, without limitation, any responsive motion
or answer to a complaint, petition, notice or other legal, equitable or
administrative process relating to the Claim, only insofar as such knowing
failure to notify the indemnifying party has actually resulted in prejudice or
damage to the indemnifying party.
14.6 Right to Contest and Defend. The indemnifying party shall be
entitled at its cost and expense to contest and defend by all appropriate legal
proceedings any Claim with respect to which it is called upon to indemnify the
indemnified party under the provisions of this Agreement; provided, that notice
of the intention to contest shall be delivered by the indemnifying party to the
indemnified party within 20 days from the date of receipt by the indemnifying
party of notice by the indemnified party of the assertion of the Claim. Any
such contest may be conducted in the name and on behalf of the indemnifying
party or the indemnified party as may be appropriate. Such contest shall be
conducted by reputable counsel employed by the indemnifying party, but the
indemnified party shall have the right but not the obligation to participate in
such proceedings and to be represented by counsel of its own choosing at its
sole cost and expense. The indemnifying party shall have full authority to
determine all action to be taken with respect thereto; provided, however, that
the indemnifying party will not have the authority to subject the indemnified
party to any obligation whatsoever, other than the performance of purely
ministerial tasks or obligations not involving material expense. If the
indemnifying party does not elect to contest any such Claim, the indemnifying
party shall be bound by the result obtained with respect thereto by the
indemnified party, having used its reasonable best efforts in resolution. At
any time after the commencement of the defense of any Claim, the indemnifying
party may request the indemnified party to agree in writing to the abandonment
of such contest or to the payment or compromise by the indemnified party of the
asserted Claim, whereupon such action shall be taken unless the indemnified
party determines that the contest should be continued, and so notifies the
indemnifying party in writing within 15 days of such request from the
indemnifying party. If the indemnified party determines that the contest
should be continued, the indemnifying party shall be liable hereunder only to
the extent of the amount that the other party to the contested Claim had agreed
unconditionally to accept in payment or compromise as of the time the
indemnifying party made its request therefor to the indemnified party.
14.7 Cooperation. If requested by the indemnifying party, the
indemnified party agrees to cooperate with the indemnifying party and its
counsel in contesting any Claim that the indemnifying party elects to contest
or, if appropriate, in making any counterclaim against the person asserting the
Claim, or any cross-complaint against any person, and the indemnifying party
will reimburse the indemnified party for any expenses incurred by it in so
cooperating. If the indemnifying party has not
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<PAGE> 51
chosen to contest a Claim, the indemnifying party shall cooperate with the
indemnified party and its counsel in contesting any Claim at no cost or expense
to the indemnified party.
14.8 Right to Participate. The indemnified party agrees to afford
the indemnifying party and its counsel the opportunity to be present at, and to
participate in, conferences with all persons, including governmental
authorities, asserting any Claim against the indemnified party or conferences
with representatives of or counsel for such persons.
14.9 Payment of Damages. The indemnifying party shall pay to the
indemnified party in immediately available funds any amounts to which the
indemnified party may become entitled by reason of the provisions of this
Agreement, such payment to be made within five (5) days after any such amounts
are finally determined either by mutual agreement of the parties hereto or
pursuant to the final nonappealable judgment of a court of competent
jurisdiction.
14.10 Right of Offset. Group shall have the right to offset amounts
that may be owed to it under the provisions of this Article XIV by the original
payee of a Convertible Note against the amounts owed by Group to the holder of
the Convertible Note.
14.11 Survival of Representations and Warranties. The
representations and warranties contained in Articles IV, V, VI and VII of this
Agreement shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby for the maximum period
allowed by law.
ARTICLE XV
LLC AND PRIDE DEBT
15.1 Representations Regarding Pride Debt. LLC represents and
warrants that it is the sole legal and beneficial owner of the Pride Debt and
Pride Loan Documents, that Group has previously been provided true and complete
copies of the Pride Loan Documents, that, as of the date of this Agreement, the
outstanding principal balance owing by Pride on the Pride Debt is $333,017.13
and all accrued, unpaid interest has been paid through December 31, 1995 and
that there is no default or event which with notice or passage of time could
constitute a default by Pride of any of its covenants, representations or
warranties in the Pride Loan Documents.
15.2 Closing Transactions Relating to Pride Debt. At the Closing,
LLC and Pride shall execute and deliver appropriate amendments to the Pride
Loan Documents and an amended and restated promissory note in replacement for
the Pride Note to reflect the partial extinguishment of the Pride Debt and
reduced monthly payments based on the original amortization period for the
Pride Note, and to permit the transactions relating to the Alexandria
Operations as described in Section 2.3 to occur. The revised Pride Note will
also reflect the right of offset that Group has under the provisions of 14.2
above.
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<PAGE> 52
ARTICLE XVI
MISCELLANEOUS
16.1 Notices. Any notice, request, instruction, correspondence or
other document to be given hereunder by either party to the other (herein
collectively called "Notice") shall be in writing and delivered in person or by
courier service requiring acknowledgment of receipt of delivery or mailed by
certified mail, postage prepaid and return receipt requested, or by telecopier,
as follows:
If to Pride or the Pride Shareholders, addressed to:
Pride Aviation, Inc.
1218 Hangar Drive
New Iberia, LA 70560
Attention: Mr. Frank B. Rice
Telecopy: (318) 487-8736
with a copy to:
John L. Schober, Jr.
Schober, Reynolds & Antee
330 Marshall Street, Suite 711
Shreveport, LA 71101
Telecopy: (318) 221-2649
If to Sunbelt, LLC or the Sunbelt Shareholders, addressed:
c/o Sunbelt Business Capital Incorporated
920 Pierremont, Suite 105
Shreveport, LA 71106
Attention: Mr. Charles Weed
Telecopy: (318) 865-7754
with a copy to:
John L. Schober, Jr.
Schober, Reynolds & Antee
330 Marshall Street, Suite 711
Shreveport, LA 71101
Telecopy: (318) 221-2649
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<PAGE> 53
If to Group, addressed to:
Aviation Group, Inc.
1327 Empire Central, Suite 260
Dallas, Texas 75247
Attention: Mr. Lee Sanders
Telecopy: (214) 634-1566
with a copy to:
Bracewell & Patterson, L.L.P.
500 North Akard Street, Suite 4000
Dallas, Texas 75201-3387
Attention: Mr. Daryl B. Robertson
Telecopy: (214) 740-4010
Notice given by personal delivery, courier service or mail shall be effective
upon actual receipt. Notice given by telecopier shall be confirmed by
appropriate answer back and shall be effective upon actual receipt if received
during the recipient's normal business hours, or at the beginning of the
recipient's next Business Day after receipt if not received during the
recipient's normal business hours. All Notices by telecopier shall be
confirmed promptly after transmission in writing by certified mail or personal
delivery. Any party may change any address to which Notice is to be given to
it by giving Notice as provided above of such change of address.
16.2 Governing Law. The provisions of this Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Texas (excluding any conflicts-of-law rule or principle that might refer
same to the laws of another jurisdiction).
16.3 Entire Agreement; Amendments and Waivers. This Agreement
(including the exhibits and schedules hereto) constitute the entire agreement
between the parties hereto pertaining to the subject matter hereof and
supersede all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as set forth specifically herein or contemplated
hereby. No supplement, modification or waiver of this Agreement shall be
binding unless executed in writing by the party to be bound thereby. The
failure of a party to exercise any right or remedy shall not be deemed or
constitute a waiver of such right or remedy in the future. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver
of any other provision hereof (regardless of whether similar), nor shall any
such waiver constitute a continuing waiver unless otherwise expressly provided.
-45-
<PAGE> 54
16.4 Binding Effect and Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective permitted successors and assigns; but neither this Agreement nor any
of the rights, benefits or obligations hereunder shall be assigned, by
operation of law or otherwise, by any party hereto without the prior written
consent of the other party. Nothing in this Agreement, express or implied, is
intended to confer upon any person or entity other than the parties hereto and
their respective permitted successors and assigns, any rights, benefits or
obligations hereunder.
16.5 Severability. If any provision of the Agreement is rendered
or declared illegal or unenforceable by reason of any existing or subsequently
enacted legislation or by decree of a court of last resort, Group, Pride,
Sunbelt and the Shareholders, as applicable, shall promptly meet and negotiate
substitute provisions for those rendered or declared illegal or unenforceable
so as to preserve as nearly as possible the contemplated economic effects of
the transactions, but all of the remaining provisions of this Agreement shall
remain in full force and effect.
16.6 Headings. The headings of the sections herein are inserted
for convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
16.7 Execution. This Agreement may be executed in multiple
counterparts each of which shall be deemed an original and all of which shall
constitute one instrument.
16.8 Publicity. Except as otherwise required by applicable laws or
regulations, Pride, Sunbelt, the Shareholders and Group agree to not issue any
press release or make any other public statement, in each case relating to or
connected with or arising out of this Agreement or the matters contained
herein, without obtaining the prior approval of the other parties hereto to the
contents and the manner of presentation and publication thereof.
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<PAGE> 55
IN WITNESS WHEREOF, each of the parties hereto has caused this Stock
Purchase Agreement to be executed on its or his behalf as of the date first
above written.
GROUP:
AVIATION GROUP, INC.
By: /s/ LEE SANDERS
--------------------------------------
Lee Sanders, President
PRIDE:
PRIDE AVIATION, INC.
By: /s/ FRANK B. RICE
--------------------------------------
Frank B. Rice, President
SUNBELT:
SUNBELT BUSINESS CAPITAL
INCORPORATED
By: /s/ CHARLES E. WEED
--------------------------------------
Charles E. Weed, President
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<PAGE> 56
LLC:
SUNBELT BUSINESS CAPITAL, L.L.C.
By: /s/ CHARLES E. WEED
--------------------------------------
Charles E. Weed, Manager
PRIDE SHAREHOLDERS:
/s/ PAUL LUBOMIRSKI
-----------------------------------------
Paul Lubomirski
/s/ FRANK B. RICE
-----------------------------------------
Frank B. Rice
/s/ CAROL B. RICE
-----------------------------------------
Carol B. Rice
-----------------------------------------
Dan Thompson
SUNBELT BUSINESS CAPITAL
INCORPORATED
By: /s/ CHARLES E. WEED
--------------------------------------
Charles E. Weed, President
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<PAGE> 57
SUNBELT SHAREHOLDERS:
/s/ CHARLES E. WEED
-----------------------------------------
Charles E. Weed
/s/ PATRICIA EWING HENDRICK
-----------------------------------------
Patricia Ewing Hendrick
/s/ JUDY L. CHIDLOW
-----------------------------------------
Judy L. Chidlow
/s/ JOHN H. CHIDLOW
-----------------------------------------
John H. Chidlow
JESSWALT, INC.
By: /s/ RONA A. STANTON
--------------------------------------
Rona A. Stanton, President
/s/ FRANK SCOTT MORAN
-----------------------------------------
Frank Scott Moran
/s/ ANNE S. COUCH
-----------------------------------------
Anne S. Couch
3650 INVESTMENT CORPORATION, L.C.
By: /s/ ROBERT ALAN SCHATZMAN
--------------------------------------
Robert Alan Schatzman, President
-49-
<PAGE> 58
/s/ MAY H. CHIDLOW
-----------------------------------------
May H. Chidlow
/s/ GREGORY A. DESPOT
-----------------------------------------
Gregory A. Despot
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<PAGE> 59
ADDENDUM
JESSWALT, INC. ADDENDUM TO SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT BY AND
AMONG AVIATION GROUP, INC., PRIDE AVIATION GROUP, INC., SUNBELT BUSINESS
CAPITAL INCORPORATED, SUNBELT BUSINESS CAPITAL, C.C.G. AND ALL OF THE
STOCKHOLDERS OF PRIDE AVIATION, INC. AND SUNBELT BUSINESS CAPITAL INCORPORATED
Jesswalt, Inc. is not an accredited investor. Jesswalt, Inc. has
received advice from a person having knowledge and experience in
matters involving securities investments such that Jesswalt, Inc. is
capable of evaluating the relative risks and merits of this
investment. Jesswalt, Inc. also acknowledges receipt of Aviation
Group, Inc's Confidential Private Offering Memorandum dated January
15, 1996 with respect to its offering of 500,000 shares of common
stock at a price of $3.00 per share.
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY STATE OF INCORPORATION
------------------ ----------------------
<S> <C>
TriStar Airline Services, Inc. Texas
TriStar Aircraft Services, Inc. Texas
Pride Aviation, Inc. Oklahoma
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
As independent auditors, we hereby consent to the use of our reports
and to the reference to our firm under the caption "Experts" included in or
made a part of this registration statement.
ARSEMENT, REDD & MORELLA, L.L.C.
March 4, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the "Experts," under the
caption "Summary Combined Historical and Pro Forma Financial Information" and
to the use of our report dated December 22, 1995, in the Registration Statement
(Form SB-2).
JAMES SMITH & COMPANY
A Professional Corporation
Dallas, Texas
March 4, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AVIATION
GROUP, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REGISTRATION STATEMENT ON
FORM SB-2 FILED BY THE COMPANY ON MARCH 4, 1997.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1996
<PERIOD-START> JUL-01-1996 OCT-01-1995
<PERIOD-END> DEC-31-1996 JUN-30-1996
<CASH> 213 457
<SECURITIES> 0 0
<RECEIVABLES> 628 674
<ALLOWANCES> 30 30
<INVENTORY> 172 143
<CURRENT-ASSETS> 1,112 1,277
<PP&E> 2,657 2,409
<DEPRECIATION> 386 220
<TOTAL-ASSETS> 4,571 4,524
<CURRENT-LIABILITIES> 1,733 1,403
<BONDS> 1,329 1,350
0 0
0 0
<COMMON> 16 16
<OTHER-SE> 1,213 1,439
<TOTAL-LIABILITY-AND-EQUITY> 4,571 4,524
<SALES> 4,227 3,881
<TOTAL-REVENUES> 4,227 3,881
<CGS> 2,996 2,838
<TOTAL-COSTS> 2,996 2,838
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 16
<INTEREST-EXPENSE> 74 71
<INCOME-PRETAX> (345) 68
<INCOME-TAX> (119) 34
<INCOME-CONTINUING> (226) 34
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (226) 34
<EPS-PRIMARY> (.14) .02
<EPS-DILUTED> (.14) .02
</TABLE>
