<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended December 31, 1999
[_] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required)
For the transition period from ____________ to ____________
Commission file number : 0-10124
-------
Aviation Group, Inc.
(Exact name of Small Business Issuer as specified in its charter)
Texas 75-2631373
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
700 North Pearl Street
Suite 2170
Dallas, Texas 75201
(Address of Principal Executive Offices)
214/922-8100
(Issuer's Telephone Number)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
3,573,929 shares of Common Stock were outstanding as of February 9, 2000.
Transitional Small Business Disclosure Format (check one):
Yes No X
------- -------
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
AVIATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, June 30,
1999 1999
------------- ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 369,000 $ 84,000
Restricted time deposit 104,000 538,000
Accounts receivable, net 1,298,000 2,200,000
Inventory 1,361,000 1,547,000
Prepaid expenses and other 426,000 170,000
Discontinued assets held for resale, net 267,000
----------- -----------
Total Current Assets 3,825,000 4,539,000
----------- -----------
Property and equipment 5,107,000 4,481,000
Product manufacturing licenses 1,440,000 1,341,000
Less: accumulated depreciation (963,000) (1,772,000)
----------- -----------
4,144,000 4,050,000
----------- -----------
Goodwill, net 1,802,000 4,144,000
Other 239,000 319,000
----------- -----------
2,041,000 4,463,000
----------- -----------
Total Assets $10,010,000 $13,052,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term obligations $ 500,000 $ 463,000
Current portion of capital lease obligations 182,000 164,000
Revolving and other short-term borrowings 1,571,000 2,316,000
Accounts payable 2,018,000 2,334,000
Accrued liabilities 1,217,000 1,335,000
----------- -----------
Total Current Liabilities 5,488,000 6,612,000
----------- -----------
Long-Term Liabilities
Long-term debt, net of current maturities 715,000 880,000
Capitalized leases, net of current maturities 439,000
----------- -----------
Total Long-Term Liabilities 715,000 1,319,000
----------- -----------
Total Liabilities 6,203,000 7,931,000
----------- -----------
Shareholders' Equity
Preferred Stock, $.01 par value, 5,000,000
shares authorized, none outstanding -- --
Common Stock, $.01 par value, 10,000,000 shares
authorized, 3,465,673 and 3,296,601 shares
issued and outstanding 36,000 36,000
Additional paid-in capital 9,766,000 9,766,000
Retained earnings (deficit) (5,995,000) (4,681,000)
----------- -----------
Total Shareholders' Equity 3,807,000 5,121,000
----------- -----------
Total Liabilities and Shareholders' Equity $10,010,000 $13,052,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-1-
<PAGE>
AVIATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
------------------------- ------------------------
1999 1998 1999 1998
------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
Revenue $ 2,400,000 $4,694,000 $ 5,529,000 $8,355,000
Cost of Revenue 1,634,000 2,715,000 3,550,000 4,820,000
----------- ---------- ----------- ----------
Gross Profit 766,000 1,979,000 1,979,000 3,535,000
----------- ---------- ----------- ----------
General and Administrative Expenses 1,629,000 1,630,000 3,125,000 2,956,000
Depreciation and Amortization 169,000 194,000 339,000 347,000
----------- ---------- ----------- ----------
1,798,000 1,824,000 3,464,000 3,303,000
----------- ---------- ----------- ----------
Income (Loss) From Operations (1,032,000) 155,000 (1,485,000) 232,000
----------- ---------- ----------- ----------
Other Income (expenses)
Other income (expense) 1,000 1,000 1,000 2,000
Interest expense, net (204,000) (122,000) (381,000) (169,000)
----------- ---------- ----------- ----------
(203,000) (121,000) (380,000) (167,000)
----------- ---------- ----------- ----------
Income (loss) from continuing operations
Before income taxes (1,235,000) 34,000 (1,865,000) 95,000
Provision (benefit) for income taxes -- -- -- 14,000
----------- ---------- ----------- ----------
Income from continuing operations (1,235,000) 34,000 (1,865,000) 51,000
Income (loss) from discontinued operations (161,000) 43,000 (139,000) 44,000
Gain on sale of subsidiaries, net 681,000 -- 690,000 --
----------- ---------- ----------- ----------
520,000 43,000 551,000 44,000
----------- ---------- ----------- ----------
Net Income (Loss) $ (715,000) $ 77,000 $(1,314,000) $ 95,000
=========== ========== =========== ==========
Earnings (loss) per common share
Income (loss) before discontinued operations $ (0.35) $ 0.01 $ (0.52) $ 0.02
Income (loss) from discontinued operations 0.15 0.01 0.15 0.01
----------- ---------- ----------- ----------
Net income per share (basic and diluted) $ (0.20) $ 0.02 $ (0.37) $ 0.03
=========== ========== =========== ==========
Weighted average shares outstanding
Basic and diluted 3,573,929 3,465,673 3,573,929 3,465,673
=========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
-2-
<PAGE>
AVIATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six Months Ended December 31,
---------------------------------------
1999 1998
-------------------- -----------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (Loss) $(1,314,000) $ 95,000
Adjustments to Reconcile Net Income (Loss)
to Net Cash Provided (Used) by Operating Activities:
Depreciation and amortization 339,000 478,000
Decrease in restricted cash 434,000 --
Decrease in accounts receivable 902,000 34,000
Decrease in inventories 186,000 65,000
(Increase) in prepaids and other current assets (523,000) (144,000)
Increase (decrease) in accounts payable (316,000) 43,000
Increase (decrease) in accrued interest (23,000)
(Decrease) in accrued liabilities (118,000) (210,000)
Other 8,000 (187,000)
----------- ---------
Total Adjustments 912,000 56,000
----------- ---------
Net Cash Provided (Used) by Operating Activities (402,000) 151,000
----------- ---------
Cash Flows From Investing Activities:
Proceeds of sale of discontinued business segments 1,981,000 --
Payments for property and equipment additions -- (451,000)
----------- ---------
Net Cash Used by Investing Activities 1,981,000 (451,000)
----------- ---------
Cash Flows From Financing Activities:
Repayments of short-term borrowings, net (690,000) (97,000)
Principal payments on long-term debt (604,000) (292,000)
Proceeds from long-term debt -- 180,000
Proceeds from exercise of warrants -- --
----------- ---------
Net Cash Provided (Used) by Financing Activities (1,294,000 (209,000)
----------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents 285,000 (509,000)
Cash and Cash Equivalents at Beginning of Period 84,000 709,000
----------- ---------
Cash and Cash Equivalents at End of Period $ 369,000 $ 200,000
=========== =========
Supplemental Disclosure of Cash Paid for Interest and Income Taxes:
Cash paid for interest $ 381,000 $ 197,000
Cash paid for income taxes -- --
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
AVIATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
In the opinion of management, the accompanying balance sheets and related
interim statements of income and cash flows include all adjustments (consisting
only of normal recurring items) necessary for their fair presentation in
conformity with generally accepted accounting principles. Preparing financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses. Examples include
provisions for warranty claims and bad debts and the length of assets' useful
lives. Actual results may differ from these estimates. Interim results are not
necessarily indicative of results for a full year. The information in this Form
10-QSB should be read in conjunction with Management's Discussion and Analysis
and financial statements and notes thereto included in the Company's Form 10-KSB
for the year ended June 30, 1999.
NOTE B - SALE OF DISCONTINUED BUSINESS SEGMENTS
During the quarter ended December 31, 1999 the Company successfully sold
its Tri-Star Airline Services ground handling subsidiary operations. On
February 8, 2000 the Company successfully sold its Casper Air Service general
aviation fixed base operations. Both businesses were sold to unrelated third
parties, and when combined generated a net gain on sale to the Company of
$681,000. See Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The Company is presently in discussions with certain third parties
regarding a sale or merger of the entire enterprise, and is also in discussions
with certain third parties regarding the sale of certain remaining segments of
the Company's operations on an individual basis. Other parties interested in
the Company's status as a public company have expressed interest in a business
combination, spin-off, or other transaction. While this process is underway,
management continues to cut overhead costs and focus its energies on the
maximization of profits and cashflows of its existing business units.
Management anticipates the sale of significant additional portions of its
business during the fiscal year, but there can be no assurance that such
activities will generate a sale of the Company or that if such transaction
occurs that the related consideration will significantly enhance shareholder
value.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
- -------
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements, other than statements of historical facts, included in this MD&A
regarding the Company's financial position, business strategy and plans and
objectives of management of the Company for future operations are forward-
looking statements. These forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
contemplated in such forward-looking statements, including those described
below. Investors are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release any revisions to these forward-
looking statements to reflect events or circumstances after the date hereof or
to reflect the occurrence of unanticipated events.
A key element of the Company's strategy historically involved growth
through acquisitions of other companies, assets or product or service lines that
would complement or expand the Company's existing businesses. Since 1996, the
Company has purchased five separate companies. Management believed that
acquisitions would enable it to leverage its fixed costs of operations and
further expand the products and services that it could offer to its customers.
The Company intended to use its common stock as the major source of its capital
to execute its acquisition strategy.
While management was successful in identifying candidates that met its
acquisition criteria, the trading price of the
-4-
<PAGE>
Company's shares and the level of trading volume experienced in the public
marketplace has created a significantly negative environment for acquiring
aviation businesses for the Company using its stock as consideration. Company
management has endeavored since 1998 to remedy this condition, while continuing
to incur high corporate overhead costs necessary to properly operate and
maintain a larger aviation service enterprise.
In the present view of management, (a) the Company's stock is trading below
the value of its existing underlying companies, (b) acquisitions of new
companies at present share price levels would be dilutive to existing
shareholders, and (c) continuation of its historical corporate overhead strategy
would erode shareholder value. Additionally, the Company's operating
subsidiaries continue to be hindered by the corporate overhead associated with
the Company's original strategy of acquiring additional aviation companies with
a combination of cash and Company common stock. Accordingly, in August 1999,
the Board of Directors approved a management plan to engage investment advisors
and pursue the additional strategy of selling all or part of the Company's
businesses.
During the quarter ended December 31, 1999, the Company successfully sold
its Tri-Star Airline Services ground handling subsidiary operations. On
February 8, 2000, the Company successfully sold its Casper Air Service general
aviation fixed base operations. Both businesses were sold to unrelated third
parties, and together generated a net gain on sale to the Company of $681,000.
The Company is presently in discussions with certain third parties
regarding a sale or merger of the entire enterprise, and is also in discussions
with certain third parties regarding the sale of certain remaining segments of
the Company's operations on an individual basis. Other parties interested in
the Company's status as a public company have expressed interest in a business
combination, spin-off, or other transaction. While this process is underway,
management continues to cut overhead costs and focus its energies on the
maximization of profits and cashflows of its existing business units.
Management anticipates the sale of significant additional portions of its
business during the fiscal year, but there can be no assurance that such
activities will generate a sale of the Company or that if such transaction
occurs that the related consideration will significantly enhance shareholder
value.
Results of Operations
- ---------------------
The following discussions and tables set 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>
Three months ended Six months ended
December 31, December 31,
(Unaudited 000's) (Unaudited 000's)
----------------- -----------------
Total Company 1999 1998 1999 1998
- ------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 2,400 $ 4,694 $ 5,529 $ 8,355
Cost of revenue (1,634) (1,979) (3,550) (4,820)
Operating and other expenses (1,112) (1,901) (2,296) (2,136)
-------- -------- -------- --------
(346) 814 (317) 1,399
-------- -------- -------- --------
Corporate overhead (515) (465) (829) (834)
Depreciation and amortization (169) (194) (339) (347)
Income from discontinued operations (161) 43 (139) 44
Gain on sale of subsidiaries 681 - 690 -
Interest income - 1 1 2
Interest expense (204) (122) (381) (169)
-------- -------- -------- --------
Pre-tax income $ (715) $ 77 $ (1,314) $ 95
======== ======== ======== ========
</TABLE>
Overhaul & Service Division
- ---------------------------
Revenues consist primarily of gross revenues from stripping and painting
and other aircraft coating services to major passenger and freight airlines and
corporate aircraft and aviation related companies. During fiscal 1999, the
Company executed a hangar-facility operating lease and incurred start up costs
leading to the opening of a new paint facility in Greenville, Mississippi, and
start-up costs for this facility for the three and six months ended December 31,
1999 were $80,000 and $131,000, respectively.
<PAGE>
The Company's paint operations and related revenue and income can vary
significantly from quarter to quarter based upon seasonality and scheduling
factors of its major customers. During fiscal 1999, the Company experienced
significant revenue and income in the first and second fiscal quarters, and its
third and fourth quarters were relatively flat. During this current fiscal 2000
year, the Company experienced its slow season during the first and second
quarter, and its facilities are scheduled to return to historical utilization
levels during the third and fourth fiscal quarters. At December 31, 1999, the
paint division had a backlog of approximately $20,000,000 from numerous
customers.
The Company's Aero Design battery manufacturing subsidiary is positioning
for significant growth. During the fiscal 1999 year, Aero Design applied for
and won approval from the FAA for numerous additional manufacturing licenses
relating to its line of commercial and general aviation replacement batteries.
Non-capitalized related costs for this activity totaled $59,000 and $109,000 for
the three and six-month periods ended December 31, 1999. The Company has
capitalized direct costs for its manufacturing license inventory of $1,400,000,
consisting of $1,341,000 in license inventory existing at the time of Aero
Design's purchase by the Company, and $59,000 in additional capital costs
incurred during the six months ended December 31, 1999. These licenses will
allow Aero Design to focus its activities in fiscal 2000 on growth in sales and
operating profits. General Electrodynamics Corporation (acquired in August
1998) comprises the remaining operating activities of this division.
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 or order. Operating expenses consist of 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.
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
(Unaudited 000's) (Unaudited 000's)
----------------- -----------------
Overhaul & Service Division 1999 1998 1999 1998
- --------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 2,400 $ 4,694 $ 5,529 $ 8,355
Cost of revenue (1,634) (1,979) (3,550) (4,820)
Operating and other expenses (1,112) (1,901) (2,296) (2,136)
-------- -------- -------- --------
(346) 814 (317) 1,399
Recurring division income -------- -------- -------- --------
Depreciation and goodwill amortization (162) (189) (324) (337)
Interest income -- 1 1 1
Interest expense (90) (43) (140) (70)
-------- -------- -------- --------
Pre-tax income $ (598) $ 583 $ (780) $ 993
======== ======== ======== ========
</TABLE>
Ground Handling & Service Division
- ----------------------------------
The Company's ground handling and service division derived revenue
primarily by providing commercial airlines with a variety of support services
including aircraft interior cleaning, exterior washes, lavatory and water
services and ramp services and baggage handling. On December 31, 1999, the
Company sold this operation to a non-affiliated third party. The Company
received $1,500,000 cash for the operating assets, and retained cash,
receivables, and other working capital with a net realizable value of
approximately $200,000. Following is a summary of ground handling and service
operations for the three and six months periods ended December 31, 1999 and
1998, which are included on a net basis, along with the Casper Air Service fixed
base operations, in the Company's financial statements as Income from
Discontinued Operations.
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
(Unaudited 000's) (Unaudited 000's)
----------------- -----------------
Ground Handling & Service Division 1999 1998 1999 1998
- ---------------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 369 $ 318 $ 766 $ 757
Cost of revenue (280) (139) (522) (401)
Operating and other expenses (85) (141) (145) (253)
------ ------ ------ ------
Recurring division income 4 38 99 103
------ ------ ------ ------
Depreciation and amortization - (29) (27) (57)
Interest income - - - 2
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Interest expense (3) (2) (16) (3)
------ ------ ------ ------
Operating income $ 1 $ 7 $ 56 $ 45
====== ====== ====== ======
Gain (loss) on sale summary
- ---------------------------
Purchase proceeds $1,500 $1,500
Book value of assets sold, net of debt (334) (334)
Write-off of unrealized goodwill, net -- --
------ ------
Gain on sale of division $1,166 $1,166
====== ======
</TABLE>
FBO Operations Division
- -----------------------
In August 1997, the Company acquired Casper Air Service, which operated a
fixed-base operation in Casper, Wyoming. This operation, located at Natrona
County International Airport in Casper, Wyoming, provided fuel and light
maintenance services to general aviation, corporate and light freight aircraft
customers. On February 8, 2000, the operating assets of this division were sold
to an unrelated private third party for a purchase price of $200,000 cash and
the buyer's assumption of $600,000 in related accounts payable. The Company
retained its ownership in Casper's accounts receivable, inventories, and certain
aircraft which will be sold during fiscal 2000. Following is a summary of
Casper's operations for the three and six months periods ended December 31, 1999
and 1998, which are included on a net basis, along with the ground handling and
service operations, in the Company's financial statements as Income from
Discontinued Operations.
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
(Unaudited) (Unaudited)
-----------
FBO Operations Division 1999 1998 1999 1998
- ----------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 686 $ 1,433 $ 1,490 $ 2,957
Cost of revenue (683) (955) (1,325) (2,070)
Operating and other expenses (127) (384) (266) (791)
------ -------- -------- --------
Recurring division income (124) 94 (101) 96
------ -------- -------- --------
Depreciation and amortization (31) (46) (66) (74)
Interest income - 2 - 2
Interest expense (7) (14) (28) (25)
------ -------- -------- --------
Operating income $ (162) $ 36 $ (195) $ (1)
====== ======== ======== ========
Gain (loss) on sale summary
- ---------------------------
Purchase proceeds $ 249 $ 258
Book value of assets sold, net of debt 247 247
Write-off of unrealized goodwill, net (981) (981)
------ --------
Loss on sale of division $ (485) $ (476)
====== ========
</TABLE>
Aviation Group - Corporate Overhead
- -----------------------------------
Operating expenses consist of all general and administrative and operating
costs to provide management to the Company's divisions, to support expected
growth, and to seek acquisition targets, not directly attributable to the
divisions' operations. These charges include legal, accounting, travel and other
related overhead. During the quarters ended December 31, 1999 and 1998, the
Company incurred $41,000 and $25,000 in non-amortizable acquisition related
costs and direct costs associated with the Company's status as a public company.
For the six months ended December 31, 1999 and 1998, such amounts were $99,000
and $92,000. Increases in interest expense relating to the issuance of Common
Stock warrants associated with the Company's $600,000 short term notes accounted
for the rise in overhead in fiscal 2000. These notes were repaid in January
2000. Management continues its efforts to reduce overhead costs, and expects
additional improvements in future periods, principally from reductions in
Aviation Group management overhead, insurance cost reductions, and reductions in
accounting, legal, and other indirect expenses.
<PAGE>
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
(Unaudited 000's) (Unaudited 000's)
----------------- -----------------
Corporate Overhead 1999 1998 1999 1998
- ------------------ ---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating and other expenses $ (474) $ (440) $ (730) $ (742)
Depreciation and amortization (7) (5) (14) (10)
Acquisition activity costs (41) (25) (99) (92)
Interest income -- -- -- 1
------ ------ ------- -------
Interest expense (115) (79) (241) (99)
------ ------ ------- -------
Operating income $ (637) $ (549) $(1,084) $ (942)
====== ====== ======= =======
</TABLE>
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. Scheduling of the Company's paint customer fleet deliveries can
significantly affect quarter to quarter results as well. During fiscal 1999,
the Company experienced significant revenue and income in the first and second
fiscal quarters, and its third and fourth quarters were relatively flat During
this current fiscal 2000 year, the Company experienced its slow season during
the first and second quarter, and its facilities are scheduled to return to
historical utilization levels during the third and fourth fiscal quarters.
Significant changes in such scheduled operations could have a material adverse
effect on Company operations.
At December 31, 1999, the paint division had a backlog of approximately
$20,000,000 from numerous customers. With the sale of its ground handling and
fixed base operations, a significant percentage of the Company's current revenue
is generated by its aircraft paint operations. Management, therefore, is
required to plan cash flow accordingly.
Year 2000 Compliance Issues
- ---------------------------
The Company's systems have experienced no significant Y2K shutdowns, issues
or costs. The Company considers its present systems to be Y2K compliant and
operational. The Company continues to monitor its hardware and software systems
for potential Year 2000 operating risks and costs, however, and will continue
such oversight for the remainder of the fiscal 2000 year.
Three Months Ended December 31, 1999 Compared to the Three Months Ended December
- --------------------------------------------------------------------------------
31, 1998
- --------
The Company's revenue for the three months ended December 31, 1999
decreased $2,294,000 to $2,400,000. The decrease was primarily due to seasonal
variations in paint revenues of $1,645,000 and reductions in aviation scale
revenue of $654,000 at the Company's GEC subsidiary. Scheduling of the
Company's paint customer fleet deliveries can significantly affect quarter to
quarter results. During fiscal 1999, the Company experienced significant paint
revenue and income in the first and second fiscal quarters, and its third and
fourth quarters were relatively flat. During the current fiscal 2000 year, the
Company experienced its slow season during the first and second quarter, and its
facilities are scheduled to return to historical utilization levels during the
third and fourth fiscal quarters.
The cost of revenue for the three months ended December 31, 1999 decreased
by $1,081,000, to $1,634,000. Cost of revenue as a percentage of revenue
increased by 10%, from 58% in 1998, to 68% in 1999. Marginal cost of revenues
is higher at reduced paint activity levels, and this accounted for most of the
cost percentage increase. Gross margins should improve as paint revenues
significantly increase during the remaining fiscal 2000 year.
The Company's G&A expenses for the three months ended December 31, 1999,
were flat. Reductions in corporate overhead continue to be made by management,
and further reductions are expected in subsequent quarters. The Company's
interest expense increased by $82,000, to $204,000 for the quarter ended
December 31, 1999. This increase is due to the non-cash interest expense
relating to the Company's $600,000 short term note issuance in June 1999. These
notes were repaid in December 1999.
During the quarter ended December 31, 1999, the Company recognized a loss
from discontinued operations of $161,000, versus income from these divisions of
$43,000 for the same period ended December 31, 1998. This reduction was
associated with the Company's lower operating levels of its fixed base
operations in anticipation of its eventual sale. The Company sold its ground
handling operations during the three months ended December 31, 1999, and on
February 8, 2000 sold its fixed base operations, recognizing a net gain on sale
of $681,000.
<PAGE>
Six Months Ended December 31, 1999 Compared to the Six Months Ended December 31,
- --------------------------------------------------------------------------------
1998
- ----
The Company's net revenue decreased by $2,826,000, or 34%, for the six
months ended December 31, 1999. The decrease was primarily due to seasonal
variations in paint revenues of $2,430,000. Scheduling of the Company's paint
customer fleet deliveries can significantly affect quarter to quarter results.
During fiscal 1999, the Company experienced significant paint revenue and income
in the first and second fiscal quarters, and its third and fourth quarters were
relatively flat. During the current fiscal 2000 year, the Company experienced
its slow season during the first and second quarter, and its facilities are
scheduled to return to historical utilization levels during the third and fourth
fiscal quarters.
The cost of revenue for the six months ended December 31, 1999 decreased by
$1,270,000, to $3,550,000. Cost of revenue as a percentage of revenue increased
by 6%, from 58% in 1998, to 64% in 1999. Marginal cost of revenues is higher at
reduced paint activity levels, and this accounted for most of the cost
percentage increase. Gross margins should improve as paint revenues
significantly increase during the remaining fiscal 2000 year.
Operating costs and overhead associated with the Company's new paint
facility in Greenville, Mississippi contributed to increase in Company's G&A
expenses for the six months ended December 31, 1999. Reductions in corporate
overhead continue to be made by management, and further reductions are expected
in subsequent quarters. The Company's interest expense increased by $212,000,
to $381,000 for the six months ended December 31, 1999. This increase is due to
the non-cash interest expense associated with common stock warrants issued to
lenders relating to the Company's $600,000 short term note issuance in June
1999. These notes were repaid in December 1999.
During the six months ended December 31, 1999, the Company recognized a
loss from discontinued operations of $139,000, versus income from these
divisions of $44,000 for the same period ended December 31, 1998. This
reduction was associated with the Company's lower operating levels of its fixed
base operations in anticipation of its eventual sale. The Company sold its
ground handling operations and certain fixed base departments during the six
months ended December 31, 1999, and on February 8, 2000 sold its fixed base
operations, recognizing a net gain on sale of $690,000.
Financial Condition and Liquidity
- ---------------------------------
The Company has incurred significant losses, due principally to corporate
overhead associated with the Company's acquisition strategy, and has a working
capital deficit of $1,663,000 at December 31, 1999. Management continues its
efforts to reduce overhead costs, and expects improvements in future periods,
principally from reductions in Aviation Group corporate overhead, insurance cost
reductions, and reductions in accounting, legal, and other indirect expenses.
Reductions in non-essential division operating expenses, along with elimination
of marginal products and services that do not provide future growth or near-term
profits have also been pursued.
During the quarter ended December 31, 1999, the Company successfully sold
its Tri-Star Airline Services ground handling subsidiary operations. On
February 8, 2000, the Company successfully sold its Casper Air Service general
aviation fixed base operations. Both businesses were sold to unrelated third
parties, and together generated a gain on sale to the Company of $681,000.
Goodwill was reduced $2,342,000 and tangible net worth was increased by
$1,028,000. Identified cost-saving activities, combined with the Company's sale
of its ground handling and fixed base assets should generate significant cash
resources during the next six months.
These proceeds and operating funds will supplement the Company's existing
revolving credit facilities to fund its business. During this current fiscal
2000 year, the Company experienced its slow aircraft painting season during the
first and second quarter, but its paint facilities are scheduled to return to
historical utilization levels during the third and fourth fiscal quarters. (See
Seasonality and Variability of Results.) While these funds combined with current
operating levels should allow the Company to meet its working capital
requirements during fiscal 2000, significant interruptions in currently
scheduled Company operations would adversely affect the Company's financial
condition and require additional capital from asset sales, borrowings, or equity
financings in order to allow the Company to meet its obligations. No assurance
can be made that such sales or financings will be available or available on
terms deemed advantageous to the Company if such events occur.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in certain pending legal proceedings and other
ordinary routine litigation considered to be incidental to its business. The
Company believes that such litigation should have no material financial or
operating impact on the Company's business.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of the stockholders of the Company was held on December
7, 1999 pursuant to a proxy statement dated November 5, 1999. The various
matters voted upon as well as the results of such voting are as follows:
(a) Election of two Directors to serve for a term of three years:
Lee Sanders Richard Morgan
----------- --------------
Votes in favor 3,495,594 3,495,439
Votes withheld 20,860 21,015
--------- ---------
Total 3,516,454 3,516,454
========= =========
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The following documents are included as exhibits to this Form 10-QSB and
are filed herewith unless otherwise indicated.
Exhibit Description
------- -----------
10.1 Asset Purchase Agreement dated as of February 8, 2000 between
Casper Air Service and Casper Jet Center Fueling, L.L.C.
10.2 Asset Purchase Agreement dated as of December 15, 1999 between
Tri-Star Acquisition Corp., d/b/a Servisair, Inc., and Tri-Star
Airline Services, Inc., joined for limited purposes by Aviation
Group, Inc. and Servisair USA, Inc.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: February 13, 1999.
AVIATION GROUP, INC.
By: /s/ Richard L. Morgan
----------------------------
Richard L. Morgan, Chief Financial
Officer and Executive Vice President
<PAGE>
EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
___________________________________
CASPER JET CENTER FUELING, L.L.C.
"Buyer"
and
CASPER AIR SERVICE
"Seller"
February 8, 2000
<PAGE>
INDEX OF
ASSET PURCHASE AGREEMENT
___________________________________
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. PURCHASE OF ASSETS........................................... 1
1.1 Transfer of Assets...................................... 1
(a) Leases, Contracts and Agreements................... 1
(b) Fuel Truck Leases.................................. 2
(c) Trademarks, Servicemarks, Telephone Numbers........ 2
(d) Fixed Assets and Tangible Personal Property........ 2
(e) Customer List...................................... 2
(f) Files, Data, Libraries and Records................. 2
1.2 Assets Not Purchased.................................... 2
1.3 Work In Progress........................................ 3
2. PURCHASE PRICE............................................... 3
2.1 Purchase Price.......................................... 3
2.2 Payment of Purchase Price............................... 3
2.3 Assumption of Liabilities............................... 4
2.4 Allocation of Purchase Price............................ 4
2.5 Transfer Taxes.......................................... 4
2.6 Disbursement of Purchase Price Withheld................. 5
3. CLOSING...................................................... 5
4. TITLE........................................................ 6
5. TAXES AND PRORATIONS......................................... 6
6. REPRESENTATIONS AND WARRANTIES OF SELLER..................... 7
6.1 With Respect to the Assets.............................. 7
(a) Ownership of Assets................................ 7
(b) Delivery of Assets................................. 7
(c) Property to Operate Business....................... 7
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
6.2 Accuracy of Schedules, Documents and Information........ 7
6.3 No Violation............................................ 8
6.4 Title and Condition of Assets........................... 8
6.5 Contracts............................................... 8
6.6 No Defaults............................................. 9
6.7 Compliance With Laws.................................... 9
6.8 Corporate Authorization and Organization................ 10
6.9 Customers and Suppliers................................. 10
6.10 Broker's or Finder's Fees............................... 10
6.11 Taxes and Fees.......................................... 10
6.12 Employment by Buyer..................................... 11
6.13 Repairs................................................. 11
6.14 Environmental Laws...................................... 11
7. REPRESENTATIONS AND WARRANTIES OF BUYER...................... 13
7.1 Organization and Authority.............................. 13
7.2 Compliance With Law and Other Instruments............... 13
7.3 Authority Relating to this Agreement.................... 13
7.4 Brokers and Finders..................................... 13
7.5 Availability of Funds................................... 14
8. CONDITIONS TO THE OBLIGATIONS OF BUYER....................... 14
8.1 Representations and Warranties True at Closing.......... 14
8.2 Covenants Performed by Seller........................... 14
8.3 Authority Relating to this Agreement.................... 14
8.4 Releases and Consents................................... 15
8.5 Compliance With Laws; Consents.......................... 15
8.6 Due Diligence........................................... 15
8.7 New Operating Agreement................................. 15
9. CONDITIONS TO THE OBLIGATION OF SELLER....................... 15
9.1 Representations and Warranties True at the Closing...... 16
9.2 Covenants Performed by Buyer............................ 16
9.3 Authority Relating to this Agreement.................... 16
10. INDEMNIFICATION.............................................. 16
10.1 Seller's Indemnification of Buyer....................... 16
(a) Obligations Not Assumed............................ 16
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
(b) Breach of Agreement............................... 17
(c) Warranties........................................ 17
(d) Associated Costs.................................. 17
10.2 Buyer's Indemnification of Seller...................... 17
(a) Obligations Assumed............................... 17
(b) Breach of Agreement............................... 18
(c) Post-Closing Operations........................... 18
(d) Associated Costs.................................. 18
10.3 Notice of Claims - Participation in Third Party Suits.. 18
10.4 Remedies Cumulative.................................... 19
11. DUE DILIGENCE................................................ 19
12. TERMINATION OF AGREEMENT..................................... 20
13. NONCOMPETITION............................................... 21
14. ACCESS OF SELLER TO RECORDS.................................. 23
15. MISCELLANEOUS................................................ 23
15.1 Assignment............................................. 23
15.2 Expenses............................................... 23
15.3 Further Assurances..................................... 23
15.4 Notices................................................ 24
15.5 Entire Agreement and Modification...................... 24
15.6 Survival of Terms...................................... 25
15.7 Governing Law.......................................... 25
15.8 Counterparts........................................... 25
15.9 Enforcement............................................ 25
15.10 Headings............................................... 25
15.11 Reporting of Transaction............................... 25
15.12 Confidentiality; Joint Announcements................... 25
15.13 Compliance With Laws and Regulations................... 26
15.14 Construction........................................... 26
15.15 Confidential Information............................... 26
</TABLE>
iv
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of this 8/th/ day of February, 2000, by and between CASPER JET CENTER
FUELING, L.L.C., a Wyoming limited liability company ("Buyer") and CASPER AIR
SERVICE, a Wyoming corporation ("Seller").
WHEREAS, Seller conducts a fixed based operation at Natrona County
International Airport in Casper, Wyoming; and.
WHEREAS, Buyer is willing to purchase from Seller, and Seller is willing to
sell to Buyer, certain of the assets of Seller located in Casper, Wyoming, on
the terms and subject to the conditions contained in this Agreement.
THE PARTIES AGREE AS FOLLOWS:
1. PURCHASE OF ASSETS.
------------------
1.1 Transfer of Assets. On the terms and subject to the conditions
------------------
set forth in this Agreement, Seller shall sell, convey, assign, transfer and
deliver to Buyer, and Buyer shall acquire on the Closing Date, effective as of
February 8, 2000, good and defensible title to or leasehold interest in those
assets of Seller hereinafter described and which are not excluded from transfer
pursuant to Section 1.2 (the "Assets"), free and clear of all liens,
encumbrances and adverse claims except those relating to the Assumed Liabilities
(as hereinafter defined) listed in Schedule 2.3. The Assets shall consist of the
following:
(a) Leases, Contracts and Agreements. Seller is a party to the
--------------------------------
leases, subleases, contracts and agreements used in connection with or
relating to the fixed base operation business of Seller as of the date
hereof, as more particularly described
1
<PAGE>
in Schedule 1.1(a). At Closing, such leases, subleases, contracts and
agreements will be assigned to and assumed by Buyer.
(b) Fuel Truck Leases. All of Seller's fuel truck leases
-----------------
described in Schedule 1.1(b) entitled "Fuel Truck Leases."
(c) Fixed Assets and Tangible Personal Property. All of Seller's
-------------------------------------------
furniture, line equipment, maintenance tools and equipment,
miscellaneous shop supplies and fuel used in connection with the fixed
base operation business of Seller as of the date hereof, as more
particularly described in Schedule 1.1(c) entitled "Personal
Property."
(d) Tradenames, Servicemarks, Telephone Numbers. All of Seller's
-------------------------------------------
tradenames, servicemarks, telephone numbers and facsimile numbers used
in connection with the fixed base operation business of Seller as of
the date hereof, as more particularly described on Schedule 1.1(d).
(e) Customer Lists. All rights of Seller to conduct the same or
--------------
similar business or to perform the same or similar services for or in
relation to all persons, whether or not such persons have previously
been Customers of the Seller and all records and lists of such
Customers as described on Schedule1.1(e). The term "Customers" as used
herein shall be deemed to mean all active clients or customers of
Seller.
(f) Files, Data, Libraries and Records. All of Seller's right,
----------------------------------
title and interest in and to files and data (other than Seller's
accounting and related records), howsoever compiled, relating to the
fixed base operation of Seller.
2
<PAGE>
1.2 Assets Not Purchased. Notwithstanding Section 1.1, Seller shall
--------------------
not sell, and Buyer shall not acquire, any interest in any of Seller's Assets
that are listed on Schedule 1.2 entitled "Assets Not Purchased." Such Assets Not
Purchased shall remain the property of Seller and Buyer shall have no ownership
interest in them, nor liability or other responsibility with respect thereto.
All Assets Not Purchased shall be physically removed from the premises of Seller
within one (1) year after the Closing. Seller is specifically retaining the
accounts receivable which accrue prior to the Closing. The Seller's retained
accounts receivable shall be referred to as the "Seller's Accounts Receivable."
1.3 Work in Progress. All repairs and other work in progress as of
----------------
the close of business on February 7, 2000 which have not been completed as of
such time shall be completed by Buyer. Buyer shall be responsible for billing
all repairs and work in progress which have not been completed as of the close
of business on February 7, 2000. The collections for all invoices containing
billings for incomplete repairs and work in progress as of the close of business
on February 7, 2000 will be allocated between Seller and Buyer based upon the
relative amount of work performed and parts provided by Seller and Buyer
attributable to the periods before and after the close of business on February
7, 2000. Seller unconditionally agrees to defend, indemnify and hold harmless
Buyer of and from any and all demands, claims, liabilities, causes of action,
costs and expenses attributable to repair and work in progress performed by
Seller.
2. PURCHASE PRICE.
--------------
2.1 Purchase Price. In full consideration of the transfer of good and
--------------
defensible title to or leasehold interest in the Assets to Buyer, the purchase
price for the Assets shall be the sum of two hundred thousand dollars
($200,000.00) (the "Cash Purchase Price") and Buyer shall assume all of the
liabilities set forth in Schedule 2.3 entitled "Assumed Liabilities" (the sum of
3
<PAGE>
the Cash Purchase Price and the amount of the Assumed Liabilities is hereinafter
referred to as the "Purchase Price").
2.2 Payment of Cash Purchase Price. At the time of the Closing (as
------------------------------
hereinafter defined) a total of one hundred ninety thousand dollars ($190,000)
of the Cash Purchase Price shall be sent to Seller by wire transfer to an
account designated by Seller. The balance of the Cash Purchase Price shall be
retained by Buyer and distributed by Buyer as provided in section 2.6.
2.3 Assumption of Liabilities. In connection with the purchase and
-------------------------
sale of Assets pursuant to this Agreement, Buyer shall assume in writing on the
Closing Date, effective as of February 8, 2000, those, and only those, certain
liabilities and obligations of Seller specifically described in Schedule 2.3
with accounts payable included therein not exceeding six hundred thousand
dollars ($600,000) in the aggregate, to the extent incurred in the ordinary
course of business prior to the Closing Date, subject to Seller's continuing
obligation to retain and be responsible for any and all liabilities and
obligations of Seller not specifically set forth in the said Schedule 2.3,
whether arising before or after the Closing Date. Notwithstanding any other
provision of this Agreement, no liabilities or obligations of any nature shall
be assumed by Buyer hereunder or in connection with the purchase and sale of the
Assets provided for in this Agreement, except the Assumed Liabilities and those
contained in Section 10.2(c) regarding operations by the Buyer from and after
the Closing Date.
2.4 Allocation of Purchase Price. The sum of twenty five thousand
----------------------------
dollars ($25,000) of the Purchase Price shall be allocated to the Personal
Property described in Section 1.1(c) and the balance of the Purchase Price shall
be allocated to the other Assets as provided in Schedule 2.4. Buyer and Seller
shall file all tax returns and reports in a manner consistent with the
allocation in this Section 2.4 and Schedule 2.4.
4
<PAGE>
2.5 Transfer Taxes. Any taxes, including sales, use, or similar
--------------
transfer taxes (other than income taxes, franchise taxes and similar taxes)
arising out of or incurred directly in connection with the sale of the Assets by
Seller to Buyer contemplated by this Agreement shall be paid by Buyer regardless
of to whom the tax liability is allocated as a matter of law.
2.6 Disbursement of Purchase Price Withheld. The sum of ten thousand
---------------------------------------
dollars ($10,000) of the Cash Purchase Price withheld by Buyer at the Closing
shall be used to pay any unpaid sales, use and other taxes of Seller
attributable to the period prior to the Closing Date other than those taxes
required to be paid by Buyer pursuant to Section 2.5. Any portion of the sum of
ten thousand dollars ($10,000) withheld by Buyer which is not used to pay such
taxes of Seller shall be paid to Seller after receipt by Buyer from all
applicable taxing authorities of evidence of the payment of all taxes imposed on
or incurred by Seller attributable to the period prior to the Closing Date (as
hereinafter defined). Seller shall promptly file with all governmental
authorities any and all tax reports due with respect to any period prior to the
Closing Date, shall pay and be responsible for any and all taxes reflected
thereon and for any other taxes attributable to the period prior to the Closing
Date, and shall furnish Buyer with a copy of each such report and evidence of
payment of all such taxes.
3. CLOSING. The closing of the transactions provided for in this
-------
Agreement (the "Closing") shall occur on February 8, 2000 (the "Closing Date")
at the offices of Haynes and Boone, LLP located at 201 Main Street, Suite 2200,
Fort Worth, Texas 76102, at 10:00 a.m. On or before the Closing, the parties
shall deliver the instruments of conveyance and assignment and such other
performance on the part of each party as is necessary to cause this transaction
to be closed on such date. If there are valid objections to title which require
correction, the Closing Date may be extended as provided in Section 4. At or
prior to the Closing, the Seller shall deliver to the Buyer or its designee each
of the following, each in form and substance reasonably satisfactory to Buyer
and its
5
<PAGE>
legal counsel: (a) assignments of each of the leases, subleases, contracts and
agreements listed in Schedule 1.1(a), (b) a Bill of Sale and Assignment for the
Personal Property, (c) a settlement statement reflecting the prorations
described in Section 5, and (d) such other documents as are reasonably necessary
to convey the Assets and rights therein to the Buyer or its designee upon
payment of the portion of the Cash Purchase Price required to be paid by Buyer
at the Closing. At the Closing, the Buyer shall deliver to Seller an assumption
agreement duly executed by Buyer pursuant to which Seller assumes the Assumed
Liabilities.
4. TITLE. Seller, at Seller's expense, within ten (10) days after the
-----
execution of this Agreement, shall furnish to Buyer a current Uniform Commercial
Code search certificate showing no encumbrances upon the Assets except as
related directly to the Assumed Liabilities. Buyer shall have twenty (20) days
after the execution of this Agreement to furnish Seller notice in writing of any
title defects or other objections thereto. In the case of valid objections to
title, Seller shall have ten (10) days or such additional time as may be agreed
to in writing by Seller and Buyer to satisfy such objections. If such valid
objections cannot be satisfied within the time specified in this Section 4,
Buyer shall have the right to terminate and cancel this Agreement, in which case
Buyer shall have no further obligations hereunder.
5. TAXES AND PRORATIONS. The Seller shall pay in full: (i) all special
--------------------
assessments against the Assets upon the date of Closing for the calendar years
prior to 2000, whether or not payable in installments; (ii) all taxes, including
general ad valorem taxes for the calendar years prior to 2000, which are or may
become a lien on any of the Assets upon the date of Closing; and (iii) the cost
of any item of workmanship or material furnished on or prior to the date of
Closing which is or may become a lien on any of the Assets. All taxes, including
general ad valorem taxes for the calendar year 2000, which are or may become a
lien on any of the Assets upon the date of Closing
6
<PAGE>
shall be prorated between the parties as of the Closing Date. All items of
income or expense respecting the Assets and business being transferred pursuant
to this Agreement which properly apply to periods commencing prior to and ending
after the Closing Date and not otherwise allocated pursuant to this Agreement
shall be prorated between Seller and Buyer as of the close of business on the
Closing Date.
6. REPRESENTATIONS AND WARRANTIES OF SELLER.
----------------------------------------
In addition to the other representations and warranties made herein, Seller
hereby represents and warrant to Buyer that:
6.1 With respect to the Assets:
--------------------------
(a) Ownership of Assets. Seller has all necessary power and
-------------------
authority to sell the Assets to Buyer.
(b) Delivery of Assets. Upon delivery to Buyer of assignments,
------------------
bills of sale or other instruments of conveyance with respect to the Assets on
the Closing Date, Buyer will acquire good title to or a leasehold interest in
the Assets, free and clear of all claims, liens, security interests, or other
encumbrances except as may be directly related to the Assumed Liabilities as
described in Section 2.3 above.
(c) Property to Operate Business. Except for the assets set
----------------------------
forth on Schedule 1.2, the Assets constitute all of the property material to the
conduct of Seller's business as it is presently being conducted.
6.2 Accuracy of Schedules, Documents and Information. The Schedules,
------------------------------------------------
the exhibits, and copies of all instruments, agreements, other documents, and
written information delivered to Buyer by Seller, or any representative of
Seller, are complete and correct in all material
7
<PAGE>
respects, and are not misleading in any material respects as of the date hereof
and as of the Closing Date.
6.3 No Violation. Except as set forth in Schedule 6.3, neither the
------------
execution or delivery of this Agreement by Seller nor the consummation by Seller
of the transactions contemplated hereby will constitute a violation of, or be in
conflict with, or constitute a default under, or create (or cause the
acceleration of the maturity of) any debt, liability or obligation affecting the
Assets (or any other rights of Buyer created under this Agreement) pursuant to,
or result in the creation or imposition of any security interest, mortgage, lien
or other encumbrance upon any of the Assets under: (i) any material contract,
lease, agreement, arrangement or other commitment to which Seller is a party or
by which Seller is bound; (ii) any judgment, decree, order, regulation or rule
of any court or governmental authority; or (iii) any statute or regulation. No
consent of, or notice to, any governmental authority, or any other person or
entity, is required of Seller in connection with the execution and delivery of
this Agreement by Seller or the consummation by Seller of the transactions
contemplated hereby except as set forth in Schedule 6.3, the failure of which to
obtain could reasonably be expected to result in a material adverse affect.
6.4 Title and Condition of Assets. Except as set forth in Schedule
-----------------------------
6.4, Seller has good and defensible title to or a leasehold interest in all of
the Assets, and all properties and assets of Seller have been acquired in the
ordinary course of business for fair value and the Assets being purchased will
be transferred to Seller, free and clear of all mortgages, liens, pledges,
charges, property taxes, or other encumbrances except as related to the Assumed
Liabilities and any lien for taxes not yet due and payable.
6.5 Contracts. Except as set forth in Schedule 6.5, Seller is not a
---------
party as of the date hereof to: (i) any contract for the purchase, sale or lease
of real property; (ii) any contract for
8
<PAGE>
the lease of personal property from or to third parties not listed on Schedule
1.1(a) or Schedule 1.1(c); (iii) any vendor contract for the purchase or sale of
supplies, material or personal property or for the furnishing or receipt of
services; (iv) any contract involving any capital expenditure by Seller in
connection with the business of Seller; (v) any loan agreement or guarantee of
the obligations of others; or (vi) any other contract, whether or not made in
the ordinary course of business, which is material to the maintenance and
operation of the business of Seller or the Assets.
6.6 No Defaults. Seller is not in default in any material respect
-----------
under the terms of any material contract or agreement, nor has any event
occurred which with the passage of time or giving of notice would constitute
such a default in any material respect by Seller, and, to the best of Seller's
knowledge, no other party to any such contract or agreement is in default in any
material respect thereunder nor has any such event occurred with respect to any
such party.
6.7 Compliance With Laws. To the best of Seller's knowledge, Seller
--------------------
is not in violation of any law or order of any court or federal, state,
municipal or other governmental department or agency (including, without
limitation, laws, regulations, orders and restrictions applicable to
environmental standards and controls, wages and hours, civil rights and
occupational health and safety,) nor has it received any notice of noncompliance
which would have a material adverse effect upon the assets, liabilities,
financial condition, results of operation, business or prospects of the business
or of Seller, or upon Seller's right to conduct the Business as presently
conducted. Except as set forth and described in Schedule 6.7 attached hereto and
made a part hereof, to the best of Seller's knowledge there are no lawsuits,
proceedings, claims or governmental investigations pending or threatened or
proposed against Seller or the business of Seller or its assets or business.
There is no basis known to Seller for any such action which would have a
material adverse effect upon the assets, liabilities, financial condition,
results of operation, business or
9
<PAGE>
prospects of Seller or the business of Seller, or upon Seller's right to conduct
the business of Seller as presently conducted or to consummate the transactions
contemplated by this Agreement.
6.8 Corporate Authorization and Organization. This Agreement has been
----------------------------------------
duly executed and delivered by Seller, and constitutes a legal and valid
obligation of Seller. Neither the execution of this Agreement nor the
performance hereof by Seller will result in any breach or violation of the terms
of any agreement by which Seller is bound or of any decree, judgment, order, law
or regulation now in effect of any court or other governmental body. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Wyoming and has the requisite power and authority to own its
properties and conduct the business of Seller as now conducted and to make the
sale herein contemplated.
6.9 Customers and Suppliers. Seller has no information and is not
-----------------------
aware of any facts indicating that any customer or supplier of the business of
Seller relating to the Assets intends to cease doing business with Buyer as the
successor to its assets and business hereunder or materially and adversely to
alter the amount of the business that they are presently doing with Seller.
6.10 Broker's or Finder's Fees. All negotiations relative to this
-------------------------
Agreement and the transactions contemplated hereby have been carried on by Buyer
directly with Seller without the intervention of any other person in such manner
as to give rise to any valid claim against any of the parties hereto for a
finder's fee, brokerage commission, advisory fee or other similar payment.
6.11 Taxes and Fees. Seller has paid, adequately provided for or filed
--------------
proper extensions of time for the filing of any payment of any and all taxes,
withholding, license fees and other charges, including taxes arising from the
transaction contemplated herein, levied, assessed or imposed upon any of the
property of Seller, the Business and salaries and wages paid by Seller; and
Seller represents that (a) Seller has filed all tax returns and reports required
by federal, state and local
10
<PAGE>
tax authorities; (b) the returns so filed are correct, true and complete; (c)
any and all such taxes have been paid or are otherwise provided for by Seller;
and (d) Seller is not involved in any dispute with any tax authority nor has
Seller received any deficiency, audit or other indication of deficiency from any
tax authority not otherwise disclosed to Buyer. Seller has furnished Buyer with
true and complete copies of all tax reports required to be filed by Seller with
any state, local or other governmental authority of the State of Wyoming and/or
Natrona County, Wyoming or any division or agency thereof with respect to each
period during the calendar year 1999.
6.12 Employment by Buyer. Seller acknowledges that Seller is not
-------------------
imposing on Buyer any obligation to retain or to employ any employees of Seller
subsequent to Closing. To the extent any of such employees are employed by Buyer
following the Closing, such employment shall be on terms and conditions
determined by Buyer and Buyer shall have no obligation to offer such employees
the same or similar wages, salaries or benefits as are paid or provided by
Seller prior to the Closing. Seller shall retain any and all obligations to or
in respect of such employees and shall pay any termination pay, severance pay,
sick pay or vacation pay, any unemployment benefits, any pension plan or welfare
plan benefits to which Seller's past and current employees may be entitled, or
to which they may claim to be entitled, by virtue of their employment or the
termination of their employment with Seller. At least ten (10) days prior to
Closing, Buyer shall provide Seller with a list of the employees of Seller that
Buyer will retain.
6.13 Repairs. No notices have been given by any insurance company
-------
which has issued a policy with respect to any portion of the Assets or by any
board of fire underwriters (or other body exercising similar functions)
requesting the performance of any repairs, alterations or other work which has
not been complied with.
11
<PAGE>
6.14 Environmental Laws. Neither the operations of the business by the
------------------
Seller nor the use of the Assets violates any applicable federal, state or local
law, statute, ordinance, rule, regulation, memorandum of understanding, order or
notice requirement pertaining to the collection, transportation, storage,
treatment, discharge, release or disposal of hazardous or non-hazardous waste or
substances which would have a material adverse effect on the Assets or the
business of Seller, including without limitation (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C.
(S)(S)9601 et seq.), as amended from time to time ("CERCLA") (including, without
limitation, as amended pursuant to the Superfund Amendments and Reauthorization
Act of 1986), and such regulations promulgated under CERCLA, (ii) the Resources
Conservation and Recovery Act of 1976 (42 U.S.C. (S)(S)6901 et seq.), as amended
from time to time ("RCRA"), and such regulations promulgated under RCRA, and
(iii) any applicable federal, state or local laws or regulations relating to the
environment (collectively, the "Applicable Environmental Laws"). To the Seller's
knowledge, none of the operations of the business by the Seller has ever been
conducted nor have any of the Assets been used in such a manner as to constitute
a material violation of any of the Applicable Environmental Laws. No written
notice has been served on Seller by any person or governmental entity regarding
any existing, pending or threatened investigation or inquiry related to
violations under any Applicable Environmental Law, or regarding any claims for
corrective action, remedial obligations or contribution for removal costs or
damages under any Applicable Environmental Law or regarding the designation of
Seller as a potentially responsible party for any facility under the Applicable
Environmental Laws, nor, to the knowledge of the Seller, does any fact or
circumstance exist which, if disclosed publicly, would be reasonably likely to
result in the service on Seller, of any such notice. The Seller does not have
actual knowledge of any reason Buyer would be required to obtain permits,
licenses or similar authorization pursuant to any Applicable
12
<PAGE>
Environmental Law in effect as of the date of this Agreement to operate and use
any of the Assets for their current purposes and uses. The Seller does not know
of any action taken, or omitted to be taken by Seller which has caused, or would
be reasonably likely to cause, a "release" of any "hazardous substance" at any
"facility", without limitation, within the meaning of such terms as defined in
the Applicable Environmental Laws.
7. REPRESENTATIONS AND WARRANTIES OF BUYER.
---------------------------------------
Buyer hereby represents and warrants to Seller that:
7.1 Organization and Authority. Buyer is a limited liability company
--------------------------
duly organized, validly existing and in good standing under the laws of the
State of Wyoming and is duly authorized to do business in the State of Wyoming.
Buyer has all requisite power and authority to enter into, perform and carry out
this Agreement.
7.2 Compliance with Law and Other Instruments. The execution and
-----------------------------------------
delivery of this Agreement and compliance with the provisions hereof by Buyer
will not violate any decree, judgment, order, law, or regulation and will not
conflict with or result in any breach of any of the terms, conditions and
provisions of, or constitute a default under any article, by-law, indenture,
mortgage, lease, agreement, or other instrument to which Buyer is a party or by
which it is bound.
7.3 Authority Relating to this Agreement. The execution, delivery and
------------------------------------
performance of this Agreement by Buyer has been duly authorized by all necessary
corporate action of Buyer and this Agreement constitutes a legal and valid
obligation of Buyer.
7.4 Brokers and Finders. Neither Buyer nor any member of Buyer has
-------------------
retained any broker or finder in connection with the transactions contemplated
by this Agreement and Buyer will indemnify and hold Seller harmless against all
claims for brokers' or finders' fees made or asserted
13
<PAGE>
by any party claiming to have been employed by Buyer or any members of Buyer and
all costs and expenses (including the reasonable fees of counsel) of
investigating and defending such claims.
7.5 Availability of Funds. Buyer shall have sufficient funds to
---------------------
consummate the transactions contemplated by this Agreement prior to Closing.
8. CONDITIONS TO THE OBLIGATIONS OF BUYER. Except as otherwise
--------------------------------------
specifically set forth herein or as contemplated by this Agreement, the
obligation of Buyer to consummate the purchase of the Assets is subject to the
fulfillment, prior to or at the Closing Date, of each of the following
conditions, any one or more of which may be waived by Buyer:
8.1 Representations and Warranties True at Closing. Each of the
----------------------------------------------
representations and warranties of Seller set forth herein shall be true and
correct as if made on the Closing Date; and Buyer shall have received a
certificate dated the Closing Date and executed on behalf of Seller certifying
that Seller has complied with all covenants required to be complied with under
this Agreement, and that each of the representations and warranties of Seller
contained in this Agreement are true and correct as of the Closing with the same
effect as though such representations and warranties had been made as of such
time.
8.2 Covenants Performed by Seller. Seller shall have performed and
-----------------------------
complied with all agreements and covenants required by this Agreement to be
performed by Seller on or before the Closing Date, and Seller shall have
furnished Buyer with a certificate dated the Closing Date executed by Seller
certifying the fulfillment of the foregoing obligations.
8.3 Authority Relating to this Agreement. All corporate and other
------------------------------------
proceedings required to be taken by, or on the part of, Seller to authorize
Seller to execute, deliver and carry out this Agreement and to sell the Assets
to Buyer in accordance with this Agreement shall have been
14
<PAGE>
duly and properly taken. Certified resolutions of the directors and shareholders
of Seller will be delivered at Closing.
8.4 Releases. Buyer shall have been furnished, at Seller's expense,
--------
with releases of all liens, security interests, and encumbrances required by
Buyer except as to those which relate to the Assumed Liabilities.
8.5 Compliance with Laws; Consents. All statutory requirements and
------------------------------
necessary governmental consents in order to transfer the Assets to Buyer shall
have been satisfied and obtained, and no legal prohibition or injunction against
the transactions contemplated hereby shall be in effect.
8.6 Due Diligence. Buyer shall have determined that the Assets are
-------------
suitable to Buyer in Buyer's absolute discretion.
8.7 New Operating Agreement. Buyer shall have the opportunity to
-----------------------
enter into a new Operating Agreement and Lease with the Board of Trustees of
Natrona County International Airport, on terms reasonably satisfactory to Buyer,
for the operation of a fixed base operation at Natrona County International
Airport, Casper, Wyoming, and for the lease of Hangars 3, 4, 3 1/2, 3 3/4, T-
Hanger #8B, two 12-unit T-Hangars, and one 8-unit T-Hangar as presently located
at such airport.
9. CONDITIONS TO THE OBLIGATIONS OF SELLER.
---------------------------------------
Except as otherwise specifically set forth herein, the obligation of Seller
to consummate the sale of the Assets is subject to the fulfillment and
satisfaction, prior to or at the Closing, of each of the following conditions,
any one or more of which may be waived by Seller:
9.1 Representations and Warranties True at the Closing. The
--------------------------------------------------
representations and warranties of Buyer contained in this Agreement shall be
true and correct at and as of the Closing
15
<PAGE>
Date (except to the extent limited to a specific date) and on the Closing Date,
Buyer shall deliver to Seller a certificate dated the Closing Date to such
effect.
9.2 Covenants Performed by Buyer. Buyer shall have performed and
----------------------------
complied with all agreements and covenants required by this Agreement to be
performed by Buyer on or before the Closing Date, and Buyer shall have furnished
Seller with a certificate dated the Closing Date executed by Buyer certifying
the fulfillment of the foregoing obligations.
9.3 Authority Relating to this Agreement. All corporate and other
------------------------------------
proceedings required to be taken by, or on the part of the Buyer, to authorize
Buyer to execute, deliver and carry out this Agreement, shall have been duly and
properly taken. Certified resolutions of the managers and members shall be
delivered at Closing.
10. INDEMNIFICATION.
---------------
10.1 Seller's Indemnification of Buyer. Seller shall indemnify and
---------------------------------
hold harmless Buyer at all times from and after the Closing against and in
respect of any and all of the following:
(a) Obligations Not Assumed. Any and all claims, losses, costs,
-----------------------
expenses, commitments, agreements, damages, liabilities, and obligations whether
accrued, absolute, contingent, or otherwise (collectively, "Damages") suffered
by the Buyer as a result of any claim or claims made or threatened against
Seller or Buyer based upon, arising out of, or in connection with any conduct of
or transaction involving Seller or any event prior to the Closing Date
respecting the business operations or affairs of Seller or the Assets to the
extent not expressly assumed by Buyer pursuant to this Agreement in Section 2.3
(whether or not such Damages are imposed by statute).
(b) Breach of Agreement. Any and all Damages resulting to Buyer from
-------------------
any misrepresentation, breach of warranty, or nonfulfillment, in whole or in
part, of any obligation,
16
<PAGE>
covenant or agreement on the part of Seller under this Agreement or any Schedule
or exhibit hereto; and
(c) Warranties. Any and all Damages resulting to Buyer from claims
----------
made under any warranty given by Seller in connection with transactions entered
into prior to the Closing Date provided Seller receives notice of such claim
within two (2) years of the Closing Date.
(d) Associated Costs. All costs, assessments, judgments (including
----------------
reasonable costs and attorneys fees and other expenses) arising out of any
claim, or the defense or investigation thereof, made with respect to any of the
matters described in this Section 10.1.
Seller shall not be liable for any claim for Damages or indemnification (other
than claims based upon willful misconduct or fraud) under this Agreement until
the aggregate amount of such claims for Damages and indemnification exceeds
$25,000 (the "Basket"). If the aggregate amount of such claims by Buyer for
Damages exceeds the Basket, Seller shall then only be responsible for the amount
of such excess. The Seller shall not be liable for any claim for Damages or
indemnification under this Agreement (except for willful misconduct or fraud) in
excess of eight hundred thousand dollars ($800,000.00) in the aggregate.
10.2 Buyer's Indemnification of Seller. Buyer shall indemnify Seller
---------------------------------
and hold Seller harmless at all times after the Closing against and in respect
of any and all of the following:
(a) Obligations Assumed. Any and all Damages suffered by Seller
-------------------
attributable to the failure of Buyer to pay or perform the Assumed Liabilities;
(b) Breach of Agreement. Any and all Damages resulting to Seller from
-------------------
any misrepresentation, breach of warranty, or nonfulfillment, in whole or in
part, of any obligation, covenant or agreement by or on the part of Buyer under
this Agreement or any Schedule or exhibit hereto;
17
<PAGE>
(c) Post-Closing Operations. Any and all Damages suffered by the
-----------------------
Seller as a result of any claim or claims made or threatened against Seller or
Buyer, based upon, arising out of or in connection with any conduct of or
transaction involving Buyer subsequent to the Closing Date unless attributable
to the conduct or actions of Seller.
(d) Associated Costs. All costs, assessments, judgments (including
----------------
reasonable costs and attorneys' fees and other expenses) arising out of any
claim, or the defense or investigation thereof, made with respect to any of the
matters described in this Section 10.2.
10.3 Notice of Claims - Participation in Third Party Suits. Any party
-----------------------------------------------------
with a right to indemnification pursuant to this Article 10 ("Indemnified
Party") shall be reimbursed by the other party ("Indemnifying Party") for any
damage subject to such indemnification. Any Indemnified Party making any claim
against an Indemnifying Party for indemnification shall make such claim in
writing, setting forth in general terms the facts upon which the Indemnified
Party bases such claim. In the event of any claim or demand asserted against any
Indemnified Party by a third party upon which the Indemnified Party may claim
indemnification under this Article 10, the Indemnified Party shall give the
Indemnifying Party written notice within thirty (30) days after receipt thereof
indicating whether the Indemnified Party intends to assume the defense of such
claim or demand. The Indemnifying Party shall have the right, at its own
expense, to participate in such defense, by written notice given to the
Indemnified Party within fifteen (15) days from the date of the Indemnified
Party's notice of such claim. If the Indemnified Party assumes the defense and
the Indemnifying Party does not participate, the Indemnified Party shall have
the right fully to control the proceeding and to settle the proceeding with
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. If the Indemnifying Party elects to participate in such
defense, and does not dispute liability for indemnification of all damages
arising out of such action, the Indemnifying Party
18
<PAGE>
may elect to control the proceeding, but shall not settle the same without the
consent of the Indemnified Party, which consent shall not be unreasonably
withheld or delayed. If the Indemnifying Party does dispute liability and does
not elect to control the proceeding, the Indemnified Party shall control the
proceeding but shall not settle the same without the consent of the Indemnifying
Party, which consent shall not be unreasonably withheld or delayed. If the
Indemnified Party elects not to assume the defense, the Indemnifying Party shall
have the right to do so and to control the proceeding, but the Indemnified Party
shall nonetheless have the right to participate therein, and the Indemnifying
Party shall not settle the same without the consent of the Indemnified Party,
which consent shall not be unreasonably withheld or delayed.
10.4 Remedies Cumulative. The remedies provided herein shall be
-------------------
cumulative and shall not preclude the assertion by any party hereto of any other
rights or the seeking of any other remedies against the other parties hereto.
11. DUE DILIGENCE. Any term or condition of this Agreement to the contrary
-------------
notwithstanding, the obligations of Buyer as specified in this Agreement are
wholly conditioned on Buyer's having determined, in Buyer's sole and absolute
discretion, during the period commencing with the date hereof and ending on the
day prior to the Closing (the "Due Diligence Period"), based on such
inspections, examinations, studies and investigations Buyer deems necessary or
desirable, at Buyer's sole cost, that Buyer finds the Assets suitable for
Buyer's purposes. Prior to the expiration of the Due Diligence Period, Buyer
may, for any reason, terminate this Agreement by giving written notice of such
termination to Seller, in which case this Agreement shall become null and void
and neither Buyer nor Seller shall have any further duties or obligations
hereunder. Seller agrees to give Buyer reasonable access to the Assets, and the
books and records and other financial data or information pertaining to the
business of Seller, the Assets, and the Assumed Liabilities. No due
19
<PAGE>
diligence action taken by Buyer pursuant to this Article 11 shall in any way
affect the Seller's representations and warranties in this Agreement or the
Buyer's right to rely on such representations and warranties to their full
extent.
12. TERMINATION OF AGREEMENT.
------------------------
(a) This Agreement may, by written notice given at or prior to
Closing in the manner hereinabove provided, be terminated or abandoned
(i) in the event that the Closing shall not have occurred on
or before February 15, 2000, by Seller or by Buyer;
(ii) by Buyer if a material default or breach shall be made by
Seller with respect to the due and timely performance of any of its
covenants and agreements contained herein, or with respect to the
correctness of, or due compliance with, any of its representations and
warranties contained in Article 6 hereof and such default or breach
continues for a period of at least ten (10) days after receipt by
Seller of written notice from Buyer of such default or breach and such
default or breach has not been waived;
(iii) by Seller if a material default or breach shall be made by
Buyer with respect to the due and timely performance of any of its
covenants and agreements contained herein, or with respect to the
correctness of or due compliance with any of its representations and
warranties contained in Article 7 hereof and such default or breach
continues for a period of at least ten (10) days after receipt by
Buyer of written notice from Seller of such default or breach and such
default or breach has not been waived.
20
<PAGE>
(b) In the event this Agreement is terminated pursuant to Section
12(a) all further obligations of the parties hereunder shall terminate,
except that the obligations set forth in Sections 15.2 and 15.12 shall
survive; provided, however, that if this Agreement is so terminated by one
-------- -------
party because one or more of the conditions to such party's obligations
hereunder is not satisfied as a result of the other party's failure to
comply with any of its obligations under any provision of this Agreement,
it is expressly agreed and understood that the terminating party's right to
pursue all legal remedies for breach of contract and damages shall also
survive such termination unimpaired.
13. NONCOMPETITION. As an inducement for Buyer to enter into this
--------------
Agreement and the consideration to be paid under this Agreement, Seller agrees
that:
(a) For a period of five (5) years after the Closing:
(i) Seller will not, directly or indirectly, engage or invest
in, own, manage, operate, finance, control, or participate in the
ownership, management, operation, financing, or control of, be
employed by, associated with, or in any manner connected with, lend
Seller's name or any similar name to, lend Seller's credit to, or
render services or advice to, any business whose products or
activities compete in whole or in part with the activities of the
Buyer at Natrona County International Airport; provided, however, that
Seller may purchase or otherwise acquire up to (but not more than) one
percent of any class of securities of any enterprise (but without
otherwise participating in the activities of such enterprise) if such
securities are listed on any national or regional securities exchange
or have been registered under Section 12(g) of the Securities Exchange
Act of 1934. Seller agrees that this covenant is reasonable with
respect to its duration, geographical area, and scope. The foregoing
shall not
21
<PAGE>
prohibit the sale by Seller of any of the Assets Not Purchased to any
customer of Seller.
(ii) Seller will not, directly or indirectly, either for itself
or any other person or entity, (A) induce or attempt to induce any
employee of Buyer to leave the employ of Buyer, (B) in any way
interfere with the relationship between Buyer and any employee of
Buyer, (C) employ, or otherwise engage as an employee, independent
contractor, or otherwise, any employee of Buyer, or (D) induce or
attempt to induce any customer, supplier, licensee, or business
relation of Buyer to cease doing business with Buyer, or in any way
interfere with the relationship between any customer, supplier,
licensee, or business relation of Buyer.
(iii) Seller will not, directly or indirectly, either for itself
or any other person or entity, solicit the business of any person or
entity known to Seller to be a customer of Buyer, whether or not
Seller had personal contact with such person or entity, with respect
to products or activities which compete in whole or in part with the
products or activities of the Buyer.
(b) In the event of a breach by Seller of any covenant set forth in
Section 13(a) of this Agreement, the term of such covenant will be extended
by the period of the duration of such breach.
(c) If Seller breaches the covenants set forth in Section 13(a) of
this Agreement, Buyer will be entitled to exercise any one or more of the
following remedies:
(i) Damages from Seller;
(ii) In addition to its right to damages and any other rights
it may have, to obtain injunctive or other equitable relief to
restrain any breach or threatened
22
<PAGE>
breach or otherwise to specifically enforce the provisions of Section
13(a) of this Agreement, it being agreed that money damages alone
would be inadequate to compensate the Buyer and would be an inadequate
remedy for such breach; and
(iii) The rights and remedies of the parties to this Agreement
are cumulative and not alternative.
14. ACCESS OF SELLER TO RECORDS. Buyer agrees to maintain, for a period of
---------------------------
three (3) years following the Closing, and to provide Seller reasonable access
during such period to, the books and records of the business of Seller as they
exist at the Closing Date.
15. MISCELLANEOUS.
-------------
15.1 Assignment. This Agreement shall be binding upon and inure to the
----------
benefit of the successors and assigns of the parties; provided, however, that
the rights and obligations of either party under this Agreement may not be
assigned without obtaining the prior written consent of the other party.
15.2 Expenses. Except as otherwise expressly provided herein, the
--------
parties will each pay their own costs and expenses, including legal and
accounting expenses, related to the transactions provided for herein,
irrespective of when incurred.
15.3 Further Assurances. From time to time after the Closing Date,
------------------
each party at the request of the other and without further consideration, agrees
to execute and deliver or cause to be executed and delivered at its expense such
other instruments of transfer as reasonably may be requested by the other more
effectively to transfer the Assets to Buyer or for Buyer to assume the Assumed
Liabilities and to take or cause to be taken such further action as may
reasonably be necessary or appropriate in order to effectuate the transactions
contemplated by this Agreement.
23
<PAGE>
15.4 Notices. Any Notice or other communication required or permitted
-------
hereunder shall be in writing and shall be deemed to have been duly given on the
date of service if served personally, or three (3) days after the date of
mailing if mailed, by first class mail, registered or certified, postage prepaid
and addressed as follows:
To Seller at: CASPER AIR SERVICE
c/o Aviation Group, Inc.
700 North Pearl, Suite 2170
Dallas, Texas 75201
With copy to: Daryl Robertson, Esq.
Jenkens & Gilchrist
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202
Telephone: (214) 855-4165
Facsimile: (214) 855-4300
To Buyer at: Casper Jet Center Fueling, L.L.C.
c/o Fort Worth Jet Center
201 Aviation Way
Meacham Field - Location 11N
Fort Worth, Texas 76102
With copy to: Rob Watson, Esq.
Haynes and Boone, LLP
201 Main Street, Suite 2200
Fort Worth, Texas 76102
Telephone: (817) 347-6600
Facsimile: (817) 347-6650
15.5 Entire Agreement and Modification. This Agreement constitutes the
---------------------------------
entire agreement of the parties and supersedes any and all prior negotiations,
correspondence, understandings, and agreements between the parties respecting
the subject matter hereof. This Agreement may only be amended by a written
instrument signed by the parties.
24
<PAGE>
15.6 Survival of Terms. All warranties and representations contained
-----------------
in this Agreement and any certificate or other instrument delivered by or on
behalf of the parties pursuant to this Agreement shall be continuous and shall
survive the Closing, but shall expire on January 1, 2002.
15.7 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Texas.
15.8 Counterparts. This Agreement may be executed in counterparts
------------
which together shall constitute one instrument.
15.9 Enforcement. If any portion of this Agreement shall be
-----------
determined to be invalid or unenforceable, the remainder shall be valid and
enforceable to the maximum extent possible.
15.10 Headings. The headings appearing at the beginning of several
--------
sections contained herein have been inserted for identification and reference
purposes and shall not by themselves determine the construction or
interpretation of this Agreement.
15.11 Reporting of Transaction. Each party covenants with each other
------------------------
party that such party will report the transactions contemplated by this
Agreement precisely in accordance with their terms, and will indemnify and hold
harmless all other parties against all costs and expenses arising from any
failure to do so.
15.12 Confidentiality; Joint Announcements. The parties agree that the
------------------------------------
provisions of this Agreement shall be kept confidential and not disclosed,
except with the prior consent of the other parties or as required by law or
regulations. The parties further agree that any announcements, private or
public, made concerning this Agreement shall be mutually agreed upon by the
parties as to wording, timing, distribution and persons present at any
presentation.
25
<PAGE>
15.13 Compliance With Laws and Regulations. In the event any party to
------------------------------------
this Agreement, in consultation with counsel, develops a good faith concern that
any provision of the Agreement or any activity of any other party is in
violation of any applicable federal, state or local laws or any regulation,
order or policy issued under any such laws, such party shall immediately notify
the other parties, in writing, of such concern and the specific activities
giving rise to such concern and the reasons therefor. If an agreement on a
method for resolving such concern is not reached within ten (10) days of such
written notice, the activities described in the notice will cease or be
appropriately altered until the concern is resolved.
15.14 Construction. Each party and its counsel has reviewed this
------------
Agreement and the documents to be delivered in connection with this Agreement
and has had the opportunity to negotiate the terms hereof and thereof and to
suggest changes to the language herein and therein. Accordingly, the rules of
construction to the effect that any ambiguities shall be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any of the documents delivered in connection with this Agreement.
15.15 Confidential Information. Seller has provided or will provide to
------------------------
Buyer information regarding the Seller's suppliers, customers, employees,
agreements, business, assets, liabilities and other information that Seller
considers confidential (collectively, the "Confidential Information"). Buyer
agrees to maintain in confidence, not to disclose to others and not to copy any
or all of the Confidential Information, except disclosure to Buyer's
accountants, attorneys and financial sources, but only to the extent necessary
and reasonable to purchase Assets and to assume the Assumed Liabilities. Prior
to the Closing, Buyer agrees not to use the Confidential Information for any
purpose other than to consummate the purchase of the Assets and assumption of
the Assumed Liabilities. If this Agreement is terminated for any reason without
consummation of the sale of the Assets, Buyer agrees, upon request from Seller,
to return all of the Confidential Information that is in its possession and to
direct any third parties to whom it has disclosed the Confidential Information
to return it to Seller.
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above set forth.
BUYER:
CASPER JET CENTER FUELING, L.L.C., a
Wyoming limited liability company
By: /s/ Mark Barrow
------------------------------------
Mark Barrow, Manager
SELLER:
CASPER AIR SERVICE, a Wyoming
corporation
By: /s/ Richard L. Morgan
----------------------------------------
Richard L. Morgan, Executive Vice
President and Chief Financial Officer
27
<PAGE>
EXHIBIT 10.2
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is entered into as of
this 15th day of December, 1999 by and between Tri-Star Acquisition Corp., d/b/a
Servisair Texas, Inc., a corporation organized under the laws of the State of
Texas (hereafter, "Servisair" or "Buyer"), and Tri-Star Airline Services, Inc. a
corporation organized under the laws of the State of Texas (hereafter,"Seller")
concerning the airline service business of Tri-Star which is located at the
Dallas-Fort Worth International Airport. Tri-Star is a wholly owned subsidiary
of Aviation Group, Inc.(hereafter, "AVGP"), a Texas corporation, which is a
guarantor of certain of the terms and provisions hereof. Buyer is a wholly-owned
subsidiary of Servisair USA, Inc. a Delaware corporation, and the guarantor of
certain of the provisions hereof.
RECITALS
A. Seller owns and operates an airline ground handling service business
comprising, by way of example and not of limitation (i) ground handling of
aircraft, (ii) internal and external cleaning of aircraft; (iii) baggage
handling; (iv) gate service and (v) miscellaneous cleaning (collectively
referred to herein as the "Business"), all at the Dallas-Fort Worth
International Airport, Dallas Texas (hereafter, "DFW").
B. Seller desires to sell certain of its assets to Buyer, on the terms
and conditions hereinafter set forth.
C. Buyer desires to purchase certain assets of Seller, on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the recitals and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
SALE OF ASSETS
Section 1.1 Assets to be Sold. Subject to the terms and conditions of
-----------------
this Agreement, Seller shall sell, convey, transfer and assign to Buyer and
Buyer shall purchase from Seller all the operating assets and operations of Tri-
Star, but excluding the assets described in (S)1.3 (collectively, the "Assets")
including the following:
1
<PAGE>
(a) All of Seller's rights and interests in the personal property,
leasehold improvements, fixed assets, machinery and equipment, furniture and
fixtures, supplies, vehicles, and other similar property of Seller relating to
the Business as of the Closing Date, including but not limited to those items
set forth on Schedule 1.1 (a) (the "Personal Property");
----------------
(b) The Leases set forth on Schedule 1.1 (b), including, inter alia,
----------------
the operating lease for Tri-Star at DFW (the "Leases");
(c) Subject to Section 11.2, Seller's full right and benefit under any
contracts, agreements, franchises, licenses, permits, registrations or
authorizations relating to the Business including, without limitation, all
customer contracts, any additional rental contracts or leases other than the
Leases, and those specifically set forth on Schedule 1.1 (c) (collectively,
----------------
including the Leases, the "Assumed Contracts");
(d) Subject to Section 11.2, the operating certificates, licenses and
permits of Seller relating to the Business, including but not limited to those
set forth on Schedule 1.1(d) (the "Operating Rights") to the extent that said
--------------
operating certificates, licenses and permits shall be assignable;
(e) All goodwill of Seller associated with the Business;
(f) All intangible assets and intellectual property of Seller, including
without limitation the rights to the name "Tri-Star" and any variation thereof,
and all logos, copyrights, tradename, trademark, trade dress, service marks, and
-
all associated goodwill, together with all rights of Seller to use the
foregoing, including but not limited to those set forth on Schedule 1.1 (f)
---------------
(the "Proprietary Rights");
(g) All lists and records pertaining to any customers, suppliers,
distributors, vendors, personnel, agents and all other books and records of
Seller relating to the Business; provided, however, that Seller shall be allowed
to keep copies of all such documents and records, as well as the originals of
any state or federal tax returns;
(h) All of Seller's interest in telephone listings, fax listings, e-mail
listings, domain names and any other such directories relating to the Business;
and
(i) All other property of Seller not referred to above which is used in
the conduct of the Business.
The Assets shall be conveyed by Seller to Buyer free and clear of all
liabilities, obligations, liens and encumbrances, excepting only those
liabilities and obligations constituting the Assumed Liabilities (as hereinafter
defined).
Section 1.2 Time of Conveyance. The Assets will be conveyed to Buyer at
------------------
the Closing, which shall be deemed by the parties hereto to occur at 12:01 a.m.
(E.S.T.) on January 1, 2000.
2
<PAGE>
Section 1.3 Assets to be Retained by Seller. The following shall not be
-------------------------------
transferred or sold by Seller to Buyer pursuant to this Agreement (collectively
referred to as "Excluded Assets"): (1) accounts receivable, including unbilled
receivables (work-in-progress) generated by the Business prior to Closing; (2)
all inventories used in the Business; (3) all prepaid assets and deposits, if
any; (4) all cash or cash equivalents, including deposit accounts; (5) all tax
returns, tax worksheets and tax refunds; and (6) all insurance policies,
including rights to proceeds and coverage.
Section 1.4 Purchase Price. The purchase price for the Assets (the
--------------
"Purchase Price") shall be One Million Five Hundred Thousand Dollars
(US$1,500,000.00).
Section 1.5 Payment of the Purchase Price. At the Closing, Buyer shall
-----------------------------
pay to Seller the Purchase Price via wire transfer, subject to the additional
arrangements and procedures agreed to by the parties and set forth in (S)(S)
1.5.1 and 2.1 hereof.
Section 1.5.1 Deposit and Escrow. On December 13, 1999, Buyer paid a
------------------
deposit to Seller in the amount of US $200,000.000, payable by corporate check
(hereafter, the "Downpayment"). Seller shall be authorized to retain and not
refund the Downpayment in the event of a termination of this Agreement prior to
Closing unless the cause for such failure to consummate the transaction
contemplated hereby is a material breach of a covenant or representation by
Seller. In addition, Buyer shall deposit, upon Buyer's execution of this
Agreement, via wire transfer, US $1,300,000.00 with counsel for Seller in trust
(hereafter, the "Escrow Agent") as an escrow to be held by the Escrow Agent
pending the Closing. On the Closing Date, or, if the Closing Date shall occur
on a Sunday or legal holiday, on the first business day following the Closing
Date, Buyer and Seller shall execute written instructions to the Escrow Agent to
release all funds then held by said Escrow Agent to Seller. All escrowed funds
shall be held by the Escrow Agent pursuant to the terms and conditions of that
certain Escrow Agreement of even date herewith by and among Escrow Agent, Buyer
and Seller.
Section 1.6 Assumption of Liabilities of Seller. In addition to the
-----------------------------------
payment of the Purchase Price, Buyer, at the Closing, subject to the terms and
conditions of this Agreement, shall assume and agree to pay, perform or
discharge (i) the rents, taxes and utilities to the extent related to the period
from and after the Closing as set forth on Schedule 1.6 (the "Specified Rents,
------------
Taxes and Utilities"), and (ii) the obligations of Seller under the Assumed
Contracts (including herein any equipment leases entered into by Seller in
connection with the Business) arising or accruing on and after the Closing Date
in accordance with the terms thereof, (collectively, including the Specified
Rents, Taxes and Utilities, the "Assumed Liabilities"). In the event of a
conflict between the terms and provisions of this (S)1.6 and those of Schedule
--------
1.6, those of Schedule 1.6 shall control.
- --- ------------
Section 1.7 Retained Liabilities. Except for the Assumed Liabilities,
--------------------
Buyer does not and shall not assume any obligations, commitments or liabilities
of Seller (including accounts payable, accrued liabilities and revolving bank
debt of Seller). (All of such liabilities being hereinafter referred to as the
"Excluded Liabilities").
3
<PAGE>
Section 1.8 Allocation. The Purchase Price shall be allocated by the
----------
parties as mutually agreed at Closing.
ARTICLE 2
CLOSING
Section 2.1. Actual Time and Place of Closing. Subject to the terms and
--------------------------------
conditions of this Agreement, the execution of all documents necessary to the
completion of the transaction contemplated hereby shall take place at the law
offices of Jenkens & Gilchrist, Dallas, Texas, at 10:00 a.m. local time on
December 15, 1999, or sooner, if the parties so agree, but the closing of the
sale and purchase of the Assets and the assumption of the Assumed Liabilities
(the "Closing") shall be deemed by the parties hereto to have taken place as of
12:01 a.m. on January 1, 2000, subject to the payment arrangements set forth in
Section 1.5.1 hereof, or, if the conditions to Closing set forth in Article 4 of
this Agreement shall not have been satisfied by such date, as soon as
practicable after such conditions shall have been satisfied; provided, however,
that the Closing shall not occur later than any termination of this Agreement as
provided herein. The date on which the Closing shall occur shall hereinafter be
referred to as the "Closing Date."
Section 2.2. Effective Time of Closing. All transactions contemplated by
-------------------------
this Agreement shall be deemed to have occurred simultaneously at 12:01 a.m.
Eastern Standard Time on the Closing Date.
ARTICLE 3
DELIVERIES TO BE MADE AT CLOSING
Section 3.1 Deliveries to be Made by Seller to Buyer. At the Closing, the
----------------------------------------
following shall be delivered by Seller to Buyer:
(a) A bill of sale and assignment and any other instrument
necessary to effectively convey, assign, sell and transfer the Assets from
Seller to Buyer (the "Bill of Sale");
(b) Possession of all Assets;
(c) Such documents of assignment and transfer, together with
such consents and approvals as may be reasonably required to vest in Buyer all
right, title and interest of Seller in and to the Assumed Contracts, and other
intangible assets of Seller to be transferred thereunder;
(d) Evidence that Seller is in good standing in the State
of Texas; and
(e) All records and files of Seller relating to the Assets
or the Business being transferred hereunder; provided, however, that transfer of
these records and files shall be made
4
<PAGE>
in situ, and providing further, that Seller shall be permitted to keep the
originals of all organizational documents of Seller (e.g., articles of
incorporation);
(f) a certificate of an executive officer of Seller, dated
the Closing Date, certifying that: (i) all representations and warranties made
by Seller in Article 5 hereof were true and correct when made, and are true and
-
correct on the Closing Date, except for changes permitted or contemplated by
this Agreement and except that representations which are specifically made as of
a specified date shall be true and correct as of such earlier date; and (ii) all
covenants and agreements contained in this Agreement or to be performed or
complied with by Seller on or prior to the Closing Date have been performed or
complied with;
(g) an opinion of Jenkens & Gilchrist, counsel for Seller,
dated the Closing Date;
(h) Certified copies of the resolutions of the board of
directors of Seller authorizing the execution hereof and of all documents
contemplated herein;
(i) Certified copies of an amendment to Seller's Articles of
Incorporation which will be promptly filed after the Closing to effect a change
in Seller's corporate name to a name completely dissimilar to its present name;
and
(j) A payoff letter regarding Seller's obligations under a
revolving line of credit with an entity known as C.I.T., along with U.C.C.-3
termination statement with respect to the Assets which CIT will authorize to be
filed upon payment of Seller's obligations to CIT under the revolving line of
credit.
Section 3.2. Deliveries to be Made by Buyer to Seller. At the Closing, the
----------------------------------------
following shall be delivered by Buyer to Seller:
(a) Delivery of the Purchase Price required by Sections 1.5
and 1.5.1;
(b) Evidence that Buyer is in good standing in the State of
Texas;
(c) A certificate of an executive officer of Buyer dated the
Closing Date, certifying that: (i) all representations and warranties made by
Buyer in Article 6 hereof were true and correct when made, and are true and
correct on the Closing Date, except for changes permitted or contemplated by
this Agreement and except that representations which are specifically made as of
a specified date shall be true and correct as of such earlier date; and (ii) all
covenants and agreements contained in this Agreement to be performed or complied
with by Buyer on or prior to the Closing Date have been performed or complied
with;
(d) An opinion of McBreen, McBreen & Kopko, counsel for
Buyer, dated the Closing Date;
5
<PAGE>
(e) A Bill of Sale executed by Buyer in favor of Seller,
under which Buyer assumes the Assumed Liabilities; and
(f) Certified copies of the resolutions of Buyer's Board of
Directors authorizing the execution hereof and of all documents contemplated
herein.
ARTICLE 4
CONDITIONS PRECEDENT
Section 4.1 Conditions to Obligations of Buyer. All of the obligations of
----------------------------------
Buyer under this Agreement are subject to the fulfillment prior to or at the
Closing Date of each of the following conditions, any one or more of which may
be waived by Buyer:
(a) The representations and warranties of Seller contained
herein or in the Schedules attached hereto shall be true in all material
respects as of the Closing Date:
(b) Seller shall have performed and complied in all material
respects with all agreements and covenants required by this Agreement to be
performed and complied with by it prior to or at the Closing Date; and
(c) All required, material consents and approvals of all
third parties (including consents or approvals of airport authorities and
holders of contracts) which are necessary to the consummation of the transaction
contemplated hereby (the "Transactions") shall have been obtained.
Section 4.2 Conditions to Obligations of Seller. All of the obligations
-----------------------------------
of Seller under this Agreement are subject to the fulfillment prior to or at the
Closing Date of each of the following conditions, any one or more of which may
be waived by Seller:
(a) The representations and warranties of Buyer contained
herein or otherwise delivered pursuant hereto shall be true in all material
respects as of the Closing date;
(b) Buyer shall have in all material respects performed and
complied with all the conditions required by this Agreement to be performed or
complied with by it prior to or at the Closing Date; and
(c) All required, material consents and approvals of third
parties (including consents or approvals of airport authorities) which are
necessary to the consummation of the Transactions shall have been obtained.
6
<PAGE>
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and AVGP jointly and severally represent and warrant to the Buyer
that the statements contained in this Article 5 are true and correct as of the
date of this Agreement and will be true and correct as of the Closing Date.
Section 5.1 Organization of Seller. Seller is a corporation validly
----------------------
existing and in good standing under the laws of the State of Texas, and is not
required to be qualified to do business in any other jurisdiction. Seller has
the corporate power and authority to own its properties and carry on the
Business as now being conducted, to execute and deliver this Agreement and carry
out the transactions contemplated hereby. Seller has no subsidiaries nor any
interest, direct or indirect, in any other corporation or any other business
enterprise or entity.
Section 5.2 Authority; Enforceability. The execution and delivery of this
-------------------------
Agreement and the due consummation of the transactions contemplated hereby by
Seller have been duly authorized by all necessary corporate action on behalf of
Seller. This Agreement constitutes the valid and binding agreement of Seller
and is enforceable against Seller in accordance with its terms, subject to any
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting generally the enforcement of creditors' rights and principles of
-----------------
equity.
- ------
Section 5.3 No Conflict by Seller. Except as set forth on Schedule 5.3,
--------------------- ------------
neither the execution or delivery of this Agreement by Seller nor the
consummation of the transactions contemplated hereby by Seller require the
consent of any federal, state or local authority or any third party, the failure
to obtain which could reasonably be expected to result in a Material Adverse
Effect. Except as set forth on Schedule 5.3, neither the execution or delivery
------------
of this Agreement by Seller nor the consummation of the transactions
contemplated hereby by Seller will result in or constitute any of the following:
(a) violation of the terms of the charter or bylaws of Seller; (b) a violation
of any provision of any applicable law or regulation, or of any writ or decree
of any court or governmental instrumentality applicable to Seller or a default
or an event that, with notice or lapse of time or both, would be a default,
breach, or violation of any lease, license, promissory note, conditional sales
contract, commitment, indenture, mortgage, deed of trust, contract, or other
agreement, instrument, or arrangement to which Seller is a party or by which
Seller, the Business or any of the Assets is bound except for such defaults,
breaches, or violations which could not reasonably be expected to have a
Material Adverse Effect; or (c) the creation or imposition of any lien, charge,
or encumbrance on any of the Assets, excepting any lien, charge or encumbrance
resulting from Buyer's actions or any lien, charge or encumbrance which results
from Buyer's failure to pay or perform the Assumed Liabilities. For purposes of
this Agreement, "Material Adverse Effect" shall mean any material adverse change
in the financial condition or results of operations of the Business.
Section 5.4 Absence of Material Changes. From September 30, 1999 to the
---------------------------
Closing Date, except as set forth in Schedule 5.4 attached hereto, there has not
------------
been:
(a) Any change constituting a Material Adverse Effect;
7
<PAGE>
(b) Any damage, destruction or loss by fire, theft or other casualty,
whether or not covered by insurance, materially and adversely affecting the
properties, assets, business or financial condition of the Business;
(c) Any acquisition of, or agreement to acquire, any stock, business,
property or assets of any other person, firm, association, corporation or other
business organization, for the Business and to which Seller is a party
involving a purchase price in excess of $10,000 other than purchases of
inventory, supplies and equipment in the ordinary course of business;
(d) Any commitment to make capital expenditures in excess of $10,000 by
any Seller with respect to the Business for additions to property, plant or
equipment;
(e) Any failure to comply in all material respects with the terms of any
Assumed Contracts (including paying all amounts due through the Closing Date);
(f) Any agreement to amend any of the provisions of the Assumed Contracts
in any material respect;
(g) Any failure to operate the Business in the ordinary course of
business; or
(h) Any disposal of the Assets outside of the ordinary course of business.
Section 5.5 Title to Assets. Seller has, and from and after the Closing
---------------
Date, Buyer will have good and valid title to all the Assets, except those
Assets which are leased by Seller, free and clear of all liens, encumbrances,
and charges whatsoever except as set forth on Schedule 5.5 or included as
------------
Assumed Liabilities. The Assets are all assets (other than the Excluded Assets)
which Seller believes are necessary to operate the Business as it is currently
operated.
Section 5.6 Assumed Contracts. Except as set forth on Schedule 5.6 each
----------------- ------------
of the Assumed Contracts is a valid and binding agreement of Seller and, to the
best of Seller's knowledge, is a valid and binding agreement of all other
parties thereto and, with respect to each such Assumed Contract, there is not
any existing material default or any material condition, event or act which with
notice or lapse of time or both would constitute a default of Seller or, to
Seller's knowledge, any other party thereto, of a material provision thereof.
The Assumed Contracts are all material contracts, agreements, commitments and
understandings, either oral or written (including, without limitation, leases,
subleases and service contracts), to which any Seller is a party which Seller
believes are necessary to operate the Business as it is currently operated.
Seller has furnished to Buyer true and correct copies of all such written
Assumed Contracts. There are no written amendments to any Assumed Contracts
which have not been furnished to Buyer. All such Assumed Contracts are
currently in full force and effect and are enforceable against Seller in
accordance with their respective terms. All rental charges and other amounts
due pursuant to the Assumed Contracts are current.
Section 5.7 Labor Relations: Employment Agreements. Except as set forth
--------------------------------------
on Schedule 5.7, there are no (a) collective bargaining agreements, (b)
------------
employment agreements (excluding all
8
<PAGE>
agreements that do not relate to compensation or continued employment), or (c)
any other labor agreements which are binding on Seller with respect to employees
of the Business.
Section 5.8 Litigation. Except as set forth in Schedule 5.8, Seller (a)
---------- -----------------------------------
is not engaged in or, to the best knowledge of Seller, threatened with, any
claim, controversy, legal action, or other proceeding involving the operation of
the Business whether or not before any court or administrative agency, and (b)
is not in material violation of any law, judgment, order, decree, regulation or
rule of any court or governmental authority applicable to it involving the
operation of the Business.
Section 5.9 Compliance with Laws; Environment. Seller is in material
---------------------------------
compliance with all laws, ordinances, regulations and orders applicable to the
conduct of the Business and has no notice or knowledge of any violations thereof
applicable to the conduct of the Business, whether actual, claimed or alleged.
Without limiting the generality of the foregoing, Seller has all of the permits,
licenses and authority necessary to conduct the Business and all permits and/or
licenses for discharge into waterways, municipal sewer systems, air or the
environment. All such permits and licenses are identified in Schedule 5.9
------------
attached hereto. Seller is in material compliance with all federal, state and
local laws, ordinances, rules and regulations applicable to the Business
pertaining to waste disposal, toxic substances, and air or water pollution, with
all OSHA requirements and all laws, rules, ordinances and regulations of any
governmental authority concerning the exposure of persons to chemicals,
including, but not limited to, its employees and customers each as in effect as
of the Closing Date (collectively, "Environmental Laws").
Attached hereto as Schedule 5.9 is a listing of all of the following known
------------
to Seller which, with respect to subsections (i)-(v), would reasonably be
expected to have a Material Adverse Effect:
(i) any release of or presence known by Seller of a hazardous substance
as defined in sections 101 (22) and 101 (14) of the Comprehensive Environment
Response, Compensation and Liability Act of 1980 ("CERCLA") into, on, from or
upon the premises upon which the Business operates or the Assets are located
(the "Premises") in violation of Environmental Laws or which has created a
condition which Seller believe are reasonable likely to require Remediation (as
defined herein) under Environmental Laws; or
(ii) petroleum products (including crude oil or any fraction thereof)
released into, from or upon the Premises in violation of Environmental Laws, or
which Seller believes have created a condition reasonably likely to require
Remediation under Environmental Laws; or
(iii) storage tanks (whether currently in use, out of service or closed)
located on, under or upon the Premises; or
(iv) any adverse environmental condition which Seller believes is
--
reasonably likely to require Remediation relating to the soil or groundwater or
damage to the environment or natural resources of the Premises or to third party
property, whether arising under CERCLA or other statutes and regulations, or
common law; or
9
<PAGE>
(v) any toxic, explosive or otherwise dangerous materials or hazardous
substances, including friable asbestos, which Seller believes have been buried
beneath, concealed within or released into, on, upon, or from the Premises; or
(vi) any and all material environmental reports prepared for Seller
regarding the Premises.
Hereinafter "hazardous substances" referenced to in clause (i), petroleum
products as referred in clause (ii) and other materials and substances referred
to in clause (v) are collectively referred to as "Hazardous Substances".
"Remediation" shall mean the taking of any action to report, remove,
characterize, treat, remediate, or dispose of Hazardous Substances or
environmental contamination.
Section 5.10 Seller's Financial Statements. Attached hereto as Schedule
-----------------------------
5.10 are unaudited historical summaries of Seller regarding revenue, costs of
revenue and expenses for Seller's operations at DFW, for the periods stated
therein (the "Financial Information"). The Financial Information has been
prepared from the books and records of Seller, which books and records are in
accordance with generally accepted accounting principles. The Financial
Information fairly presents in all material respects the revenue, costs of
revenue and expenses of Seller for the Business, for the periods stated,
consistent with Seller's accounting principles.
Section 5.11 Employees. Attached hereto as Schedule 5.11 is a list of the
--------- -------------
current employees of Seller who devote all or substantially all of their work
efforts to the Business, which list contains the following information with
respect to each employee:
(i) location of such employee;
(ii) United States Department of Labor job classification;
(iii) whether such employee works full or part-time;
(iv) date of original hire; and
(v) base compensation rate, including bonuses or other remuneration above
base compensation rate.
Seller hereby represents and warrants that it has not entered into
employment contracts with any of its employees.
Section 5.12 Employee Benefit Plans. Set forth on Schedule 5.12 is a list
---------------------- -------------
and description of all employee benefit plans and programs and fringe benefits
plans and programs provided by the Business for its employees (the "Benefit
Plans"). Seller has provided Buyer with true and correct copies of its employee
handbook(s) which govern the employees working in the Business. All Benefit
Plans have been and are in substantial compliance with all (i) statutes, laws,
rules, regulations and promulgations related thereto; and (ii) plan documents,
approvals, authorizations, and determination
10
<PAGE>
letters applicable thereto. There are no pending or, to Seller's knowledge,
threatened litigation, claims or proceedings against Seller relating to any of
the Benefit Plans.
Section 5.13 Brokerage. Except as set forth in Schedule 5.13, Seller has
--------- -------------
not made any agreement or taken any other action which might cause anyone to
become entitled to a broker's fee or commission as a result of the transactions
contemplated hereby.
Section 5.14 Customers. Schedule 5.14 is a true and correct list of the
------------------------
ten (10) largest customers of Seller at DFW by monthly revenue during the month
of November, 1999 (customers identified on Schedule 5.14 are hereinafter
-------------
referred to as ("Key Customers")). To the best of Seller's actual knowledge,
none of the Key Customers intends to reduce in any material respect its buying
of goods or services for the 180-day period subsequent to the Closing or request
a rate reduction from Seller or has notified Seller that it will take any such
action as a result of the sale of the Assets to Buyer.
Section 5.15 Affiliated Transactions. Except as set forth on the
-----------------------
"Affiliated Transaction Schedule" attached hereto as Schedule 5.15, no officer,
- --------------------------------- -------------
director, holder of 5% or more of any class of equity of Seller ("5%
Shareholder"), or affiliate of Seller or any person related by blood or marriage
to any such person or any entity in which any such person owns, directly or
indirectly, any beneficial interest, is a party to any agreement, contract,
commitment or transaction with Seller in connection with the Business or has any
interest, directly or indirectly, in any property used by Seller in connection
with the Business. Neither Seller nor any of its subsidiaries nor any director
or officer of Seller possesses, directly or indirectly, any financial interest
in, or is a director, officer or employee of, any corporation, firm, association
or business organization which is a substantial supplier, customer, lessor,
lessee, or competitor of the Business.
Section 5.16 Airport and Other Regulatory Matters. All certificates of
------------------------------------
public convenience and necessity, permits, licenses and operating rights issued
to Seller in connection with the Business by the applicable municipal, regional,
state or federal regulatory authority having or exercising jurisdiction over
common, fixed based, or other airport operations (collectively "Operating
Rights") are set forth on the "Operating Rights Schedule" attached hereto as
Schedule 5.16. Except as otherwise set forth on the "Operating Rights Schedule,"
- -------------
Seller does not require any governmental permits, consents, authorities or
approvals to conduct the Business. Between the date hereof and the Closing
Date, Seller shall maintain on file with the applicable municipal, regional or
state licensing authority, and observe the terms, of all applicable fees,
tariffs and schedules.
Section 5.17 Condition of Tangible Property. The Personal Property is in
------------------------------ --
good condition and repair, ordinary wear and tear excepted, and is in material
compliance with all applicable laws and regulations.
Section 5.18 Title and Condition of Properties. (a) The Leases are in
---------------------------------
full force and effect, and Seller (as indicated on such schedule) holds a valid
and existing leasehold interest in the Leases described on Schedule 1.1(b). The
---------------
Leases constitute all of the leases under which Seller holds a leasehold
interest in real estate or personal property. Seller has delivered to Buyer
complete and
11
<PAGE>
accurate copies of each of the Leases and none of the Leases have been modified
in any respect, except to the extent that such modifications are disclosed by
the copies delivered to Buyer. Seller is not in default under any of such
Leases, and no other party to such Leases has the right to terminate, accelerate
performance under or otherwise modify any of such Leases, including upon the
giving of notice or passage of time. To Seller's knowledge, no third party to
any such Lease is in default under such Lease.
(b) Except as disclosed on Schedule 5.18(b), Seller owns good and
----------------
marketable title, free and clear of all liens, charges, security interests,
encumbrances and claims of others, to all of the personal property and assets
used in the Business or located on any of their premises, except for liens of
current taxes not yet due and payable, and except for property and assets leased
under the Leases. At the Closing, Seller shall convey good and marketable title
to all of the personal property included within the Assets, free and clear of
all liens, security interests, charges, encumbrances and claims of others, other
than liens for current taxes not yet due and payable, and except for property
and assets leased under the Leases.
(c) Seller's machinery, equipment and other tangible assets are in good
condition and repair, ordinary wear and tear excepted, in all material respects
and are usable in the ordinary course of business. Seller owns or leases under
valid leases all buildings, machinery, equipment and other tangible assets
necessary for the conduct of its Business as currently conducted by it. All
vehicles, tractors, and other equipment owned or leased by Seller are in
material compliance with all regulations issued by any federal or state
governmental authority.
(d) Seller is not in material violation of any applicable zoning,
building, fire or other ordinance or other law, regulation or requirement
relating to the operation of owned or leased properties, including, without
limitation, applicable environmental protection and occupational health and
safety laws and regulations. Within the five years prior to the date of this
Agreement, Seller has not received any notice of any such violation or any
condemnation proceeding with respect to any properties owned, used or leased by
it, except as has been previously disclosed to Buyer in writing.
(e) The Assets represent all of the assets utilized by Seller in the
conduct of the Business (other than those retained by Seller in (S)1.3 hereof).
5.19 Warranties; Warranty Claims:
----------------------------
(a) Except as set forth in Schedule 5.19 attached hereto and except for
-------------
warranties implied by law, in the conduct of the Business, Seller makes no
representation or warranty to their customers with respect to products sold or
services delivered by them.
(b) Except as set forth in Schedule 5.19 attached hereto, there are no
-------------
warranty claims relating to products at any time sold or services at any time
performed by Seller pending or threatened.
5.20 Tax Matters. Both parties to this Agreement acknowledge that, for
-----------
purposes of this
12
<PAGE>
Section 5.20, all tax returns of Seller are filed as a part of the consolidated
tax returns of AVGP.
(a) Except as set forth in Schedule 5.20, Seller has duly filed all
federal, state, local and foreign tax information and tax returns (the
"Returns") required to be filed by them (all such returns being accurate and
complete) and have duly paid or made provision for the payment of all taxes and
other governmental charges (including, without limitation, interest, additions
to tax and penalties) which have been incurred or are shown to be due on said
Returns or are claimed in writing to be due from Seller or imposed on Seller or
its properties, assets, income, payroll, franchises, licenses, sales or use, by
any federal, state, local or foreign taxing authorities (collectively, the
"Taxes") on or prior to the date hereof, other than Taxes which are being
contested in good faith and by appropriate proceedings and as to which Seller
has set aside on its books adequate reserves, or which may be attributable to
the transactions contemplated hereby. The "Tax Matters Schedule" attached hereto
as Schedule 5.20 sets forth the date or dates through which the Internal Revenue
-------------
Service ("IRS") has examined the federal income tax returns of Seller, whether
singly or as members of an affiliated group, and the date or dates through which
any state, local, foreign or other taxing authority is in the process of
examining any federal, state, local, foreign or other tax return of Seller.
Except as disclosed on the "Tax Matters Schedule", (i) there are no disputes
pending, or claims asserted, for Taxes upon Seller, (ii) Seller has not been
required to give any currently effective waivers extending the statutory period
of limitation applicable to any federal, state, local or foreign return for any
period, and (iii) Seller has in effect no power of attorney or authorization to
anyone to represent them with respect to any Taxes. There exists no proposed
assessment against Seller or notice, whether formal or informal, of any
deficiency or claim for additional Tax (including, without limitation, interest,
additions to tax or penalties) except as disclosed on the "Tax Matters
Schedule."
(b) Except as disclosed on the "Tax Matters Schedule", all monies required
to be withheld from employees of Seller for income taxes, social security and
unemployment insurance taxes or collected from customers or others as sales, use
or other taxes have been withheld or collected and paid, when due, to the
appropriate governmental authority, or if such payment is not yet due, an
adequate reserve has been established.
5.21 Proprietary Rights. Seller owns and/or possesses the right to use the
------------------
Proprietary Rights. Seller has not received any notice of infringement,
misappropriation, invalidity or conflict from any third party with respect to
the Proprietary Rights; Seller has not, to Seller's knowledge, infringed,
misappropriated or otherwise conflicted with any Proprietary Rights of any third
parties; and Seller's Proprietary Rights have not been infringed by any third
parties.
5.22 Insurance. The "Insurance Schedule" attached hereto as Schedule 5.22
--------- -------------
lists each insurance policy maintained by Seller with respect to the Assets or
the Business. All of such insurance policies are in full force and effect,
Seller has paid in full all insurance premiums required to be paid to date and
Seller is not nor has Seller ever been in material default with respect to its
obligations under any of such insurance policies. Such insurance coverage is
customary for well insured entities engaged in similar lines of business.
13
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5.23 Airport and Other Regulatory Matters. Except as otherwise set forth
------------------------------------
in Schedule 1.1(f), Seller requires no governmental permits, consents,
---------------
authorities or approvals to conduct the Business. Between the date hereof and
the Closing Date, Seller shall maintain on file with the applicable municipal,
regional or state licensing authority, and observe the terms, of all applicable
fees, tariffs and schedules.
5.24 Disclosure. Neither this Agreement nor any of the schedules,
----------
attachments or exhibits hereto contain any untrue statement of a material fact
or omit a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they were made, not misleading.
There is no material fact which has not been disclosed in writing to Buyer of
which any officer, director, shareholder, or key employee of any Seller is aware
and which materially adversely affects or could reasonable be anticipated to
affect materially adversely the Business or the Assets.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer and Servisair USA, Inc. jointly and severally represent and warrant
to the Seller that the statements contained in this Article 6 are true and
correct as of the date of this Agreement and will be true and correct as of the
Closing Date:
Section 6.1 Organization. Buyer is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Texas. Buyer has
all requisite power and authority to execute and deliver this Agreement and
carry out the transactions contemplated hereby.
Section 6.2 Authority, Enforceability, The execution and delivery of this
-------------------------
Agreement and the due consummation of the transactions contemplated hereby by
Buyer have been duly authorized by all necessary corporate action. This
Agreement constitutes the valid and binding agreement of Buyer enforceable
against Buyer in accordance with its terms, subject to any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting generally the enforcement of creditors' rights and principles of
equity.
Section 6.3 No Conflict by Buyer. Except as set forth on Schedule 6.3,
-------------------- ------------
neither the execution or delivery of this Agreement by Buyer nor the
consummation of the transactions contemplated hereby by Buyer require the
consent of any federal, state or local authority or any third party. Except as
set forth on Schedule 6.3, neither the execution or delivery of this Agreement
------------
by Buyer nor the consummation of the transactions contemplated hereby by Buyer
will result in or constitute any of the following: (a) a violation of the terms
of the charter or bylaws of Buyer; (b) a violation of any provision of any
applicable law or regulation, or of any writ or decree of any court or
governmental instrumentality; (c) a default or an event that, with notice or
lapse of time or both, would be a default, breach, or violation of any lease,
license, promissory note, conditional sales contract, commitment, indenture,
mortgage, deed of trust, contract, or other agreement, instrument, or
arrangement to which Buyer is a party or by which Buyer is bound that would
result in the right of any other person to cause the rescission of the
transactions contemplated hereunder or to assert any claim against Buyer;
14
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or (d) the creation or imposition of any lien, charge, or encumbrance on any
asset of Buyer, which might adversely affect Buyer's ability to consummate the
transactions contemplated by this Agreement.
Section 6.4 Litigation. Except as set forth on Schedule 6.4, Buyer (a) is
----------
not engaged in or, to the knowledge of Buyer, threatened with, any claim,
controversy, legal action, or other proceeding whether or not before any court
or administrative agency, any adverse determination of which might adversely
affect Buyer's ability to consummate the transactions contemplated by this
Agreement, and (b) is not in violation, to any material extent, of any law,
judgment, order, decree, regulation or rule of any court or governmental
authority applicable to it that would result in the right of any other person to
cause the rescission of the transactions contemplated hereunder.
Section 6.5 Brokerage. Except as set forth on Schedule 6.5, Buyer has
--------- ------------
not made any agreement or taken any other action which might cause anyone to
become entitled to a broker's or finder's fee or commission as a result of the
transactions contemplated hereby.
Section 6.6 Availability of Funds. At the Closing, Buyer will have
---------------------
available sufficient funds to pay the Purchase Price to Seller.
ARTICLE 7
CONFIDENTIALITY
If for any reason the transactions contemplated by this Agreement are not
consummated, each of the parties shall keep confidential (subject to applicable
law and legal process) the terms and conditions of this transaction and any
information which one party shall have obtained from the other (unless in the
public domain); and in the event this Agreement is not consummated, each party
shall promptly return to the other party all schedules, documents, or papers or
other written information without retaining copies thereof, previously furnished
to, or otherwise obtained by one party from the other as a result of this
Agreement or in connection with the same.
After the Closing and subject to applicable law and legal process, Buyer
and Seller shall use their best efforts to keep confidential the terms of this
transaction.
ARTICLE 8
OTHER COVENANTS
Section 8.1 Employees. Seller shall transition to the employment of Buyer
---------
all the employees of the Business described on Schedule 8.1 as of the Closing.
------------
In accordance with the terms of any applicable Benefit Plan (as listed on
Schedule 5.12) and applicable law, Seller will be solely responsible for all
- --------------
benefits provided under any such Benefit Plan (including, but not limited to,
termination, severance and COBRA benefits) to the employees of the Business. As
of the Closing, Seller shall satisfy all accrued, earned and outstanding
employee benefit obligations to their employees
15
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at their sole cost and expense. Effective as of the Closing, Buyer will offer
employment on such terms and conditions as the Buyer shall determine to all the
employees described in Schedule 8.1. Buyer will use its best efforts to
------------
grandfather such employees under its Employee Benefit Plans so that such
employees will receive credit for service while employed by Seller.
Section 8.2 Lock-up Agreement. During the term of this Agreement, Seller
-----------------
will not entertain, solicit, initiate or encourage any acquisition proposal with
respect to all or a substantial portion of the stock of any Seller or the assets
of the Business (an "Acquisition Proposal"). During the term of this Agreement,
Seller will not enter into any agreement or contractual commitment with respect
to an Acquisition Proposal, whether or not such agreement or contract is
secondary and conditioned on the termination of this Agreement.
ARTICLE 9
INDEMNIFICATION
Section 9.1 Seller Indemnification.
----------------------
(a) The Seller and AVGP, jointly and severally (Seller and AVGP, for the
purposes of this Article 9 only, are referred to collectively as "Seller") shall
indemnify and hold harmless Buyer (but only up to and including an amount equal
to the Purchase Price) from and against all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, amounts
paid in settlement, liabilities, obligations, taxes, liens, losses, expenses and
fees, including all attorney's, investigator's or consultant's fees and court
costs ("Losses") incurred or suffered by Buyer as a direct result of, (i) any
Loss or Losses resulting from any breach of the warranties, representations and
covenants of Seller contained in this Agreement, or any schedule or exhibit
hereto, and (ii) any and all liabilities and obligations (including any
contingent liabilities) of Seller which are not expressly assumed by Buyer
hereunder, whether presently known or unknown, excluding only those liabilities
and obligations which are expressly assumed by Buyer under Section 1.6 of this
Agreement.
The obligation of Seller to provide the indemnity granted pursuant to this
(S)9.1 shall not apply for amounts in controversy which do not total at least
one per cent (1%) of the Purchase Price (hereafter, the "Indemnity Threshold");
provided, however, that once the amount in controversy exceeds the Indemnity
Threshold, Seller's indemnity obligation applies to all amounts in controversy,
without deduction or setoff.
The obligation of Seller to provide the indemnity granted pursuant to this
(S)9.1 shall also be reduced pari passu with the receipt by Buyer of insurance
proceeds as compensation for the Losses, and if Seller shall have previously
indemnified Buyer for such Losses, Buyer shall remit such insurance proceeds to
Seller, in an amount equal to the lesser of (i) Seller's previous payments to
Buyer in respect of such Losses or (ii) the amount received by Buyer from its
insurance carrier(s).
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(b) Seller shall indemnify and hold harmless Buyer from and against all
Losses incurred or suffered as a result of any environmental Loss or
environmental Losses resulting from any release of or presence of a Hazardous
Substance into, on, from or upon the Premises or any off-site location to which
Hazardous Substances generated at the Premises were disposed of or released, or
violation of Environmental Law with respect to the Premises, to the extent such
Losses were caused by conditions arising prior to Closing or violations of
Environmental Laws prior to Closing.
(c) Buyer acknowledges and agrees that Seller shall not have any liability
under any provision of this Agreement for any Loss to the extent that such Loss
relates solely to actions taken by Buyer or its affiliates or any of their
respective directors, officers, employees or agents after the Closing Date.
Buyer shall take and cause its affiliates (including their respective directors,
officers, employees and agents) to take all reasonable steps to mitigate any
Loss described in Section 9. 1 (a) upon becoming aware of any event which would
reasonably be expected to, or does, give rise thereto, including incurring
minimal costs to remedy the breach, event or condition which gives rise to the
Loss.
Section 9.2 Buyer's Indemnification.
-----------------------
(a) Buyer and Servisair USA, Inc., jointly and severally (Buyer and
Servisair USA, Inc., for the purposes of this Article 9 only, are referred to
collectively as "Buyer") shall indemnify and hold harmless Seller (but only up
to and including an amount equal to the Purchase Price) against Losses incurred
or suffered by Seller as a direct result of (i) any breach of the warranties,
representations and covenants of Buyer contained in this Agreement, or any
schedule or exhibit hereto and (ii) any of the Assumed Liabilities or the
operation of the Business following Closing.
The obligation of Buyer to provide the indemnity granted pursuant to this
(S)9.2 shall not apply for amounts in controversy which do not total at least
one per cent (1%) of the Purchase Price (hereafter, the "Indemnity Threshold")
provided, however, that the Indemnity Threshold shall not apply to obligations
of Buyer under the Assumed Liabilities which arise or occur after the Closing;
and provided further, however, that once the amount in controversy exceeds the
Indemnity Threshold, Buyer's indemnity obligation applies to all amounts in
controversy, without deduction or setoff.
The obligation of Buyer to provide the indemnity granted pursuant to this
(S)9.2 shall also be reduced pari passu with the receipt by Seller of insurance
proceeds as compensation for the Losses, and if Buyer shall have previously
indemnified Seller for such Losses, Seller shall remit such insurance proceeds
to Buyer, in an amount equal to the lesser of (i)Buyer's previous payments to
Seller in respect of such Losses or (ii) the amount received by Seller from its
insurance carrier(s).
(b) Buyer shall indemnify and hold harmless Seller for and against all
Losses incurred or suffered as a result of, any environmental Loss or
environmental Losses resulting from any release of or presence of a Hazardous
Substance into, on, from or upon the Premises or any off-site location to which
Hazardous Substances generated at the Premises were disposed of or releases, or
violation
17
<PAGE>
of Environmental Law, to the extent such Losses were caused by conditions
arising subsequent to Closing or violations by Buyer of Environmental Laws
subsequent to Closing.
(c) Seller shall take and cause its affiliates (including their respective
directors, officers, employees and agents) to take all reasonable steps to
mitigate any Loss described in Section 9.2(a) upon becoming aware of any event
which would reasonably be expected to, or does, give rise thereto, including
incurring minimal costs to remedy the breach, event or condition which gives
rise to the Loss.
Section 9.3 Survival of Indemnity; Certain Conditions of Indemnity.
------------------------------------------------------
(a) The representations and warranties contained herein are and will be
deemed and construed to be continuing representations and warranties and will
survive the Closing and, other than fraudulent misrepresentations and breach of
the representations set forth in Section 5.21, continue in full force and effect
thereafter for twelve (12) months after the Closing Date. All fraudulent
misrepresentations and breach of the representations set forth in Section 5.21
shall continue in full force and effect until expiration of the applicable
statute of limitations. All representations and warranties relating to tax,
ERISA or environmental matters shall survive and continue for any applicable
statute of limitation period. All representations and warranties relating to
ownership shall survive and continue in perpetuity. If a notice of breach is
given within any applicable time period, the indemnifying party shall be
responsible for all Losses resulting from, arising out of, or related to such
breach, including all Losses suffered after the date notice has been given.
(b) As to any environmental Loss, the indemnification provisions in (S)(S)
9.1 (b) and 9.2(b) shall govern over the indemnification provisions in
(S)(S) 9.1 (a) and 9.2(a).
Section 9.4 Demands and Actions. The party from whom indemnity is sought
-------------------
("Indemnitor") reserves the right to contest and defend by all appropriate legal
or other proceedings any demand, assertion, claim, action or proceeding with
respect to which it has been called upon to indemnify the party who seeks
indemnity ("Indenmitee") under the provisions of this Agreement; provided,
however, that:
(a) Notice of the intention so to contest shall be delivered to Indemnitee
within twenty (20) calendar days from the date of receipt by Indemnitor of
notice of the assertion of such demand, assertion, claim, action or proceeding;
and
(b) Such contest shall be conducted by reputable attorneys employed by
Indemnitor at Indemnitor's cost and expense, but Indenmitee shall have the right
to participate in but not control such proceedings and to be represented by
attorneys of its own choosing, at its own cost and expense.
Should Indemnitor so elect to assume and control the defense and settlement
of any claim, Indemnitor will not be liable to Indenmitee for legal expenses
subsequently incurred by the Indemnitee in connection with the defense or
settlement thereof. If Indemnitor assumes such defense, Indemnitee
18
<PAGE>
shall have the right to participate in, but not control, the defense thereof and
to employ counsel, at its own expense, separate from the counsel employed by
Indenmitor. If Indenmitor shall have assumed the defense of any claim,
Indenmitee shall not admit any liability with respect to, or settle, compromise
or discharge, such claim without Indemnitor's prior written consent. If
Indenmitor has not so assumed the defense of and Indemnitee shall settle,
compromise or discharge any claim without Indemnitor's consent, such settlement,
compromise or discharge shall not be conclusive as to the amount of Indenmitee's
Losses, if any, with respect to such claim but may be used as evidence of such
amount.
ARTICLE 10
TERMINATION
Section 10.1 When Agreement May Be Terminated. This Agreement may be
--------------------------------
terminated at any time prior to the Closing:
(a) By mutual written consent of Buyer and Seller; or
(b) By Buyer or Seller, if the conditions set forth in (S)(S)1.5.1 and 2.1
hereof shall not have been satisfied by December 15, 1999, and the Closing shall
not have occurred by January 1, 2000 ( or, at the latest, the first business day
thereafter); provided, however, that this right to terminate shall not be
available (A) if the only matter causing a delay is the approval of the
applicable airport authorities to this transaction or (B) to any party whose
failure to fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of the Closing to occur on or before such date.
Section 10.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either Buyer or Seller as provided above, this Agreement shall
forthwith terminate and there shall be no liability on the part of either Buyer
or Seller, except for liabilities arising from a breach of this Agreement prior
to such termination.
ARTICLE 11
MISCELLANEOUS PROVISIONS
Section 11.1 Good Faith: Further Assurances Further Cooperation. The
--------------------------------------------------
parties to this Agreement shall in good faith undertake to perform their
obligations under this Agreement, to satisfy all conditions and to cause the
transactions contemplated by this Agreement to be carried out promptly in
accordance with the terms of this Agreement. Upon the execution of this
Agreement and prior to and following the Closing, the parties hereto shall do
such things as may be reasonably requested by the other parties hereto in order
more effectively to consummate or document the transactions contemplated by this
Agreement, including the execution and delivery to both parties and their
respective successors of additional and further documents of transfer and
assignment of any of the Assets. Acknowledging that the nature of the
transactions contemplated hereby is such that continued cooperation between
themselves before and after the Closing with respect to the business
19
<PAGE>
of Seller will be required, the parties hereto hereby agree to cooperate with
the other to the extent reasonably necessary to enable the other to obtain such
information and take such actions are required of them, and each party further
agrees that, subject to applicable attorney-client privilege and obligations
owed to third parties, the Seller shall have reasonable access to the books and
records transferred to Buyer, and the Buyer shall have reasonable access to the
books and records retained by Seller.
Section 11.2 Consent of Third Parties. Nothing in this Agreement shall be
------------------------
construed as an attempt to assign any contract, agreement, permit, franchise, or
claim included in the Assets which is by its terms or by law nonassignable
without the consent of the other party or parties thereto, unless such consent
shall have been given or unless all the remedies for the enforcement thereof
enjoyed by Seller would, as a matter of law, pass to Buyer as an incident of the
assignments provided for by this Agreement. In order, however, to provide Buyer
with the full realization and value of every contract, agreement, permit,
franchise and claim of the character referred to in the immediately preceding
sentence, Seller agrees that, on and after the Closing, it will, at the request
and under the direction of Buyer (at Buyer's sole cost and expense, which
amounts or reasonable estimates thereof shall be paid in advance), take all
reasonable actions (a) to assure that the rights of Seller under such contracts,
agreements, permits, franchises, and claims shall be preserved for the benefit
of Buyer and (b) to facilitate receipt of the consideration to be received by
Seller in and under every such contract, agreement, permit, franchise, or claim,
which consideration shall be held for the benefit of, and shall be delivered to,
Buyer.
Section 11.3 Notices. All notices, communications and deliveries under
-------
this Agreement shall be made in writing signed by the party making the same,
shall specify the section of this Agreement pursuant to which it is given, and
shall be deemed given on the date delivered if delivered in person, by special
or overnight delivery, or on the third (3rd) business day after mailed if mailed
first-class mail (with postage prepaid, return receipt requested) as follows:
To Buyer:
---------
Servisair USA, Inc.
5201 Blue Lagoon Drive
Suite 936
Miami, FL 33126
Attention: Mr. Michael J. Hancock
with a copy to:
McBreen, McBreen & Kopko
110 Summit Avenue
Montvale, NJ 07645
Attention: Robert S. Moran, Jr.
20
<PAGE>
To Seller:
----------
Aviation Group, Inc.
700 North Pearl #2170
Dallas, TX 75201
Attention: Mr. Richard L. Morgan
with a copy to:
Jenkens & Gilchrist
1445 Ross Avenue, #3200
Dallas, TX 75202
Attention: Daryl Robertson, Esq.
or to such other representative or such other address as the parties hereto may
furnish to the other parties in writing. If notice is given pursuant to this
Section 11.3 of a permitted successor or assign of a party to this Agreement,
then notice shall be given as set forth above to such successor or assign of
such party.
Section 11.4 Assignment. This Agreement shall be binding upon and shall
----------
inure to the benefit of the parties hereto, and their respective legal
representatives, heirs, successors and assigns. No assignment or transfer of
rights and obligations hereunder shall be made except with the prior written
consent of the parties hereto.
Section 11.5 Captions; Definitions. The titles or captions of articles,
---------------------
sections or subsections contained in this Agreement are inserted only as a
matter of convenience and for reference and in no way define, limit, extend or
describe the scope of this Agreement or the intent of any provision hereof. The
parties agree to all definitions in the statement of parties to this Agreement
and in the other introductory language to this Agreement. For purposes of this
Agreement, the term "knowledge" shall be construed to mean both knowledge of
which such party is actually possessed, and that knowledge which may be
legitimately imputed to such party.
Section 11.6 Controlling Law; Waiver; Remedies Cumulative. This Agreement
--------------------------------------------
shall be construed and enforced in accordance with the laws of the State of
Texas, without regard to its applicable conflict of laws provisions. This
Agreement may not be altered or amended except in a writing signed by Seller and
Buyer. The failure of any party hereto at any time to require performance of
any provision hereof shall in no manner affect the right to enforce the same.
No waiver by any party hereto of any condition, or of the breach of any term,
provision, warranty, representation, agreement or covenant contained in this
Agreement, whether by conduct or otherwise, in any one or more instances shall
be deemed or construed as a further or continuing waiver of any
21
<PAGE>
such condition or breach or a waiver of any other condition or of the breach of
any other term, provision, warranty, representation, agreement or covenant
herein contained.
Section 11. 7 Exhibits and Schedules. All exhibits and schedules and
----------------------
attachments to exhibits and schedules and any other attachments to this
Agreement are hereby incorporated into this Agreement and are hereby made a part
of this Agreement as if set out in full in the first place that reference is
made thereto.
Section 11.8 Expenses. Except as otherwise set forth herein, each party
--------
to this Agreement shall pay its own expenses incurred in connection herewith.
Section 11.9 Counterparts; Entire Agreement. This Agreement may be
------------------------------
executed by each party upon a separate copy, and in such case one counterpart of
this Agreement shall consist of enough of such copies to reflect the signatures
of all of the parties to this Agreement. This Agreement shall become effective
when one or more counterparts has been signed by each of the other parties to
this Agreement. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, and it shall not be necessary in
making proof of this Agreement or the terms of this Agreement to produce or
account for more than one of such counterparts. This Agreement together with
all schedules and exhibits hereto and all other agreements and undertakings
provided for hereunder shall constitute the entire agreement of the parties and
there are no other written or oral understandings or agreements among the
parties.
Section 11.10 Enforcing the Agreement.
-----------------------
(a) Enforceability. If any of the provisions of this Agreement shall be
--------------
held invalid, illegal or unenforceable by the final determination of a court of
competent jurisdiction and all appeals therefrom shall have failed or the time
for such appeals shall have expired, such provision or provisions shall be
deemed eliminated from this Agreement but the remaining provisions shall
nevertheless be given full effect. In the event this Agreement or any portion
hereof is more restrictive than permitted by the law of the jurisdiction in
which enforcement is sought, this Agreement or such portion shall be limited in
that jurisdiction only to the extent required by the law of that jurisdiction.
If a court of competent jurisdiction shall determine that the terms of this
Agreement are partially or wholly inoperative, unenforceable or invalid in a
particular case because of their time or geographic scope or for any other
reason, such court shall have the power to limit such time or geographic scope
or otherwise to recast the terms of this Agreement in such case as to permit its
enforcement to the greatest extent permitted by applicable law.
(b) Injunctive Relief. In the event of a breach or threatened breach by
-----------------
any of the parties of any of the agreements and obligations set forth herein,
monetary damages or the other remedies at law that may be available to the non-
breaching party for such breach or threatened breach may be inadequate and,
without prejudice to the non-breaching party's right to pursue any remedies at
law or in equity available to it for such breach or threatened breach, including
without limitation the recovery of damages, the nonbreaching party will be
entitled to seek injunctive relief as a means of having the breaching party
comply with the provisions herein.
22
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Section 11.11 Transition Assistance. From the date hereof and until three
---------------------
years after the Closing, Seller shall not in any manner take any action which is
designed, intended or might be reasonably anticipated to have the effect of
discouraging employees, customers, suppliers, lessors and other business
associates from maintaining the same business relationships with Buyer after the
date of this Agreement as were maintained with Seller prior to the date of this
Agreement.
Section 11.12 Non-Compete-, Non-Solicitation.
------------------------------
(a) As a significant inducement of Buyer to enter into and to perform its
obligations under this Agreement, Seller agrees that, for a period of five
years after the Closing Date (the "Non-Competition Period"), neither it, nor any
of its affiliates shall, within 100 miles of DFW (the "Geographical Area")
directly or indirectly, either for themselves or any other person, legal or
natural: (i) engage in the sale of goods or provision of services which are
substantially identical to those goods sold or services provided, as the case
may be, in the Business (or any part thereof) being sold to Buyer hereunder (the
"Restricted Business"), except that the foregoing shall not prohibit Seller from
being a passive owner of not more than 2% of the outstanding stock of any class
of a corporation which is publicly traded, so long as it has no active
participation in the business of such corporation; (ii) offer employment to or
hire any current employee of the Business without the prior written consent of
Buyer; or (iii) solicit or do business with any customer of Buyer who was a
customer of Seller at any time during the one-year period immediately prior to
the Closing Date for the purposes of soliciting or otherwise doing business
substantially identical to, or competitive with, the Business in the
Geographical Area.
(b) If, at the time of enforcement of this Section 11.12 a court shall hold
that the duration, scope or area restrictions stated herein are unreasonable
under circumstances then existing, the parties agree that the maximum duration,
scope or area reasonable under such circumstances shall be substituted for the
stated duration, scope or area.
(c) Seller recognizes and affirms that in the event of breach by it of any
of the provisions of this Section money damages would be inadequate and Buyer
would have no adequate remedy at law. Accordingly, Seller agrees that Buyer
shall have the right, in addition to any other rights and remedies existing in
its favor, to enforce its rights and the obligations of Seller under this
Section 11.12 not only by an action or actions for damages, but also by an
action or actions for specific performance, injunction and/or other equitable
relief without posting any bond or security to enforce or prevent any
violations, whether anticipatory, continuing or future, of the provisions of
this Section including, without limitation, the extension of the Non-Competition
Period by a period equal to (i) the length of the violation of this Section
11.12 plus (ii) the length of any court proceedings necessary to stop such
violation. In the event of a breach or violation by Seller of any of the
provisions of this Section 11.12, the running of the Non-Competition Period, but
not of the obligations of Seller under this 11.12, shall be tolled during the
period during which such occurrence of any alleged breach or violation is
investigated and during the continuance of any actual breach or violation.
23
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Section 11.13 Specific Performance. Seller acknowledges that the Business
--------------------
and the Assets are unique and recognize and affirm that in the event of a breach
of this Agreement by Seller, money damages would be inadequate and Buyer would
have no adequate remedy at law. Accordingly, Seller agrees that Buyer shall
have the right, in addition to any other rights and remedies existing in its
favor, to enforce its rights and the obligations of Seller hereunder not only by
an action or actions for damages but also by an action or actions for specific
performance, injunction and/or other equitable relief, without posting any bond
or security.
Section 11.14 Remittances; Mail. All mail and other communications
-----------------
relating to the Assets, Assumed Liabilities or the Business received by Seller
at any time after the Closing Date shall be immediately turned over to Buyer by
Seller. All mail and other communications relating to the Excluded Assets or
the Excluded Liabilities received by Buyer at any time after the Closing Date
shall be immediately turned over to Seller by Buyer. Each party shall
cooperate with the other, and take such actions as the other party reasonably
requests, to assure that customers of the Business send their remittances
directly to the party which sold the goods or performed the services (goods sold
or services performed pre-Closing to Seller, goods sold or services performed
post-Closing to Buyer), and to assure that remittances from customers of the
Business which are improperly sent to one party are redirected and delivered to
the other in a timely manner.
Seller authorizes and empowers Buyer from and after the Closing Date to
receive and open all mail and other communications received by Buyer, unless on
its face such mail or other communication clearly relates only to the Excluded
Assets or the Excluded Liabilities, and to act with respect to such
communications in such manner as Buyer may elect if such communications relate
to the Business (other than the Excluded Assets or the Excluded Liabilities),
or, if such communications do not relate to the Business, to forward the same
promptly to Seller. Seller and Buyer shall promptly deliver to the other party
any cash, checks or other instruments of payment to which the other party is
entitled following the Closing Date. Seller agrees not to discourage any
individuals who are offered employment by Buyer from accepting employment with
Buyer. No provision in this Agreement shall create any third party beneficiary
or other right in any person for any reason, including, without limitation, in
respect of continued employment by Buyer or in respect of any benefits that may
-- --
be provided by Buyer.
Section 11.15 Warranty Claims. If at anytime after the Closing Date any
---------------
claim is made against Buyer or Seller arising out or resulting from a warranty
made by Seller prior to the Closing Date, Buyer may elect to satisfy such claim.
If such claim is satisfied in a manner and on a basis consistent with Buyer's
ordinary business practices, Buyer shall be entitled to receive proceeds, if
any, from any of Seller's insurance policies applicable to such claim as
reimbursement for the costs to Buyer of the satisfaction of such claim. If
there are no such insurance proceeds or to the extent any such insurance
proceeds are not sufficient to reimburse Buyer fully for the costs of the
satisfaction of such claim, Seller shall pay to Buyer an amount equal to all
such unreimbursed costs.
24
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
set forth above.
TRI-STAR AIRLINE SERVICES, INC.
a Texas corporation
/s/ Lee Sanders
By:______________________________
President
Its:_____________________________
Attest:
/s/ RICHARD L. MORGAN
By:______________________________
Secretary
Its:_____________________________
TRI-STAR ACQUISITION CORP.,
d/b/a SERVISAIR TEXAS, INC.
a Texas corporation
/s/ MICHAEL HANCOCK
By:______________________________
President/C.O.O.
Its:_____________________________
Attest:
By:______________________________
Its:_____________________________
25
<PAGE>
Acknowledged and Agreed To (as to Articles 5 and 9 only):
AVIATION GROUP, INC.
a Texas corporation
/s/ LEE SANDERS
By:______________________________
President
Its:_____________________________
Attest:
/s/ RICHARD L. MORGAN
By:______________________________
Secretary
Its:_____________________________
Acknowledged and Agreed To (as to Articles 6 and 9 only):
SERVISAIR USA, INC.
a Delaware corporation
/s/ MICHAEL HANCOCK
By:______________________________
President/C.O.O.
Its:_____________________________
Attest:
By:______________________________
Its:_____________________________
26
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 369,000
<SECURITIES> 104,000
<RECEIVABLES> 1,298,000
<ALLOWANCES> 0
<INVENTORY> 1,361,000
<CURRENT-ASSETS> 3,825,000
<PP&E> 6,547,000
<DEPRECIATION> 963,000
<TOTAL-ASSETS> 10,010,000
<CURRENT-LIABILITIES> 5,488,000
<BONDS> 715,000
0
0
<COMMON> 36,000
<OTHER-SE> 3,771,000
<TOTAL-LIABILITY-AND-EQUITY> 10,010,000
<SALES> 2,400,000
<TOTAL-REVENUES> 2,400,000
<CGS> 1,634,000
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,798,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 204,000
<INCOME-PRETAX> (1,235,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,235,000)
<DISCONTINUED> 520,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (715,000)
<EPS-BASIC> (.20)
<EPS-DILUTED> (.20)
</TABLE>
