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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1994 Commission File Number: 0-14646
AIRSHIP INTERNATIONAL LTD.
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(Exact name of Registrant as specified in its charter)
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New York 06-1113228
(State of Incorporation) (I.R.S. Employer Identification Number)
7380 Sand Lake Road, Suite 350, Orlando, FL 32819
(Address of Principal Executive Offices) (Zip Code)
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(407) 351-0011
(Registrant's Telephone Number)
Securities Registered Pursuant to Section 12 (b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value per share.
(Title of Class)
Class A Common Stock Purchase Warrant, each warrant entitling the
holder to purchase one share of Common Stock, $.01 par value
(Title of Class)
Class B Common Stock Purchase Warrant, each warrant
entitling the holder to purchase one share of Common
Stock, $.01 par value.
(Title of Class)
Class A 8% Cumulative Convertible Voting Preferred Stock,
par value $.01 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant including Preferred Stock as of August 21, 1997 was $3,967,500.
The number of shares of Common Stock outstanding as of August 21, 1997 was
42,522,778.
Documents Incorporated by Reference: The Company's Proxy Statement, dated
March 20, 1995, is hereby incorporated by reference into this Annual Report on
Form 10-K. A list of Exhibits to this Annual Report on Form 10-K begins on
page ___.
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AIRSHIP INTERNATIONAL LTD.
1994 FORM 10-K REPORT
TABLE OF CONTENTS
PART I
Item 1. BUSINESS...............................................................1
Item 2. PROPERTIES.............................................................9
Item 3. LEGAL PROCEEDINGS......................................................9
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................10
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.........................................11
Item 6. SELECTED FINANCIAL DATA...............................................14
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS...........................................15
Item 8. FINANCIAL STATEMENTS AND SCHEDULES....................................20
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.................................20
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..................21
Item 11. EXECUTIVE COMPENSATION..............................................23
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT .....26
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .....................27
1
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PART I
ITEM 1. BUSINESS
GENERAL
Airship International Ltd. (the "Company") operates
lighter-than-air airships, also commonly known as blimps, which are used to
advertise and promote the products and services of the Company's clients. The
Company currently operates one airship (the "Airship"). The Company's clients
utilize its airships at major sporting and special events and over urban and
beach locations as an informative advertising and promotional vehicle. The
Airship which was operating during 1994 was under an aerial advertising
contract with Anheuser-Busch Companies, Inc. ("Anheuser Busch") to promote
the products of Anheuser-Busch (the "Bud One Airship"). In addition, on
December 15, 1994 the Company and its wholly-owned subsidiary Airship
Operations, Inc. ("AOI") consummated an Aircraft Lease Agreement (the
"Argentina Lease Agreement") and an Airship Operations Agreement (the
"Argentina Operations Agreement"), respectively, with Mastellone Hnos. S.A.
("Mastellone") for the promotion of the products of Mastellone (the "Argentina
Airship"). Subsequently, on May 24, 1995, prior to commencement of operations
of the Argentina Airship and pursuant to an Aircraft Purchase and Lease
Assignment and Assumption (the "Purchase and Assignment Agreement") between
the Company and First Security Bank of Utah, as trustee ("First Security")
for the benefit of Aviation Support Group Ltd. ("Aviation"), the Argentina
Airship was sold and the Argentina Lease Agreement was assigned to First
Security. In consideration for such sale and assignment, First Security
assumed the Company's obligations under the Argentina Lease Agreement.
In addition, the Company had the option, by notifying First
Security prior to December 15, 1995, to repurchase the Airship for 120% of the
out-of-pocket expenses and the assumption of all liabilities incurred by First
Security and Aviation in connection with the Argentina Airship. The exercise
period of such option was extended to January 15, 1996, at which time such
option expired unexercised.
Concurrently with the execution and delivery of the Purchase and
Assumption Agreement, the Company sold to Aviation all of the issued and
outstanding shares of the capital stock of AOI. Mr. Julian Benscher, who held,
indirectly through designees, approximately 4.0% of the Company's common stock,
is an officer and stockholder of Aviation. See "Certain Relationships and
Related Transactions".
In addition to providing clients with aerial advertising and
promotion with its airships, the Company also has acquired assets enabling it to
construct additional airships either to service existing or potential clients of
the Company or for lease or purchase by other parties. To date, the Company has
assembled four airships. In November 1990, the Company acquired a substantial
amount of airship related assets from the receivers of its former competitor,
Airship Industries (UK) Limited ("Airship UK"). The Company believes that this
acquisition enhanced the Company's ability to construct future airships and
maintain its existing fleet. In December 1992 and in 1993, the Company
purchased certain assets (but not the business) of the airship maintenance and
assembly operations (the "Slingsby Assets") of Slingsby Aviation Ltd.
("Slingsby"), a division of ML Holdings Ltd., a United Kingdom company. The
Company believes that the acquisition of these assets has enhanced the
Company's self-maintenance capabilities and reduced maintenance, replacement
and assembly costs.
A maintenance facility in Weeksville, North Carolina that the
Company had rented on a per diem basis was destroyed in a fire during 1995. The
facility was owned by Westinghouse Airship, Inc. ("Westinghouse"), and used as a
storage facility for airship spare parts. As Westinghouse's inventory of such
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spare parts was destroyed, the Company believes that it is currently one of few
available sources in the United States with a significant inventory of such
spare parts.
The Company was incorporated in New York on June 9, 1982 and
commenced operations in August 1985 following the completion of the Company's
initial public offering in June 1985. The Company's principal executive offices
are located at 7380 Sand Lake Road, Suite 350, Orlando, Florida 32819 and its
telephone number is (407) 351-0011. The Company also maintains a small office in
New York, New York.
AIRSHIPS
The Company's Airships were each approximately 194 feet long,
67 feet high and 50 feet wide. Each has an approximate volume of 235,000 cubic
feet and is inflated with helium, a nonflammable gas. The Company's Airships
were among the world's largest commercial airships available for advertising.
The Company's airships, when fully assembled and operational, can
be used as both daytime and nighttime advertising and promotional vehicles. The
Argentina Airship is equipped on both sides with a computerized night sign,
approximately 118 feet long and 29 feet high ("NightSign`tm'"). A NightSign`tm'
is multicolored, contains approximately 8,500 bulbs and is designed to depict
messages, logos, animation, cartoons and other designs. The fast-moving logos
and visual effects, which can be seen from over a mile away, are used for
twilight and night displays. Although not carrying a NightSign`tm', the Bud One
Airship had a fixed NightSign`tm' depicting the client's name.
For daytime advertising, each of the Airships and its ground
support vehicles were generally painted with the name and logo of the respective
client. In addition, the Company's operating personnel wore uniforms carrying
the client's logo or name.
The Company's clients have utilized its Airships as an aerial
ambassador and network- television camera platform for numerous major events.
The Company's clients have utilized its airships at major
sporting and special events (to maximize its exposure as a television
"eye-in-the-sky"), as well as over urban and beach locations, as an innovative
advertising and public relations goodwill ambassador. Generally, the Company's
clients provided the television networks with the use of one of the Airships as
a television camera platform in order to televise major sporting and other
events and in return the client received certain on-the-air advertising exposure
during the event. Although the Company did not receive any direct compensation
for this usage, the Company believes that it benefited from the media coverage
that the Airships received as a result.
Each of the Company's airships was operated by a team employed by
the Company which included U.S. Federal Aviation Administration ("FAA")
certified airship pilots, mechanics, technicians and crew. The team supervised
and executed the flight schedule and activities which the client specified. The
team was supported by specially equipped ground support vehicles owned by the
Company, which were used in the operation and maintenance of the Airships. The
flight schedule of an airship could have included flights over a several hundred
mile geographical area. The Company could accommodate such requirements because
an airship's mooring support facilities are mobile and will travel with the
ground crew to each of the landing sites. The Company believes that this
mobility provides the flexibility for the use of the airships and implementation
of a client's promotional campaign. No specialized facility is required for use
as a landing site.
Historically, substantially all of the Company's revenues have
been derived from the operation of the Airships pursuant to aerial advertising
contracts with its clients. Fees were generally paid to the Company on a monthly
basis and the respective Airships are flown according to a flight schedule
provided by
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the client, subject to weather conditions, government regulations and
maintenance requirements. In the absence of availability of suitable
replacements and/or rights of the Company to terminate outstanding advertising
contracts, Termination of or substantial reduction in fees provided by the
Company's operating Airships has had a material adverse impact on the
Company's revenues.
AERIAL ADVERTISING AND OTHER CONTRACTS
Set forth below are descriptions of the Company's aerial
advertising contracts which were in effect during the fiscal year ended December
31, 1994 (for further detail see "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Comparison of Revenue and
Operating Costs -- 1994 to 1993").
600.05 AERIAL ADVERTISING AGREEMENT. On January 18, 1994,the
Company entered into an Aerial Advertising Agreement (the "600.05 Aerial
Advertising Agreement") with Kingstreet Tours Limited ("Kingstreet Tours") for
the use of an airship (the "600.05 Airship"), to promote Pink Floyd. Pursuant to
this agreement, the 600.05 Airship operated for approximately three months from
March through May 1994. The 600.05 Airship was operated as the Met Life airship
pursuant to an aerial advertising agreement ( the "Met Life Contract") with
Metropolitan Life Insurance Company ("Met Life") from 1989 through October 1993.
On June 20, 1994, subsequent to the termination of the 600.05 Aerial Advertising
Agreement, the 600.05 Airship was damaged in a storm. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
GULF OIL CONTRACT. On May 28,1993, the Company entered into an
Aerial Advertising Agreement, which was amended in October 1993 (the "Gulf Oil
Contract"), with Catamount Petroleum Limited Partnership, ("Catamount" now known
as Gulf Oil Limited Partnership ("Gulf Oil")) for the use of an airship to
promote Gulf Oil Company (the "Gulf Oil Airship"). The Gulf Oil Contract had a
three-year term ending on June 15, 1996 subject to an annual right of
termination by either party; however, pursuant to the terms of the Gulf Oil
Contract, the Gulf Oil Airship was not operated from November 1993 to April 14,
1994 and no operating fees for the Gulf Oil Airship were received by the Company
for this period. The Gulf Oil Airship was then operated from April 15, 1994
until September 11, 1994, when it was damaged in an accident. As a result, as
provided for in the Gulf Oil Contract, Gulf Oil terminated the Gulf Oil Contract
as of October 15, 1994. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
BUD ONE CONTRACT. On March 12, 1992, the Company entered into an
agreement (the "Bud One Contract") with Anheuser-Busch for the use of the Bud
One Airship. In March 1994, the Company and Anheuser-Busch agreed to reduce
flight time and monthly fees under the Bud One Contract by approximately 50%,
effective February 1994 through July 1994 (the "March Amendment").
On July 8, 1994 the Bud One Contract was amended and restated,
pursuant to which amendment the Bud One Airship was to be operated from
September 1, 1994 through December 31, 1996. Thereafter, Anheuser-Busch had the
option to extend the agreement for one year. The airship was to be operated, in
all material respects, in the same manner as it had been operated in the past,
with contract payments being substantially equivalent to those under the Bud One
Contract prior to the March Amendment. The Bud One Contract contained
restrictions on the Company's ability to operate airships for potential clients
which are competitive with Anheuser-Busch.
ARGENTINA AGREEMENTS. On December 15, 1994 the Company and AOI
consummated the Argentina Lease Agreement and the Argentina Operations
Agreement, respectively, with Mastellone, an Argentinean dairy company, for the
promotion of the products of Mastellone.
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Subsequently, on May 24, 1995, prior to commencement of flight
operations of the Argentina Airship and pursuant to the Purchase and Assignment
Agreement, the Argentina Airship and related equipment were sold and the
Argentina Lease Agreement was assigned to First Security. In consideration for
such sale and assignment, First Security assumed the Company's obligations
under the Argentina Lease Agreement. The initial terms of the Agreements were
for a period of four months, and commenced in July 1995. Such initial terms
were extended for a ten-month period by Mastellone pursuant to the provisions
of the Agreements.
In addition, the Company had the option to repurchase the Airship
for 120% of the out-of-pocket expenses and the assumption of all liabilities
incurred by First Security and Aviation in connection with the Argentina
Airship. Such option expired unexercised on January 15, 1995.
SEA WORLD PASSENGER CONTRACT. Following the cessation on June 30,
1993 of its previous contract with Anheuser-Busch covering an airship, (the "Sea
World Airship") and the conclusion of flights thereunder in December 1993, the
Company and Anheuser-Busch entered into a Limited Passenger Airship Agreement,
dated as of January 2, 1994 (the "Sea World Passenger Contract"), pursuant to
which the Company was able to use the Sea World Airship to provide passenger
flights and to display advertising. This contract did not provide for usage fees
or for a monthly operating fee, but permitted the Company to use this airship
while it still Carried Sea World's logos/markings. The term of this agreement
was to expire on December 31, 1994; however, the Company exercised its right
under the contract to voluntarily suspend operations of the Airship in April
1994.
The Company's revenues were historically dependent on the
Company's aerial advertising contracts. For the years ended December 31, 1994
and 1993, 52% and 67%, respectively, of the Company's revenues were derived from
Anheuser-Busch and 29% and 10% respectively, of the Company's revenues were
derived from Gulf Oil. In addition, 19% of 1994 revenues were derived from
Kingstreet Tours, and 23% of 1993 revenues were derived from the Met Life
Contract which was terminated in October 1993. The Company has been adversely
affected during the period between the time that any particular aerial
advertising agreement terminated and the time a new contract commenced.
ACQUISITIONS, LEASES AND FINANCINGS
Set forth below is a description of the Company's financing arrangements
in effect during the year ended December 31, 1994 and for the period from
December 31, 1994 through August 24, 1997.
ORIX LEASE
In 1989 the Company executed, as lessee, an airship lease (the
"Orix Lease") with Orix USA, Inc. then known as Orix Commercial Credit
Corporation ("Orix") for the 600.05 Airship, which provided for an initial three
year term with two three-year renewal options. Pursuant to the Orix Lease, the
Company was obligated to pay a monthly lease payment of $121,000 (through
November 1995), and $35,000 per month from December 1995 to November 1998. As a
result of the termination of the Met Life Contract in October 1993, the Company
and Orix entered into amendments to the Orix Lease in January and May 1994 to
restructure the monthly payments. As a result of the reduced fees under the Bud
One Contract and the suspension of operations of the Gulf Oil Airship, several
required payments were not made. The Company again renegotiated its arrangement
with Orix and in October, 1995, entered into an Amended and Restated Lease
Agreement in the form of a Conditional Sales Contract effective as of June 2,
1995 (the "Amended Lease"). Pursuant to the Amended Lease, the payments to Orix
are $20,000 per month for the first year, $40,000 plus interest per month for
the next 6 months, $60,000 plus interest per month for the next 6 months and
thereafter the greater of $80,000 per month or 50% of annual cash flow for the
proceeding 12 month period. The Amended Lease expires June 2, 2002 at which time
the Company can purchase the Airship for $1.00. The Airship which is the
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subject of the Amended Lease is not currently operational, at it requires a new
envelope. To date, the envelope has not been replaced.
As security for the Company's obligations under the Orix Lease
and the Amended Lease, Louis J. Pearlman, Chairman of the Board, President and
Chief Executive and Operating Officer of the Company ("Mr. Pearlman"), has
personally guaranteed the payment and performance of the obligations of the
Company. In addition, the Company's obligations to Orix are guaranteed by
TransContinental Airlines, Inc., an affiliate of the Company, which received
common stock of the Company in exchange for such guaranty. See "Certain
Relationships and Related Transactions."
WDL LEASE
Pursuant to an agreement effective May 16, 1993 (the "WDL
Lease"), the Company leased from Westdeutsche Luftwerbung Theodor Wullenkemper
GMBH ("Westdeutsche") a used type WDL IB airship equipped with a NightSign`tm'
system. The Company entered into the WDL Lease to procure an airship to fulfill
its obligations under the Gulf Oil Contract when it became apparent that the
proposed acquisition of the assets of Slingsby could not be completed in time to
provide an additional airship to fulfill the Company's obligations under the
Gulf Oil Contract. The Company began operating this airship as the Gulf Oil
Airship on June 25, 1993. On September 11, 1994, the Gulf Oil Airship was
damaged in an accident and its operations ended. As a result of the damage to
the Gulf Oil Airship, the Company sustained a loss of $1,978,000, representing
the cost of the airship less insurance proceeds and credits allowed, including
salvage value, when the airship was returned to WDL in September 1994. At
December 31, 1994, the Company owed WDL a total of $2,866,000 under the WDL
Lease including the $1,978,000 described above plus lease and other operating
costs through September 11, 1994. Pursuant to the WDL Lease, the Company was to
maintain a security deposit of $2,500,000 in a cash account (the "Cash Escrow
Account") with Trans Continental Airlines Inc., an affiliate of the Company
("Trans Continental") (see Note C to the Financial Statements included
elsewhere herein). The Cash Escrow Account, from which the Company may withdraw
its funds at any time upon demand, enabled the Company to maintain a lower
amount of insurance coverage on the Gulf Oil Airship than otherwise would have
been required under the WDL Lease. During the fiscal year ended December 31,
1995, the Company had withdrawn the funds from the Cash Escrow Account to pay
certain obligations owing to WDL. As a result of the payment to WDL of such
funds, the Company is currently indebted to WDL in the approximate amount of
$1,000,000. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
ALLSTATE LOAN
On November 16, 1994, the Company entered into an Aircraft
Collateral Funding Repayment Agreement (the "Allstate Agreement") with Allstate
Financial Corporation ("Allstate"). Pursuant to the Allstate Agreement, on
December 6, 1994, the Company borrowed $1,500,000, (the "Allstate Loan") and as
of December 31, 1994, the Company owed Allstate $1,250,000 plus approximately
$47,000 of accrued interest. The Allstate Loan bore interest at the rate of
37.5% annually and required a minimum payment of $75,000 each month, the first
payment of $75,000 having been made on January 5, 1995. The Allstate Loan was
guaranteed by both Mr. Pearlman and Trans Continental. See "Certain
Relationships and Related Transactions." The guarantors agreed to subordinate
any payments due to them from the Company while the Allstate Loan is
outstanding, and any payments that would otherwise be paid to the guarantors is
to be paid to Allstate and applied against the Allstate Loan.
Subsequently on June 22, 1995 the Allstate Loan was repaid when
Transcontinental Leasing, Inc. ("TLI"), a wholly-owned subsidiary of
Transcontinental Airlines, Inc., ("Transcontinental"), an affiliate of the
Company, entered into a Sale-Leaseback Agreement the ("S/L Agreement") with the
Company pursuant to
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which the Bud One Airship was sold by the Company to TLI for the purchase price
of $2,060,000, which in turn leased such airship back to the Company. TLI
borrowed the purchase price for the airship (the "Phoenixcor Loan") from
Phoenixcor, Inc. ("Phoenixcor"), which was granted a pledge of the lease and a
lien on the Bud One Airship. In addition, the Phoenixcor Loan was guaranteed by
the Company and Transcontinental. The lease payments to be made under the S/L
Agreement are equal to the payments to be made under the Phoenixcor Loan. As TLI
has no source of income other than the rental stream generated by lease of the
airship to the Company, it is likely that a default in such lease payments would
result in TLI's default under the Phoenixcor Loan and a foreclosure by
Phoenixcor of its lien on the Bud One Airship and a potential sale of such
airship.
The Company has entered into an arrangement with Senstar Capital
Corporation, ("Senstar") pursuant to which the sale leaseback arrangement with
TLI has been reversed with the result that the Company reacquired Bud One
Airship and the Company has borrowed a total of $3,500,000 from Senstar (the
"Senstar Loan"), part of which has been used to repay the Phoenixcor Loan.
The loan from Senstar is repayable over 5 years in sixty monthly payments of
approximately $63,371.06 each, with a balance due at the end of the five year
term of approximately $700,000, and is secured by a lien on the Airship and a
guaranty by Transcontinental. The Senstar Loan provided approximately
$1,337,207.31 to the Company after payment of the Phoenixcor Loan. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources".
The Phoenixcor Loan was structured as a sale-leaseback for
financing purposes only.
ADDITIONAL AIRSHIPS; AIRSHIP ASSEMBLY
In addition to providing clients with aerial advertising and
promotion with its airships, the Company also has acquired assets enabling it to
partially construct additional airships either to service existing or potential
clients of the Company or for lease or purchase by other parties. The Company
owns substantial airship replacement components and its experience in airship
assembly includes the assembly of four airships. The airship components that the
Company currently has in inventory, plus approximately $1,000,000 of additional
capital per airship, would enable the Company to construct up to five additional
airships. The Company believes that its inventory of spare airship components
will significantly reduce its cost for initial airship assembly and future
maintenance expenditures, should future clients be obtained. There can be no
assurance, however, that the Company would be able to obtain the financing
necessary to complete construction of any additional airships, or that it would
be able to consummate aerial advertising agreements with respect to any such
airships. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
AIRSHIP OPERATIONS
Operation of the Company's airships is subject to suitable
weather conditions and an absence of mechanical failures, either of which could
damage or destroy an airship. During 1994, the 600.05 Airship was damaged in a
storm while attached to its mast and the Gulf Oil Airship was damaged in an
accident. Airships can be operated only in warm climates. Accordingly, during
the winter months airships can only operate in the southern states and west
coast states. Furthermore, maintenance of an airship requires that it cease
operations for an aggregate of approximately one month each year, including
approximately two weeks of in-hangar maintenance. During 1994, the Company
rented a hangar facility in Weeksville, North Carolina from Westinghouse
Airship, Inc. ("Westinghouse") and used a Santa Ana, California hangar owned by
the U.S. Government for a nominal per diem fee. See "Properties".
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During 1994, each airship's annual in-hangar maintenance was
performed in the late summer by the Company's employees and routine maintenance
was performed on an as-needed basis by the Company's employees wherever the
airship was located. The Company also leases a warehouse in Kissimmee, Florida
which is being used to store spare parts, including the components needed for
additional airships.
MARKETING
The Company markets its airship services directly to potential
clients through a sales effort conducted by its management, including a Director
of Marketing. During 1994, the Company was in negotiations with several
potential new clients, both for aerial advertising contracts and for the
purchase of new airships; none of such contracts or purchases was consummated.
SUPPLIERS
Airships are manufactured by a limited number of suppliers
worldwide. The 600.05 and Argentina Airships were manufactured by Airship UK, a
United Kingdom supplier no longer doing business. The Bud One Airship was
manufactured by Slingsby and assembled by the Company. Due to asset purchases
and expertise described above in "Additional Airships; Airship Assembly," the
Company is in a position to manufacture or assemble up to five additional
airships, subject to financing requirements.
BLIMP PORT USA`tm'
The Company had been to considering the construction of an
airship hangar and maintenance facility to be called "Blimp Port USA,"`tm' which
would be located at a site near its Orlando, Florida base of operations.
Construction of Blimp Port USA`tm' was dependent upon the availability of
additional financing and an increase in the number of aerial advertising
contracts for the Company's airships, none of which materialized. Accordingly,
the Company subsequently determined to forgo any further development of this
project and that the $479,000 it spent in 1993 on architectural design services
for the project should be written off in 1994.
COMPETITION
Historically, the Company's direct competition has been limited
to those companies which have an airship legally permitted to operate in the
United States. The Company competed with Airship Management Service (AMS), the
operator of the Fuji airship, and Icarus Aircraft, Inc. ("IAI"), a
privately-held firm which operates lightships, which are small airships
approximately 1/3 the size of the Company's airships. Currently, IAI is
operating for MetLife. The Lightship Group, Inc. (formerly Virgin Lightships
Inc. and American Blimp Company) owns and operates the smaller airships on
behalf of numerous advertising clients in the United States. MetLife is a former
client of the Company which did not renew its agreement with the Company in
1993, at least in part due to these alternative airship providers.
In addition, Goodyear Tire & Rubber Company ("Goodyear")
manufactures, owns and operates on a regular basis three airships in the United
States. However, for over 30 years Goodyear has used its airships to advertise
only its own products and has not leased or sold its airships to others. It is
unknown at this time whether Goodyear will sell or lease the use of its airships
to other companies or permit such entities to use Goodyear's airships for
advertising.
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In addition to the direct competition with other airship
companies, the Company competes with other forms of aerial advertising, such as
small-scale blimps, hot air balloons, aerostats (tethered blimps), skywriting
and banner towing by fixed-wing aircraft, and with other forms of advertising
and public relations media, such as print (including magazines and newspapers)
and television and radio.
GOVERNMENTAL REGULATION
Operation of airships in the United States is regulated by the
Federal aviation laws of the United States. The Company currently holds all
necessary Federal Aviation Administration ("FAA") and U.S. Department of
Transportation authorizations to operate all of its existing airships, including
a Standard airworthiness Certificate issued by the FAA with respect to each of
the airships. In addition, the Company holds an FAA "Type Certificate" which
certifies that the design for the Company's airships meets air-worthiness
requirements of Federal aviation regulations, and an FAA facilities license
which permits the Company to assemble, repair and maintain airships. However,
there can be no assurance that the federal government will not impose additional
requirements on the operation of airships in the future, which might require the
Company to incur additional expense, or which might otherwise have a material
adverse effect on the Company's operations.
In addition, the Argentina Airship is subject to regulation by the
Argentinean equivalent of the FAA. The Company is currently in compliance with
the requirements of such governmental authority, and anticipates that it will be
able to maintain such compliance in the foreseeable future.
EMPLOYEES
As of March 31, 1995, the Company had approximately 30 full-time
employees, 11 of whom are administrative, 3 of whom are pilots and the balance
of whom are field operating personnel including mechanics and others who have a
high degree of knowledge and expertise in the airship industry as well as field
workers who accompany and maintain the Airships. The number of employees
fluctuates based in part on the number of Airships conducting flight operations.
The Company's employees are not represented by any union. The
Company considers its employee relations to be good.
INSURANCE
There are risks inherent in the ownership and operation of
airships. The Company has maintained insurance in such amounts and for such
coverage as management has determined to be appropriate and as has been required
from time to time under its contracts with Orix and various financing companies
and airship aerial advertisers. Currently, the Company maintains insurance for
its spare parts, as well as property coverage and general liability insurance.
The Company has also maintained Aircraft Hull All Risk Insurance for the periods
when its Airships are operational.
ITEM 2. PROPERTIES
The Company had leased its principal executive offices pursuant
to the terms of a five-year lease, which commenced May 7, 1991 and ended May 6,
1996, for approximately 7,000 square feet in Orlando, Florida, the home base of
the Company. The annual rent under such lease was approximately $132,000. Since
May 7, 1996, the Company has subleased approximately 2,000 square feet of such
facility from
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<PAGE>
<PAGE>
Trans Continental Airlines, Inc. on a month-to-month basis for monthly rental
payments of approximately $1,800. The Company also maintains a small office in
New York City for which it pays minimal rent. In December 1994, the Company
renewed for one year a lease for a warehouse of approximately 5,000 square feet
in Kissimmee, Florida for approximately $15,000 per year. The Company stores
various spare parts for its existing airships at this warehouse and intends to
do so for the foreseeable future.
In May 1991, the Company and Westinghouse entered into a contract
for the Company to use Westinghouse's Weeksville, North Carolina hangar for
repair, renovation, maintenance, and related uses. The Westinghouse facility was
destroyed in a fire during the third quarter of 1995. The Company rents space
as available in Lakehurst, New Jersey, if needed, to perform maintenance and
related functions previously performed at the Westinghouse facility.
ITEM 3. LEGAL PROCEEDINGS
Tenerten and Drake, Inc. On September 15, 1994, Tenerten and
Drake, Inc. ("TDI") filed a complaint against the Company. The complaint alleges
that the Company failed to pay certain sums of money due and owing to TDI under
an agreement to perform advertising and related services for the Company. The
Company filed its answer and raised its affirmative defenses to said complaint
alleging that the services allegedly performed by TDI were defective in numerous
respects. On June 13, 1995, the parties entered into a Settlement Stipulation
whereby the Company agreed to make certain payments to Tenerten and Drake, Inc.
On July 20, 1995, Tenerten And Drake, Inc. filed its Motion for Final Judgment
alleging that the Company failed to make a payment under the Settlement
Stipulation. A Final Judgment was entered against the Company on July 20, 1995.
The Company filed its Notice of Appeal on September 19, 1995 and posted a cash
bond in the amount of $24,190.76. The Company filed Appellant's Initial Brief on
January 8, 1996, contending that the Company's payment was made in a timely
manner as required by the Settlement Stipulation. The Circuit Court of the
Eighteenth Judicial Circuit in and for Seminole County, Florida is reviewing the
Briefs filed by the parties and no opinion has been received as of this date.
Westinghouse. On September 14, 1994, Westinghouse Airships,Inc.
filed a complaint against Airship International Ltd. ("AIL"). The Complaint
alleges that AIL breached an agreement to purchase two Gondolas from WAI.
Specifically, the complaint alleges that WAI delivered both Gondolas at issue
and AIL failed to make certain installments to WAI under the Agreement. The
complaint also alleges that AIL breached a sub-lease to occupy certain hangar
space located at Elizabeth City, North Carolina. On October 31, 1994, WAI filed
its Second Amended Complaint. On November 31, 1994, AIL filed its answer and
raised its affirmative defenses to said complaint alleging payment, fraudulent
concealment by WAI and estoppel. On June 19, 1995, the parties entered into
Defendant's Consent to Entry of Judgment in the amount of $320,240.00. The
Company has paid all sums of money due and owing under said Consent to Entry of
Judgment. On July 27, 1995, a Satisfaction of Judgment was filed with the Court.
Watermark. In January, 1993, a second amended complaint to a
lawsuit, which was initially commenced in March 1991 and subsequently dismissed
twice without prejudice, was filed in the Circuit Court of the State of Florida
against the Company and its President by Watermark Group PLC and Von Tech
Corporation, as general partners of Company Communications (collectively, the
"WNT Plaintiffs") alleging breach of an alleged joint venture agreement
involving Company Communications and Airship Enterprises Ltd. (a company that
was owned by Mr. Pearlman and that was not in any way owned or controlled by the
Company), breach of an alleged agreement by the Company regarding the lease and
operation of a particular airship; and breach of an alleged oral commission
agreement by the Company relating to the Company's acquisition of two airships
it presently owns. The WNT Plaintiffs seek various legal and equitable remedies,
including monetary damages against the Company and Mr. Pearlman in excess of
$800,000 together with a claim for some portion of the advertising revenue the
Company has received, and will continue to receive, from
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<PAGE>
<PAGE>
the operation of some of its airships. On October 3, 1995, the parties entered
into a Mutual Release and Joint Stipulation for Settlement whereby the Company
agreed to make payments to Watermark in the total amount of $40,000. Such
payments were made during 1995 and 1996.
In March 1993, the second amended complaint was dismissed without
prejudice. Since the Company denies any involvement with any of the transactions
set forth in the second amended complaint, the Company believes that its
liability, if any, on the claims made by the WNT Plaintiffs will not be
material.
Sequel. In November 1992, Sequel Capital Corporation ("Sequel")
filed an action against the Company asserting breach of an alleged contract to
enter into a sale lease back agreement and a claim of fraudulently inducing
Sequel to make a loan to the Company. Such action sought damages in excess of $3
million from the Company and Louis J. Pearlman, its President. In July 1993, the
Federal District Court in Chicago entered a judgement on the jury verdict in the
amount of $602,000 in favor of Sequel. In September 1993 the Company settled
this lawsuit for the amount of $386,000. Total expenses after legal fees and
other related costs were $742,000, which amounts were paid and expensed during
1993.
Capital Funding Group Ltd. In February 1992, Capital Funding
Group Ltd. ("CFG") commenced an action against the Company and others in excess
of $1,000,000 in damages based on the alleged failure by the Company to provide
adequate collateral and security in connection with certain alleged financial
agreements with CFG. The Company retained CFG in July 1991, paid a commitment
fee (which was written off in 1991) and received a commitment from CFG which
then failed to provide the funding. The Company and the other defendants
answered the complaint in February 1992 by denying all of the substantive
allegations and asserting several affirmative defenses. In addition, the
Company asserted certain counterclaims against CFG and its two principals for
breach of a commitment letter pursuant to which CFG was to arrange for a
$9 million loan to the Company, breach of a compromise agreement accepted
by CFG in January 1992, pursuant to which CFG was to provide funding to the
Company in the amount of $7 million, breach of an escrow agreement, pursuant
to which CFG was to return $200,000 of the commitment fee paid by the Company
and various other counterclaims. In March 1993, the Company was awarded a
default judgment of $8,000,000 against CFG and the complaint against the
Company was dismissed. No balances have been returned to the Company as of
December 31, 1994.
Due to the weakening financial position of the Company at the time, the
Company was unable to complete its audit for the year ended December 31, 1994 or
to conduct audits for the years ended December 31, 1995 and 1996. Accordingly,
the Company had not filed any periodic reports pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, for the quarterly and annual
periods ended December 31, 1994 through March 31, 1997 or any Current Reports on
Form 8-K during such periods until July 11, 1997, on which date the Company
filed its Current Report on Form 8-K reporting a change of accountants. On July
18, 1997, the Company entered into a Consent and Undertaking with the Securities
and Exchange Commission pursuant to which the Company agreed, among other
things, to file this Annual Report on Form 10-K, Annual Reports on Form 10-K for
the years ended December 31, 1995 and 1996 and all reports due under Sections 13
and 15 of the Securities Exchange Act of 1934, as amended, for all subsequent
periods. Judgement was entered on August 21, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of stockholders for the year ended
December 31, 1993 was held on January 6, 1994. In connection with such meeting,
a proxy statement was sent to the Company's stockholders with respect to the
following items: (1) election of the Company's Board of Directors (2)
ratification of Grant Thornton, as independent accountants of the Company, for
the fiscal year ended December 31, 1993.
At the meeting, the Company's directors were elected. For Louis
Pearlman 26,122,020 shares were voted for and 463,159 shares were withheld, for
Roy Belotti 26,116,454 shares were voted for and 468,725 shares were withheld;
for Marvin Palmquist 26,115,863 shares were voted for and 469,316 shares were
withheld for James Ryan 26,124,454 shares were voted for and 460,725 shares were
withheld; and for Alan Siegel 26,126,574 shares were voted for and 458,605
shares were withheld. The appointment for Grant Thornton as the Company's
independent accountants for the fiscal year was approved with 26,060,801 shares
being cast for, 373,979 shares cast against, 114,899 shares abstaining, and
35,500 shares not voted.
The Company's annual meeting of stockholders for the year ended
December 31, 1994 was held on April 11, 1995. In connection with such meeting, a
proxy statement was sent to the Company's stockholders with respect to the
following items: (1) election of the Company's Board of Directors (2)
ratification of Grant Thornton, as independent accountants of the Company, for
the fiscal year ended December 31, 1994. (3) approval of a reverse stock split
pursuant to which 100 shares of the Company's Common Stock would be combined
into one share of Common Stock and 100 shares of the Company's Preferred Stock
would be combined into one share of Preferred Stock (the "Reverse Stock Split");
(4) adoption of an Employee Share Purchase Plan of the Company to be effective
as of November 1, 1994 (the "Share Purchase Plan") and (5) approval of a
proposal to issue options to purchase Common Stock to certain employees of the
Company (the "Employee Options").
At the meeting, the Company's directors were elected. For Louis
Pearlman 18,396,603 shares were voted for and 1,266,328 shares were withheld,
for Roy Belotti 18,510,594 shares were voted for and 1,152,337 shares were
withheld; for Marvin Palmquist 18,540,217 shares were voted for and 1,122,714
shares were withheld; for James Ryan 18,554,134 shares were voted for and
1,108,747 shares were withheld; and for Alan Siegel 18,556,117 shares were voted
for and 1,106,814 shares were withheld. The appointment for Grant Thornton as
the Company's independent accountants for the fiscal year was approved with
18,487,369 shares being cast for, 526,545 shares cast against and 648,908 shares
abstaining. The Reverse Stock Split was defeated, with 11,517,471 shares being
cast for, 7,487,272 shares cast against, and 498,213 shares abstaining.
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<PAGE>
The Employee Share Purchase Plan was approved, with 16,677,446 shares being cast
for, 2,487,272 shares cast against and 498,213 shares abstaining. The issuance
of the Employee Options was approved, with 14,465,208 shares being cast for
4,653,011 shares cast against and 544,712 shares abstaining.
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<PAGE>
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock, Preferred Stock, Class A Warrants and
Class B Warrants had been listed on the Nasdaq SmallCap Market under the symbols
BLMP, BLMPP, BLMPW and BLMPL, respectively, until Nasdaq's delisting of the
Company's securities on July 5, 1995 (the "Delisting") as a result of the
Company's failure to timely file this Annual Report on Form 10-K. Since the
Delisting, the Company's Common Stock and Preferred Stock have traded on the
over-the-counter market under the symbols "BLMPE" and "BLMPPE," respectively.
The price ranges presented below represent the highest and lowest quoted bid
prices during each quarter reported by the Nasdaq SmallCap Market for periods
prior to the Delisting and periods subsequent to the quarter of 1995, and as
obtained from the National Quotation Bureau, Inc for the third quarter of 1995.
The Nasdaq quotes represent prices between dealers and do not reflect mark-ups,
markdowns or commissions and therefore may not necessarily represent actual
transactions.
Common Stock:
<TABLE>
<CAPTION>
1994 High Bid Low Bid
---- -------- --------
<S> <C> <C>
1st Quarter $ 9/8 $ 5/16
2nd Quarter $ 5/16 $ 1/8
3rd Quarter $ 5/32 $ 3/32
4th Quarter $ 1/8 $ 1/16
<CAPTION>
1995 High Bid Low Bid
---- -------- --------
1st Quarter $.125 $.0625
2nd Quarter $.0625 $.03125
3rd Quarter* N/A N/A
4th Quarter $.125 $.3125
<CAPTION>
1996 High Bid Low Bid
---- -------- -------
1st Quarter $.03125 $.03125
2nd Quarter $.03125 $.04
3rd Quarter $.1 $.04
4th Quarter $.085 $.05
</TABLE>
- --------
* Prior to the Delisting. Price ranges during the third quarter of 1995
include quotations on NASDAQ SmallCap Market up to such date. The Common
Stock and the Preferred Stock are currently traded on the Nasdaq OTC
Electronic Bulletin Board.
N/A Not available.
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<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1997 High Bid Low Bid
---- -------- -------
<S> <C> <C>
1st Quarter $.19 $.08
2nd Quarter $.2 $.09
Preferred Stock:
<CAPTION>
1994 High Bid Low Bid
---- -------- -------
1st Quarter $3 1/4 $2 9/16
2nd Quarter $2 1/2 $1 1/6
3rd Quarter $1 5/32 $2 5/32
4th Quarter $1 3/16 $ 5/16
<CAPTION>
1995 High Bid Low Bid
---- -------- -------
1st Quarter $.59375 $.40625
2nd Quarter $.46875 $.375
3rd Quarter* N/A N/A
4th Quarter N/A N/A
<CAPTION>
1996 High Bid Low Bid
---- -------- -------
1st Quarter
2nd Quarter $1 5/8 $3/8
3rd Quarter $.71875 $.385
4th Quarter $.59375 $.28125
<CAPTION>
1997 High Bid Low Bid
---- -------- -------
1st Quarter $1.125 $.51
2nd Quarter $1.09375 $.53125
Class A Warrants:
<CAPTION>
1994 High Bid Low Bid
---- -------- -------
1st Quarter through February 6, 1994, at which time
the Class A Warrants expired $ 1/32 $ 1/32
</TABLE>
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<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Class B Warrants:
1994 High Bid Low Bid
---- -------- -------
<S> <C> <C>
1st Quarter $ 1/16 $ 1/32
2nd Quarter. The Class B Warrants
expired on February 6, 1995. $ 1/32 $ 1/32
</TABLE>
As reported by the Nasdaq OTC Bulletin Board, on August 21, 1997
the closing bid price of the Common Stock was $0.081 per share and the closing
bid price of the Preferred Stock was $0.38.
As of August 21, 1997, there were 1,496 holders of record of the
Company's Common Stock and 83 holders of record of the Preferred Stock,
respectively.
No dividends were declared or paid on the Common Stock during the
foregoing periods and the Company does not anticipate paying any dividends on
its Common Stock in the foreseeable future.
Dividends on the Preferred Stock are payable quarterly on
February 15, May 15, August 15 and November 15 of each year (each such date a
"Dividend Payment Date") and accrue at the annual rate of $.48 per share, to the
extent payable in cash and $.60 per share, to the extent payable in shares of
Common Stock. The first four dividend payments were paid 50% in cash and 50% in
registered shares of Common Stock computed on an annual basis, the last such
dividend payment being made on February 15, 1994. The cash portion of such
dividend payments was paid with a portion of the proceeds of the 1993 Offering,
which had been reserved for such purposes. Beginning May 15, 1994, dividends
were payable in cash from the available cash derived from the adjusted earnings
of the Company for the fiscal quarter immediately preceding the Dividend Payment
Date to the extent available, according to a formula based on adjusted earnings.
Such formula provides that the available cash will be determined as one half of
the difference between airship operating revenues and the sum of operating
costs, interest and principal payments on debt, selling, general and
administrative expenses (limited to a ceiling based on historical numbers with
stated annual percentage increases thereafter) and airship related capital
expenditures (limited to $2,000,000 in any given year). The components of the
above formula are to be determined in accordance with generally accepted
accounting principles as applied in the Company's financial statements as filed
with the Securities and Exchange Commission (the "Commission"). At its option,
the Company may pay cash dividends in excess of the available cash determined by
the above formula. The May 15, 1994 dividend was paid in registered shares of
Common Stock. The Company has deferred and accrued the cash dividend on the
Preferred Stock due on August 15, 1994 and subsequent quarterly dividends until
a later payment date. The Company does not anticipate paying such dividends in
the near future, and intends to continue to defer and accrue such dividends.
Concern has been expressed by management and various shareholders
of the Company over the dilutive effects of issuances of shares of Common Stock
in payment of dividends accrued on the Preferred Stock. The Company is currently
exploring possible alternatives to such issuances, including submitting to the
Company's shareholders a proposal to amend the terms of the Preferred Stock.
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<PAGE>
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA [1994 NUMBERS MUST BE REVISED BASED UPON AUDIT
NUMBERS.]
The following selected financial data should be read in
conjunction with the Company's financial statements and related notes and
Management's Discussion and Analysis of Financial Condition and Results of
Operations appearing elsewhere herein.
OPERATING STATEMENT DATA:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------
1994 1993 1992 1991 1990
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gross Revenue $ 3,972,000 $ 9,748,000 $ 7,258,000 $ 7,015,000 $ 4,693,000
Net Income (loss) before cumulative
effect of a change in accounting
principal $(10,945,000) $ (5,406,000) $ 1,165,000 $ (4,418,000 $ (3,356,000)
Net Income (loss) $(10,945,000) $ (5,406,000) $ 1,165,000 $ (4,418,000) $ (4,498,000)
Net Income (loss) Per Share
applicable to Common Stockholders:
Before cumulative effect of a change
in accounting principle $(0.41) $(0.24) $0.05 $(0.31) $(0.48)
Net Income (loss) $(0.41) $(0.24) $0.05 $(0.31) $(0.65)
BALANCE SHEET DATA:
<CAPTION>
At December 31,
--------------------------------------------------------------------------------
1994 1993 1992 1991 1990
--------------------------------------------------------------------------------
Total assets $ 19,384,000 $ 26,077,000 $ 21,690,000 $ 16,536,000 $ 14,315,000
Long term debt, excluding current
maturities $ 1,126,000 $ 2,380,000 $ 12,394,000 $ 4,580,000 $ 7,915,000
Total liabilities $ 12,084,000 $ 7,842,000 $ 12,394,000 $ 13,909,000 $ 14,170,000
Stockholders' equity $ 7,300,000 $ 18,235,000 $ 9,296,000 $ 2,627,000 $ 145,000
Book value per common share $(0.23) $0.13 $0.36 $0.15 $0.02
</TABLE>
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<PAGE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GOING CONCERN AND MANAGEMENT'S PLANS
As shown in the accompanying financial statements, the Company has
experienced significant operating losses and negative cash flow from operations
in recent years and has an accumulated deficit of $39,977,000, at December 31,
1994. During the year ended December 31, 1994, the Company generated revenues
from airship operations; however, it reported a net loss of $20,645,000 and has
negative working capital of $9,754,000. These conditions raise substantial doubt
about the Company's ability to continue as a going concern.
Management's plans to improve the financial position and operations with
the goal of sustaining the Company's operations for the next twelve months and
beyond include:
Arranging with Trans Continental Airlines, Inc. or other related parties
common directorship and ownership, to provide funds on a monthly basis as a loan
and acquiring assets and operations of one or more entities, with which the
Company has been in negotiation. The expectation is that such business
combination, if completed, would provide additional cash flow and net income to
the Company.
Though management believes the Company will secure additional capital
and/or attain one or more of the above goals, there can be no assurance that any
acquisition, financing or other plan will be effected. Any acquisition or
securities offering is subject to the Company's due diligence, the state of the
general securities markets and of the specific market for the Company's
securities, and any necessary regulatory review.
While the Company believes that its plans for additional funding or
possible business combination have the reasonable capability of improving the
Company's financial situation and ensuring the continuation of its business,
there can be no assurance that the Company will be successful in carrying out
its plans and the failure to achieve them could have a material adverse effect
on the Company.
OVERALL FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, WHICH CONTEMPLATE
CONTINUATION OF THE COMPANY AS A GOING CONCERN. For its year ended December 31,
1993, the Company incurred a loss of $5,406,000 and had negative cash flows of
$2,956,000 from operations. For its year ended December 31, 1994, the Company
incurred a loss of $20,645,000 and had negative cash-flows of $2,144,000 from
operations. The accompanying financial statements do not include any adjustments
that might result from the Company's current liquidity shortage, including any
adjustments relating to the values that would be realized from the Company's
assets.
The Company's stockholders' deficit at December 31, 1994 was
$3,861,000, a decrease of $21,500,000 from stockholders' equity of $18,235,000
at December 31, 1993. The decrease was due primarily to the net loss of
$20,645,000 in fiscal 1994. Issuance of Common Stock less the payment of cash
dividends on Preferred Stock decreased equity by $852,000. As a result of
these equity changes, during 1994 the Company's assets decreased $16,300,000
while liabilities increased $5,300,000. Compared to the year ended December 31,
1993, revenues, selling, general and administrative costs decreased 59.3% and
27.7%, respectively, while operating costs increased 75.2%. Interest expense
less other income for 1994 was $599,000, an increase of $77,000 or 14.8%.
In 1993 the Company incurred a nonrecurring cost of $741,000 in connection
with the settlement of a lawsuit by a lender and related expenses and a
$478,000 cost on disposition of airship components, while in 1994 the Company
incurred losses of $3,443,000 when two airships were damaged. These changes in
revenues and costs, as explained in more detail below, resulted in a net loss
for fiscal 1994 of $20,645,000 compared to a net loss of $5,406,000 in fiscal
1993.
The Company continues to experience negative cash flows from
operating activities. Cash flow was adversely affected in 1994 through the
termination, at the end of 1993, of contracts relating to the Met Life and Sea
World Airships, and through the temporary cessation of flights and fees under
the Gulf Oil Contract and its subsequent termination in 1994, as well as by the
modification in certain terms of the Bud One Contract pursuant to the March
Amendment. Cash flows for 1995 will also be adversely affected by the
termination of the Gulf Oil Contract as liabilities at December 31, 1994 related
to its termination and the damage to the Gulf Oil Airship approximates
$3,220,000.
The Company has made changes in its management, office and
airship crew operations (the "Restructuring"). The Restructuring includes the
reduction of salaries of certain of its management, office, and operations
personnel ("Personnel"); the reduction of Personnel; the reduction of insurance
costs and the reduction of recurring costs throughout its operations;
(collectively, the "Cost Savings"). Certain of the Restructuring considerations
were the result of the cessation of operations under both the 600.05 Aerial
Advertising Agreement and the Sea World Passenger Contract. Additional Personnel
reductions were made, and operating costs ceased, when the Gulf Oil Airship was
destroyed in an accident on September 11, 1994.
Comparison of Revenue and Operating Costs 1994 to 1993.
Airship revenues for 1994 were $3,980,000, a decrease of
$5,776,000 (or 59.2%) compared to revenues of $9,748,000 for 1993, primarily due
to $3,454,000 of decreased revenues from the Sea World Airship contract which
terminated on December 31, 1993. In addition, monthly fees under the Bud One
Contract were reduced for a period of six months effective February 1994. The
600.05 Airship, formerly the
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<PAGE>
<PAGE>
Met Life airship, operated for only three months during 1994, while the Met Life
airship operated for six months during 1993, reducing revenues for 1994, as
compared to 1993. These decreases were partially offset by approximately four
months of revenues earned from operating the Gulf Oil Airship in 1994 compared
to its operation for just over three months during 1993 when operations of that
airship first began.
Operating costs for 1994 were $17,453,000, an increase of
$7,488,000 or 75.2% compared to 1993. This increase was primarily due to a
write down in its airships and airship components by $9,634,000. See
Note A to the financial statements "Impairment of Long-Lived Assets."
Costs to operate the 600.05 Airship until it was damaged on June 20, 1994,
primarily in connection with the 600.05 Aerial Advertising Agreement, were
$1,349,000 lower than costs to operate that airship during 1993 under the
former Met Life contract. The cost savings resulted primarily from a
decrease in costs to operate the Bud One Airship of $710,000,or 34% compared
to the 1993 fiscal year. Costs to operate the Sea World Airship declined
61% or $1,471,000 compared to the 1993 fiscal year as it began limited
operations under the Sea World Passenger Contract beginning January 1994. These
cost reductions were offset in part by cost increases resulting primarily from
operation and lease of the Gulf Oil Airship of $231,000, and secondarily due to
increased warehouse costs of $69,000, related to depreciation on airship
components purchased during 1993. In addition, increased depreciation charges of
$1,156,000 related to changes in accounting estimates and writedowns of $479,000
related to construction in progress were taken during 1994.
Selling, General and Administrative expense Comparison 1994 to 1993.
Selling, general and administrative costs were $2,480,000 for
1994, a decrease of $1,841,000 or 30.2% compared to 1993, primarily due to the
non-recurrence of accounting, legal and other costs incurred in 1993 related to
the Company's public offering of its Preferred Stock (the "1993 Offering") and
the acquisition of the Slingsby Assets ($687,000). The Cost Savings reduced
salaries and certain other costs by approximately $710,000. These savings were
partially offset by restructuring costs of $135,000 and a net increase in other
costs, primarily in connection with late fees incurred with respect to the Orix
Lease plus costs incurred in connection with the Allstate Loan. Such costs
resulted from the Company's liquidity shortage. See "Liquidity and Capital
Resources", below.
Interest Expense
Interest expense in 1994 was $805,000, a decrease of $108,000 or
12.4% compared to 1993. Debt that was fully repaid in 1993 reduced interest
costs by $102,000 in 1994 compared to 1993. Interest costs related to the Orix
Lease and Mr. Pearlman's loan to the Company decreased $88,000 compared to 1993
as payments were made in both 1993 and 1994, (including the reduction of Mr.
Pearlman's loan in connection with the June 1993 Loan. See "Certain
Relationships and Related Transactions"). These decreases were partially offset
by interest costs related to the Allstate Loan and the short term loans from
private investors received and repaid in 1994 (See Note E to the Financial
Statements included elsewhere herein). Ongoing interest expense, at the end of
1994, relates to the Orix Lease plus other loans payable and capital leases,
mainly for vehicles, the loan from Mr. Pearlman and the Allstate Loan.
Other Income (Expense)
Interest and other income in 1994 was $206,000, a decrease of
$185,000 or 47.3% compared to 1993. In 1993, proceeds from the 1993 Offering
were placed in certificates of deposit and utilized throughout 1993 and
interest was earned in 1993 on a receivable related to a sale of airship
components in 1992.
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<PAGE>
<PAGE>
Comparison of Revenue and Operating Costs 1993 to 1992.
Revenues for 1993 were $9,748,000, an increase of $2,490,000 or
34.3% compared to revenues of $7,258,000 for 1992. The increase was primarily
due to (i) revenues from the operation of the Bud One Airship for all of 1993
compared to its use as the Bud One Airship beginning May 1992 and as a passenger
airship during the first quarter of 1992; (ii) revenues from the operation of
the Gulf Oil Airship for approximately fourteen weeks between June and October
1993; (iii) revenues from the operation of the Met Life Airship until its
contract ended in October 1993, compared to its operation for approximately four
and one-half months in 1992 as the airship was in the hangar for repairs due to
damage, plus (iv) increases in monthly revenues from operation of the Sea World
Airship.
Operating costs in 1993 were $9,964,000, an increase of
$3,465,000 or 53.3% compared to 1992. Operation of the Gulf Oil Airship began in
1993 increasing costs by $2,014,000. Gulf Oil Airship costs included (i)
$451,000 of net costs (after $100,000 was reimbursed to the Company by
Catamount) to ship the airship from Germany and assemble it in the United
States; (ii) $450,000 of lease payments on the airship from the time it was
shipped from Germany until the end of 1993, representing approximately thirty
one weeks compared to its operation for Catamount for fourteen weeks. The
Company also maintained a full operating crew for the Gulf Oil Airship through
the end of 1993. As a result of these costs, the 1993 operating costs for the
Gulf Oil Airship exceeded 1993 revenues by $1,042,000.
Operation of the Met Life airship increased operating costs by
$855,000 or 53.4% in 1993 compared to 1992, mainly as a result of the airship
being in the hangar for repairs from June 1, 1992 until October 15, 1992, for
which time the Company received insurance proceeds of $585,000 for loss of use
of the airship. The Company maintained a full operating crew through the end of
1993 since these employees were subsequently needed to operate the airship under
the 600.05 Aerial Advertising Agreement in 1994. As a result of these net cost
increases and reduced revenues in 1993 when the Met Life Contract ended,
operating costs for the Met Life airship, including non-cash depreciation
charges of $469,000, exceeded revenues by $180,000.
Operating costs for the Sea World Airship increased by $242,000,
or 11.2%, compared to 1992, including $83,000 in increased insurance costs due
to the addition of loss of use coverage in 1993. For 1993, revenues exceeded
operating costs (including non-cash depreciation charges of $270,000) by
$1,053,000. The Sea World contract had ended on June 30, 1993 and the airship
was operated under the terms of the expired contract until December 31, 1993
when such operations terminated.
Operating costs for the Bud One Airship in 1993 were similar to
those in 1992 when the airship was utilized as both a passenger airship and as
the Bud One Airship beginning May 1992. Cost increases for normal maintenance of
the airship plus insurance, including the addition of loss of use coverage, were
offset by travel cost reimbursements beginning February 1993.
Space rented at warehouse facilities in North Carolina and
Florida increased costs by $373,000. These increases were mainly for payroll
costs to service the airships, including the Gulf Oil Airship added in 1993,
plus travel costs related to the acquisition of the Slingsby Assets. Airship
components, parts and equipment purchases, including the acquisition of the
Slingsby Assets in 1993 and the assets acquired in 1990 from Airship UK,
resulted in a major increase in airship components and spare parts that are
being stored. As a result, depreciation and insurance related to warehouse
operations increased a total of $196,000.
Selling, General, and Administrative Expense Comparison 1993 to 1992.
These costs were $3,449,000 in 1993, an increase of $1,040,000 or
43.2% compared to 1992. Costs associated with the delay in filing the Company's
annual report on Form 10-K for the year ended
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<PAGE>
<PAGE>
December 31, 1992, mainly for accounting professional services, plus increases
related to the change in accountants, increased costs approximately $350,000.
Costs incurred with respect to the 1993 Offering increased costs by $112,000,
mainly for travel, as compared to costs incurred during 1992 related to previous
registration statements filed by the Company. Legal suits increased costs
$69,000 and consulting fees related to the acquisition of the Slingsby Assets
increased costs by $135,000. All other costs increased $374,000, or 15.5%. The
primary increases in these other costs relate to (i) payroll ($233,000),
including the addition of a sales manager and a manager for the Company's
merchandising and mini blimp promotion programs, plus increases in health
insurance and an average increase of 5.3% in all other payroll related costs;
(ii) travel costs ($80,000), related to increased corporate activity including
the acquisition of the Slingsby Assets, the operation of the Gulf Oil Airship
and the related WDL Lease, (iii) a net increase in all other administrative
costs ($67,000), related to the increased corporate activity plus increased rent
costs.
Inflation.
Since the formation of the Company in August 1985, the rate of
inflation has remained low and the cost of the Company's operations has not been
significantly affected by inflationary trends in the economy. The Company has
incorporated adjustments for inflation in its contract with Anheuser-Busch.
Liquidity and Capital Resources.
In 1993 the Company completed the 1993 Offering, obtaining net
proceeds of approximately $14,471,000. The 1993 Offering proceeds have been
utilized to date: to repay short term debt ($3,600,000) and related interest
($120,000), for architectural and design services for Blimp Port USA(TM)
($479,000); to acquire parts for the assembly of an additional airship,
including a Nightsign(TM) ($823,000); to acquire additional airship assets
($2,500,000); to fund a portion of dividend payments on the Preferred Stock
($600,000); and for working capital ($1,455,000). Of the 1993 Offering proceeds
to be used for the purchase of land and a hangar for Blimp Port USA(TM) a
significant portion had been used instead for working capital purposes due to
net losses sustained by the Company.
The Company continues to experience negative cash flows from
operating activities. During 1994, the Company sustained a net change in cash
and cash equivalents of ($623,000), with a reduction of $2,070,000 from
operating activities. At December 31, 1994, available cash balances were
represented by the $542,000 in cash plus $1,809,000 in funds contained in the
Cash Escrow Account. The balance of the funds in the Cash Escrow Account were
subsequently used by the Company to repay certain obligations owing to WDL. See
"Business--WDL Lease". Cash flow has been adversely affected by the temporary
cessation in November 1993 of flights and fees under the Gulf Oil Contract which
recommenced on April 15, 1994 and which ended on September 11, 1994, the
cessation of flights and fees under the 600.05 Aerial Advertising Agreement in
April 1994, and by the changes in terms of both the Sea World and Bud One
Contracts.
The Gulf Oil Airship did not recommence operations until April
15, 1994, causing an approximate $650,000 negative cash flow. The accident
involving the Gulf Oil Airship and its subsequent suspension of operations on
September 11, 1994 resulted in a further negative operating cash flow for 1994
of approximately $400,000. The Gulf Oil Airship was returned to WDL in September
1994. Approximately $610,000 of the negative cash flow sustained in connection
with the Gulf Oil Airship during 1994 resulted from rental and other costs due
WDL. Including similar costs for 1993, the Company owed WDL $2,866,000 at
December 31, 1994 including $1,978,000 representing the loss incurred when the
Gulf Oil Airship was damaged. The Company will not incur additional operating
cash costs relating to the Gulf Oil Airship. However, the Company's liability to
WDL at December 31, 1994 was $2,866,000. Of such amount, approximately
$1,800,000 was repaid to WDL from the Cash Escrow Account during 1995, leaving a
balance owing from the Company to WDL of approximately $1,000,000.
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<PAGE>
<PAGE>
The Sea World Airship commenced limited operations under the Sea
World Passenger Contract, causing a $659,000 negative cash flow during 1994,
including maintenance costs when it was disassembled for shipment to Argentina
for use as the Argentina Airship. The 600.05 Airship was operated under an
aerial advertising contract only during ____ months of 1994, causing a $128,000
negative cash flow for 1994. The 600.05 Airship was disassembled in June 1994,
and ongoing cash costs will be minimal for this airship.
The Company's negative cash flow for 1994 was $622,000. Operating
activities utilized $2,144,000 principally as a result of the net loss for the
period, which includes non-cash charges of approximately $14,122,000. In
addition, the change in operating assets and liabilities offset the negative
cash flow effect of the net loss by approximately $4,379,000 as liabilities
at December 31, 1994 increased to approximately $13,070,000. All but
approximately $1,000,000 of these liabilities are payable in 1995. Investing
activities contributed $455,000 in the form of funds taken from the Cash Escrow
Account. Financing activities contributed $1,067,000 principally from proceeds
of the Allstate Loan, partially offset by the payment of dividends and
repayment of loans.
The Company has not had existing bank lines of credit available
to provide additional working capital due to the Company's negative cash flow
and existing encumbrances on assets, and has previously received substantial
financing from Mr. Pearlman in the form of loans and guarantees which supplement
the funds available from the Company's operations. There can be no assurance
that Mr. Pearlman will make additional cash advances or loans or give personal
guarantees if the Company requires additional capital. At December 31, 1994, the
Company owed Mr. Pearlman $950,000 net of unauthorized discount and after
offsetting $785,000 with respect to a loan made by the Company and guaranteed by
Mr. Pearlman. As of December 31, 1994, the Company owed Mr. Pearlman $950,000
net of unamortized discount. The entire unpaid principal balance of the loan
from Mr. Pearlman, together with all accrued and unpaid interest, becomes due
and payable on May 31, 1997.
In addition, Trans Continental has guaranteed the Company's
obligations under the Allstate Loan and the Phoenixcor Loan. In consideration
for these and other guarantees of the Company's obligations, Trans Continental
has been granted 10% of the issued and outstanding common stock of the Company.
See "Certain Relationships and Related Transactions." There can be no assurance
that Trans Continental will continue to guaranty the Company's obligations in
connection with any future financings.
The Company is currently taking steps to improve its liquidity.
On July 8, 1994, the Bud One Contract was amended, as explained in Note I to
the Financial Statements included herein, on terms more favorable to the Company
than those contained in the March Amendment. In addition, the Company has
renegotiated the Orix Lease, and has completed refinancing of the Phoenixcor
Loan. See "Business-Acquisitions, Leases and Financings." Cost Savings in
operations and administration were instituted in 1994. Management has
eliminated its hull insurance on certain airships and continues to attempt
to renegotiate certain long term obligations. In addition, the Company
anticipates decreases in ongoing costs resulting from the acquisition in 1993
of certain airship assets, and is seeking new aerial advertising contracts,
although there can be no assurance that these anticipated results will be
achieved.
To date the Company has never paid a dividend on its Common Stock
and does not anticipate paying one on its Common Stock in the foreseeable
future.
Dividends on the Company's Preferred Stock are payable in cash to
the extent of available cash derived from the adjusted earnings of the Company
for the fiscal quarter immediately preceding the Dividend Payment Date
(according to a formula based on adjusted earnings). The Company has deferred
and
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<PAGE>
<PAGE>
accrued the cash dividend on the Preferred Stock due on August 15, 1994, and all
subsequent quarterly dividend payment dates, until a later payment date.
ITEM 8. FINANCIAL STATEMENTS AND SCHEDULES
The report of the Company's Independent Auditor, Financial
Statements, Notes to Financial Statements and Financial Statement Schedules
appear herein commencing on Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On May 27, 1993, the Company and Wiss & Co. ("Wiss"), mutually
agreed that Wiss would no longer serve as the Company's outside auditors. The
Company had determined that in light of the fact that it is a growing public
company, it would be more appropriate to seek a larger, full-service national
accounting firm to serve as its outside auditors. This decision was approved by
the Company's Board of Directors.
On August 23, 1993, the Company engaged Grant Thornton as its new
independent accountants. In April 1993, pursuant to discussions between the
Company and its former independent auditor, the Company engaged Grant Thornton
to examine the issue of revenue recognition described below. The Company and
Wiss subsequently reached an agreement on this matter before Grant Thornton was
in a position to reach a conclusion. Accordingly, no oral advice or written
opinions on the issue in dispute were given by Grant Thornton.
For further information relating to the replacement of Wiss by
Grant Thornton, including an exchange of letters between Wiss and the Company,
see the current Report on form 8-K-A filed by the Company with the Commission on
July 12, 1993.
In connection with their audit of the Company's financial
statements for the year ended December 31, 1992, the Company and Wiss had a
disagreement regarding gain recognition for a transaction that occurred in the
fourth quarter of 1992. As reported on its reports on Form 8-K filed with the
Securities and Exchange Commission (the "Commission") on April 16 and May 18,
1993, this disagreement was resolved to the satisfaction of both the Company and
Wiss. In connection with their audit of the Company's financial statement for
the year ended December 31, 1992, Wiss had preliminarily indicated to the
Company their agreement with the Company's proposed accounting treatment that
recognized that the gain on a sale of airship components could be recognized in
1992. However, shortly before the due date for the filing of the Company's
annual report on Form 10-K with the Commission, Wiss indicated that they
disagreed with the Company's position on the gain recognition and indicated
instead that the gain should be recognized in 1993. After several discussions
between Wiss and the Company and following the receipt of additional supporting
documents and audit evidence, Wiss concluded that the gain could be recognized
in 1992. Therefore, the Company's financial statements for the year ended
December 31, 1992 were filed with the Company's Annual Report on Form 10-K
(which was filed with the Commission on May 20, 1993) as originally prepared.
The Company became delinquent in its financial filings
subsequent to filing its Form 10-Q for the period ending September 30, 1994.
In June 1997 the Company retained Charlie Meeks, C.P.A., P.A. as its
independent auditor due to the added expense of continuing with a large audit
firm such as Grant Thornton.
The Company authorized Wiss to respond fully to inquiries of
Grant Thornton concerning the aforementioned disagreement. The Wiss report on
the Company's 1991 financial statements included a going concern qualification.
However, the 1992 financial statements contained no such qualification.
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<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information, as of August 21,
1997, relating to each director and executive officer of the Company.**
<TABLE>
<CAPTION>
POSITIONS WITH
NAME AGE THE COMPANY POSITION HELD SINCE
- ---- --- ---------------- --------------------
<S> <C> <C> <C>
Louis J. Pearlman 43 Chairman of the Board of June 1982
Directors, President and Chief
Executive and Operating Officer
Marvin Palmquist 81 Director November 1984
James J. Ryan 49 Director July 1986
Alan A. Siegel 33 Secretary and Director October 1989
Seth M. Bobet(1) 34 Vice President of Finance and February 1990
Chief Financial Officer
</TABLE>
- --------------------
(1) Mr. Bobet resigned as Chief Financial Officer in June 1995. Mr. Pearlman
now acts as Chief Financial Officer of the Company.
The following sets forth the business experience of each
director, executive officer, including principal occupations, at present and for
at least the past five years.
Louis J. Pearlman has been Chairman of the Board, President,
Chief Executive and Operating Officer and Treasurer of the Company since June
1982. Since November 1976, Mr. Pearlman has been President and Chief Operating
Officer, a director and a 21% shareholder of Trans Continental. See "Certain
Relationships and Related Transactions." Mr. Pearlman currently devotes
approximately 10% of his time to Trans Continental and the remainder of his time
to the Company.
Marvin Palmquist has been a director of the Company since
November 1984. Since August 1967, Mr. Palmquist has been Chairman of the Board
of Directors and President of Lloyd American Corporation ("LAC") and its
subsidiaries, including Lloyd Communications Group, Inc. which develops, owns
and operates local television stations and a satellite receiving center
associated with the Independent Network System. LAC also owns and operates the
Midway Theater, an historic theater located in Rockford, Illinois.
- --------
** Mr. Roy Belotti, a director since November 1984, passed away in May, 1995.
To date the Company's Board of Directors has not chosen a director to fill
the vacancy on the Board created by Mr. Belotti's death.
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<PAGE>
<PAGE>
Seth M. Bobet was appointed Vice President of Finance in February
1990. From June 1987 through February 1990, Mr. Bobet was the controller of the
Company. Mr. Bobet graduated in June 1985 with a Bachelor of Science Degree in
Accounting from the State University of New York.
James J. Ryan has been a director of the Company since July 1986.
Until 1994 for more than 20 years he had been employed with Alexander and
Alexander Inc., an international insurance brokerage firm and its predecessor
firm, where he most recently held the title of Senior Vice President of the
Aviation and Aerospace Division. Mr. Ryan is currently Executive Director of
Sedgwick Aviation of North America, an international insurance brokerage firm.
Alan A. Siegel has been a director of the Company since December
1991 and Secretary of the Company since October 1989. From 1985 to 1989, Mr.
Siegel was Senior Account Manager of the Company and since 1989 has served as
the Company's General Manager. Mr. Siegel has also been Senior Account Manager
for Trans Continental since 1986.
The Company's directors are elected for a period of one year and
until their successors are duly elected and qualified. Directors who are not
employees of the Company are compensated at a rate of $500 for each meeting of
the full Board of Directors which they attend in person, up to a maximum of
$2,000 in any one year, plus expenses for attending such meetings. Officers are
appointed annually by the Board of Directors and serve at the discretion of the
Board.
To the knowledge of management of the Company, except as set
forth above, no director of the Company holds any directorship in any other
company with a class of securities registered pursuant to Section 12, or subject
to the requirements of Section 15(d), of the Securities Exchange Act of 1934 or
in any company registered as an investment company under the Investment Company
Act of 1940.
There are currently four members of the Board of Directors. The
Company and its principal shareholders have agreed to use their best efforts to
elect two designees of the underwriters of the 1993 Offering to the Company's
Board of Directors. Due to the Company's failure to pay a specified portion of
dividends on the Preferred Stock in cash, the holders of the Preferred Stock,
voting as a class, have the right to designate two additional members of the
Company's Board of Directors.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT. Section 16(a)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
requires officers and directors of the Company and persons who own more than ten
percent of the Common Stock or the Preferred Stock, to file initial statements
of beneficial ownership (Form 3), and statements of changes in beneficial
ownership (Forms 4 or 5), of the Common Stock and the Preferred Stock with the
Securities and Exchange Commission (the "SEC"). Officers, directors and greater
than ten percent shareholders are required by SEC regulation to furnish the
Company with copies of all such forms they file.
To the Company's knowledge, based solely on its review of the
copies of such forms received by it, or written representations from certain
reporting persons that no additional forms were required for those persons, the
Company believes that during 1994 all filing requirements applicable to its
officers, directors, and greater than ten percent beneficial owners were
complied with. Mr. Pearlman filed one late Statement of Changes of Beneficial
Ownership of Securities on Form 4 for the month of August 1994.
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<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table summarizes all compensation earned by or paid to the
Company's Chief Executive Officer for services rendered in all capacities to the
Company for the three years ended December 31, 1994. No other executive
officer's annual salary and bonus exceeded $100,000 during the Company's past
three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
---------------------------------------- --------------------------
SECURITIES
FISCAL OTHER ANNUAL RESTRICTED UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION STOCK AWARD OPTIONS COMPENSATION
- -------------------------- ----- ------ ----- ------------ ----------- --------- ------------
<S> <C> <C> <C>
Louis J. Pearlman, Chairman, 1994 $252,101(1) $0 -- -- -- --
President, Chief Executive and 1993 $251,573 $0 -- -- -- --
Operating Officer 1992 $240,000 $0 -- -- -- --
1991 $249,318 $100,000 -- -- -- --
</TABLE>
(1) Mr. Pearlman had agreed to voluntarily defer approximately $100,000 of his
salary for 1994, to which he is entitled pursuant to his employment agreement
with the Company. On December 31, 1994, such deferred compensation was applied
by the Company as an offset against the exercise price payable with respect to
the exercise by Mr. Pearlman of certain options on such date. (See "Other
Options").
INCENTIVE STOCK OPTION PLAN
On November 1, 1984, the Company adopted an Incentive Stock
Option Plan (the "Plan") for all management and other key employees. The Plan
was intended to qualify under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"). The Board of Directors has sole authority to select
participating employees. On December 22, 1991 the Plan was amended, increasing
the number of shares reserved for issuance under the Plan to 750,000. The
aggregate fair market value (determined as of the date the options are granted)
of the shares for which an employee is granted options which are exercisable for
the first time by the employee in any calendar year (granted pursuant to all of
the stock option plans of the Company or any parent or subsidiary of the
Company) may not exceed $100,000.
These options may have a term of up to ten years (five years in
the case of a 10% shareholder or director) and the Board may provide for the
exercise of such options in installments over a period of up to ten years (five
years in the case of a 10% shareholder or director). The option price may not be
less than the fair market value of the shares on the date of grant (110% of such
value in the case of a 10% shareholder or director). The Plan terminated on
October 31, 1994.
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<PAGE>
The following options have been granted under the Plan to the
following persons:
<TABLE>
<CAPTION>
Name Number of Shares Price Per Share Date of Expiration
- ---- ---------------- --------------- -------------------
<S> <C> <C> <C> <C>
Mike Fitzpatrick 20,000 $ .94 2/27/99
Alan A. Siegel 50,000 $ .94 2/27/99
Frank I. Sicoli 50,000 $ .94 2/27/99
Mary T. Iannerelli 5,000 $ .94 2/27/99
Mary T. Iannerelli 10,000 $1.28 10/1/01
Scott Bennett 10,000 $1.28 10/1/01
Frank Vazquez 10,000 $1.28 10/1/01
</TABLE>
No options have been granted under the Plan since fiscal year 1992.
1994 EMPLOYEE SHARE PURCHASE PLAN
The Company has an employee share option plan (the "Plan") for
employees of the Company and any present or future "subsidiary corporations."
The Company intends the Plan to be an "employee stock purchase plan" as defined
in Section 423 of the Internal Revenue Code of 1986, as amended (the "Code").
The Plan, approved by the Company's shareholders on April __, 1995, was
effective November 1, 1994. All employees are eligible to participate in the
Plan, except that the Company's appointed committee may exclude any or all of
the following groups of employees from any offering: (i) employees who have been
employed for less than 2 years; (ii) employees whose customary employment is 20
hours or less per week; (iii) employees whose customary employment is not more
than 5 months in any calendar year; and (iv) highly compensated employees
(within the meaning of Code Section 414(q). The shares issuable under the Plan
shall be common shares of the Company subject to certain restrictions up to a
maximum of 1,000,000 shares. The committee shall determine the length of each
offering but no offering may exceed 27 months. The option price for options
granted in each offering may not be less than the less of (i) 85% of the fair
value of the shares on the day of the offering, or (ii) 85% of the fair market
value of the shares at the time the option is exercised.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding
individual options granted in fiscal year 1994 to the Chief Executive Officer.
In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), the table sets forth the hypothetical gains or "options spreads"
that would exist for the options at the end of their respective terms. These
gains are based on assumed rates of annual compound stock price appreciation of
5% and 10% from the date the option was granted to the end of the option term.
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<PAGE>
<PAGE>
OPTION GRANTS IN 1994
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
PERCENTAGE OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE MARKET PRICE TERM
OPTIONS EMPLOYEES IN PRICE ON DATE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR PER SHARE OF GRANT DATE 5% 10%
- ---- ----------- ------------- ------------ ------------ ----------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
LOUIS J. PEARLMAN 5,000,000(1) 100%(1) $.02 per share $625,000(2) August 11, 1999(3) $681,250 $837,500
</TABLE>
- ----------
(1) On August 11, 1994, the Company issued to Mr. Pearlman five-year options to
purchase 5,000,000 shares of Common Stock at an exercise price of $.125 per
share, which was the closing market value of the Common Stock on August 10,
1994. These options were non-compensatory in nature and were issued in
connection with Mr. Pearlman's guaranty of certain obligations pursuant to
a restructuring of the Company's indebtedness. Thereafter, Mr. Pearlman
personally guaranteed the Company's obligations under an Airship Lease
Agreement between the Company and Mastellone Hnos. S.A. dated December 15,
1994, and in connection therewith the Company's Board of Directors lowered
the exercise price of such options to $.02 per share. The closing market
value of the Common Stock on such date was $.125. These options were
granted in connection with the guaranty of certain obligations of the
Company by Mr. Pearlman and were not issued as compensation.
(2) Based upon the closing price of the Company's Common Stock on the National
Association of Securities Dealers Automated Quotation System on August 11,
1994.
(3) Mr. Pearlman exercised these options on December 31, 1994. (See Summary
Compensation Table).
AGGREGATED OPTION EXERCISE IN 1994
AND 1994 FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED VALUE FISCAL YEAR-END AT FISCAL YEAR-END
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
LOUIS J. PEARLMAN 5,000,000(1) $525,000 - 0 - - 0 -
</TABLE>
- ----------
(1) The option exercised by Mr. Pearlman was issued in consideration of Mr.
Pearlman's guaranty of certain obligations of the Company. See " - Other
Options."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors of the Company does not have a
compensation committee. Messrs. Pearlman and Siegel determine executive
compensation, based on corporate performance and market conditions. The
compensation of Mr. Pearlman, the Chief Executive and Operating Officer of the
Company, is based solely upon the terms of his employment agreement with the
Company. Similarly, the compensation of Mr. Siegel, the Secretary of the
Company, is fixed by the terms of his employment agreement with the Company. See
"Employment Agreements."
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<PAGE>
<PAGE>
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement as of February
15, 1993 with Louis J. Pearlman, superseding his prior agreement which was to
expire December 31, 1994. Both agreements contemplate an annual salary to Mr.
Pearlman of $200,000 during 1989 and for annual increases thereafter in an
amount equal to the greater of 5% of his previous year's salary or the increase,
if any, in the Consumer Price Index for All Urban Consumers, Central Florida
1967 - 100. The agreement also provided for an annual profit bonus payable to
Mr. Pearlman in an amount equal to 4% of the first $1 million of the Company's
net after-tax profits for such fiscal year. Pursuant to the agreement, Mr.
Pearlman's annual compensation, including salary and bonus was limited to
$340,000 per year. In addition, Mr. Pearlman agreed in 1993 not to receive a
bonus for the 1993 fiscal year. Mr. Pearlman received a bonus of $254,000
(including $100,000 applied to exercise of options) for the 1994 fiscal year.
See "Option Grants in 1994." The Company is presently negotiating a new
employment agreement with Mr. Pearlman.
The Company entered into an employment agreement as of December
31, 1992 with Alan A. Siegel. Mr. Siegel's agreement expires on January 1, 1998.
Mr. Siegel's agreement provides for an annual salary of $75,000 for the first
year of the agreement and for annual increases thereafter in an amount equal to
the greater of 5% of his previous year's salary or the increase, if any, in the
Consumer Price Index for All Urban Consumers, Central Florida 1967 -- 100. The
agreement also provides for an annual bonus payable to Mr. Siegel in an amount
equal to 1 1/2% of the Company's net after-tax profits for such fiscal year plus
an amount determined in the discretion of the Board.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total
shareholder return of the Company's Common Stock, based on the market price of
the Common Stock, with the cumulative total return of companies on the Nasdaq
Market Index. Because of the unique nature of the Company's business, the
Company has been unable to identify a peer group consisting of companies in a
similar line of business, and instead has provided a comparison with a "peer
group" of companies with a similar market capitalization. Such peer group is
comprised of companies with market capitalizations of between one million and
ten million dollars on December 31, 1994 and whose stock is traded on Nasdaq.
[INTENTIONALLY LEFT BLANK]
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<PAGE>
[GRAPHIC]
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<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of
shares of Common Stock beneficially owned, as of the Record Date, by (i) all
persons known by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock or Preferred Stock, (ii) each of the Company's
directors, (iii) the Company's Chief Executive Officer and (iv) all executive
officers and directors of the Company as a group (5 persons).
<TABLE>
<CAPTION>
Shares Owned of Record Percentage of Outstanding Percentage of Outstanding
Name and Address or Beneficially Shares of Common Stock Shares of Preferred Stock
- ---------------- ----------------- ------------------------ -------------------------
<S> <C> <C> <C>
Louis J. Pearlman(1) 9,302,291 23.9% *
Alan A. Siegel(2) 51,130 * *
Roy T. Belotti 1,250 * *
Marvin Palmquist -0- * *
James J. Ryan(3) 97,000 * *
Transcontinental(4) 3,666,862 10% *
All officers and directors 9,451,671 24.3% *
as a group
(5 persons)(2)(5)
</TABLE>
- ----------
* Denotes less than 1%.
(1) Mr. Pearlman has an address at: c/o Airship International Ltd., 7380 Sand
Lake Road, Suite 350, Orlando, Florida 32819.
(2) Includes 50,000 options granted under the Company's Incentive Stock Option
Plan.
(3) Includes a warrant to purchase 67,000 shares of Common Stock. See "Certain
Relationships and Related Transactions."
(4) Such shares of Common Stock were granted to Transcontinental Airlines, Inc.
in consideration for its guaranty of the Company's obligations under the
Allstate Loan, the Phoenixcor Loan, the Senstar Loan, the Argentina Lease
Agreement and the Argentina Operations Agreement, and a corporate credit
card issued for the Company's benefit. See "Certain Relationships and
Related Transactions".
(5) Includes the options described in footnotes (2) through (3), above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of January 1, 1993, the Company owed Mr. Pearlman an aggregate
amount of approximately $1,900,000 which amount represented accrued and unpaid
salary and bonus, and principal and accrued and unpaid interest on loans made to
the Company by Mr. Pearlman for general operation purposes. On June 30,1993, the
Company made a $789,000 loan (the "June 1993 Loan") to an individual who had
previously facilitated financing for the Company. Mr. Pearlman has guaranteed
repayment of the Loan and in addition, has agreed that the Company's obligation
to repay principal and interest on Mr. Pearlman's loan to the
-29-
<PAGE>
<PAGE>
Company shall be reduced proportionately to reflect the amount of the then
outstanding Loan for so long as the Loan shall remain outstanding. The loan from
Mr. Pearlman bears interest at the rate of 8.5%. In consideration for Mr.
Pearlman's guaranteeing repayment of the Loan and agreeing that the Loan can be
offset against his loan, the Company has treated the $789,000 as a reduction of
the amount due to Mr. Pearlman.
As the result of further interest accruing on the amounts owing
to Mr. Pearlman by the Company, at December 31, 1994, and after allowing for the
offset described above with respect to the Loan, the Company owed Mr. Pearlman
$950,000 net of unamortized discount. As of December 31, 1994 the Company owed
Mr. Pearlman $950,000 net of unamortized discount.
During the year ended December 31, 1994, the Company earned
$164,000 of interest income on advances (the "Trans Continental Account")
previously made to Trans Continental Airlines, Inc. ("Trans Continental"). Mr.
Louis J. Pearlman owns 21% of Trans Continental and is the Company's Chairman of
the Board, President and principal shareholder. The advances were made to obtain
higher yields and, at December 31, 1994, totaled $1,809,000. Trans Continental
has pledged a $2,500,000 money market account as collateral for this advance.
This advance is returnable to the Company upon demand, and during the year ended
December 31, 1994, an aggregate amount of $881,000 of the advances were returned
to the Company including interest earned. The balance of the advances were
returned to the Company during 1995 and were used by the Company to pay
outstanding amounts owing to WDL.
On October 9, 1995 the Company granted to Transcontinental
3,666,862 shares of Common Stock representing 10% of the issued and outstanding
Common Stock of the Company. Such grant was made in consideration of
Transcontinental's guaranty of the Company's obligations under the Allstate
Loan, the Phoenixcor Loan and the Senstar Loan and the Argentina Lease and
Operations Agreements. In addition, Transcontinental has procured, for the
Company's benefit, a corporate credit card.
The Company advanced Airship Airways, Inc. ("AAI") $137,500 in
August 1994. At such time, Mr. Pearlman was a principal stockholder of AAI,
owning approximately 44% of its stock. Subsequent to such transaction Mr.
Pearlman has reduced his ownership interest in AAI to approximately 4%. The
advance was made in connection with a proposed merger (the "Merger") transaction
between the Company and AAI. At the present time the Company believes that it is
unlikely that the Merger will be consummated. In connection with the advance,
AAI issued to the Company its promissory note (the "AAI Note") in the amount of
$137,500 in October 1994. The AAI Note is secured by certain aircraft and
equipment owned by AAI. The AAI Note bore interest at the rate of 8% per annum,
and was due and payable on or before February 23,1995. On February 8, 1995 AAI
repaid the AAI Note in full by paying the Company $82,100 and cancelling two
promissory notes that had been issued by the Company to AAI in the respective
principal amounts of $25,000 and $30,400. These notes had been issued in
connection with expenses incurred in connection with the Merger, and reductions
in rental payments on office space obtained with the cooperation of AAI, and
which were due and payable on February 23, 1995 and May 1, 1996, respectively.
Pursuant to an Agreement dated December 7, 1993, the Company made
a $75,000 unsecured loan to Superbound Limited ("Superbound"), a United Kingdom
corporation controlled by James Stuart Tucker, the former President of Slingsby.
The loan bears interest at an annual rate of 10%. Principal is payable in two
equal installments of $37,500 each on the first two anniversaries of the date
the loan proceeds were paid to Superbound (within seven days of December 7,
1993). Mr. Tucker is a guarantor of this loan. During 1994 Mr. Tucker was able
to procure, without cost to the Company, required maintenance service and parts
which would otherwise have cost the Company over $100,000. In exchange for his
services, $37,500 of the loan was cancelled as of December 3, 1994 and interest
of $7,500 was received in February 1995. The remaining balance of the loan was
subsequently repaid.
-30-
<PAGE>
<PAGE>
On December 31, 1991, Mr. Julian Benscher and the Company entered
into a Line of Credit Agreement, pursuant to which Mr. Benscher loaned the
Company $ 1,000,000 in 1992. As partial consideration for making these loans,
the Company issued to Mr. Benscher warrants to purchase 775,000 shares of Common
Stock and issued additional warrants to purchase 325,000 shares of Common Stock
to certain parties designated by Mr. Benscher. The Company has granted Mr.
Benscher registration rights with respect to all shares of Common Stock and
warrants owned by him. These warrants were to expire on December 31, 1994;
however, for continued assistance provided to the Company by Mr. Benscher, the
Company extended the expiration date of these warrants to December 31,1995,
on which date the warrants expired unexercised.
The Company sold the Argentina Airship to First Security for the
benefit of Aviation, in June, 1995 in consideration for First Security's
assumption of the Company's liabilities under the Argentina Lease Agreement and
AOI's obligations under the Argentina Operations Agreement. In connection with
such sale, the Company assigned the Argentina Lease Agreement to First Security,
and Aviation purchased all of the issued and outstanding Capital Stock of AOI.
See "Business-Aerial Advertising and Other Contracts-Argentina Airship."
The Company has purchased hull insurance for the Company's
airships through Sedgwick Aviation of North America, an international insurance
brokerage firm of which Mr. James J. Ryan is the Executive Director. For
assisting in reducing the Company's insurance costs, on April 7, 1990, Mr. Ryan
was granted a five year warrant to purchase 67,000 shares of Common Stock at
$2.20 per share.
-31-
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
AIRSHIP INTERNATIONAL LTD.
Dated: August 25, 1997 By: /s/ LOUIS J. PEARLMAN
--------------------------
Louis J. Pearlman
Chairman of the Board of
Directors, President and
Treasurer (Principal Executive
and Financial Officer)
Dated: August 25, 1997 By: /s/ Alan A. Siegel
--------------------------
Alan A. Siegel
Secretary & Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Dated: August 25, 1997 By: /s/ Marvin Palmquist
--------------------------
Marvin Palmquist
Director
Dated: August 25, 1997 By: /s/ James J. Ryan
--------------------------
James J. Ryan
Director
-32-
<PAGE>
<PAGE>
Item 14 - Exhibits, Financial Statements, Schedules and Reports on Form 8-K
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
(a) (1) The following financial statements of the Company have been
filed as part of this report:
A. Report Independent Certified Public Accountant F-1
B. Balance Sheets as of December 31, 1994 and 1993 F-2
C. Statements of Operations for the years ended December 31,
1994, 1993 and 1992 F-3
D. Statements of Changes in Stockholders' (Deficit) Equity for
the years ended December 31, 1994, 1993 and 1992 F-4 to F-5
E. Statements of Cash Flows for the years ended December 31,
1994, 1993 and 1992 F-6 to F-7
F. Notes to Financial Statements F-7 to F-25
(a) (2) No Financial Statement Schedules are required to be filed by the
Company other than the following which have been filed as part of
this report:
A. Report of Independent Certified Public Accountants on Schedules F-27
B. II - Amounts receivable from related parties F-27
C. IV - Indebtedness to related parties F-28
D. V - Airships and related equipment F-29
E. VI - Accumulated depreciation and amortization of airships and
related equipment F-30
F. IX - Short-term borrowings F-31
-33-
<PAGE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
Board of Directors and Stockholders
Airship International Ltd.
I have audited the accompanying balance sheet of Airship International Ltd. as
of December 31, 1994 and the related statement of operations, stockholders'
equity (deficit) and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based
on my audit. The December 31, 1993 financial statements were audited by other
auditors whose report, dated March 24, 1994 on those statements included an
explanatory paragraph describing conditions that raised substantial doubt
about the Company's ability to continue as a going concern. The December 31,
1992 financial statements were audited by other auditors whose report dated
February 26, 1993, expressed an unqualified opinion on those statements.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Airship International Ltd. at
December 31, 1994, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
As discussed in Note B, the Company is subject to various matters giving rise to
uncertainty, including matters giving rise to substantial doubt as to the
Company's ability to continue as a going concern. The accompanying financial
statements do not include any adjustments that might result from the outcome of
such matters.
CHARLIE M. MEEKS, C.P.A., P.A.
Maitland, Florida
August 22, 1997
F-1
<PAGE>
<PAGE>
Airship International Ltd.
Balance Sheets
December 31,
</TABLE>
<TABLE>
<CAPTION>
1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Airships and Related Equipment:
Airships $ 2,104,000 $ 12,048,000
Vehicles 1,609,000 1,514,000
Parts and equipment 1,542,000 2,768,000
Airship components 2,730,000 6,762,000
Construction in progress -- 479,000
- ------------------------------------------------------------------------------------------------------------------------------------
7,985,000 23,571,000
Less: Accumulated depreciation and
amortization 1,492,000 3,257,000
- ------------------------------------------------------------------------------------------------------------------------------------
6,493,000 20,314,000
Cash and cash equivalents 543,000 1,165,000
Prepaid insurance 626,000 1,433,000
Due from Transcontinental Airlines, Inc., an affiliate 1,809,000 2,526,000
Deferred financing and offering costs,
net of accumulated amortization 157,000 196,000
Other assets 181,000 443,000
- ------------------------------------------------------------------------------------------------------------------------------------
$ 9,809,000 $ 26,077,000
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Accounts payable - trade $ 4,068,000 $ 915,000
Customer payment on future services 1,367,000 250,000
Insurance financing 291,000 1,504,000
Accrued expenses and other liabilities 1,886,000 771,000
Obligations under capital leases 3,258,000 3,556,000
Loan payable 1,250,000 --
Due to related party 950,000 846,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 13,070,000 7,842,000
- ------------------------------------------------------------------------------------------------------------------------------------
CONTINGENCIES AND COMMITMENTS -- --
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.01 par value: Authorized -
10,000,000 shares, issued and outstanding 2,875,000 29,000 29,000
Common stock, $.01 par value: Authorized -
80,000,000 shares, issued and outstanding - 31,400,000
shares in 1994 and 27,946,000 in 1993 314,000 279,000
Capital in excess of par value - Preferred Stock 14,442,000 14,442,000
Capital in excess of par value - Common Stock 21,931,000 21,136,000
Accumulated deficit (39,977,000) (17,651,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity (deficit) (3,261,000) 18,235,000
- ------------------------------------------------------------------------------------------------------------------------------------
$ 9,809,000 $ 26,077,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
<PAGE>
Airship International Ltd.
Statements of Operations
For the Year Ended December 31,
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Airship Revenue $ 3,980,000 $ 9,748,000 $ 7,258,000
------------ ------------ ------------
Costs and Expenses:
Operating costs 17,452,000 9,964,000 6,499,000
Selling, general and administrative expenses 2,408,000 3,449,000 2,409,000
- ------------------------------------------------------------------------------------------------------------------------------------
19,860,000 13,413,000 8,908,000
Loss from operations (15,880,000) (3,665,000) (1,650,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Other income (expense)
Gain on sale of airship components,
net of imputed interest of $69,000 -- -- 2,366,000
Gain (loss) on sale of airship components
to a stockholder (659,000) -- 1,077,000
Gain (loss) on insurance settlement (3,443,000) -- 769,000
Interest expense (805,000) (913,000) (1,571,000)
Interest capitalized -- -- 30,000
Interest, royalties and other income 206,000 391,000 144,000
Costs relating to settlement of litigation (64,000) (741,000) --
Loss on disposition of airship component -- (478,000) --
- ------------------------------------------------------------------------------------------------------------------------------------
(4,765,000) (1,741,000) 2,815,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $(20,645,000) $ (5,406,000) $ 1,165,000
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted average number of common
shares and equivalents outstanding 30,161,000 27,073,000 22,070,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) applicable to common stock:
Net income (loss) $(20,645,000) $ (5,406,000) $ 1,165,000
Less preferred stock dividend (1,683,000) (1,166,000) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) applicable to common stock $(22,328,000) $ (6,572,000) $ 1,165,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share $ (0.74) $ (0.24) $ 0.05
- ------------------------------------------------------------------------------------------------------------------------------------
SIGNIFICANT AMOUNTS APPLICABLE TO RELATED PARTIES
Operating costs - Insurance expense $ 877,000 $ 1,319,000 $ 1,072,000
Selling, general and administrative:
Travel $- $ 6,000 $ 115,000
Interest expense $ 105,000 $ 149,000 $ 292,000
Interest income $ 164,000 $ 184,000 $ 131,000
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
<PAGE>
Airship International Ltd.
Statements of Changes in Stockholders' Equity (Deficit)
For the Year Ended December 31,
<TABLE>
<CAPTION>
Capital in Excess
of Par Value
Preferred Stock Common Stock -----------------------
---------------------------------------------- Preferred Common Accumulated
Shares Par Value Shares Par Value Stock Stock Deficit
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1991 -- $ -- 17,307,000 $ 173,000 $ -- $ 14,698,000 $(12,244,000)
Sale of common stock and
warrants issued to private investors,
less related expenses of $360,000 -- -- 5,225,000 52,000 -- 3,972,000 --
Exercise of warrants, less
expenses of $65,000 -- -- 3,069,000 31,000 -- 1,295,000 --
Conversions of debt into common
stock, less related expenses
of $15,000 -- -- 338,000 3,000 -- 223,000 --
Fair value of options issued in
connection with loan to:
President -- -- -- -- -- 25,000 --
Others -- -- -- -- -- 33,000 --
Expenses incurred in registration of
previously outstanding shares and
warrants -- -- -- -- -- (130,000) --
Net income -- -- -- -- -- -- 1,165,000
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 -- -- 25,939,000 259,000 -- 20,116,000 (11,079,000)
Sale of common stock and warrants
issued to private investors, less
related expenses of $27,000 -- -- 318,000 3,000 -- 209,000 --
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
<PAGE>
Airship International Ltd.
Statements of Changes in Stockholders' Equity (Deficit)
For the Year Ended December 31,
<TABLE>
<CAPTION>
Capital in Excess
of Par Value
Preferred Stock Common Stock ----------------------
------------------------------------------------ Preferred Common Accumulated
Shares Par Value Shares Par Value Stock Stock Deficit
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sale of preferred stock to public
less related expenses of $2,779,000 2,875,000 29,000 -- -- 14,442,000 -- (11,079,000)
Exercise of warrants into common
stock -- -- 640,000 6,000 -- 396,000 --
Repurchase of warrants -- -- -- -- -- (222,000) --
Dividends paid on preferred stock:
In cash -- -- -- -- -- -- (518,000)
In common stock -- -- 1,049,000 11,000 -- 637,000 (648,000)
Loss -- -- -- -- -- -- (5,406,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 2,875,000 29,000 27,946,000 279,000 14,442,000 21,136,000 (17,651,000)
Issuance of common stock from private
placement, less expenses of $7,000 -- -- 1,344,000 14,000 -- 169,000 --
Dividends paid on preferred stock:
In cash -- -- -- -- -- -- (172,000)
In common stock -- -- 2,066,000 21,000 -- 626,000 (647,000)
Accrued common stock dividend -- -- -- -- -- -- (862,000)
Loss -- -- -- -- -- -- (20,645,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 2,875,000 $29,000 31,356,000 $ 314,000 $ 14,442,000 $ 21,931,000 $(39,977,000)
- ------------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
<PAGE>
Airship International Ltd.
Statements of Cash Flows
For the Year Ended December 31,
Increase (decrease) in cash and cash equivalents
</TABLE>
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $(20,645,000) $ (5,406,000) $ 1,165,000
Adjustments to reconcile net income (loss)
to net cash flows used in operating activities:
Depreciation and amortization 2,389,000 1,223,000 981,000
Gain on sale of airship components
to J&B Enterprises Limited (UK) Corp. -- -- (2,366,000)
Gain on sale of airship components
to stockholder -- -- (1,077,000)
Loss from impairment of long-lived assets 9,634,000 -- --
Gain (loss) on dispositon of airship
components and related assets 153,000 -- (769,000)
Loss on insurance settlement 1,467,000 -- --
Loss on abandonment of Blimp USA 479,000 -- --
Other - net -- 232,000 197,000
Loss on disposition of airship component -- 478,000 --
Changes in operating assets and liabilities:
Prepaid insurance 807,000 (253,000) (224,000)
Other assets 262,000 (136,000) (70,000)
Accounts payable - trade 3,153,000 464,000 (451,000)
Customer payments on future services 1,117,000 (57,000) (157,000)
Insurance financing (1,213,000) 433,000 167,000
Accrued expense to principal stockholder -- 139,000 167,000
Accrued expenses and other liabilities 253,000 (73,000) 236,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash flows used in operating
activities (2,144,000) (2,956,000) (2,201,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Net proceeds from insurance settlement -- -- 1,529,000
Proceeds from sale of airship components 55,000 2,228,000 500,000
Acquisition of airships and related equipment (317,000) (6,716,000) (3,008,000)
Deposit for purchase of airships
and related equipment -- -- (2,000,000)
Net change in due from Trans Continental 717,000 (1,940,000) 770,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash flows provided by (used in)
investing activities 455,000 (6,428,000) (2,209,000)
</TABLE>
F-6
<PAGE>
<PAGE>
The accompanying notes are an integral part of these statements.
Airship International Ltd.
Statements of Cash Flows - Continued
For the Year Ended December 31,
Increase (decrease) in cash and cash equivalents
<TABLE>
<CAPTION>
1994 1993 1992
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of loans payable 1,432,000 420,000 1,800,000
Principal payments on capital leases and loans (479,000) (4,728,000) (1,450,000)
Principal payments to related party 104,000 (1,150,000) (467,000)
Net proceeds from issuance of common stock -- 614,000 5,205,000
Net proceeds from private placement of debt 183,000 -- --
Net proceeds from issuance of preferred stock -- 14,662,000 --
Payment of dividends (173,000) (518,000) --
Repurchase of warrants -- (222,000) --
Deferred financing and offering costs paid -- -- (271,000)
- ---------------------------------------------------------------------------------------------
Net cash flows from financing activities $ 1,067,000 $ 9,078,000 $ 4,817,000
- ---------------------------------------------------------------------------------------------
Net changes in cash and equivalents (622,000) (306,000) 407,000
Cash and equivalents, beginning of year 1,165,000 1,471,000 1,064,000
- ---------------------------------------------------------------------------------------------
Cash and equivalents, end of year $ 543,000 $ 1,165,000 $ 1,471,000
- ---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
<PAGE>
Airship International Ltd.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
NOTE A - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business - The Company operates lighter-than-air airships used to
advertise and promote the products and services of the Company's clients. At
December 31, 1994, the Company operated two airships.
Cash and Equivalents - The Company considers unrestricted short-term, highly
liquid investments with maturities of three months or less at the time of
purchase to be cash equivalents.
Revenue Recognition - Airship revenues are being recognized during the period in
which services are provided. Whenever significant flight time is owed to a
customer, the incremental cost of providing services is accrued. No amounts are
accrued at December 31, 1994 or 1993.
Flight Crew Training Costs - Significant flight crew training costs for new
blimps are amortized over twelve months from the date related revenues commence.
Airships and Related Equipment - Property and Equipment are stated at cost.
Depreciation is provided by the straight line method over the estimated useful
lives of the assets - 10 to 20 years (airships), 4 to 8 years (vehicles), 3 to
5 years (parts and equipment) and 2 to 3 years (improvements). Airship
components are not depreciated until placed in service.
Construction in Progress - The Company has abandoned its plans to build a
manufacturing complex and aviation hangar to be called Blimp Port USA'tm' which
will be located at a site near its Orlando, Florida base of operations. The
Company intended to use this facility to manufacture, assemble and maintain
airships for commercial and governmental use and provide offices for technical
and executive personnel. The Company has acquired a Federal Aviation
Administration (FAA) license necessary for the assembly and maintenance of
airships. Capitalized costs, including interest, relating to the facilities
amounted to $479,000 were written off during the year ended December 31, 1994.
Such costs included incremental costs directly identifiable with the facility,
such as land lease rental, property taxes, insurance and other costs directly
associated with the acquisition, development and construction of the project. To
date costs capitalized represent consulting, architectural and design fees.
Deferred Financing and Offering Costs - Costs incurred to obtain debt financing
are capitalized and amortized over the terms of the related loans. Such costs
include incremental payments to consultants, lenders and other out of pocket
expenses, as well as the fair value of options and warrants issued to persons
other than lenders. The fair value of options and warrants issued to lenders are
reported as debt discount and amortized over the term of the related loan. In
determining the fair value of warrants issued, substantial discounts have been
provided for the effects of restrictions on sale, the volume of shares involved
and other factors.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-8
<PAGE>
<PAGE>
Airship International Ltd.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
NOTE A - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Continued
Income Taxes - The Company follows the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting For Income Taxes", which requires the
recognition of deferred tax liabilities and assets for expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect when these
differences are expected to reverse. Valuation allowances are established when
appropriate, to reduce deferred tax assets to the amount expected to be
realized.
Impairment of Long-Lived Assets - In March 1995, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets to be Disposed Of
("SFAS 121"). SFAS 121 requires that long-lived assets held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
adoption of this standard in the fourth quarter of the fiscal year ended
December 31, 1994 resulted in an adjustment $9,634,000 to the Company's
financial statements. The Company obtained an independent appraisal on its
airship components in August 1997, which reflects a range of values from
$2,174,000 (on a liquidation sale value) to $5,096,000 (on a market value
basis). Based on the fact that the Company had two airships in operation at
December 31, 1994, the Company adjusted the carrying value to $3,635,000 or the
midpoint of the above range. The Company reviews all of its long-lived assets
for impairment in accordance with SFAS 121. Prior to the adoption of SFAS 121,
all long-lived assets, were reviewed for impairment by comparing the carrying
value of such assets to future expected net cash flows.
Change in Accounting Estimate - Effective April 1, 1994, the Company revised its
estimate of useful lives of airships and airship components. Previously, airship
envelopes and Nightsigns'tm' on operating airships were depreciated over 20
years. The Company has changed the useful lives to 4'pp'1/2 on airship
envelopes years and 10 years for Nightsigns'tm' resulting in an additional
charge to income of $774,000 or $.03 per share.
Net Income (Loss) Per Share - Net income (loss) per share is based on the
weighted average number of shares outstanding during the periods. When losses
have been incurred, warrants and options are not included since the effect would
dilute loss per share, however, preferred stock dividends are included in the
loss per share calculation. When net income is reported, warrants and options
are included using the treasury stock method, provided exercise prices are less
than the average market price; warrants convertible into common stock are
included when such inclusion results in further dilution.
Recently Issued Pronouncements - In October 1995, the FASB issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation", ("SFAS 123") which sets forth accounting and disclosure
requirements for stock-based compensation arrangements. The new statement
encourages, but does not require, companies to measure stock-based compensation
cost using a fair-value method, rather than the intrinsic-value method
prescribed by Accounting Principles Board Opinion No. 25 ("APB Opinion 25"). The
Company will adopt the disclosure requirements of SFAS 123 in 1995 and will
elect to continue to record stock-based compensation expense using the
intrinsic-value approach prescribed by APB Opinion 25. Accordingly, the Company
computes compensation cost for each employee stock option granted as the amount
by which the quoted market price of the Company's Common Stock on the date of
grant exceeds the
F-9
<PAGE>
<PAGE>
Airship International Ltd.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
NOTE A - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Continued
amount the employee must pay to acquire the stock. The amount of compensation
costs, if any, will be charged to operations over the vesting period.
In February 1997, the FASB issued Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" ("SFAS 128") and Statement of Financial Accounting
Standards No. 129, "Disclosure of Information about Capital Structure ("SFAS
129"). SFAS 128 specifies the computation of earnings per share, and SFAS 129
specifies the presentation and disclosure requirements about an entity's capital
structure. Both SFAS 128 and 129 shall be adopted in the fourth quarter of 1997
with restatement back to January 1, 1997. The initial adoption of these
standards are not expected to have a material effect on the Company's earnings
per share as disclosed.
NOTE B - SIGNIFICANT UNCERTAINTIES AND MANAGEMENT'S PLANS TO OVERCOME OPERATING
DIFFICULTIES AND MEET CASH REQUIREMENTS
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. For its year ended December 31, 1994 and 1993, the
Company incurred losses of $20,571,000 and $5,406,000, respectively, and had
negative cash flows of $ 2,144,000 and $2,956,000, respectively, from
operations.
Management believes that additional contracts, if obtained, may be sufficient to
achieve positive cash flow. However, there can be no assurances that such
positive cash flows would be achieved.
As a result of the losses during the year, plus cancellation and modification of
advertising agreements with clients, the Company postponed its original plans
for purchase of land and the hangar for Blimp Port USA'tm' (a hangar and
maintenance facility). Losses for 1993, which continuing into 1994, were funded
by proceeds from the offering previously designated as capital expenditures for
Blimp Port USA'tm'. In addition, the Company made the additional deposit of
$1,940,000 and made a $789,000 loan to an individual who had previously
facilitated financing for the Company (see disussion in Note C). The
accompanying financial statements do not include any adjustments that might
result from such matters.
NOTE C - TRANSACTIONS WITH STOCKHOLDERS, RELATED PARTIES AND OTHERS
Due from Affiliate - At December 31, 1994 and 1993, the Company made advances of
$1,809,000 and $2,526,000, respectively, to Transcontinental Airlines, Inc.
("Transcontinental"), an affiliated aircraft leasing company. Louis J. Pearlman
("Mr. Pearlman") owns 21% of Transcontinental and is the Company's Chairman of
the Board, President and Principal Stockholder. Transcontinental has pledged a
$2,500,000 money market account as collateral for this advance. The deposit may
be returned to the Company upon demand. Interest earned on this deposit
amounted to $164,000, $107,000 and $131,000 for years ended December 31, 1994,
1993 and 1992, respectively.
Personal Guarantees - Mr. Pearlman has personally guaranteed all capital leases
and loans of the Company (see Note E).
F-10
<PAGE>
<PAGE>
Airship International Ltd.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
NOTE C - TRANSACTIONS WITH STOCKHOLDERS, RELATED PARTIES AND OTHERS - Continued
Loans from Principal Stockholder - In May 1992, all amounts due to Mr. Pearlman,
consisting of 10% notes payable, accrued salaries, bonuses and interest were
consolidated into one single loan of $1,845,000. The loan was payable in equal
quarterly installments of $135,000 per year including interest at 8 1/2% per
annum, and commenced in July 1992. This payment schedule continued until a
loan payable to a bank for the SeaWorld airship was paid (with the
preferred stock proceeds - see Note H), at which time the loan became
payable at the discretion of the Company. All unpaid principal and interest is
due in May 1997 and has been deferred by Mr. Pearlman for an indefinite period
of time. If the Company's income before taxes had exceeded $500,000 in
any of the three years ending December 31, 1994, the Company would have been
required to pay Mr. Pearlman an amount equal to 20% of such annual pre-tax
profit as a prepayment on this loan. Interest on the loan payable was $105,000,
$144,000, and $167,000 for the years ended 1994, 1993, and 1992, respectively.
On June 30, 1993, the Company made a $789,000 loan (the "Loan") to an individual
who had previously facilitated financing for the Company. Mr. Pearlman has
guaranteed repayment of the Loan. The Loan is being repaid by Mr. Pearlman in
equal monthly installments of $6,209 per month, including interest at the rate
of 8.75%. The remaining unpaid principal balance of the Loan is due no later
than June 30, 1995. Mr. Pearlman has guaranteed repayment of the Loan. In
addition, it has been agreed that the Company's obligation to repay principal
and interest on the loan to Mr. Pearlman shall be reduced to reflect the
outstanding balance on this Loan for so long as it shall remain outstanding.
Amounts due to Mr. Pearlman at December 31, 1994 and 1993 totaled $950,000 and
$846,000, respectively, net of unamortized discount.
Transactions with Stockholder and His Affiliate - Mr. Julian Benscher ("Mr.
Benscher") beneficially owned 4.0% of the common stock of the Company at
December 31, 1994. Mr. Benscher is also a stockholder and director of J&B
Enterprises Limited (UK) Corp. ("J&B"). The Company and Mr. Benscher have been
involved in certain transactions as follows:
Sale of Airship Components - The following transactions involve the sale of
unassembled airship components acquired in the 1990 asset acquisition from
Airship UK:
1. In December 1992, the Company entered into two agreements with J&B to sell
for $2,790,000 ($2,721,000 net of imputed interest) an unassembled airship and
its related components which had a cost basis to the Company of $355,000. The
Company received a $500,000 initial payment in December 1992. The balance of the
purchase price was paid in February and November 1993 and bore interest at the
LIBOR rate. The unpaid balance of the purchase price was collateralized by the
respective airship components and such other security as the parties were to
mutually agree to be reasonable and guaranteed by Mr. Benscher.
In addition, certain real property located in the United Kingdom and
owned by a director of J&B who is a relative of Mr. Benscher was pledged and
accepted by the Company in satisfaction of the unspecified collateral stated in
the December 1992 agreement. Certain components at this time continue to remain
in a warehouse leased by the Company in Florida. J&B reimburses the Company for
occupancy costs for storage of the components.
F-11
<PAGE>
<PAGE>
Airship International Ltd.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
NOTE C - TRANSACTIONS WITH STOCKHOLDERS, RELATED PARTIES and OTHERS - Continued
2. In September 1992, the Company sold to Mr. Benscher a gondola, tail fins and
certain other airship components for $1,150,000. Payment consisted of offsetting
the $1,000,000 loan payable (and related interest) due to Mr. Benscher pursuant
to the loans under a line-of-credit agreement discussed below. The transaction
resulted in a gain of $1,077,000.
Rental Arrangement and Travel Agency Service - Transcontinental serves as the
Company's travel agent for substantially all of its travel arrangements and the
Company is its principal customer. In the opinion of management, the terms and
prices received from the corporation are similar to those available from other
travel agencies. The Company paid the agency $6,000 and $115,000 for travel
expenses in 1993 and 1992, respectively. During 1994 and 1993, the Company
utilized the travel agency services for reservations, while primarily paying
certain costs directly to the provider.
Hull and Liability Insurance - The Company purchases hull and liability
insurance with respect to the Company's airships through Alexander and
Howden, Inc., an international insurance brokerage firm of which James J.
Ryan is the Senior Vice President of its Aviation Aerospace Division. Mr. Ryan
is also a director of the Company and, in 1990, was granted a five-year warrant
to purchase 67,000 shares of common stock at $2.20 per share. Insurance expense
for Alexander and Howden was $72,000, $1,319,000 and $1,072,000 in 1994, 1993,
and 1992, respectively.
Warrants - Reference should be made to Note H for warrants issued in connection
with certain of the above transactions.
Transaction with Slingsby Aviation Limited ("Slingsby") - On January 29, 1992,
Slingsby exchanged the aforementioned airship components it had acquired from
Airship UK for certain of the Airship components the Company had acquired from
Airship UK. In connection with this exchange, Slingsby agreed to provide the
Company storage for the components at no cost, not to increase certain prices to
assemble that airship by more than 5% for twelve months and certain other items.
The Company did not recognize gain or loss on this nonmonetary transaction as
this was not considered the culmination of an earnings process.
On December 31, 1992, Transcontinental, on behalf of the Company, paid
$2,000,000 to Slingsby in connection with an understanding to acquire Slingsby
airship components (the 'Slingsby Asset Purchase'). Slingsby had indicated that
the Company was to receive airship parts with a fair market value equal to at
least this sum if a definitive agreement was not entered into by March 31, 1993.
During 1993, the Company concluded its acquisition of airship components from
Slingsby for a total of $5,457,000.
F-12
<PAGE>
<PAGE>
Airship international Ltd.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
NOTE C - TRANSACTIONS WITH STOCKHOLDERS, RELATED PARTIES and OTHERS - Continued
Underwriter - Emanuel and Company ("Emanuel"), one of the two representatives of
the several underwriters for the offering of Preferred Stock which was sold in
February 1993 (see Note H) is a beneficial owner of 4.0% of the Company's common
stock. Emanuel received warrants to purchase 1,450,000 shares of common stock at
$1 per share for arranging the sale in April 1992 of 1,048,000 common shares to
private investors. The private investors received three year warrants to
purchase 1,048,000 shares of common stock at an exercise price of $1.25 per
share, subject to adjustment. Emanuel will receive a 7% commission from the
Company upon the exercise of the warrants held by the private investors.
In addition, Emanuel is the custodian of the collateral pledged as security for
amounts due from Transcontinental.
Corporate Offices - The Company provides office space to affiliates free of
charge. The Company is reimbursed by the affiliates for telephone charges.
Loan Receivable - During 1993 the Company made an unsecured loan of $75,000 to a
company controlled by and guaranteed by the former president of Slingsby. This
loan bears interest at 10%, payable quarterly. Principal payments of $37,500 are
due on December 7, 1995.
NOTE D - INCOME TAXES
At December 31, 1994, the Company had net operating loss carryforwards for
income taxes of approximately $29,949,000 available as offsets against future
taxable income. During 1991, the Company experienced changes in the Company's
ownership as defined in Section 382 of the Internal Revenue Code ("IRC"). The
effect of these changes in ownership is to limit the utilization of certain
existing net operating loss carryforwards for income tax purposes. Operating
losses incurred after the ownership change are not limited. As a result, only
approximately $15,268,000 of the operating losses which occurred after the
ownership change are not limited. The operating losses incurred prior to the
ownership change are limited to a certain dollar amount each year. The net
operating loss carryforwards expire during the years 2000 to 2011. The company
also has unused investment tax credits of $140,000 which expire principally in
the year 2000.
F-13
<PAGE>
<PAGE>
Airship International Ltd.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
NOTE D - INCOME TAXES - Continued
The tax effect of temporary differences that give rise to significant positions
of the deferred tax assets and deferred tax liabilities, consist of the
following at December 31:
<TABLE>
<CAPTION>
1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss $ 14,548,000 $ 4,900,000
Accrued expenses 291,000 300,000
- --------------------------------------------------------------------------------
14,839,000 5,200,000
Less: Valuation allowance 11,962,000 2,600,000
- --------------------------------------------------------------------------------
2,877,000 2,600,000
Deferred tax liabilities:
Airships and related equipment (2,877,000) (2,600,000)
- --------------------------------------------------------------------------------
(2,877,000) (2,600,000)
- --------------------------------------------------------------------------------
Net deferred tax asset $ -- $ --
- --------------------------------------------------------------------------------
</TABLE>
The net change in the valuation allowance was approximately $277,000 relating to
net operating losses from 1994.
NOTE E - CAPITAL LEASES AND LOANS PAYABLE
Capital leases payable consist of the following:
<TABLE>
<CAPTION>
1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C>
Capital lease of MetLife airship, payable monthly
through November 1995 with an option to renew
through November 1998, less amounts ($640,000
and $670,000) representing interest with an
annual interest rate of 16%. The lease was
renegotiated in January 1994 and June 1995 $2,904,000 $3,113,000
Other loans and capital leases with various annual
interest rates 354,000 443,000
- ------------------------------------------------------------------------------------
$3,258,000 $3,556,000
- ------------------------------------------------------------------------------------
</TABLE>
F-14
<PAGE>
<PAGE>
Airship International Ltd.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
NOTE E - CAPITAL LEASES AND LOANS PAYABLE - Continued
The following is a schedule by year of future minimum lease payments pursuant to
the capital leases together with the present value of the net minimum lease
payments as of December 31, 1994:
<TABLE>
<S> <C>
1995 $ 299,000
1996 540,000
1997 911,000
1998 979,000
1999 960,000
Thereafter 3,869,000
----------
Total minimum lease payments 7,558,000
Less amount representing interest 4,300,000
----------
Present value of net minimum lease payments $3,258,000
==========
</TABLE>
Capital Leases - In October 1989, the Company purchased a new Skyship 600 Series
airship (the "MetLife airship") from Airship UK. The MetLife airship and
related equipment were financed primarily by net proceeds of $6,200,000 from a
capital lease obtained through ORIX Commercial Credit Corp. ("ORIX"). The
capital lease initially required monthly payments of $135,000 through November
1992. In December 1992, the lease was renewed for an additional three-year term
at monthly payments of $121,000. At the end of the additional three year term
the Company had the option to purchase this airship for $1,000,000 or renew the
lease for another three year term at monthly payments of $35,000. At the
completion of the third lease term, title is to be transferred to the Company
upon payment of $1. On January 11, 1994 the Company renegotiated the lease to
reduce the $121,000 payments. Even after the payment modifications the Company
was unable to make the payments and went into default. Effective June 2, 1995
the lease was renegotiated again calling for payments of $20,000 for twelve
months, $40,000 for the next six months, $60,000 for an additional six months
and the higher of $80,000 for the remaining term until the lease is paid off
or a larger payment based upon the annual cash flow of the year. Based upon
the revised payment schedule, the payments are not sufficient to cover the
interest expense. Thus negative amortization results in 1994 and 1995 and the
ending principal balance is increased.
The airship and related equipment financed by the capital leases have a cost of
$6,687,000 and accumulated depreciation of $1,077,000 at December 31, 1993.
During 1994 the leased airship was damaged and taken out of service. A cost of
$2,699,000 and accumulated depreciation of $1,232,000 were written off due to
the damage. The remaining cost basis of approximately $3,500,000 was transferred
to spare parts and airship components. The resulting net book value was later
analyzed as part of the SFAS 121 writedown as described in Note A.
Loan Payable to Allstate - The Company entered into an accounts receivable
factoring security agreement on September 19, 1994 which was modified on
November 16, 1994 and November 23, 1994. The maximum borrowing amount under the
November 23rd agreement was $1,500,000. The loan balance was to be reduced by
$75,000 per month beginning December 1, 1994. A fee of 0.125% per month is
payable each month on the higher of funds outstanding or $1,500,000. The loan
was used to pay off certain liabilities and provide a source of working capital.
The balance due to Allstate as of December 31, 1994 amounted to $1,250,000. The
loan was secured by accounts receivable, inventory, certain airships and
equipment.
F-15
<PAGE>
<PAGE>
Airship International Ltd.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
NOTE E - CAPITAL LEASES AND LOANS PAYABLE - Continued
Subsequently on June 22, 1995, the Allstate loan was repaid when
Transcontinental Leasing, Inc. ("TLI"), a wholly-owned subsidiary of
Transcontinental, an affiliate of the Company, entered into a sale-leaseback
agreement with the Company pursuant to which the Bud One Airship was sold by the
Company to TLI for the purchase price of $2,060,000, which in turn was leased
back to the Company.
Subsequently on November 30, 1995, the Company entered into an arrangement with
Senstar Capital Corporation ("Senstar") pursuant to which the sale-leaseback
arrangement with TLI was reversed. The Company borrowed a total of $3,500,000
from Senstar, part of which has been used to repay the loan from Phoenixcor,
Inc., the lender for TLI's transaction. The loan from Senstar is repayable over
5 years in sixty monthly payments of approximately $63,000 each, with a balance
due at the end of the five year term of approximately $700,000, and secured by a
lien on the Airship and is guaranteed by Transcontinental.
Warrants - Reference should be made to Note H for warrants issued in connection
with certain of these transactions.
NOTE F - LEGAL PROCEEDINGS
Capital Funding Group Ltd. - In February 1992, Capital Funding Group Ltd.
("CFG") commenced an action against the Company and others seeking in excess of
$1,000,000 in damages based on the alleged failure by the Company to provide
adequate collateral and security in connection with certain alleged financial
agreements with CFG. The Company retained CFG in July 1991, paid a commitment
fee (which was written off in 1991) and received a commitment from CFG which
then failed to provide the funding. The Company and the other defendants
answered the complaint in February 1992 by denying all of the substantive
allegations and asserting several affirmative defenses. In addition, the Company
asserted certain counterclaims against CFG and its two principals for breach of
a commitment letter pursuant to which CFG was to arrange for a $9 million loan
to the Company, breach of a compromise agreement accepted by CFG in January
1992, pursuant to which CFG was to provide funding to the Company in the amount
of $7 million, breach of an escrow agreement, pursuant to which CFG was to
return $200,000 of the commitment fee paid by the Company and various other
counterclaims. In March 1993, the Company was awarded a default judgment against
CFG. No balances have been returned to the Company as of December 31, 1994.
Watermark Group PLC and Von Tech Corporation - In January 1993, a second amended
complaint to a lawsuit, which was initially commenced in March 1991 and
subsequently dismissed twice without prejudice, was filed against the Company
and Mr. Pearlman by Watermark Group PLC and Von Tech Corporation, a general
partners of Company communications (collectively the "W/VT Plaintiffs") alleging
breach of an alleged joint venture agreement involving Company Communications
and Airship Enterprises Ltd. (a company that was owned by Mr. Pearlman and that
was not in any way owned or controlled by the Company); breach of an alleged
agreement by the Company regarding the lease and operation of a particular
F-16
<PAGE>
<PAGE>
Airship International Ltd.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
NOTE F - LEGAL PROCEEDINGS - Continued
airship; and breach of an alleged oral commission agreement by the Company
relating to the Company's acquisition of two airships it presently owns. The
W/VT Plaintiffs seek various legal and equitable remedies, including monetary
damages against the Company and Mr. Pearlman in excess of $800,000 together with
a claim for some portion of the advertising revenue the Company has received,
and will continue to receive, from the operation of some of its airships. In
March 1993, the second amended complaint filed against the Company and Mr.
Pearlman by W/VT Plaintiffs was dismissed without prejudice. Since the Company
denies any involvement with any of the transactions set forth in the second
amended complaint, the Company believes that its liability, if any, on the
claims made by the W/VT Plaintiffs will not be material. This case was settled
on October 3, 1995 for $40,000.
Sequel Capital Corporation - In December 1992 a lawsuit was filed against the
Company, Mr. Pearlman and an advertising customer of the Company by Sequel
Capital Corporation ("Sequel"). The complaint (as amended) contains claims for
default on an $800,000 loan from Sequel (the "Sequel Loan") as a result of an
alleged failure to provide collateral consisting of monthly payments being made
to the Company by a third party on an airship advertising agreement. The
proceeds of the Sequel Loan, which was personally guaranteed by Mr. Pearlman,
were applied by the Company towards the purchase of a new airship from the Seoul
Olympic Sports Promotion Foundation. The amended complaint also includes a claim
for breach of an alleged contract to enter into a sale leaseback agreement with
respect to one of the company's airships and a claim for allegedly fraudulently
inducing Sequel to make the Loan to the Company. This claim was settled by the
Company in 1993 for approximately $741,000 including legal expenses.
Tenerten and Drake, Inc. - On September 15, 1994, Tenerten and Drake, Inc.
("TDI") filed a complaint against the Company. The complaint alleges that the
Company failed to pay certain sums of money due to TDI under an agreement to
perform advertising and related services for the Company. The Company filed its
answer and raised its affirmative defenses to said complaint alleging that the
services allegedly performed by TDI were defective in numerous respects. A final
judgment was entered against the Company on July 20, 1995 in the amount of
$24,000.
Westinghouse Airships, Inc. - On September 14, 1994, Westinghouse Airships, Inc.
("WAI") filed a complaint against the Company alleging that the Company and Mr.
Pearlman breached an agreement to purchase two gondolas from WAI. Specifically,
the complaint alleges that WAI delivered both gondolas at issue and that the
Company failed to make certain installments to WAI under the agreement. The
complaint also alleges that the Company breached a sub-lease to occupy certain
hanger space located in North Carolina. On June 19, 1995, the Company and WAI
agreed to settle the case for $32,000.
Other Proceedings - The Company is a defendant in a number of other legal
proceedings which occurred in the ordinary course of its business. Those cases
in which the ultimate settlement is known or estimable have been accrued in
the financial statements. It is not possible at this time to predict the
outcome of the unsettled legal actions; however, in the opinion of management
and informal advice of counsel, the disposition of these other lawsuits will
not have a material effect on the financial statements.
F-17
<PAGE>
<PAGE>
Airship international Ltd.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
NOTE G - COMMITMENTS AND CONTINGENCIES
Possible Future Tax Claims - Because blimp advertising services differ from many
other forms of advertising, state and local tax authorities may assert claims
based on interpretations of law which differ from interpretations by management.
In the opinion of management, its positions are consistent with similar
entities.
The State of Florida completed a sales tax audit of the Company in March 1992
covering all periods through December 31, 1991 and assessed the Company
approximately $12,000, which was paid in March 1992.
Employment Agreements - In 1993 the Company and Mr. Pearlman entered into an
employment agreement which expires in December 1994. The agreement provides for
an annual salary to Mr. Pearlman of $200,000 for the first year of the agreement
and for annual increases thereafter in an amount equal to the greater of 5% of
his previous year's salary or the increase, if any, in the Consumer Price Index
for All Urban Consumers, Central Florida. The agreement also provides for an
annual bonus payable to Mr. Pearlman in an amount equal to 4% of the first $1
million of the Company's net after-tax profits for such fiscal year. Pursuant to
this agreement, Mr. Pearlman's annual compensation, including salary and bonus
is limited to $340,000 per year. Accrued and unpaid salaries through December
31, 1994 are $391,000 and are included in amounts due to related party.
On March 1, 1994 the Company agreed to reimburse Mr. Pearlman $4,000 per month
in expenses, effective January 1, 1993, due to Mr. Pearlman's out-of-pocket
expenses for the Company's business.
The Company entered into employment agreements as of January 1, 1993 with each
of two officers and another employee. Each agreement expires on January 1, 1998
and provides for annual salaries of $75,000 for the first year of the agreement
and annual increases thereafter in an amount equal to the greater of 5% of his
previous years salary or the increase, if any, in the Consumer Price Index for
All Urban Consumers, Central Florida. Each agreement also provides for an annual
bonus payable in an amount equal to 1 1/2% of the Company's net after tax
profits for such fiscal year plus an additional amount determined at the
discretion of the Board of Directors.
Operating Leases - The Company has various operating leases which will expire at
various dates through May 1996 with unrelated parties for its executive offices,
warehouse space, maintenance facility, and the Gulf airship discussed in Note I.
Future minimum payments under these operating leases at December 31, 1993 are as
follows:
1994 $ 634,000
1995 93,000
1996 31,000
----------
$ 758,000
==========
Rent expense was approximately $577,000 in 1993.
F-18
<PAGE>
<PAGE>
Airship International Ltd.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
NOTE H - STOCKHOLDERS' EQUITY
Common Stock - In February 1991, the Company completed a public offering (the
"Offering") of its units (the "Units"), consisting of two shares of Common
Stock, two Class A Common Stock Purchase Warrants and two Class B Common Stock
Purchase Warrants. Each Class A Warrant entitles the holder to purchase one
share of Common Stock at a price of $1.50 until February 6, 1994. Each Class B
Warrant entitles the, holder to purchase one share of Common Stock at a price of
$2.00 until February 6, 1995. The warrants may be redeemed by the Company at a
price of $.10 per Warrant at any time upon at lease 30 days, prior written
notice if the closing bid price of the Common Stock during 20 of the 30
preceding trading days exceeds the exercise price of the Warrants by at least
40%.
Convertible Subordinated Notes - In connection with a private placement of the
Company's 15% Convertible Subordinated Notes (the "Notes") completed in December
1990, the placement agent received a commission of 10% of the aggregate
principal amount of the notes sold and three-year warrants to purchase a total
of 374,000 shares of common stock (254,000 and 120,000 shares of common stock at
$1 and $.75 per share, respectively).
In addition, the placement agent received a commission of 9% of the principal
amount of each note converted to common stock and, upon exercise of each related
warrant will receive a commission equal to 7% of the exercise price. For
accounting purposes, the proceeds of the notes were allocated based upon the
fair value of the debt and warrants. The resulting debt discount was amortized
over the term of the debt and the amount of $22,000 assigned to the warrants was
credited to capital in excess of par value. Substantially all of the above
warrants were exercised as of December 31, 1993.
The Company borrowed $100,000 in December 1990 at 10% interest per quarter plus
three-year warrants to purchase 30,000 shares of common stock at $.75 per share,
subject to anti-dilution adjustments. Effective December 31, 1990, the
noteholder converted the $100,000 loan into 100,000 shares of common stock. In
connection with this transaction, the placement agent received three-year
warrants to purchase 30,000 shares of common stock at $.75 per share, subject to
anti-dilution adjustments. All such warrants were exercised during 1992.
Preferred Stock - In February 1993, the Company completed a public offering
("the Offering") of 2,875,000 shares of its Class A 8% Cumulative Convertible
Voting Preferred Stock ("Preferred Stock") at $6.00 per share.
Each share of Preferred Stock is convertible, at any time after the earlier of
February 16, 1994 or a date determined by the underwriters at their sole
discretion (which date was not to be prior to April 19, 1993), into 6 shares of
common stock, subject to future adjustment. Dividends on the Preferred Stock are
payable quarterly and the first four dividends were paid, on an annualized
basis, 50% in cash and 50% in shares of the Company's common stock. The
Preferred Stock accrues dividends at the annual rate of $.60 per share for
dividends paid in shares of common stock, and $.48 per share for dividends paid
in cash. If available cash is not sufficient to pay any or all of the subsequent
dividend payments, the balance of the dividend will be paid in shares of the
common stock.
The Preferred Stock is redeemable at the option of the Company, in whole or in
part, at $6.60, together with all accrued and unpaid dividends, at any time
after February 16, 1996. The liquidation preference of the Preferred Stock is
$6.00 per share.
F-19
<PAGE>
<PAGE>
Airship International Ltd.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
NOTE H - STOCKHOLDERS' EQUITY - Continued
In connection with the offering, the Company issued to the two representatives
of the several underwriters, warrants to purchase an additional 10% of the
Preferred Stock sold in the Offering. The Preferred Stock warrants are
exercisable for four years commencing February 1994 at an exercise price equal
to 165% of the initial offering price of the Preferred Stock, subject to certain
anti-dilution provisions.
Private Placement of Common Stock - During the first and second quarters of
1994, the Company sold common stock to certain investors pursuant to a share
subscription agreement. The number of shares initially sold were 5,301,164 at an
average purchase price of $.20 per share. These shares were not sold pursuant to
a formal offering memorandum. Therefore, the Company offered a right of
recession, which the majority of the purchasers of the common stock exercised.
Warrants and Options - Outstanding warrants and options at December 31, 1994,
all of which are currently exercisable, after giving effect to adjustments
through such date for anti-dilution provisions and exercisable price reductions
are as follows:
<TABLE>
<CAPTION>
Exercise
Shares Price Expiration
Issuable Per Share Date
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Warrants:
Issued in connection with public
offering in 1991:
Class B Warrants 4,575,000 $ 2.00 February 1995
Underwriter's Warrants 567,000 $ 0.96 February 1996
Underwriter's Class B Warrants 567,000 $ 2.00 February 1995
Issued to consultants in 1991 710,000 $ 1.12 Various through May 1995
Issued to stockholder and certain others
In 1992 19,000 $ 0.41 December 1994
Issued to placement agent in 1992 in
Connection with sale of Common
Stock to private investors 1,096,000 $ 0.96 April 1995
Issued to private investors in 1992 in
Connection with purchase of Common
Stock 519,000 $ 1.17 April 1995
Options:
Issued to director in 1990 67,000 $ 2.20 April 1995
Incentive options issued to key
Employees:
Officer and director in 1989 50,000 $ 1.03 February 1994
Officer and others in 1989 and 1991 215,000 $0.94 to $1.28 February 1990 to
October 2001
</TABLE>
F-20
<PAGE>
<PAGE>
Airship International Ltd.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
NOTE H - STOCKHOLDERS' EQUITY - Continued
<TABLE>
<S> <C> <C> <C>
Issued to the Company's President in
1994 in connection with cancellation of
certain warrants and for guarantee of
Company debt 5,000,000 $.125 August 10, 1999
-----------
13,385,000
===========
</TABLE>
The Company has an incentive stock option plan (the "Plan") for key employees
under which it may grant options to purchase the Company's common stock over a
term of up to ten years at the fair market value at the time of the grant.
Options granted to a ten percent or more shareholder, an officer, or a director,
may not be for less than 110% of fair market value and must be exercised within
five years. The Plan was amended in December 1991 increasing to 750,000 the
number of shares reserved for issuance. The Plan terminated on October 31, 1994.
Options under the Plan are summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1994 1993 1992
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at beginning of year 265,000 265,000 265,000
Options granted -- --
Options exercised -- --
Options cancelled 265,000 -- --
- --------------------------------------------------------------------------------------------------
Options outstanding at end of year -- 265,000 265,000
- --------------------------------------------------------------------------------------------------
Option price per share $.94 - $1.28 $.94 - $1.28 $.94 - $1.28
Options exercisable:
Number of shares -- 265,000 265,000
- --------------------------------------------------------------------------------------------------
</TABLE>
Since inception, 24,000 options granted under the Plan have been exercised (none
in 1994, 1993 or 1992). The Plan terminated on October 31, 1994.
Employee Share Purchase Plan - The Company has an employee share option plan
(the "Plan") for employees of the Company and any present or future "subsidiary
corporations." The Company intends the Plan to be an "employee stock purchase
plan" as defined in Section 423 of the Internal Revenue Code of 1986, as amended
(the "Code"). The Plan was effective November 1, 1994. All employees are
eligible to participate in the Plan, except that the Company's appointed
committee may exclude any or all of the following groups of employees from any
offering: (i) employees who have been employed for less than 2 years; (ii)
employees whose customary employment is 20 hours or less per week; (iii)
employees whose customary employment is not more that 5 months in any calendar
year; and (iv) highly compensated employees (within the meaning of Code Section
414(q). The shares issuable under the Plan shall be common
F-21
<PAGE>
<PAGE>
Airship International, Ltd.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
NOTE H - STOCKHOLDERS' EQUITY - Continued
shares of the Company subject to certain restrictions up to a maximum of
1,000,000 shares. The committee shall determine the length of each offering but
no offering may exceed 27 months. The option price for options granted in each
offering may not be less than the less of (i) 85% of the fair value of the
shares on the day of the offering, or (ii) 85% of the fair market value of the
shares at the time the option is exercised.
NOTE I - AIRSHIP REVENUES, MAJOR CUSTOMERS AND CREDIT CONCENTRATION
Metropolitan Life - During 1993, the Company derived airship revenue from
Metropolitan Life Insurance Company ("MetLife") pursuant to an amended aerial
advertising agreement which expired in October 1993. The agreement provided for
minimum monthly revenues plus travel expense reimbursements. The Company was
responsible for all costs associated with the ownership, use or operation of the
MetLife airship, including repairs, maintenance supplies, insurance and taxes.
In January 1994, the Company entered into an advertising agreement with
Kingstreet Tours Limited (UK) for the use of the MetLife airship promoting Pink
Floyd. The term of the agreement was originally for six months commencing
January 18, 1994. The Company was responsible for all costs associated with the
operations of the airship, including travel costs, repairs, maintenance,
insurance and taxes. On June 20, 1994, the MetLife airship was damaged in a
storm and the contract was cancelled (See Note E).
No revenues were earned on the MetLife airship during the period subsequent to
the airship accident described below until October 15, 1992. The Company
collected $585,000 of business interruption insurance proceeds relating to the
loss of revenues during the months that the MetLife airship was under repair
due to damage.
Anheuser-Busch/Sea World - In April 1990, the Company entered into an aerial
advertising agreement with Anheuser-Busch Companies, Inc. ("Anheuser-Busch")
granting Anheuser-Busch the exclusive use of the Sea World airship to advertise
and promote Anheuser-Busch's products and business. The agreement was replaced
in April 1991 (retroactive to January 1, 1991) to include the payment of
$540,000 to the Company in January 1991 as an advance against the fees for the
next 18 months. The $540,000 advance was recognized as airship revenue at the
rate of $30,000 per month over the period of January 1, 1991 to June 30, 1992.
The agreement also provided for additional monthly revenues through the
expiration of the agreement on June 30, 1993. The Company continued to operate
the airship for a monthly fee through December 1993, after which the lease was
terminated.
The Company was responsible for all costs associated with the ownership, use or
operation of the airship, including repairs, maintenance supplies, insurance and
taxes.
The Company is also entitled to receive royalties from Anheuser-Busch on monthly
sales of merchandise shaped like or containing an image of the airship and
bearing Anheuser-Busch's trademarks during the term of the Sea World Contract
and for two years thereafter. The amount of royalties recognized as revenue
amounted to $7,000 and $18,000 for the years ended December 31, 1993 and 1992,
respectively.
F-22
<PAGE>
<PAGE>
Airship International Ltd.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
NOTE I - AIRSHIP REVENUES, MAJOR CUSTOMERS AND CREDIT CONCENTRATION - Continued
On January 2, 1994 the Company entered into an agreement with Anheuser-Busch,
whereby the Company was permitted to provide passenger rides and to display
advertising. The contract did not provide for usage fees or for a monthly
operating fee, but permits the Company to use this airship while it still
carries Sea World's logos/markings. The term of this agreement was to expire on
December 31, 1994. However, the Company exercised its right under the contract
to voluntarily suspend operations of the airship in April 1994.
Anheuser-Busch/Bud One - In March 1992, the Company entered into an agreement
similar to the above with Anheuser-Busch for the use of the Bud One airship.
Pursuant to this agreement, the Company agreed to convert the Bud One airship
(then being used as a passenger airship) into an airship operated to promote the
goods and products of Anheuser-Busch. The agreement provides for an initial term
of six months with renewals for additional terms totaling three years.
Anheuser-Busch may terminate the agreement during the first or at the end of the
second annual period by giving proper notice to the Company (see Note L). The
Company had operated this airship to advertise and promote the Sea World theme
park from September 1991 to March 1992 under a prior agreement with
Anheuser-Busch which enabled the Company to operate sightseeing tours for
passengers on a fee basis at Kissimmee Airport.
Pursuant to an amendment dated March 4, 1994, monthly fees under the Bud One
agreement were reduced by 50% effective February 1994 through July 1994.
Catamount Petroleum Corporation/Gulf Oil - In May 1993, the Company entered into
an agreement with Catamount Petroleum Corporation for the use of the Gulf
airship. The initial term of the agreement is for three years. Notwithstanding
this term, the agreement may be terminated by either party upon proper written
notice. During 1993, the airship was in operation from July through October upon
which, at the request of Catamount, the agreement was suspended through April
1994 when the airship will resume operations through October 1994.
The Company is responsible for all costs associated with the operation of the
Gulf airship, including repairs, maintenance, insurance and taxes.
Mastellone Hnos, S.A. - On December 15, 1994, the Company and its wholly-owned
subsidiary Airship Operations, Inc. consummated an Aircraft Lease Agreement (the
"Argentina Lease Agreement") and an Airship Operations Agreement (the "Argentina
Operations Agreement"), respectively, with Mastellone Hnos, S.A. ("Mastellone")
for the promotion of the products of Mastellone (the "Argentina Airship"). The
Company received a deposit from Mastellone in the amount of $500,000. The
operations for the Argentina Airship were never commenced by the Company due to
a transaction with First Security Bank of Utah, as described below.
Subsequently, on May 24, 1995, prior to commencement of operations of the
Argentina Airship and pursuant to an Aircraft Purchase and Lease Assignment and
Assumption between the Company and First Security Bank of Utah, as trustee for
the benefit of Aviation Support Group, Ltd. ("Aviation"), the Argentina Airship
was sold and the Argentina Lease Agreement was assigned to First Security. In
consideration for such sale and assignment, First Security assumed the Company's
obligations under the Argentina Lease Agreement. The Company is entitled to
receive, during a ten-month renewal term provided for in the Argentina Lease and
Argentina Operations Agreements, a portion of the rental income generated should
Mastellone exercise its right to extend the terms of such agreement.
F-23
<PAGE>
<PAGE>
Airship international Ltd.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
NOTE I - AIRSHIP REVENUES, MAJOR CUSTOMERS AND CREDIT CONCENTRATION - Continued
In addition, by notifying First Security prior to December 15, 1995 (extended to
January 15, 1996), the Company had the right to repurchase the airship for 120%
of the out-of-pocket expenses and the assumption of all liabilities incurred by
First Security and Aviation in connection with the Argentina Airship. The
Company did not exercise the right to repurchase the airship.
Concurrently with the execution and delivery of the Purchase and Assumption
Agreement, the Company sold to Aviation all of the issued and outstanding shares
of the capital stock of Airship Operations, Inc. Mr. Benscher, who holds
indirectly through designees approximately 4.0% of the Company's common stock,
is a principal stockholder of Aviation. See Note C - Transactions With
Stockholders, Related Parties And Others.
Other Credit Concentrations - Reference should be made to Note C for advances to
affiliate and deposit with Slingsby.
In June 1992, the Company's MetLife airship was damaged during a test flight.
The airship was in the hangar in North Carolina through October 15, 1992
undergoing repairs as a result of the damage, during which time no related
airship revenues were received. In August 1992, the Company received $1,850,000
from its insurance carrier in settlement of such damages to the airship and
loss of revenues from interruption of operations. The Company wrote off the
net book value of the damaged components ($760,000, principally related to the
envelope) and costs to repair the airship, including the cost of replacement
components, of $321,000. The Company provided most of the replacement
components from its existing stock. The cost of the new envelope ($711,000)
and other reassembly costs were capitalized and totaled approximately
$1,201,000.
NOTE J - EMPLOYEE SAVINGS PLAN
The Company has an employee savings plan (the "Savings Plan") that qualifies as
a deferred salary arrangement under Section 401(k) of the Internal Revenue Code.
Under the Savings Plan, participating employees may defer a portion of their
pretax earnings, up to the Internal Revenue Service annual contribution limit of
15% of the employee's salary. The Company matches 5% of each employee's
contributions, depending on length of service, up to a maximum of 6% of the
employee's earnings. The Company's matching contributions to the Savings Plan
was $11,000 for 1994. There were no matching contributions for 1992.
F-24
<PAGE>
<PAGE>
Airship international Ltd.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
NOTE K - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid during the year for:
Interest $392,000 $832,000 $1,044,000
Supplemental non-cash activity:
Conversion of debt to equity $ -- $ -- $ 241,000
Application of debt toward sales price of airship components
and related equipment $ -- $ -- $1,150,000
Accrued common stock dividend $862,000 $ -- $ --
Warrants or options granted for loan guarantees or
convertible subordinate notes $ -- $ -- $ 58,000
</TABLE>
NOTE L - SUBSEQUENT EVENTS
F-25
<PAGE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON SCHEDULES
Board of Directors and Stockholders
Airship International Ltd.
In connection with our audit of the financial statements of Airship
International Ltd. referred to in our report dated August 22, 1997 (that
contains an explanatory paragraph pertaining to a going concern and other
uncertainties), which is included in the Annual Report on SEC Form 10-K for the
year ended December 31, 1994, we have also audited Schedules II, IV, V, VI, IX,
and X for the year ended December 31, 1994. In our opinion, these schedules
present fairly, in all material respects, the information required to be set
forth therein.
CHARLIE M. MEEKS, C.P.A., P.A.
Orlando, Florida
August 22, 1994
F-26
<PAGE>
<PAGE>
(b) Exhibits listed in the Exhibit Index below have been filed as part
of this report:
<TABLE>
<CAPTION>
Exhibit Index
--------------
Exhibit Incorporated by
Number Description Reference to
- ------- ----------- ---------------
<S> <C>
3.1 Certificate of incorporation of the Company filed June 9, 1992. Exhibit 2(12)
3.2 Amendment to Certificate of Incorporation filed September 18, 1984. Exhibit 3(12)
3.3 Amendment to Certificate of Incorporation filed April 8, 1985. Exhibit 4(12)
3.4 Amendment to Certificate of Incorporation filed August 1, 1986. Exhibit 5(12)
3.5 Amendment to Certificate of Incorporation filed January 27, 1989. Exhibit 6(12)
3.6 Amendment to Certificate of Incorporation filed August 5, 1992. Exhibit 7(12)
3.7 Certificate of Correction to Amendment of Certificate of Incorporation filed Exhibit 8(12)
on February 26, 1993.
3.8 Amendment to Certificate of Incorporation filed February 26, 1993. Exhibit 9(12)
3.9 By-laws of the Company. *
4.1 Warrant Agreement dated February 14, 1991 between the Company and Exhibit 4.1(4)
American Securities Transfer, Inc. including form of Class A Warrant and
form of Class B. Warrant.
4.2 Warrant dated February 7, 1991 issued to Stephen M. Bathgate. Exhibit 4.2(4)
4.3 Two warrants dated respectively December 31, 1991 and February 25, 1992 Exhibit 4.3(4)
issued to Julian M. Benscher.
4.4 Two warrants dated respectively February 7, 1991 and March 23, 1991 Exhibit 4.4(4)
issued to Kenneth S. Bernstein.
4.5 Two warrants dated respectively February 7, 1991, and May 23, 1991 Exhibit 4.5(4)
issued to Chatfield Dean & Co., Inc.
4.6 Warrant dated September 26. 1991 issued to Dr. Joseph C. F. Chow and Exhibit 4.6(4)
Cynthia B. Chow.
4.7 Warrant dated September 26, 1991 issued to Cohig & Associates, Inc. Exhibit 4.7(4)
4.8 Warrant dated May 1, 1991 issued to Daliz Associates. Exhibit 4.8(4)
4.9 Two warrants dated respectively February 8, 1990, and February 21, 1991 Exhibit 4.9(4)
issued to Emanuel and Company.
4.10 Warrant dated December 10, 1991 issued to After Falkowitz. Exhibit 4.10(4)
4.11 Four warrants dated respectively June 5, 1990, December 5, 1990, Exhibit 4.11(4)
December 17,1 990, and February 21, 1991 issued to Alfonso Figlioia.
4.12 Two warrants dated respectively, May 23, 1991 and February 7, 1992 Exhibit 4.12(4)
issued to Sanford D. Greenberg.
4.13 Warrant dated December 7, 1991 issued to Edward C. Larkin. Exhibit 4.13(4)
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Index
--------------
Exhibit Incorporated by
Number Description Reference to
- ------- ----------- ---------------
<S> <C>
4.14 Warrant dated December 4, 1991 issued to David Mathis. Exhibit 4.14(4)
4.15 Warrant dated February 7, 1991 issued to Eugene McColley. Exhibit 4.15(4)
4.16 Warrant dated February, 1992 issued to Nour Collection, Inc. Exhibit 4.16(4)
4.17 Warrant dated November 3, 1989 issued to ORIX Commercial Credit Exhibit 10.29(5)
Corporation ("ORIX").
4.18 Warrant date February, 1992 issued to Chahram Pahlavi. Exhibit 4.18(4)
4.19 Warrant dated April 7, 1992 issued to Jim Ryan. Exhibit 4.19(4)
4.20 Warrant dated May 1, 1992 issued to Sterling Capital Group, Inc. Exhibit 4.20(4)
4.21 Warrant dated May 1, 1991 issued to Jonathan Turk. Exhibit 4.21(4)
4.22 Warrant dated February 7, 1991 issued to Steven R. Hinkle. Exhibit 4.22(4)
4.23 Warrant dated April 1. 1992 issued to Simon Zamet. Exhibit 4.23(4)
4.24 Warrant dated May 8, 1992 issued to Louis J. Pearlman. Exhibit 4.24(6)
4.25 Two Warrants dated April 17, 1992 issued to Emanuel and Company. Exhibit 4.25(6)
4.26 Representatives' Preferred Stock Warrant issued to Emanuel and Company
and Chatfield Dean & Co. Inc.
10.1 Amended and Restated Loan Agreement dated as May 8, 1992 between the Exhibit 10.1(6)
Company and Louis J. Pearlman.
10.2 Form of Subscription Agreement between the Company and certain Exhibit 10.2(6)
investors relating to the 1992 Private Placement.
10.3 Letter Agreement dated April 17, 1992, between the Company and Emanuel Exhibit 10.3(6)
and Company in connection with the 1992 Private Placement.
10.4 Incentive Stock Option Plan as amended, of the Company. Exhibit 10.2(1)
10.5 Amendment to Incentive Stock Option Plan dated December 9, 1991. Exhibit 10.2(4)
10.6 Aerial Airship Agreement dated October 26, 1987 by and between the Exhibit 10.29(7)
Company and the Metropolitan Life Insurance Company ("MetLife").
10.7 Amendment dated as of March 15, 1988 to the Advertising Agreement Exhibit B.1(3)
between the Company and MetLife.
10.8 Amendment dated as of March 15, 1988 to the Aerial Advertising Exhibit 10.14(5)
Agreement between the Company and MetLife.
10.9 Amendment dated as of March 15, 1988 to the Aerial Advertising Exhibit 10.15(5)
Agreement between the Company and MetLife.
10.10 Amendment dated as of March 15, 1988 to the Aerial Advertising Exhibit 19.4(8)
Agreement between the Company and MetLife.
10.11 Airship Advertising Agreement dated as to April 27, 1990 between the Exhibit 10.8(4)
Company, Airship Industries (USA), Inc. ("AIUSA") and Anheuser Busch
Companies, Inc. ("Anheuser").
</TABLE>
2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Index
--------------
Exhibit Incorporated by
Number Description Reference to
- ------- ----------- ---------------
<S> <C>
10.12 Termination Agreement dated as of January 1, 1991 between the Company, Exhibit 19.2(8)
Anheuser, and AIUSA.
10.13 Airship Advertising Agreement dated as of January 1, 1991 between the Exhibit 19.3(8)
Company and Anheuser.
10.14 Amendment to Airship Advertising Agreement dated May 31, 1991 between Exhibit 10.11(4)
the Company and Anheuser.
10.15 Passenger Airship Agreement dated May 31, 1991 between the Company Exhibit 19.12(4)
and Anheuser.
10.16 Airship Advertising Agreement dated March 12, 1992 between the Exhibit 10.13(4)
Company and Anheuser.
10.17 Term Loan Agreement dated as of February 27. 1990, between State Bank Exhibit 10.3(9)
of South Australia and the Company in the principal amount of $250,000.
10.18 Airship Lease dated February 27, 1990 between the Company and the State Exhibit 10.23(5)
Bank of South Australia together with Lease Supplement No. 1 thereto.
10.19 Subordination Agreement dated February 27, 1990, between the Company, Exhibit 10.16(4)
State Bank of South Australia and Louis J. Pearlman.
10.20 Line of Credit Agreement dated December 31, 1991 between Julian Exhibit 10.17(4)
Benscher and the Company in the amount of $1,000,000, as amended on
February 20, 1992 and Secured and Credit Note dated December 31, 1991
from the Company to Julian Benscher in the principal amount of
$1,000,000.
10.21 Loan Agreement dated December 8, 1988 between the Company and Louis Exhibit C.1(3)
J. Pearlman relating to a loan of $500,000.
10.22 Promissory note dated December 8, 1988 of the Company. Exhibit D.1(3)
10.23 Demand Note dated as of December 31, 1988 of the Company to Louis J. Exhibit H.1(3)
Pearlman, in the principal amount of $324,929.76.
10.24 Term Note for the principal amount of $850.000 dated January 31, 1990 Exhibit 10.21(4)
from the Company to Louis J. Pearlman.
10.25 Stock Option Agreement dated January 1, 1989 between the Company and Exhibit E.1(3)
Louis J. Pearlman to purchase 1,000,000 shares.
10.26 Amendment to Stock Option Agreement between the Company and Louis J. Exhibit 10.24(4)
Pearlman dated as of February 7, 1991.
10.27 Exchange Agreement dated January 29, 1992 between Slingsby Aviation Exhibit 10.28(4)
Limited and the Company.
10.28 Purchase Agreement Assignment dated November 2, 1989 between the Exhibit 10.26(5)
Company and ORIX and Consent by Airship UK.
10.29 Letter of Credit dated November 2,1989 between the Company and ORIX. Exhibit 10.309(5)
10.30 Assignment of (MetLife) Aerial Advertising Agreement and Consent dated Exhibit 10.27(5)
as of November 2, 1989 between the Company and Airship (UK).
</TABLE>
3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Index
--------------
Exhibit Incorporated by
Number Description Reference to
- ------- ----------- ---------------
<S> <C>
10.31 Guaranty of Louis J. Pearlman in favor of ORIX dated as of November 2, Exhibit 10.28(5)
1989.
10.32 Note and Warrant Purchase Agreement dated as of November 2, 1989 Exhibit 109.33(5)
between the Company and ORIX
10.33 Agreement dated November 12, 1990 among the Company the Receiver for Exhibit 10.30(10)
Airship UK, AIUSA and others.
10.34 Corporate Financial Consulting Agreement dated February 14, 1991 Exhibit 10.38(4)
between the Company and Cohig & Associates.
10.35 Engagement Letter dated September 22, 1988 between Emanuel and Exhibit K.1(3)
Company and the Company.
10.36 Agreement dated August 28, 1992 between Seoul Olympic Sports Promotion Exhibit 10.45(11)
Foundation and the Company.
10.37 Fifth Amendment to Aerial Advertising Agreement effective as of Exhibit 10.46(11)
September 1, 1992 between Metropolitan Life and the Company.
10.38 Loan Agreement dated October 14, 1992 between Sequel Capital Corporation and Exhibit 10.47(11)
the Company.
10.39 Agreement dated December 17, 1992 between J&B Enterprises Limited Exhibit 10.48(11)
(UK) Corp. Julian Benscher and the Company.
10.40 Airship Mortgage dated December 17, 1992 between the Company and J&B Exhibit 10.49(11)
Enterprises Limited (UK) Corp.
10.41 Employment Agreement dated as of December 31, 1992 between the Exhibit 10.50(11)
Company and Seth Bobet.
10.42 Employment Agreement dated as of December 31, 1992 between the Exhibit 10.51(11)
Company and Alan Siegel.
10.43 Employment Agreement dated as of December 31, 1992 between the Exhibit 10.52(11)
Company and Frank Sicoli.
10.44 Amended Employment Agreement dated as of February 15,1993 between Exhibit 10.53(11)
the Company and Louis J. Pearlman
10.45 Second Amendment to Stock Option Agreement between the Company and Exhibit 10.54(11)
Louis J. Pearlman date as of February 15.l 1993.
10.46 Mast Sale Agreement dated December 30, 1992 between J&B Enterprises Exhibit 10.55(11)
Limited (UK) Corp. Julian Benscher and the Company.
10.47 Mortgage dated December 30, 1992 between the Company and J&B Exhibit 10.56(11)
Enterprises Limited (UK) Corp.
10.48 Subscription Agreements between the Company and certain investors Exhibit 10.57(11)
relating to the 1992 Private Placement.
10.49 Sublease Agreement between Westinghouse Airships, Inc. and the Company Exhibit 10.58(13)
dated November 9, 1992.
</TABLE>
4
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Index
--------------
Exhibit Incorporated by
Number Description Reference to
- ------- ----------- ---------------
<S> <C>
10.50 Amendment to Sublease Agreement between Westinghouse Airships, Inc. Exhibit 10.59(13)
and the Company dated November 9, 1992.
10.51 Lease Agreement between Sand Lake IV-A Limited Partnership and the Exhibit 10.60(13)
Company dated February 25, 1991.
10.52 Lease Agreement between T&L Leasing and the Company dated January Exhibit 10.61(13)
13. 1992.
10.53 Lease Agreement between Westdeutsche Luftwerbung Theodor Exhibit 10.52(15)
Wullenkemper GMBH and the company dated May 16, 1993.
10.54 Manufacturers Agreement between WDL Luftschiffgesellschaft MBH and Exhibit 10.53(15)
the Company dated may 16, 1993.
10.55 Escrow Agreement between and among Westdeutsche Lufterbung Theodor Exhibit 10.54(15)
Wullenkemper GMBH & Co., WDL Luftschiffgesellschaft MBH, Trans Exhibit 10.55(15)
Continental Airlines Inc., and the Company dated May 15, 1993.
10.56 Aerial Advertising Agreement between the Company and Catamount Exhibit 10.56(15)
Petroleum Limited Partnership dated May 28, 1993.
10.57 Amendment to Aerial Advertising Agreement between the Company and Exhibit 10.57(15)
Catamount Petroleum Limited Partnership dated July 27, 1993.
10.58 Second Amendment to Aerial Advertising Agreement between the Company Exhibit 10.58(15)
and Catamount Petroleum Limited Partnership dated August 9, 1993.
10.59 Third Amendment to Aerial Advertising Agreement between the Company Exhibit 10.59(15)
and Catamount Petroleum Limited Partnership dated October 13, 1993.
10.60 Fourth Amendment to Aerial Advertising Agreement between the Company Exhibit 10.60(15)
and Catamount Petroleum Limited Partnership dated November 9, 1993.
10.61 Aerial Advertising Agreement between Kingstreet Tours Limited and the Exhibit 10.61(15)
Company dated as of January 18, 1994.
10.62 Passenger Airship Agreement between Anheuser-Busch Companies, Inc. Exhibit 10.62(15)
and the Company dated as of January 2, 1994.
10.63 Amendment to Airship Advertising Agreement dated March 12, 1992, Exhibit 10.63(15)
between the Company and Anheuser-Busch Companies, Inc. dated March 4,
1994 and related letter agreement dated February 11, 1994.
10.64 Amendment to note agreement dated as of November 2, 1989 between the Exhibit 10.64(15)
Company and ORIX dated January 11, 1994.
10.65 Loan Agreement between Don Golden and the Company dated June 30, Exhibit 10.65(15)
1993.
10.66 Guarantee of Louis J. Pearlman in favor of the Company dated as of June Exhibit 10.66(15)
30, 1993.
10.67 Loan Agreement between Superbound Limited and the Company dated Exhibit 10.67(15)
December 7, 1993.
</TABLE>
5
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Index
--------------
Exhibit Incorporated by
Number Description Reference to
- ------- ----------- ---------------
<S> <C>
10.68 Guarantee of James Stuart Tucker in favor of the Company dated as of Exhibit 10.68(15)
December 7, 1993.
10.69 Kingstreet Tours Limited Aerial Advertising Agreement dated January 18, *
1994, by and between the Company and Kingstreet Tours Limited.
10.70 Amended and Restated Airship Advertising Agreement, dated July 8, 1994, *
by and between the Company and Anheuser-Busch Companies, Inc.
10.71 Aircraft Lease Agreement, dated December 15, 1994, by and between the *
Company and Mastellone Hnos., S.A.
10.72 Airship Operations Agreement, dated December 15, 1994, by and between *
Airship Operations (USA), Inc. and Mastellone Hnos, S.A.
10.73 Passenger Airship Agreement, dated as of January 2, 1994, by and between *
the Company and Anheuser-Busch Companies, Inc.
10.74 Letter Agreement Modification, dated January 11, 1994, by and between *
the Company and ORIX USA Corporation.
10.75 Amendment to Lease, dated May 12, 1994, by and between the Company *
and ORIX USA Corporation.
10.76 Collateral and Security Agreement, dated as of May 10, 1994, by and *
between the Company and ORIX USA Corporation.
10.77 Aircraft Collateral Funding Repayment Agreement, dated as of November *
16, 1994, by and between the Company and Allstate Financial Corporation.
10.78 Guaranty, dated December 6, 1994, of Louis J. Pearlman. *
10.79 Guaranty, dated December 6, 1994, of Trans-Continental Airlines, Inc. *
10.80 Aircraft Lease Agreement, dated as of May 31, 1995, by and between *
Trans Continental Leasing, Inc., as Lessor and the Company, as Lessee.
10.81 Full Warranty Bill of Sale, dated as of May 31, 1994, by the Company to *
Trans Continental Leasing, Inc.
10.82 Credit Agreement, dated November 30, 1995, by and between the Company *
and Senstar Capital Corporation.
10.83 Term Note, dated November 30, 1995, of the Company to Senstar Capital *
Corporation.
10.84 Aircraft Mortgage and Security Agreement, dated November 30, 1995, by *
and between the Company and Senstar Capital Corporation.
10.85 Assignment of Contract Rights, dated November 30, 1995, by and between *
the Company and Senstar Capital Corporation.
10.86 Agreement of Guaranty and Suretyship, dated November 30, 1995, by and *
between Trans Continental Airlines and Senstar Capital Corporation.
</TABLE>
6
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Index
--------------
Exhibit Incorporated by
Number Description Reference to
- ------- ----------- ---------------
<S> <C>
10.87 Release and Settlement Agreement, dated September 20, 1993, by and *
between the Company and Sequel Capital Corporation and Louis J.
Pearlman.
10.88 Promissory Note, dated October __, 1994, of Louis J. Pearlman to Airship *
Airways, Inc.
10.89 Promissory Note, dated October 26, 1994, of Louis J. Pearlman to Airship *
Airways, Inc.
10.90 Form of Share Subscription Agreement, dated August 11, 1994, between *
the Company and _______________.
10.91 List of Purchasers in the 1994 Private Placement. *
10.92 Secured Promissory Note, dated October 26, 1994, of Airship Airways, Inc. to *
the Company.
10.93 Option Agreement, dated as of August 11, 1994, between the Company and *
Louis J. Pearlman.
10.94 Airship International Ltd. Employee Share Purchase Plan. Exhibit 1(18)
11.1 Statement re: Computation of Per Share Earnings. *
16.1 Letter of Wiss & Co. dated June 22, 1993 Exhibit 16.1(14)
16.2 Letter of Grant Thornton dated July 7, 1997. Exhibit 16(16)
16.3 Letter of Grant Thornton dated July 22, 1997 Exhibit 16(17)
21.1 List of Subsidiaries *
24.1 Consent of Charlie Meeks, CPA *
27.1 Financial Data Schedule *
</TABLE>
*Filed herewith.
(1) The Company's Registration Statement on Form S 18 Registration No. 2.96334
NY as filed with the Securities and Exchange Commission (the "SEC") on
March 9, 1985.
(2) The Company's Registration Statement on Form S-1 Registration No. 33-7830,
as filed with the SEC on August 7, 1986.
(3) The Company's Annual Report on Form 10-K for fiscal year ended December 31,
1988.
(4) The Company's Annual Report on Form 10-K for fiscal year ended December 31,
1991.
(5) The Company's Registration Statement on Form S-2, Registration No.
33-32619, as filed with the SEC on December 18, 1989.
(6) The Company's Post-effective Amendment No. 1 on Form S-3 to Form S-2,
Registration No. 33-38076, as filed with the SEC on May 14,1 992.
(7) The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1987.
(8) The Company's Report on Form 8 dated August 14, 1991.
(9) The Company's Report on Form 8-K dated February 27, 1990.
(10) The Company's Registration Statement on Form S-2, Registration No.
33038076. as filed with the SEC on December 5. 1990.
7
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<PAGE>
(11) The Company's Registration Statement on Form S-1, Registration No.
33-56382, as filed with the SEC on February 16, 1993.
(12) The Company's Registration Statement on Form 8-A, as filed with SEC on
March 16, 1993.
(13) The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1992.
(14) The Company's Report on Form 8-K dated July 9, 1993.
(15) The Company's Annual Report on Form 10-K for the fiscal year ended
December31, 1993.
(16) The Company's Report on Form 8-K, as filed with the SEC on July11, 1997.
(17) The Company's Report on Form 8-K/A, as filed with the SEC on July22, 1997.
(18) The Company's Proxy Statement, as filed with the SEC on March 20, 1995.
(b) The Company had not filed any reports on form 8-K during the last quarter of
the period covered by this report.
8
STATEMENT OF REFERENCES
The copyright symbol shall be expressed as.............................`c'
The registered trademark symbol shall be expressed as..................`r'
The trademark symbol shall be expressed as.............................`tm'
Characters normally expressed as superscript shall be preceded by.......`pp'
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BY-LAWS OF
AIRSHIP INTERNATIONAL LTD.
Incorporated under the Business Corporation Law of the
State of New York
1 PRINCIPAL OFFICE
(1.1) INITIAL LOCATION The principal office of the corporation shall
initially be located at 521 Fifth Avenue, Suite 1746, New York, New York 10017.
(1.2) CHANGE OF LOCATION The board of directors may, upon reasonable
written notice to all shareholders, relocate the principal office of the
corporation.
(1.3) OTHER OFFICES In addition to its principal office, the corporation
may have such other offices, either within or without the State of
incorporation, as the board of directors may designate.
2 DIRECTORS
(2.1) NUMBER The number of directors shall be that number as may from
time to time be fixed by the board of directors, but not less than. the minimum
number required by law.
(2.2) QUALIFICATION No person shall serve as a director unless qualified
under the following rules:
A. A director must be at least 18 years of age.
B. A director need not be a shareholder.
C. A director need not reside within the State of incorporation.
(2.3) NOTICES Upon taking office, each director shall file with the
secretary a written designation of the address that the director desires to be
used for the purpose of giving notices to him/her. Until the director shall have
effectively done so, he/she shall be deemed to have designated either the
principal office of the corporation or any other address that the sender of the
notice could reasonably believe to be an appropriate address. Any designated
address may be redesignated by similar filing with the secretary. The secretary
shall give each of the other directors prompt notice of every designation or
redesignation filed. The designation or redesignation shall be effective three
business days.after the secretary's action or upon earlier receipt. Any notice
to a director shall be valid if sent to either (a) the director's designated
address or (b) any other address used in good faith unless it be shown that
prejudice resulted from use of such other address. All notices must be in
writing. Any notice may be
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delivered by hand or sent by telecommunications device, by nail or by similar
means. If a notice is sent by registered mail or return receipt requested,
another copy shall at the same time be sent by ordinary first class mail.
(2.4) RESIGNATION A director may resign at any time by, giving notice to
each of the other directors. Unless otherwise specified, the notice shall be
effective immediately and acceptance shall not be necessary to make it
effective. A director need not assign cause for resigning.
(2.5) REMOVAL A director may be removed by the shareholders without
cause or by the board of directors with cause.
3 BOARD OF DIRECTORS
(3.1) REGULAR MEETINGS A regular meeting shall be held immediately after
and at the same place as the annual meeting of shareholders. The board of
directors may provide for other regular meetings. Notice need not be given of
any regular meeting.
(3.2) SPECIAL MEETINGS The president or any two directors may call a
special meeting upon not less than five business days' notice to every other
director stating the time and place and business to be transacted.
(3.3) ADJOURNED MEETINGS Whether or not a quorum is present, a majority
of the directors present may adjourn any meeting to such time and place as they
shall decide. Notice of any adjourned meeting need not be given. At any
adjourned meeting, whether adjourned once or more, any business may be
transacted that might have been transacted at the meeting of which it is an
adjournment. Additional business may also be transacted if proper notice shall
have been given.
(3.4) ORGANIZATION The chairperson of the meeting shall be the president
if taking part in the meeting or, if not, any director elected by a majority of
the directors present. The secretary of the meeting shall be the secretary if
taking part in the meeting or, if not, any director appointed by the chairman of
the meeting.
(3.5) COMMITTEES The board of directors may, by resolution passed by a
majority of the full board of directors (a) designate three or more of its
number to constitute an executive committee, or one or more other committees,
which, so far as may be permitted by law and to the extent and in the manner
provided in said resolution, shall have and may exercise, between meetings of
the board of directors, the powers of the board of directors in the management
of the affairs and business of the corporation, (b) at any time change the
members of any such committee, (c) fill vacancies in any such committee, and (d)
discharge any such committee, with or without cause. The board of directors may
provide for regular meetings of any such
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committee with or without notice as the board of directors may prescribe. To the
extent authority of the board of directors has been delegated to any such
committee, any reference in these by-laws to the board of directors shall be
deemed a reference to such committee.
(3.6) TELECOMMUNICATIONS PARTICIPATION Any one or more directors may
participate in a meeting of the board or any committee by means of a conference
telephone or other type of telecommunications equipment allowing persons
participating in the meeting to hear each other at the same time.
(3.7) REGULATIONS The board of directors may adopt rules and
regulations, not inconsistent with law, the certificate of incorporation or
these by-laws, for the conduct of its meetings and the management of all aspects
of the affairs of the corporation.
4 SHARES AND CERTIFICATES
(4.1) FORM OF CERTIFICATES Certificates representing shares shall be in
the form determined by the board of directors. All certificates issued shall be
consecutively numbered or otherwise appropriately identified.
(4.2) SHARE TRANSFER LEDGER There shall be kept a share transfer ledger
in which shall be entered full and accurate records including the names and
addresses of all shareholders, the number of shares issued to each shareholder
and the dates of issuance. All transfers of shares shall be promptly reflected
in the share transfer ledger. Unless otherwise directed by the board of
directors, the share transfer ledger shall be kept at the principal office of
the corporation.
(4.3) TRANSFER OF SHARES Upon (a) receipt of the certificate
representing the shares to be transferred, either duly endorsed or accompanied
by proper evidence of succession, assignment or authority to transfer, (b)
payment of any required transfer taxes, and (c) payment of any reasonable charge
the board of directors may have established, the surrendered certificate shall
be cancelled and a new certificate or certificates shall be issued to the
person(s) entitled to it.
(4.4) REPLACEMENT CERTIFICATES Replacement certificates will be issued
at the request of the shareholder upon payment of any reasonable charge the
board of directors may have established. In case of a lost, mislaid, destroyed
or mutilated certificate, proof of the facts, by affidavit or otherwise, may
also be required, as may be a bond or other proper indemnification for the
corporation and its agents.
(4.5) RECORD OWNER TO BE TREATED AS OWNER Unless otherwise directed by a
court of competent jurisdiction, the corporation shall treat the holder of
record of any share as the holder in fact and accordingly shall not recognize
any equitable or
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<PAGE>
other claim to or interest in the shares on the part of any other persons,
whether or not it shall have express or other notice of it.
5 SHAREHOLDERS' MEETINGS
(5.1) ANNUAL MEETING The annual meeting of the shareholders shall be
held at 10 A.M. on the third Tuesday of March in each year. If the day fixed for
the annual meeting is a Saturday, Sunday or holiday at the place it is to be
held, the meeting shall be held on the following day that is not such a day.
Unless otherwise stated in the notice of the meeting pursuant to direction of
the board of directors, the annual meeting shall be held at the principal office
of the corporation.
(5.2) SPECIAL MEETINGS A special meeting of the shareholders may be
called by any two or more directors, the president or the holders of not less
than 25% of all the shares entitled to vote at the meeting.
(5.3) ADJOURNED MEETINGS Whether or not a quorum is present, a majority
in voting power of the shareholders present in person or by proxy and entitled
to vote may adjourn any meeting to a time and place as they shall decide. Notice
of any adjourned meeting need not be given. At any adjourned meeting, whether
adjourned once or more, any business may be transacted that might have been
transacted at the meeting of which it is an adjournment. Additional business may
also be transacted if proper notice shall have been given.
(5.4) ORGANIZATION The president shall be chairman of the meeting. The
secretary shall be secretary of the meeting. If neither the president nor any
vice president is present, the shareholders shall choose a chairman of the
meetings If neither the secretary nor any assistant secretary is present, the
chairman of the meeting shall appoint a secretary of the meeting.
(5.5) ORDER OF BUSINESS The order of business shall be as determined by
the chairman of the meeting, but the order may be changed by a majority in
voting power of the shareholders present in person or by proxy and entitled to
vote. Unless otherwise determined as aforesaid, the order shall be as follows:
1. Roll call.
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes of preceding meeting.
4. Reports of officers.
5. Reports of committees.
6. Election of directors.
7. Unfinished business.
8. New business.
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(5.6) VOTING Upon demand of any shareholder, voting shall be by ballot,
in which event each ballot shall be signed by the shareholder or his proxy and
shall state the number of shares voted. Otherwise, voting need not be in
writing.
6 OFFICERS
(6.1) ADDITIONAL OFFICERS In addition to the president, secretary,
treasurer and any other officers required by law, the corporation may have one
or more vice presidents elected by the board of directors, one of whom may be
designated as executive vice president. The corporation may also have such other
or assistant officers as may be elected by, or appointed in a manner prescribed
by, the board of directors.
(6.2) SENIORITY The executive vice president, if there is one, shall be
deemed senior to all other vice presidents. Unless otherwise determined by, or
under rules prescribed by, the board of directors, seniority of any officer
shall be determined by length of continuous service in that office.
(6.3) CONTINUATION IN OFFICE Unless otherwise provided by the board of
directors, every officer shall serve until death, incapacity, resignation or
removal by the board of directors. Any resignation or removal shall be without
prejudice to any contractual rights of the corporation or the officer.
(6.4) DUTIES IN GENERAL Subject to these by-laws, the authority and
duties of all officers shall be determined by, or in the manner prescribed by,
the board of directors. Except as may be specifically restricted by the board of
directors, any officer may delegate any or his/her authority and duties to any
subordinate officer.
(6.5) DUTIES OF PRESIDENT The president shall be the principal executive
officer of the corporation and, subject to the control of the board of
directors, shall in general supervise and control all of the business and
affairs of the corporation. The president may sign, with the secretary or any
other proper officer of the corporation thereunto authorized by the board of
directors, certificates for shares of the corporation, any deeds, mortgages,
bonds, contracts, or other instruments that the board of directors has
authorized to be executed, except in cases where the signing and execution shall
be expressly delegated by the board of directors or by these by-laws to some
other officer or agent of the corporation or shall be required by law to be
otherwise signed or executed, and in general shall perform all duties incident
to the office of president and such other duties as may be prescribed by the
board of directors from time to time.
(6.6) DUTIES OF VICE-PRESIDENTS In the absence or incapacity of the
president, the senior vice president shall perform the duties of the president
and when so acting shall have all the powers of and be subject to all the
restrictions upon the president.
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Each vice president shall perform any other duties as may be assigned by the
president or by the board of directors.
(6.7) DUTIES OF SECRETARY The secretary shall keep the minutes of the
shareholders' and the directors' meetings in one or more books provided for that
purpose, see that all notices are duly given in accordance with the provisions
of these by-laws or as otherwise required, be custodian of the corporate records
and of the seal of the corporation, keep a register of the post office addresses
of each shareholder, have general charge of the share transfer books of the
corporation, and in general perform all duties incident to the office of
secretary and other duties as may be assigned by the president or by the board
of directors.
(6.8) DUTIES OF TREASURER If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his/her duties in a
sum and with any surety or sureties as the board of directors shall determine.
The treasurer shall have charge and custody of and be responsible for all funds
and securities of the corporation, receive and give receipts for monies due and
payable to the corporation from any source whatsoever, and deposit all such
monies in the name of the corporation in the banks, trust companies or other
depositories as shall be selected in accordance with these by-laws, and in
general perform all the duties incident to the office of treasurer and such
other duties as may be assigned by the president or the board of directors.
(6.9) SALARIES No officer shall receive any salary unless provided or
authorized by the board of directors. No officer shall be prevented from
receiving a salary by reason of the fact that he/she is a director.
7 SEAL
(7.1) FORM The seal of the corporation shall be in the form impressed in
the margin.
(7.2) USE The seal may be used by causing it to be impressed directly on
the instrument or writing to be sealed, or upon an adhesive substance annexed.
The seal on certificates for shares or other documents may be a facsimile,
engraved or imprinted.
8 AMENDMENTS
(8.1) BY BOARD These by-laws may be amended or repealed by the board of
directors.
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KINGSTREET TOURS LIMITED AERIAL ADVERTISING AGREEMENT
AGREEMENT made as of the 18th day of January 1994 by and between
Airship International Ltd., a New York corporation ("Airship"), with its
principal place of business at 7380 Sand Lake Road, Suite 200, Orlando, Florida
32819 and KINGSTREET TOURS LIMITED, a United Kingdom Company (the "Client"),
with its principal place of business at 48 Woodstock Road, London, England W4
1US. Client and Airship are collectively referred to as the "Parties" to this
Agreement:
W I T N E S S E T H:
WHEREAS, Airship is the owner and operator of a lighter-than air
airship to be provided by Airship for use under this Agreement (the "Aircraft");
and
WHEREAS, the Aircraft is suitable for aerial advertising;
and
WHEREAS, the Client wishes to utilize the Aircraft for aerial
advertising and promotion of Client's (and its affiliates') products,
merchandise and services on a fixed fee basis; and
WHEREAS, Airship wishes to furnish the Aircraft and all
equipment, supplies and personnel required to operate the Aircraft under this
Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
covenants and representations contained herein and for other good
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and valuable consideration also set forth herein, the parties hereto do hereby
agree as follows:
SECTION ONE
OPERATING FEE, TERM OF THE AGREEMENT
AND DELIVERY OF THE AIRCRAFT
Operating Fee
1.1 Airship shall provide the Aircraft to the Client, with all
equipment, instruments, engines, computers, camera mount facilities, ground
support vehicles, mooring masts, fuel, personnel, (including pilots and ground
crew), necessary for the operation of the Aircraft.
1.2 (a) Subject to the terms set forth in Section 1.4 below,
Client shall pay an operating fee to Airship in the amount of $250,000 per month
for each month for which the Airship shall be operated during the Term of this
Agreement (as defined in Section 1.4(a) herein).
(b) Upon execution of this Agreement, Client shall
pay to Airship $250,000 representing the initial monthly fee. Thereafter, Client
shall pay the monthly installments set forth in Section 1.2(a) (subject to
credit or offset pursuant to this Agreement) on the first business day each
month for which the Airship is operated during the term of this Agreement.
(c) If the Commencement Date of this Agreement
shall be other than the first day of a calendar month or if this Agreement is
terminated as of a date that is not the last day of a calendar month, then the
fee payable by Client to Airship for such
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month shall be prorated based upon the actual number of days in the month
advertising services are provided to Client. Any such excess sums paid by Client
shall be either (i) returned to Client or (ii) applied against Client's second
monthly installment payment, at Client's option.
(d) Payment by Client shall be made to the order of
Airship International Ltd., and shall be made at 7380 Sand Lake Road, Suite 200,
Orlando, Florida 32819 or to such other place as may be designated in writing by
Airship to Client in accordance with the Notice provisions of Section 11.2 of
this Agreement. If any payment due under this Agreement remains unpaid for more
than seven (7) days after the due date hereof, Client shall pay to Airship
interest calculated at the rate of ten (10) percent per annum on the unpaid
principal amount of any overdue payments from the date such payment was due to
the date of payment. Any costs, including reasonable attorney's fees, incurred
by Airship to recover sums due under this Agreement shall be paid by Client.
Flight Time
1.3 (a) Airship shall provide to Client and Client shall schedule
the Aircraft to fly, at least 120 hours of flight time per month of operation,
subject to the limitations set forth in this Section 1.3. Flight time shall be
measured from departure from Aircraft's mooring mast until mooring at said mast
and will be determined by flight meter and/or pilot's log.
(b) Airship shall perform its flight operation
duties and Client shall schedule the Aircraft to fly, on eight (8)
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consecutive hours per day for five (5) days in every week (including Saturdays
and Sundays) during the term of this Agreement (and all extension renewals),
including (i) travel from one base of operations to another; and (ii) required
ground time for mooring, refueling, equipment installation as required, and
boarding of passengers on the Aircraft; and (iii) pre-flight and post-flight
activities, it being expressly understood by Client that during a normal eight
hour work day, up to forty-five (45) minutes before and forty-five (45) minutes
after flights ordinarily must be devoted to pre-flight and post-flight
activities.
(c) Subject to Section 1.3(e) below, if the actual
flight time shall be less than 120 hours during any one full month of operation
(or pro rata for any portion of a month), for any reason other than the
scheduled hangar periods set forth in Section 1.3(g)(ii) of this Agreement, then
Client shall be due compensable flight time as set forth in this Section 1.3.
Compensable flight time shall be defined as one hour of flight time in excess of
120 hours during one full month of operation (or pro rata for any portion of a
month), for each hour less than 120 hours not flown.
(d) In the event Airship does not (i) provide
compensable flight time to Client during the month succeeding the month in which
the compensable flight time accrued, then Client shall have the option to
either: (1) receive a pro rata reduction in the monthly installment payment due
to Airship pursuant to Section 1.2(a) in the next succeeding month after Client
elects to
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take the credit; or (2) receive compensable flight time as defined in Section
1.3 during any portion of the balance of the term of this Agreement or any
renewals thereof. Each hour of compensable flight time shall be assigned a value
of $2,500 for the purpose of computing the pro rata reduction in compensation
due Client under Section 1.3. In the event that the total operating fee provided
for in Section 1.2 (a) has been paid to Airship and Client has opted to receive
a pro rata reduction under this section, Airship shall reimburse Client for the
amount of such reduction within ten business days after Client notifies Airship
in writing that it opts to receive reimbursement rather than compensable flight
time. Compensable time use shall be charged against the earliest accrued
compensable time.
(e) If the actual flight time shall be less than
120 hours during any one full month of operation (or pro rata for any portion of
a month), as a result of Client's failure to schedule the Aircraft to fly for at
least 120 hours in that month then Client shall not be due, under any
circumstances, compensable flight time nor any credit against its monthly
installment pay for such unused flight time.
(f) The required 120 hours of flight time per month
shall be prorated on a daily basis where this Agreement does not commence on the
first day of the month and/or where this Agreement terminates on a day other
than the last day of the month.
(g) Airship shall have the right at its sole
discretion, to withdraw the Aircraft from service (i) whenever
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weather conditions, limitations of the Aircraft, mechanical difficulties,
licensing requirements and/or governmental regulations prevent or limit air
flight and/or may cause damage or injury to the Aircraft or its personnel; and
(ii), after prior consultation with Client, but still at its sole discretion,
for up to two 20-day hangar periods for scheduled airship maintenance.
Term of this Agreement
1.4 The term of this Agreement shall commence on or about January
18, 1994 (the "Commencement Date"). The term of this Agreement shall terminate
six months from the Commencement Date. The parties hereby agree that the
Aircraft shall be operated for a minimum of three months during the Term. The
Client shall notify Airship at last ten (10) days' in advance of each month for
which the Airship will be operated. Notwithstanding anything in this Agreement
to the contrary, Client shall receive a two-week period immediately following
the Commencement Date during which the operating fee obligations of Section
1.2(b) shall not apply. Accordingly, the first month period for operating fee
obligations under Section 1.2 shall consist of one month plus two weeks
following execution of this Agreement. Upon termination of this Agreement,
Airship shall take possession of the Aircraft from Client at the Aircraft's
mooring mast at the geographic location where Client most recently utilized the
Aircraft.
SECTION TWO
OPERATION AND USE OF THE
AIRCRAFT AND AIRCRAFT CREWS
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Use of the Aircraft
2.1 (a) The Aircraft shall be used, exclusively, for the
advertising and promotion of products, services, and merchandise which are sold,
marketed, or otherwise provided for by Client or Client's companies,
subsidiaries or affiliates. Client shall have the right to communicate and make
arrangements with television stations for coverage of the Aircraft during
televised events.
(b) Client shall have the right to advertise the
products, merchandise or services of companies or persons other than those set
forth in Section 2.1(a), including public service messages ("third party
advertisers"), subject to the prior written consent of Airship, which consent
shall not be unreasonably withheld or delayed; provided, however, that it shall
not be considered unreasonable for Airship to withhold its consent to the
advertising and promotion of products under this Section 2.1 where in Airship's
discretion, such advertising (i) is offensive to, or violates community
standards; or (ii) violates any applicable regulations and directives of any
civil aviation authorities having jurisdiction over the Aircraft; or (iii)
violates the terms of any other agreement executed or contemplated by Airship as
of the date of this Agreement with Client or a third party; or (iv) violates any
exclusive right granted another user of an Aircraft provided by Airship under an
exclusive agreement (executed or contemplated as of the date of this Agreement)
for a term of ninety (90) days or more, subject to the limitations of Section
10.2.
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(c) Client shall inform Airship of its intention to
sell advertising space on the Aircraft to a third party advertiser in writing,
setting forth the identity of such advertiser and the terms of such party
advertising. Where such third party advertiser does not then violate an existing
exclusive advertising right granted by Airship under any other agreement entered
into by Airship, Client may continue to sell space to such third party
advertiser without regard to any subsequent agreements entered into by Airship
with other third party advertisers under an agreement between Airship and
another user of an Aircraft provided by Airship.
(d) Airship shall inform Client of any objections
to any proposed third party advertising by Client within five (5) days after
Airship's receipt of written notice from Client of the proposed third party
advertising. Operation of the Aircraft
2.2 (a) Client shall take no action nor require Airship to take
any action that will prevent or limit Airship from operating the Aircraft, and
Airship shall operate the Aircraft, in the following manner:
(i) The Aircraft shall be operated in
accordance with all applicable federal, state, municipal or other laws, rules,
regulations, ordinances and orders now existing or enacted of any jurisdiction
to, from, or through which Airship or Client shall use or operate the Aircraft;
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(ii) The Aircraft shall be operated in
accordance with the manufacturer's approved flight manual and Airship's
operations manual for the Aircraft, engines, equipment, components and
accessories under the guidance of the Federal Aviation Administration ("FAA")
and the Department of Transportation ("DOT") and in accordance with the
applicable regulations an any other civil aviation authorities having
jurisdiction over the Aircraft;
(iii) The Aircraft shall be operated by pilots
and other qualified personnel holding valid licenses and other necessary
authorizations as may be required by applicable laws, regulations and
directives; and
(iv) The Aircraft shall be operated for the
purposes and in the manner set forth in any application for insurance executed
in connection with the Aircraft and in accordance with the terms of any
insurance policies relating to the Aircraft or its operations, and in accordance
with the geographical area covered by the policies of insurance required
hereunder, and in a manner which will not cause a suspension of insurance or
make applicable any exclusionary provision of such policies.
(b) The Aircraft shall not be used or operated:
(i) at any time when the insurance referred to
in Section 4 of this Agreement is not in full force and effect;
(ii) to transport hazardous or perilous cargo;
(iii) in a manner which endangers the Aircraft's
appropriate airworthiness certificate, or in a manner which
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violates or may cause Airship to violate any license, registration or directive
relating to the Aircraft issued by any aviation authority having jurisdiction
over the Aircraft;
(iv) for any purpose for which, in Airship's
discretion, the Aircraft is not designed or suited;
(c) If weather conditions permit, the Aircraft
flight shall generally operate at an altitude of 1,000 feet above ground level
and shall be conducted pursuant to the FAA regulations for Visual Flight Rules;
(d) The Aircraft is or will be permitted to operate
in all areas in which general civil aviation is permitted to operate subject to
weather conditions, physical limitations of the Aircraft and/or governmental
regulations pertaining to the operation of the Aircraft.
Schedules of Operation
2.3 (a) On a weekly or bi-weekly basis, Client and Airship
shall establish the local regional area and hours of operations (the "Local
Regional Schedule") for the Aircraft. Client may reasonably amend the Schedules,
provided, however, that Airship can comply with Client's request. Airship shall
use its best efforts to accommodate such regional changes when requested by
Client, however, Airship specifically reserves the right to refuse its consent
to such amendment whenever Airship (i) is unable to obtain clearance with the
appropriate governmental agencies; and/or (ii) is unable to make appropriate
ground arrangements.
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(b) Airship shall have the right to refuse to fly
the Aircraft in accordance with the Local Regional Schedules of Operations (and
any amendments thereto) whenever in Airship's sole discretion, weather
conditions, physical limitations of the Aircraft and/or applicable governmental
rules or regulations prevent or limit adherence to the Local Regional Schedules
of Operations.
Guests Aboard the Aircraft
2.4 (a) Client shall be permitted to invite guests on board the
Aircraft subject to (i) Airship's prior written consent; (ii) operational
limits, schedules and capacity of the aircraft; and (iii) applicable
governmental rules and regulations; provided however, that Client shall at no
time require Airship to take either cargo or passengers for hire.
(b) All guests of the Client approved by Airship
shall sign a waiver of liability on a form provided by Airship, releasing
Airship, Client, their officers, directors, stockholders, and all related or
affiliated companies from liability for personal or property damage or injury to
such guests. Airship shall obtain such waivers for Client. Airship and Client
shall not permit any guest to board the Aircraft without execution and delivery
to Airship of the required waiver.
Demonstration Flight
2.5 During the term of this Agreement and any extensions thereof,
Airship shall have the right, upon written notice to
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Client, to conduct demonstration flights of the Aircraft during times which
shall not otherwise interfere with the Client's advertising program.
2.6 At Client's option, either (i) Client shall provide all
necessary uniforms for the Airship flight crews and all decals and logos for use
on ground support vehicles or (ii) Airship shall provide such uniforms, decals
or logos conforming to Client's requirements at Client's expense. Such uniforms,
decals and logos shall be cleaned or replaced from time to time by Airship or
Client, as the case may be, in order to main and presentable appearance to the
public. Client's registered trademarks, trade names and other proprietary
property connection with such uniforms, painted logos and decals shall remain
the property of Client and/or subsidiaries and affiliates. In the event that
Client does not require uniforms, decals or logos, the crew of the Aircraft
shall wear Airship uniforms and Airship decals and logos shall be used, at
Airship's expense.
2.7 (a) Notwithstanding anything to the contrary contained
herein, the actual operation of the Aircraft shall remain Airship's sole
responsibility. Airship which shall have sole discretion over the determination
of actual conditions and through its pilot in command of the Aircraft, shall
make the final determination whether geographic, topographic and/or weather
conditions are within acceptable limits to permit the Aircraft to fly.
(b) Where any proposed flight is cancelled, or
there is a deviation from the Local Regional Schedule of Operations
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as a result of (i) prevailing or forecast weather conditions; (ii) topographic
problems; and/or (iii) physical limitations of the Aircraft, then the pilot in
command of the Aircraft shall make a notation regarding the circumstances for
such cancellation or deviation in the Aircraft's logs.
SECTION 3
REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1 (a) Airship represents, warrants and covenants
that:
(i) The Aircraft shall measure approximately
194 feet in length, 62 feet in height, and 50 feet in width; (ii) The Aircraft
will be a certified standard type aircraft under the laws of the International
Civil Aviation Organization (ICAO);
(iii) As of the Commencement Date, Aircraft
shall have a valid Certificate of Airworthiness issued by the country of origin
or the FAA, and Airship shall maintain valid certificates of airworthiness for
the Aircraft at all times.
(iv) The Aircraft is, or will be on the
Commencement Date, in good condition and usable for the purposes
contemplated by this Agreement; and
(v) Airship shall maintain registration of the
Aircraft under applicable laws during the term of this Agreement, and shall
obtain and maintain in effect, the required approvals of the FAA, DOT and any
other aeronautical authorities having jurisdiction to operate the Aircraft in
the United States.
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(b) As owner and operator of the Aircraft, Airship
shall be responsible for performance of all Aircraft overhaul, engine overhaul
and maintenance required during the terms of this Agreement under the guidance
of the regulations of the FAA, DOT or other governmental authority having
jurisdiction over the Aircraft.
(c) Airship shall maintain all records, logs and
other materials required by the FAA, DOT, or other governmental authority having
jurisdiction over the Aircraft. Airship agrees to permit Client, or its duly
authorized agents or representatives, to inspect the Aircraft and its logs upon
reasonable notice to Airship.
(d) Prior to the Commencement Date, the Aircraft
and ground support equipment shall be painted and/or decaled by Airship in an
exterior paint or decal design in accordance with Client's specifications, which
design is annexed hereto as Exhibit A. Airship shall maintain the paint and/or
decals in a clean and orderly condition for the term of this Agreements. Client
shall have the right to change the paint scheme of the Aircraft envelope and/or
ground support equipment at any time during the term of this Agreement and all
renewals thereof, provided Airship receives at least sixty (60) days written
notice of the change. A charge of Fifty Thousand ($50,000) Dollars will be
payable by the Client to Airship for each subsequent redesigned paint scheme for
the Aircraft and support equipment, if any, which Client may require. All
operating time lost on account of such change by the Client shall constitute
"flight time" under Section 1 and Client shall not
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receive any credit or compensable flight for such lost operating
flight time.
(e) Airship shall maintain, service and repair the
Aircraft so as to (i) keep each component of the Aircraft in operating
condition; (ii) meet the requirements of the maintenance plans recommended by
the manufacturers of the engines, envelope and gondola comprising the Aircraft;
(iii) keep the Aircraft certified as airworthy by the governmental agency with
jurisdiction over the Aircraft; (iv) comply with any other governmental
authority airworthiness directives applicable to the Aircraft; and (v) keep the
Aircraft clean and in suitable condition to provide services required under this
Agreement.
(f) Airship shall maintain, service and repair all
ground support vehicles and equipment supplied by so as to (i) keep the
components thereof in good operating condition; (ii) keep such vehicles and
equipment properly licensed and (iv) keep the vehicles and equipment clean and
in good condition fit to provide the service required of Airship hereunder.
(g) Airship represents and warrants that all
necessary approvals, licenses and permits required by the DOT, FAA, or other
required federal, state or local governmental authority necessary for the
execution of this Agreement have been or will be obtained prior to the
commencement of this Agreement and that if required, such approvals, licenses
and permits shall be maintained in effect during the term of this Agreement.
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3.2 Airship represents and warrants that (i) Airship is a
corporation duly organized and validly existing under the laws of the State New
York; (ii) Airship is duly qualified and authorized to do business jurisdiction
where the nature of its business makes such authorization necessary; (iii)
Airship has the power, authority and legal right to enter into and perform this
Agreement and the execution, delivery and performance of this Agreement have
been duly authorized by all necessary corporate action of Airship; (iv) the
execution of this Agreement and compliance with its terms and conditions will
not contravene any permit applicable to Airship, nor conflict with, or breach of
the terms and condition hereof, nor constitute a default under the Articles of
Incorporation or By-Laws of Airship or any agreement or instrument to which
Airship is now a party; (v) this Agreement constitutes a legal, valid and
binding obligation of Airship; and (vi) there are no suits, actions or
proceedings pending, or to Airship's knowledge, threatened, in court or before
or by any regulatory commission, board or other administrative agency which may
have a material adverse effect on the business, operations or financial
condition of Airship.
3.3 Client represents and warrants that (i) Client is a
corporation duly organized and validly existing under the laws of the United
Kingdom: (ii) Client is duly qualified and authorized to do business in each
jurisdiction where the nature of its business makes such authorization
necessary; (ii) Client has the power, authority and legal right to enter into
and perform this Agreement
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and the execution, delivery and performance of this Agreement have been duly
authorized by all necessary corporate action on the part of Client; (iv) the
execution of this Agreement and compliance with its terms and conditions will
not contravene any franchise or permit applicable to Client, nor conflict with,
or result in a breach of the terms and conditions here, nor constitute a default
under the Articles of Incorporation or By-Laws of Client or any agreement or
instrument to which the Client is now a party; (v) this Agreement constitutes a
legal, valid and binding obligation of the Client; and (vi) there are no suits,
actions or proceedings pending, or to Client's knowledge, threatened, in court
or before or by any regulatory commission, board or other administrative agency
which may have a material adverse effect on the business, operations or
financial condition of Client.
SECTION FOUR
INSURANCE
4.1 (a) During the term of this Agreement, Airship shall procure
and maintain the following insurance coverage:
(i) Comprehensive Aviation Liability Insurance
with respect to the use and operation of the Aircraft, having single limit of
not less than $100,000,000.00, insuring and covering Airship and as an
additional insured pursuant to section 4.1(b)(i) Client, against all
liability for injury, damage or claims caused by or arising out of, or in
connection with the injuries to, or deaths of passengers or third persons or
damage to property;
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(ii) Automobile Liability Insurance or other
general liability insurance covering all owned and rented/hired automobiles,
trucks, trailers, and other vehicles and ground support equipment used by
Airship in the performance of its duties under this Agreement. Such insurance
shall provide coverage of not less than the Standard Comprehensive automobile
Liability Policy in limits not less than $10,000,000 combined single limit each
occurrence for Bodily Injury and Property Damage; and
(iii) Worker's compensation insurance in
conformity with the statutory limits of the states in which Airship shall be
required to carry such insurance.
(b) The liability insurance as set forth in
Section 4.1(a)(i) and (ii) shall include the following:
(i) Additional Insured: Client and its
subsidiaries and affiliates and their respective assigns, officers, directors
and employees, and David Gilmour, Nicholas Mason, Richard Wright and Tourlight
Inc., a Delaware corporation ("Tourlight"), shall be included as additional
insured under Section 4.1(a)(i) and (ii) with respect to the use and operation
of the Aircraft;
(ii) Waiver of Subrogation: The insurers shall
agree to waive their rights of subrogation against client and its subsidiaries
and affiliates and their respective agents, assigns, officers, directors and
employees;
(iii) Breach of Warranty: Such insurance as is
afforded Client shall not be invalidated by any act or neglect of Airship
whether or not such act or neglect is a breach or
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violation of any warranties, declarations of conditions of the policies;
provided, however, that the policy or policies providing the Automobile
Liability Insurance and other coverage provided for in Section 4.1 (a)(ii) may
be interpreted by the insurance underwriter thereof in such a manner as to
invalidate or restrict coverage for Client if the coverage for Airship shall
have been invalidated or restricted due to a breach of warranty by Airship.
(iv) Cross Liability: The inclusion of more
than one corporation, person, organization, firm or entity as Insured under the
policy of insurance shall not in any way affect the rights of any claim, demand,
suit or judgment made, brought or recovered, by or in favor of any other
insured, or by or in favor of any employee of such other insured. This policy
shall protect each corporation, person, organization, firm or entity in the safe
manner, as though a separate policy had been issued to each, but nothing herein
shall operate to increase the insurer's liability as set forth as limits to the
policy beyond the amount or amounts for which the Insurers would have been
liable if only one person or interest had been named as insured.
(v) Primary: With respect to such insurance as is
afforded to the additional insured specified above, this insurance shall be
primary with respect to damages or claims arising from acts or omissions by
Airship without right or contribution from any other insurance which is carried
by the Client.
(vi) Cancellation: Insurers shall agree that, in
the event they cancel or materially change such insurance policies, they
will give (30) days advance written notice (seven days in the case of war risk)
of such cancellation or material change to Client.
(vii) Geographic Limits: The geographic
limits of such insurance shall include all states within the continental United
States.
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(viii) Certificate of Insurance: At least ten
(10) days prior to the commencement of this Agreement and from time to time as
Client shall reasonably request, and prior to each renewal date of the
insurance, Airship shall furnish to Client certificates and cover notes
(summarizing policies) evidencing that the foregoing liability insurance is in
full force and effect.
SECTION FIVE
INDEMNITY
5.1 Airship hereby assumes liability for, and
hereby agrees to indemnify, reimburse, protect, save and hold harmless Client,
its subsidiaries and affiliates and their successors, assigns, agents, employees
and servants, and David Gilmour, Nicholas Mason, Richard Wright and Tourlight,
from and against, all claims, actions, suits or legal proceedings, in connection
with the purchase, ownership or, operation, lease of the aircraft, ground
support vehicles and equipment. This indemnity shall not however extend to (i)
claims arising from the advertising and promotion of Client's advertising copy
on the Aircraft or the advertising copy of third party advertisers; (ii) any
injury due to the negligence (in material part) or intentional acts of Client or
its third party advertisers or their officers, directors, agents, employees or
those of any affiliated company; and (iii) any sales, use or other similar tax
assessed to a user of goods and/or services which shall be the sole obligation
of the Client.
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5.2 Client hereby assumes liability for and hereby agrees to
indemnify, reimburse, protect, save and hold harmless Airship, its successors,
assigns, agents, employees and servants, from and against, any and all claims,
actions, suits, or legal proceedings, in any way related to the advertising and
promotion of Client's and its third-party advertiser's advertising copy on the
Aircraft or, any injury due to the negligence (in material part) or intentional
acts of Client or its third party advertisers, or their officers, directors,
agents, employees or those of an affiliated company or any sales, use or other
similar tax imposed on Airship as a result of the operation of the Aircraft on
behalf of Client.
SECTION SIX
GRAPHIC, COPY AND PROGRAMING
6.1 Airship shall prepare and maintain a fixed electric
NightSign(TM) on each side of the Aircraft.
6.2 All advertising of Client and its third-party advertisers
shall be in good taste and conform to the community standards. Airship shall
have the right to refuse to display copy which, in Airship's sole discretion,
does not comply with community standards.
SECTION SEVEN
COMMERCIAL EXPLOITATION OF AIRCRAFT
7.1 (a) Client may commercially exploit the likeness of
the Aircraft including the use of the Aircraft, for photographic
purposes and the taping of commercials and on items of merchandise
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during the term of this Agreement and for a period of 18 months after the
termination or expiration of this Agreement, after which time Client agrees not
to commercially exploit the Aircraft or its likeness.
(b) Client shall have the right for a period of one
(1) year after termination of this Agreement, to sell, distribute or give-away
all merchandise or products already produced or manufactured by or for Client
which commercially exploit the Aircraft or its likeness for the purposes of
liquidating the merchandise or give-aways. Notwithstanding the foregoing, Client
may use all of its existing inventory of brochures, souvenir books, and other
materials which include a photograph of the Aircraft until the inventory is
exhausted.
SECTION EIGHT
CONDITION PRECEDENT
8.1 The obligations of Client and Airship to perform its
respective obligations under this Agreement are specifically conditioned upon
the issuance and continuance by DOT and any other applicable governmental
authorities of all necessary permits for commercial air operations of the
Aircraft in connection with this Agreement and the Schedule of Operations by no
later than the Commencement Date.
SECTION NINE
EVENT OF DEFAULT
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9.1 The occurrence of any one of the following events will be
deemed to be and shall be treated as a default under this Agreement and just
cause for its termination by the non-defaulting party:
(a) Breach or failure by either party in the due
observance or performance of any term, covenant, warranty, representation or
agreement contained in this Agreement, which breach or failure continues
unremedied or uncorrected for a period of ten (10) days after written notice by
the non-breaching party to the defaulting party, which notice shall specify the
breach and require that it be remedied; or
(b) (i) Either party shall admit in writing its
inability to pay its debts, or shall make a general assignment for the benefit
of creditors; or (ii) any proceeding shall be instituted by or against either
party seeking to adjudicate such party as bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment or composition of its debts under any
law relating to bankruptcy, insolvency, reorganization, or relief of debtors, or
seeking appointment of a receiver, trustee or other similar official for such
party or for any substantial part of their property, and such proceeding shall
not have been dismissed within ninety (90) days; or (iii) either party shall
take any action to authorize any of the actions set forth above in this
subsection (b); or
(c) The operation of the Aircraft (i) without a
valid Certificate of Airworthiness in effect; or (ii) by any
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operator other than Airship, its authorized agents, servants or
employees.
SECTION TEN
RESTRICTIVE COVENANT
10.1 Airship does hereby covenant and agree that during the term
of this Agreement and all renewals thereof, that it shall not operate any
lighter-than-air aircraft for the purpose of advertising for any other musical
groups.
10.2 Client does hereby covenant and agree that during the term
of this Agreement and all renewals thereof, nothing herein shall prevent Airship
from operating any lighter-than-air aircraft for any other person or third
party, and nothing herein shall prevent Airship from entering into negotiations
and/or binding aerial advertising agreements with other clients for the
operation of additional aircraft owned or acquired by Airship, subject to the
restrictions set forth in Section 10.1 herein.
SECTION ELEVEN
MISCELLANEOUS
11.1 Client acknowledges and agrees that it does not and will not
acquire by this Agreement, any legal or equitable right, title or interest
whatsoever in the Aircraft or the proceeds of the sale of the Aircraft, or in
Airship's equipment, instruments, engines, computers, ground support vehicles or
mooring masts. Client acknowledges and agrees that it has not obtained nor will
obtain any license to use the likeness of the Aircraft as a
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result of this Agreement, except as may be expressly set forth
herein.
11.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given unless otherwise
provided herein, if delivered in person or mailed by certified mail, returned
receipt requested, with first call postage prepaid;
(a) If to Airship:
7380 Sand Lake Road, Suite 200
Orlando, Florida 32819
Attn: Louis J. Pearlman, President
with a copy to:
Baer Marks & Upham
805 Third Avenue
New York, New York 10022
Attn: Samuel F. Ottensoser, Esq.
(b) If to Client:
Kingstreet Tours Limited
48 Woodstock Road
London, England W4 1US
with a copy to:
Jerome Walton
Walton & Co.
Lanterns Lodge
Bridge Lane
London SW11 3AD
such names and addresses may be changed by written notice to each person listed
above, provided that any change of address shall be effective only on receipt.
11.3 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York,
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without giving effect to the principles of conflict of laws
thereof.
11.4 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
11.5 Headings. The section headings contained in this Agreement
are for reference purposes only and shall not effect in any way the meaning or
interpretation of this Agreement.
11.6 Entire Agreement. This Agreement, including the schedules
and documents annexed hereto, and the documents and the documents and agreements
referred to herein, embodies the entire agreement and understanding of the
parties with respect to the subject matter contained herein. There are no
restrictions, promises, representations, warranties, covenants or undertakings
other than those expressly set forth or referred to herein. This Agreement
supersedes all prior agreements and understanding between the parties with
respect to the subject matter of this Agreement.
11.7 Parties in Interest. This Agreement shall not be assignable,
except with the express written consent of the other parties hereto. This
Agreement shall inure to the benefit of and be binding upon the parties and
their respective successors and permitted assigns. Except as otherwise expressly
contemplated hereby, nothing in this Agreement, express or implied, is intended
to confer upon any other person any rights or remedies under or by reason of
this Agreement.
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11.8 Severability. If any term, covenant, condition or provision
of this Agreement or the application thereof to any person or circumstances
shall, at any time or to any extent, be rendered invalid or unenforceable, the
remainder of this Agreement or the application of such term or provision to
persons or circumstances other than those to which it is held invalid or
unenforceable, shall not be affected thereby, and each term, covenant, condition
and provision of this Agreement shall be valid and be enforced to the fullest
extent permitted by law.
11.9 Amendment and Modification. This Agreement may be amended or
modified only by written agreement of the parties hereto or their successors or
assigns.
11.10 No Third Party Beneficiaries. This Agreement does
not create, and shall not be construed as creating, any rights
enforceable by any person not a party to this Agreement.
11.11 Risk of Loss.
(a) During the term of this Agreement, the risk of
loss with respect to the aircraft shall be upon Airship. In the event that (i)
the Aircraft is subject to minor damage or injury; and/or (ii) the Aircraft is
grounded due to accident, mechanical failure and/or licensing, approval or
permit difficulties (other than weather interference or Client's actions), then
the obligations of the parties under this Agreement shall abate until such time
as the Aircraft or a replacement aircraft is certified and authorized to fly, at
which time continue in full force and effect; provided, however, this Agreement
shall be null and void as
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of the date the aircraft is grounded where the abatement exceeds
three (3) months.
(b) In the event that a total loss of all or
substantially all of the Aircraft shall occur and a replacement aircraft cannot
be provided by Airship, Airship shall promptly give written notice of such loss
to Client, in which event this Agreement shall terminate and be of no further
force and effect; provided, that in such event, a pro rata portion of the
monthly fee (based on the number of days remaining, following such total loss,
in the month of such total loss) paid pursuant to Section 1.2 by Client to
Airship for the month in which such total loss occurs shall be reimbursed to
Client by Airship.
11.12 Upon termination of this Agreement, Airship shall promptly
fly to a suitable hangar and remove all logos and other materials belonging to
Client within ninety (90) days after such termination.
11.13 Submission to Jurisdiction; Waiver of Jury Trial.
A. The Client hereby irrevocably and unconditionally:
(i) submits for itself and its property in any
legal action or proceeding relating to this Agreement, or for recognition and
enforcement of any judgment in respect thereto, to the non-exclusive general
jurisdiction of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts from any
thereof;
(ii) consents that any such action or
proceeding may be brought in such courts, and waives any objection
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that it may now or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
(iii) agrees that service of process in any
such action or proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form of mail),
postage prepaid, to the Company at its address set forth in subsection 11.2 or
at such other address of which the Agent shall have been notified pursuant
thereto; and
(iv) agrees that nothing herein shall affect
the right to effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
AIRSHIP INTERNATIONAL LTD.
By: ALAN SIEGEL
--------------------------
KINGSTREET TOURS LIMITED
By: [signature]
---------------------------
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BUD I
AMENDED AND RESTATED AIRSHIP ADVERTISING AGREEMENT
THIS AGREEMENT is made as of the 8th day of July, 1994, by and
between AIRSHIP INTERNATIONAL LTD., a New York corporation with its principal
office at 7380 Sand Lake Road, Orlando, Florida 32819 ("Operator"), and
ANHEUSER- BUSCH COMPANIES, INC., a Delaware corporation with its principal
office at One Busch Place, St. Louis, Missouri 63118 ("Company").
(A) Operator is the owner of a SKYSHIP 500-HL aircraft,
Registration No. N501LP (the "Airship").
(B) Company and Operator are parties to the BUD I Airship
Advertising Agreement dated March 12, 1992 (together with all amendments
thereto, the "1992 Agreement").
(C) Operator and Company desire for Operator to continue
the operation of the Airship pursuant to the terms and conditions of this
Agreement.
(D) Operator and Company desire to amend and restate in
full the 1992 Agreement.
NOW THEREFORE, it is hereby agreed as follows:
1. Exclusive Use; Initial Period and Option Period.
1.1 During the Initial Period and Option Period, if any
(as such terms are hereinafter defined), Operator shall use and operate the
Airship at such locations within the contiguous 48 states of the United States
of America as are designated by Company (the "Territory") exclusively for the
purposes set forth in Section 1.3 below. Operator shall provide all equipment,
instruments, engines, computers and other appurtenances used or required for
operation of the Airship, as well as ground support vehicles, mooring masts,
fuel, personnel (including pilots, ground crew, security and all other required
personnel, and all other facilities, equipment and supplies necessary for
fulfilling its obligations enumerated herein), subject to the terms and
conditions of this Agreement.
1.2 The initial term of this Agreement (the "Initial
Period") shall be from September 1, 1994 (the "Effective Date") through December
31, 1996; thereafter, Company shall have the right to extend the term of this
Agreement through December 31, 1997 (the period from January 1, 1997 through
December 31, 1997 is referred to herein as the "Option Period"), provided,
however, that at any time after the Effective Date Company may terminate this
Agreement by written notice to Operator, in which case this Agreement shall
terminate one hundred eighty (180) days following
<PAGE>
<PAGE>
the giving of such notice. The four month period from September 1, 1994 through
December 31, 1994 and each successive six month period thereafter through the
end of Initial Period and the Option Period, if any, is referred to herein as a
"Contract Period."
1.3 Throughout the term of this Agreement the Airship
shall be operated exclusively for the following purposes:
(a) Advertising and promoting the products, goods,
Services or businesses of Company and/or any of its subsidiaries or other
affiliates (as determined exclusively by Company) by over-flight of heavily
populated areas, including stadiums, open-air theaters, outdoor concerts,
sporting events, amusement parks, theme parks and other large public gatherings;
(b) Aerial filming of events for telecast and other
uses, as and when directed by Company, and
(c) The carriage of passengers, subject to the
following limitations:
(i) Only invited guests of Company may be
carried as passengers on the Airship;
(ii) Passenger flights shall originate and
terminate at the same point;
(iii) Passengers shall not pay for their
carriage, nor will payment be made or accepted on their behalf; and
(iv) The number of passenger flights per week
shall be determined by Company, subject to safety and weather conditions
as determined by the Airship pilot and applicable FAA regulations, if
any.
2. Designated Base of Airship; Design and Color Scheme.
2.1 The base of operations for the Airship (the
"Designated Base") will initially be at a mutually agreeable location (to be
determined prior to the Effective Date) in the Orlando, Florida area. During the
term of this Agreement Company shall have the right to change Designated Base to
a new location in the Territory, provided that Company reimburses Operator for
Travel Expenses (defined in 4.2 below) incurred by the Airship's crew members in
connection with such relocation and provided further that any such change to the
Designated Base shall remain in effect for a period of no less than six months.
2.2 Operator shall maintain its FAA Certificate of
Airworthiness for the Airship in effect throughout the term of this Agreement
and shall provide
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<PAGE>
Company with (i) a copy of the flight manual for the Airship approved by the
Federal Aviation Administration ("FAA") and (ii) a copy of the Operator's
Airship operations manual.
2.3 Operator shall maintain the current color and design
pur- suant to the specifications submitted by Company under the 1992 Agreement,
provided that the cost of any modifications to such color and design
specifications requested by Company shall be paid by Company.
2.4 (a) Operator has assisted Company in the installation
of, and has agreed to operate and maintain, an electric airship advertising sign
(the "Sign") on the Airship. Company shall reimburse Operator for all reasonable
and necessary maintenance costs of the Sign during the term of this Agreement
upon receipt of an invoice therefor and sufficient supporting documentation.
Operator agrees to procure the necessary insurance to cover the loss of or
damage to the Sign or any of its components, in an amount and at a cost
satisfactory to Company. Company shall reimburse Operator for the approved cost
of such insurance upon receipt of an invoice therefor and sufficient supporting
documentation.
(b) Company has obtained an FAA Supplemental Type
Certificate ("STC") for the installation of the Sign and associated equipment.
Company agrees that in consideration of the aid of Operator in installing the
sign, Company shall make the STC available to Operator for its future use.
(c) Company intends to pursue and certify, at its
sole expense, an electrical generation system modification in order to provide
additional electrical capacity for the Airship (the "System"). If, in its sole
discretion, Company completes the design of and acquisition of the components
for such a System, Operator agrees to assist Company in the installation of such
System onto the Airship in accordance with a schedule to be mutually agreed
upon. Company agrees to reimburse Operator for any costs incurred as a direct
result of aiding in the installation of the System, after receipt of an invoice
therefor and sufficient supporting documentation. Company further agrees to
reimburse Operator for reasonable and necessary maintenance costs for the System
after receipt of an invoice therefor and sufficient supporting documentation. If
an STC is required and obtained in conjunction with the installation of the
System, Company shall permit Operator to have future use of the STC.
(d) Both parties agree that upon termination of
this Agreement, Company will reimburse Operator for the actual cost of removing
the Sign from the Airship, such cost not to exceed $30,000.00, upon receipt of
an invoice therefor and sufficient supporting documentation.
3. Airship Operations.
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<PAGE>
3.1 Operator shall obtain, and maintain in effect
throughout the term of this Agreement, all requisite permits, certificates and
authorizations from all governmental agencies having jurisdiction over the use,
operation and flight of the Airship within the Territory. Operator shall also
use its best efforts to obtain all relevant permits and authorizations as may be
required from any supervising governmental agency of any special event over
which Company may ask Operator to fly the Airship. Company (and not Operator)
shall be responsible for obtaining any permits required by any organizer or
sponsor of such event.
3.2 Operator shall provide FAA certified and approved
personnel to perform all maintenance, servicing and repair required to be
performed on the Airship during the term of this Agreement in accordance with
the Airship flight operations manual and the Airship maintenance manual and in
compliance with standards prescribed by the FAA and all other governmental
agencies having jurisdiction over the Airship, its use, operation and flights
within the Territory. Except as otherwise provided herein, Operator shall also
provide the necessary ground and flight crew for the Airship and shall pay all
costs associated with the ownership, use or operation of the Airship. Such costs
shall include, but shall not be limited to, the following:
(a) Helium gas replenishment;
(b) All operational and administrative premises and
personnel;
(c) All ground support equipment and personnel
required for the operation, maintenance and security of the Airship;
(d) All insurance, taxes, maintenance and repair
costs (excluding sales taxes, if any, which shall be borne by Company);
(e) Lubricating oil;
(f) Fuel; and
(g) Airship mooring fees.
3.3 Operator shall not be required to operate the Airship
in any manner which violates any law or regulation of any governmental agency of
the United States or any state thereof, the country of registration of the
Airship or any country or state to, from or over which the Airship flies.
Operator has represented to Company that it is conversant with all such laws and
regulations and shall notify Company's representatives if operation of the
Airship might violate such laws or regulations.
3.4 In addition to the sums specified in Section 4,
Company shall pay for, provide or reimburse Operator (within 30 days of receipt
of an invoice for
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<PAGE>
same accompanied by adequate documentation) for any sum Operator shall expend on
the following:
(a) The actual cost of any change in the Airship's
exterior design required by Company after the date hereof (except as otherwise
provided in Sections 2.3 and 2.4 above); and
(b) Any special equipment not part of the normal
equipment of the Airship, other than the Sign, which is required by Company for
advertising or any other mutually agreed purposes.
3.5 (a) Company shall determine from time to time the
dates, times and locations for flight operations of the Airship, which shall be
set forth on a schedule of operations (the "Schedule"). Thirty-day Schedules
shall be submitted by Company to Operator at least fifteen (15) days prior to
the expiration of the previous Schedule. The Schedule may be amended by Company
from time to time during the Initial Period and Option Period, if any, upon
reasonable notice to Operator. Operator shall adhere to the flight plan
established by Company in the Schedule, subject only to the physical constraints
of adverse weather conditions as determined by Operator's pilot, design
limitations of the Airship and applicable governmental regulations in effect
from time to time. Operator will cooperate with Company in making Airship
flights during the times of the day and days of the week to meet the Schedule.
Changes in the geographic location of the Airship (300 miles or more) from the
location in the Schedule shall be given to Operator at least thirty (30) days in
advance of the changes; provided, however, that Operator shall use its best
efforts to accommodate Company when Company requests a change in location on
shorter notice. Company shall provide Operator reasonable assistance in locating
lodging facilities for the Airship's crew when travel is requested on short
notice.
(b) The Schedule and any amendments thereto shall
be subject to the reasonable approval of Operator based upon operational (but
not economic) considerations.
(c) Company and Operator shall, on a weekly or bi-
weekly basis, establish the local flight schedule in the Designated Base area
and hours of operation of the Airship. Any changes by Company in the local
flight schedule shall be submitted to Operator at least forty-eight hours prior
to the proposed effective date and time of such changes. Any changes required by
Company in the Schedule which will require the geographic relocation of the
ground crew and support vehicles (but within 300 miles of the Designated Base)
will be submitted at least fifteen (15) days in advance for clearance with the
appropriate governmental agencies and to make appropriate ground arrangements.
Operator will use its best efforts to accommodate all Schedule changes when
requested by Company and to fly the Airship in accordance with the Schedule.
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<PAGE>
3.6 (a) Operator shall make the Airship available for
operation according to the Schedule up to six days per week (except for the
weeks which include Super Bowl Sunday, Easter Sunday, Memorial Day, Labor Day
and Christmas Day, which shall be seven-day weeks). Company shall be entitled to
schedule flights on weekends, with the "off day" being a week day (normally
Monday). Operator shall provide, and Company will schedule, eight (8) hours per
day of flight time. Scheduled flight time for any given day shall be measured
from the first departure from the Airship's mooring mast until its mooring at
said mast at the completion of such day's operation and will include airborne
flight time for the purposes set forth in Section 1.3 above, as well as time
between flights for operational requirements such as refueling, crew changes,
and pick-up or drop-off of passengers, and time spent travelling to and from
Operator's closest maintenance facility. The Airship's flight meter, pilots' log
and maintenance and repair records will be available for review by Company at
all reasonable times upon reasonable prior notice from Company. A representative
of Company, if available, shall also sign the log at the completion of each
day's flights.
(b) If force majeure conditions (as defined in
Section 10.2 below) preclude Operator from adhering to the Schedule, there shall
be no reduction in the then applicable Monthly Fee unless Operator fails to
achieve at least 100 hours of airborne flight time in any given month. In such
case, the Monthly Fee shall be reduced pro rata. (To illustrate, if only 80
hours of airborne flight time are achieved in any given month due to force
majeure conditions, the Monthly Fee for such month shall be reduced by 20%,
either by reimbursement to Company or by reduction of the Monthly Fee the
following month.) With respect to time lost from the Schedule for which there is
no reduction in the Monthly Fee, Operator shall use its best efforts to
re-schedule such time, at no additional cost to Company, as soon as reasonably
practical thereafter.
(c) If the Schedule cannot be adhered to for
reasons other than force majeure, for each day of lost time the Monthly Fee
shall be reduced by $6,667 if such day of lost time occurs during the period
from September 1, 1994 through December 31, 1994 and by $8,546 if such day of
lost time occurs at any other time during the Initial Period or the Option
Period, if any, or Operator shall reimburse Company by such amount if no
additional Monthly Fee payments are due; provided, however, that in lieu of such
reduction in or reimbursement of the Monthly Fee, Operator shall have the option
to provide make-up flight time during a period of up to ninety (90) days
following the date on which this Agreement would otherwise terminate, such
make-up flight time to be at no additional cost to Company. However, such makeup
time can be waived by Company, in which case Operator's obligation under this
paragraph (c) shall terminate. In no event shall such additional 90-day period
(or any portion thereof) extend the Exclusivity Period provided for in Section
7.1 below. Each eight hours of scheduled flight time lost shall equal a day of
lost time (pro rated for fractional days).
(d) Notwithstanding the preceding paragraphs (a) -
(c), during each Contract Period, Operator shall withdraw the Airship from
service for scheduled maintenance and service when necessary for a period of
fifteen (15) days no
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fewer than ten of which shall be consecutive days (each such period a
"Maintenance Period" and each day of any such Maintenance Period a "Maintenance
Day") (excluding time spent on travel to and from Operator's maintenance
facility or time spent on unscheduled maintenance), taking into consideration
inspections or maintenance which is mandated by the FAR's (hereinafter defined),
the manufacturer's maintenance manual or the instruction manual (as may be
required for continued airworthiness) or by the Operator's approved inspection
and maintenance program. There shall be no reduction in any Monthly Fee payment
payable hereunder with respect to any such withdrawal of the Airship for
maintenance in accordance with this Section, subject to Sections 3.6(d)(i) and
(ii) below.
In the event that the total number of Maintenance Days
required during the period from September 1, 1994 through December 31, 1994
exceeds fifteen (15), or the total number of Maintenance Days required during
any calendar year during the Initial Term and the Option Term, if any, exceeds
thirty (30), then, in any such case the Monthly Fee payment next coming due
shall be reduced as follows:
(i) If such excess Maintenance Day(s)
occurs during the period from September 1, 1994 through December 31, 1994, such
reduction shall be made to the January 1, 1995 Monthly Fee payment and shall be
equal to the total number of such excess Maintenance Days multiplied by $6,667;
(ii) If such excess Maintenance Day(s)
occurs during the period from January 1, 1995 through the end of the Initial
Period and the Option Period, if any, such reduction shall be equal to $8,546
for each such excess Maintenance Day and each such reduction shall be made to
the Monthly Fee payment that is due following the month in which such excess
Maintenance Day(s) occurs.
(e) At the end of the Initial Period (but only if
there shall be no Option Period) or at the end of the Option Period, or upon
termination of this Agreement for any reason, any lost flight time for which
Company has not been compensated by make-up time, by reimbursement or by a
reduction of the Monthly Fee as provided above shall be paid back to Company by
Operator at the rate of $8,546 per day of lost time (pro rated for fractional
days). Such payment obligation shall survive any such termination and shall be
made within three (3) days following termination by wire transfer of immediately
available U.S. funds to an account designated by Company.
3.7 (a) Operator shall provide all necessary flight and
ground crew personnel necessary to accommodate the Schedule. All crew members
shall obtain and maintain all licenses required by the FAA and any other
governmental agencies having jurisdiction over the Airship or its use and flight
within the Territory during the Initial Period and the Option Period, if any.
Each member of the crew shall be acceptable to Company in the reasonable
exercise of its judgment.
(b) Operator shall comply with the reasonable
requests of Company to the best of its ability in order that Company may obtain
the optimum
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<PAGE>
utilization of the Airship with respect to its advertising and promotional
activities, provided that all crew activities shall be within Operator's pilots'
discretion. Notwithstanding the foregoing, the parties acknowledge that Operator
has full operational control of the Airship, and Company shall have no liability
whatsoever for any loss of or damage to the Airship.
(c) The Airship shall be piloted only by CAA or FAA
licensed pilots.
(d) Except when the authorized and licensed pilots
are at the flight controls or on duty, the ground crew chief shall be in command
of the Airship.
(e) No flight of the Airship shall take place
unless Operator's pilots on board shall be satisfied as to the prevailing
weather conditions and any geographical limitations, the load required to be
carried and the proposed places of take-off and landing. Operator's pilots shall
have the absolute right to cancel, terminate or divert any flights when such
action is deemed by them to be necessary due to the weather or to other
conditions beyond their control. The said pilots shall also have absolute
discretion to prohibit any goods or passengers on the Airship if, in the pilots'
opinion, they may adversely affect the safe flight of the Airship.
(f) Notwithstanding any of the foregoing provisions
of this Section 3.7, Operator expressly undertakes the obligation to have
available and on call such back-up pilot or pilots as may be necessary to
guarantee the performance of the Schedule. Operator acknowledges its obligation
to monitor the number of hours being flown by each of its pilots in a given
month so as to make certain that if a replacement pilot will be necessary due to
the number of hours projected to be flown, a replacement pilot will be made
available promptly so that the Schedule shall be maintained. Operator further
undertakes to provide a replacement pilot within 24 hours after it learns that
any regular pilot is unavailable due to illness or any other non-planned
absence.
(g) Operator further acknowledges that its
operations are subject to regulation by the FAA as described in the Federal
Aviation Regulations (the "FAR's"). Operator hereby certifies that it has made a
full and complete investigation of all applicable FAR'S, and that it has such
certificate or certificates as may be required under the FAR's to engage in the
operations contemplated herein. Operator agrees to furnish copies of current
certificates to Company on request.
(h) Operator will establish and implement, at
Operator's sole cost and expense, an alcohol testing program for all individuals
who are in any way involved with the maintenance or operation of the Airship
under the provisions of this Agreement, specifically including all pilots,
ground support mechanics and riggers, and any other crew members, which program
shall be, in all respects, subject to applicable law.
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(i) The testing program shall be conducted
in such manner as to ensure that the crew members of the Airship are at all
times in compliance with the requirements of FAR 91.17(a)(1), (2), (3) and (4)
and that all other employees, when performing any function required by the
provisions of this Agreement, shall not have consumed any alcoholic beverages
within the preceding 8 hours; are not under the influence of alcohol; and do not
have a blood alcohol concentration ("BAC") of .04 percent or more;
(ii) The testing shall be conducted (1) upon
a violation of an FAR; (2) upon a reasonable suspicion of a Company
representative or one or more supervisors of the employee that the employee's
ability to perform his functions is impaired; and (3) on a random basis;
(iii) There shall be a screening test and,
if necessary, a confirmation test. The screening portion of the test shall
involve the use of devices, selected by the Operator and approved by the
Company, that give an immediate indication either of positive or negative.
Anyone testing positive on the screening shall be immediately removed from any
duties relating to the maintenance or operation of the Airship. Those testing
positive shall immediately agree to allow a blood sample to be taken or to
provide, under reasonable supervision, a urine sample. The blood sample or urine
sample shall be sent to a qualified laboratory for determination of BAC level.
If the laboratory result indicates that the employee was in compliance with the
requirements set forth above, he may be allowed to resume duties related to the
Airship. If an employee refuses to provide the blood or urine sample, or by the
confirmation test, is determined not to have been in compliance with
requirements set forth above, that employee shall not be permitted to perform
any functions under this Agreement.
(iv) At Company's request, operator shall
provide a copy of its testing procedures, meeting the requirements set forth
above, for Company's approval. Operator agrees to amend said procedures as
reasonably required by Company; and
(v) If, during the term of this Agreement,
the FAA or U.S. Department of Transportation ("DOT") adopts regulations relating
to alcohol testing, Operator agrees to comply with those requirements, not only
as to personnel whose specific functions are described in the regulations, but
also as to all personnel who are in any way related to the operation or
maintenance of the Airship under this Agreement.
(i) Operator agrees, whether or not
otherwise required to do so under the FAR's or other statutory or regulatory
provisions, that Operator shall engage in drug testing of all its employees and
contractors as Company may reasonably request from time to time, following
procedures similar to those used in the Company's drug testing program for its
own employees. Operator agrees to include in such drug testing all employees and
contractors who are involved in any manner in the operation or maintenance of
the Airship under the provisions of this Agreement, specifically
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including all pilots, ground support mechanics and riggers and any other member
of the ground crew. Notwithstanding the foregoing provisions of this paragraph
(i), if Operator wishes to use an alternative drug testing program, it may do so
if such program has been approved by Company in writing. Such drug testing
program shall be, in all respects, subject to applicable law, and all costs of
the program shall be paid by Operator.
(j) Company shall provide, at its sole cost and
expense, (i) all special uniforms which must be worn by Operator's flight and
ground crew members, (ii) any decals or painted logos (and replacements thereof)
which Company requires Operator to use on Operator's ground support vehicles,
and (iii) the patches and other logos for crew members' uniforms. Such uniforms,
painted logos and decals shall be cleaned from time to time by Operator in order
to maintain a neat and clean appearance to the public. All registered
trademarks, trade names and other proprietary property used in connection with
such uniforms, as well as painted logos and decals, shall remain the exclusive
property of Company.
3.8 On reasonable notice from Company, Operator shall
cause a camera to be temporarily installed on the Airship for use in taping
television commercials, televising sporting or other events, or other
photographic or filming purposes. Company shall reimburse Operator for any
actual incremental costs it may incur in providing the camera for use in the
Airship, such reimbursement to be made within 30 days of receipt of an invoice
and documentation for same from Operator.
4. Consideration; Reimbursement of Expenses.
4.1 (a) In consideration of all services to be provided
and obligations to be performed by Operator hereunder, Company agrees to pay to
Operator a fee (the "Monthly Fee") as follows:
<TABLE>
<CAPTION>
Month Monthly Fee Payment Terms
<S> <C> <C>
(i) September 1994-December 1994 $200,000 Payable in one lump sum of
$800,000 upon execution of this
Agreement by both parties
(ii) January 1995 $512,750 Payable on January 1, 1995
(iii) February 1995-October 1995 $256,375 Payable on first day of each
month
(iv) November 1995 - December 1995 -0-
</TABLE>
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<TABLE>
<S> <C> <C> <C>
(v) January 1996 $512,750 Payable on January 1, 1996
(vi) February 1996-October 1996 $256,375 Payable on first day of each
month
(vii) November 1996 - December 1996 -0-
(viii) January 1997 $512,750 Payable on January 1, 1997
(ix) February 1997-October 1997 $256,375 Payable on first day of each
month
(x) November 1997 - December 1997 -0-
</TABLE>
Payments in (viii), (ix) and (x) above shall not be due if
Company does not elect to extend the term hereof for the Option Period.
(b) Payment by Company of the applicable Monthly
Fee may be reduced due to lost flight time as provided in Section 3.6 above.
(c) All Monthly Fee payments shall be made in U.S.
dollars by wire transfer to an account designated by Operator. If any payment
due under this Agreement from any party remains unpaid for more than seven days
after the due date thereof, it shall bear interest at the prime rate of interest
in effect at Morgan Guaranty Trust Company of New York from the date such
payment was due to the date of payment. Any costs (including reasonable
attorneys' fees) incurred by any party to recover sums due under this Agreement
shall be paid by the party failing to pay such sums when due.
4.2 During the term of this Agreement, Company shall
reimburse Operator in the amount of $2,200 per day for all out-of-pocket travel,
accommodation, subsistence and similar expenses incurred by the Airship's crew
(collectively, "Travel Expenses") whenever the Schedule requires the Airship to
spend the night at a mooring mast away from the Designated Base. Company shall
reimburse Operator for Travel Expenses within thirty (30) days of receipt of an
invoice for same.
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5. Loss of Airship.
5.1 The risk of loss or damage with respect to the Airship
shall be solely upon Operator. If there shall occur a loss of all or
substantially all of the Airship, or if the Airship is grounded due to an
accident or other damage to the Airship, then the parties' respective
obligations hereunder shall abate until such time as the Airship has been
repaired or replaced, at which time this Agreement shall continue in effect for
the remainder of the Initial Period and Option Period, if any, which Initial
Period and Option Period, if any, shall be extended by the abatement period;
provided, however, that if the abatement period exceeds one hundred fifty (150)
days, then this Agreement shall, at Company's option, be deemed to have been
terminated as of the date of the loss or damage, and neither party shall have
any further obligations to the other.
(a) If this Agreement is terminated pursuant to the
preceding paragraph (a) and the Airship shall thereafter be repaired and is
prepared to be placed in service within ninety (90) days of said termination,
then, before making any agreement(s) with any other party for the use of the
Airship, Operator shall first notify Company that Company has the right and
option to acquire the exclusive use of the Airship for a period of time equal to
the unexpired portion of the Initial Period and Option Period, if any, at the
time of termination on the same terms and conditions as are contained in this
Agreement. Such option shall be exercised, if at all, within fifteen (15) days
following Company's receipt of such notice.
6. Representations, Warranties and Covenants.
6.1 Operator represents, warrants and covenants to Company
that:
(a) The Airship is certificated as a standard type
aircraft under the laws of the United States of America;
(b) A valid Certificate of Airworthiness has been
issued for the Airship by the United States of America, and Operator shall take
all necessary actions to ensure the continued effectiveness of the Airship's
Airworthiness Certificate as set forth in FAR 21.181(a)(1), so that a valid
Certificate of Airworthiness for the Airship is maintained at all times. The
Airship is in airworthy condition and usable for the purposes contemplated by
this Agreement;
(c) The execution of this Agreement by Operator
will not constitute a breach of any other agreement to which Operator is a party
or which involves the Airship;
(d) Registration of the Airship under the laws of
the United States of America shall be maintained, and Operator shall obtain and
maintain (or cause to be obtained and maintained) in effect all required
approvals of the FAA, or any
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other governmental authorities having jurisdiction over use and operation of the
Airship in the Territory;
(e) Operator shall be responsible for performance
of all Airship overhaul, engine overhaul and maintenance required during the
Initial Period and Option Period, if any, under the FAR'S, as well as any
applicable airworthiness directives requiring modifications to the Airship, and
shall make such alterations and modifications in each component of the Airship
as may be required from time to time to meet the standards of the FAA or any
other governmental authority having jurisdiction over the Airship;
(f) Operator shall maintain all records, logs and
other materials required by the FAA or other governmental authority having
jurisdiction over the Airship and shall permit Company or its duly authorized
agents or representatives or any other person designated by Company to inspect
the Airship and its flight logs and maintenance records at any reasonable time
and shall furnish Company and its duly authorized agents or representatives any
information with regard to the operation of the Airship as any of them may
reasonably request;
(g) Operator shall maintain the paint and decals on
the Airship in a clean and orderly condition to Company's reasonable
satisfaction during the Initial Period and Option Period, if any;
(h) Operator shall maintain, service, operate,
repair and test the Airship (i) so as to keep each component of the Airship in
good operating condition, (ii) so as to meet the requirements of the maintenance
plans recommended by the manufacturers of the engines, envelope and gondola
comprising the Airship, (iii) so as to keep the Airship duly certified as
airworthy by the FAA or any other governmental agencies having jurisdiction over
the Airship, (iv) so as to comply with any FAA or other governmental authority
airworthiness directives, as well as "mandatory" and "recommended" service
bulletins applicable to the Airship, as well as licensing and relicensing with
respect thereto which may be required by any governmental agencies having
jurisdiction over the Airship, and (v) so as to keep the Airship clean and in
top condition and repair suitable to provide the services required of Operator
hereunder to Company's reasonable satisfaction;
(i) Operator shall maintain, service, operate,
repair and test all ground support vehicles and equipment supplied by Operator
hereunder so as (i) to keep the components thereof in good operating condition,
(ii) to meet all required maintenance schedules, (iii) to keep such vehicles and
equipment properly licensed, and (iv) to keep the vehicles and equipment clean
and in good condition and repair, suitable to provide the services required of
Operator hereunder to Company's reasonable satisfaction; and
(j) Operator has taken all action (including,
without limitation, the giving of notices and the obtaining of consents,
licenses and permits)
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required by any governmental authority as a condition to the execution and
delivery of this Agreement, its validity and enforceability, and the
consummation of any of the transactions contemplated hereby.
6.2 Each party hereto represents and warrants to the other
that:
(a) It is a duly organized and valid entity in good
standing under the laws of its jurisdiction of organization and has full
authority to conduct its business as presently conducted and to enter into and
perform its obligations under this Agreement;
(b) Each of the persons executing this Agreement is
a duly authorized officer or agent of such entity and has been duly authorized
by all necessary action to execute and deliver this Agreement;
(c) This Agreement has been duly and validly
executed and delivered by such party and constitutes a valid and binding
agreement of such party, enforceable in accordance with its terms, except as may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights generally or by the principles
governing the availability of equitable remedies; and
(d) No consent or approval of any third party is
required for such party's execution, delivery or performance of this Agreement.
7. Exclusivity.
7.1 Operator hereby covenants and agrees that following
the termination of this Agreement and continuing for a period (the "Exclusivity
Period") which is the lesser of (i) the time which has elapsed between the
Effective Date and the date on which this Agreement terminates, and (ii) three
(3) years, Operator shall not, directly or indirectly, sell, lease or operate
any lighter-than-air aircraft, or otherwise provide any lighter-than-air
aircraft, which is used or is expected to be used to advertise or promote any
amusement park or theme park, any malt beverage or any snack food, other than
the amusement parks or theme parks, malt beverages and snack foods owned,
operated or produced by Company or its subsidiaries; provided, however, that (i)
nothing herein shall prevent Operator from operating another aircraft on behalf
of another client in or about an amusement park or theme park so long as such
aircraft does not promote an amusement park or theme park, a malt beverage or a
snack food product; and (ii) the exclusivity granted to Company hereunder with
respect to malt beverages applies only in the United States and Mexico; snack
foods only in the United States; and amusement parks and theme parks only in the
United States, Canada and Mexico. The provisions of this Section shall apply
notwithstanding any early termination or cancellation of the Initial Period or
Option Period, if any, including but not limited to termination under Section
10.3.
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7.2 As used herein "snack foods" means salted snacks such
as potato chips, corn chips, peanuts, pretzels, cheese curls, popcorn and
similar items. It does not include candy or fast-food such as hamburgers, french
fries or basic meal items.
7.3 Operator represents and warrants to Company that it
has not previously entered into any agreement with any third party which, if
performed after the date hereof, would violate the exclusivity granted to
Company in Section 7.l.
7.4 During the term of this Agreement, Operator agrees
that each of its employees, crew members, any of Operator's agents, authorized
representatives or any subcontractors retained by Operator while wearing a
uniform containing Company's logo will not in any public place in the Territory
display any alcoholic or non-alcoholic malt beverage other than those produced
and distributed by Company and that said persons,if they choose to drink beer or
a non-alcoholic malt beverage in any public place, will drink the Company's
products.
8. Licensing and Royalties.
8.1 Company shall have the worldwide right, exclusively
and in perpetuity, to commercially exploit the likeness of the Airship bearing
one or more of Company's trademarks. The Company's right includes, but is not
limited to, the right to manufacture, market, sell, and distribute merchandise
bearing a likeness of an airship and any of the Company's trademarks; provided
that any such merchandise bearing the trademarks Budweiser, Bud (but not Bud Dry
or Bud Light) or King of Beers shall be deemed to be "Airship Merchandise" for
purposes of this Agreement. If the Company elects to discontinue the use of the
Airship for the promotion of the BUDWEISER brand (through the use of Budweiser,
Bud and/or King of Beers) and instead paint the Airship by using color and
design specifications (subject to the provisions of Section 3.4(a) hereof) which
promote a brand of beer other than Budweiser, including Bud Dry and/or Bud
Light, then when such other brand is included on merchandise bearing a likeness
of an airship, such merchandise shall also be deemed "Airship Merchandise."
(a) Operator shall be entitled to receive royalties
from Company only on Net Sales (hereinafter defined) from the date hereof until
the end of the Exclusivity Period. Company shall pay the Operator a royalty
equal to four percent (4%) of Net Sales.
(b) "Net Sales" shall mean all monies actually
received by the Promotional Products Group of Anheuser-Busch, Incorporated
("PPG") and PPG's sales of Airship Merchandise to Anheuser-Busch, Incorporated
brewery gift shops and to third parties, excluding PPG's sales to wholesalers of
Company's beverage products and sales to Operator. Net Sales shall not include
sales taxes included therein or refunds, credits and allowances actually allowed
to customers for returned Airship Merchandise. If any other Company organization
assumes PPG's responsibility for selling promotional
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merchandise bearing Anheuser-Busch, Incorporated trademarks, the definition of
Net Sales shall include monies actually received by that Company organization.
(c) Within forty-five (45) days after the close of
each calendar quarter during the Initial Period and Option Period, if any,
Company shall furnish Operator an accounting of Net Sales during that quarter
and shall pay Operator any royalty due for those Net Sales. Company is under no
duty or obligation to sell Airship Merchandise, and the duty to pay a royalty
shall exist only if Company, in its discretion, determines to sell Airship
Merchandise. All such royalty payments shall be in addition to any other
payments under this Agreement. Except as set forth above in this Section,
Company shall not be liable to Operator or any other party for any royalties,
licensing fees or other similar charges in connection with any commercial
exploitation of the Airship.
(d) Company will consider ideas for Airship
Merchandise items submitted by Operator, but selection of items for production
shall be in Company's sole discretion.
8.2 Company acknowledges and agrees that it has not
obtained any right, title or interest in the Airship other than as specifically
set forth herein.
8.3 (a) Nothing contained in this Agreement shall
constitute a license of or shall entitle Operator to use any of the Company's
trademarks, trade names or service marks, whether or not registered, in
connection with the manufacture, marketing, distribution, conduct or sale of
Operator's merchandise or services, other than through operation of the Airship
as provided herein. Any violation of this provision by Operator may subject
Operator to liability for infringement of Company's rights.
(b) Notwithstanding the foregoing paragraph, during
the Initial Period and Option Period, if any, Operator shall have the right to
purchase Airship Merchandise from PPG at PPG's then current price to wholesalers
of Company's beverage products; provided, however, that Company shall have the
right to approve the method and location of any distribution or resale of all
such Airship Merchandise.
8.4 Upon the termination of this Agreement, Operator shall
remove from the Airship and all ground support vehicles and equipment all
trademarks, logo designs, color schemes and signage belonging to the Company or
any of its subsidiaries, affiliates or related entities. Operator shall not
allow the Airship, vehicles or equipment to be used commercially until the
design graphics and other materials of Company are removed, which shall occur as
soon as practicable following the termination of this Agreement; provided,
however, that this provision shall not preclude Operator from disposing of
Airship Merchandise on hand as of the date of termination of this Agreement.
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9. Insurance.
9.1 Operator shall, during the Initial Period and Option
Period, if any, procure and maintain, at its sole cost and expense, a policy or
policies of insurance in form and content and with responsible insurers
reasonably acceptable to Company, in the following types and amounts:
(a) Comprehensive aviation liability insurance with
respect to the use and operation of the Airship, having a combined single limit
of not less than $150,000,000, insuring and covering Operator and, as an
additional insured pursuant to Section 9.2(a), Company, as their interests may
appear, against all liability for injury, damage or claims caused by or arising
out of, or in connection with, ownership, operation, maintenance or use of the
Airship, including injuries to or deaths of passengers or third persons or
damage to property.
(b) Automobile liability insurance or other general
liability insurance covering all owned, non-owned and leased automobiles,
trucks, trailers, and other vehicles and ground support equipment used by
Operator in the performance of its duties under this Agreement. Such insurance
shall provide coverage of not less than that provided for in the Standard
Comprehensive Automobile Liability Policy in limits of not less than $10,000,000
combined single limit each occurrence for bodily injury and property damage.
(c) Workers' compensation insurance in conformity
with the statutory limits of the states in which Operator shall be required to
carry such insurance. Employees liability shall be carried with a limit of not
less than $1,000,000 for accident or disease.
9.2 All insurance required hereby shall include the
following:
(a) Company and its subsidiaries, affiliates and
licensees and their respective assigns, officers, directors and employees shall
be included as additional insureds as their interests may appear (excluding
coverage under Section 9.1 (c) above);
(b) The insurers shall agree to waive their rights
of subrogation against Company and its parent companies, subsidiaries,
affiliates and licensees and their respective agents, assigns, officers,
directors and employees;
(c) The inclusion of more than one corporation,
person, organization, firm or entity as insured or additional insured under the
policy of insurance shall not in any way affect the rights of any claim, demand,
suit or judgment made, brought or recovered, by or in favor of any employee of
such other insured. Each policy shall protect each corporation, person,
organization, firm or entity in the same manner as though a separate policy had
been issued to each, but nothing herein shall operate to increase the insurer's
liability as set forth as limits to the policy beyond the amount or
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amounts for which the insurers would have been liable if only one person or
interest had been named as insured;
(d) With respect to liability arising out of work
performed by Operator under this Agreement, the insurance afforded the Company
as additional insured shall be primary, and any insurance maintained by Company
shall be excess and not contributing with Operator's insurance;
(e) The insurers shall agree that, in the event
they cancel or materially change such insurance policies, they will give thirty
(30) days' advance written notice (seven days in the case of war risk) of such
cancellation or material change to Company; and
(f) The geographic limits of such insurance shall
include at a minimum the entire Territory.
9.3 Operator shall, from time to time as Company shall
reasonably request, and prior to each renewal date of the insurance, furnish to
Company certificates evidencing that the foregoing insurance is in full force
and effect with financially sound and responsible insurers.
10. Termination; Force Majeure.
10.1 The occurrence of any of the following events will be
deemed to be, and shall be treated as, a default under this Agreement and just
cause for its termination by the non-defaulting party, which termination shall
be effective upon notice given in accordance with Section 13 hereof, and/or, at
Company's option, if Company is the non-defaulting party, abatement by Company
or reimbursement to Company of the compensation to be paid by Company pursuant
to this Agreement or previously paid but unearned:
(a) Breach or failure by either party in the due
observance or performance of any material term, covenant, warranty,
representation or agreement contained in this Agreement, which breach or failure
continues unremedied or uncorrected for a period of ten days after written
notice thereof from the non- breaching party, which notice specifies such breach
or failure in reasonable detail and requires it to be remedied; provided that,
such ten-day period shall be extended if (i) such breach or failure is not
capable of being remedied within such ten-day period, (ii) the breaching party
has diligently and in good faith commenced efforts to remedy the same within
such ten-day period, and (iii) such breach or failure is remedied within 30 days
after such notice.
(b) Either party shall admit in writing its
inability to pay its debts, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against such party
seeking to adjudicate it a bankrupt
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or insolvent, or seeking reorganization, arrangement, adjustment or composition
of its debts under any law relating to bankruptcy, insolvency, reorganization or
relief of debtors, or seeking appointment of a receiver, trustee or other
similar official for said party or for any substantial part of its property, and
such proceeding shall not have been dismissed within ninety (90) days; or either
party shall take any action to authorize any of the actions set forth above in
this subsection.
10.2 (a) The provisions of this Agreement are binding upon
the parties hereto except where performance by a party, or the ability to
achieve the material purposes set forth in Section 1.3(a), is prevented, delayed
or interfered with by causes beyond the reasonable control of the non-performing
party, including, without limitation, riot, war or hostilities between nations,
governmental action (other than action taken in response to Operator's or
Company's violation of any law or governmental regulation, in which case the
party at fault shall not be permitted to claim the benefit of this Section
10.2), acts of God, mechanical or equipment failures caused by foreign objects,
fire, accidents, strikes or adverse weather conditions (collectively, force
majeure) provided however, that force majeure shall not include mechanical or
equipment failures (other than as provided above) or unavailability of flight
crew or ground crew personnel unless attributable to act(s) of God.
(b) The party affected by force majeure shall give notice
to the other party of said force majeure event promptly after the occurrence
thereof, stating therein the nature of the suspension of performance and reasons
therefor. Such party shall use its best efforts to resume performance as soon as
reasonably possible. Upon restoration of the affected party's ability to perform
its obligations hereunder, the affected party will give immediate notice to the
other party.
(c) Subject to Section 5.1 (a), if a force majeure
condition which prevents a party's performance hereunder shall continue for a
period of 60 days, and after such 60 day period there shall be no reasonable
prospect for the prompt cure thereof despite the best efforts of the affected
party to cure the same, then either party shall have the right to terminate this
Agreement in its entirety upon 30 days' prior notice to the other party;
provided that such termination shall be effective as of the date on which the
non-performing party ceased performing hereunder due to a force majeure
condition, and upon such termination (i) Operator shall return any payments
advanced but unearned as of the termination date, (ii) Company shall make any
payments earned but not paid as of such termination date, and (iii) neither
party hereto shall have any further liability or obligation whatsoever to the
other, other than under the terms of those provisions which specifically survive
the termination of this Agreement.
10.3 Notwithstanding anything to the contrary in this
Agreement, if during the Initial Period and Option Period, if any, it becomes
necessary to cancel operations pursuant to this Agreement due to the inability
of Operator to maintain necessary permits or authorizations from the FAA, DOT or
any other governmental agency having jurisdiction over the Airship or its use or
operation, such cancellation of operations shall continue for a period of 60
days, and after such 60-day period there shall
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be no reasonable prospect for the prompt cure thereof despite the best efforts
of the Operator to remedy the same, then Company shall have the right after such
60 day period to terminate this Agreement in its entirety upon 30 days' notice
to Operator, whereupon (i) Operator shall return any payments advanced but
unearned as of the termination date, (ii) Company shall make any payments earned
but not paid as of such termination date, and (iii) neither party hereto shall
have any further liability or obligation whatsoever to the other, other than
under the terms of those provisions which specifically survive the termination
of this Agreement. If such condition is remedied within the aforementioned 60
day period, the Agreement shall continue in effect for the remainder of the
Initial Period and Option Period, if any, provided that the Initial Period and
Option Period, if any, shall be extended by the number of days during which such
condition existed, and the respective obligations of the parties shall be abated
for that same period. If an event or circumstance which would otherwise
constitute a default with respect to the Company under Section 10.1 (a) also is
subject to this Section 10.3, it shall be governed by this Section 10.3 and will
not constitute a default.
11. Confidentiality.
Except as may be required by law or to obtain a permit or other
authorization for the operation of the Airship, no party to this Agreement shall
divulge to any third party the contents of this Agreement or any other agreement
between the parties or any information (which is not publicly available) gained
in the performance of this Agreement or such other agreements, except to the
extent necessary, normal or appropriate for the purposes contemplated hereunder,
and information by way of plans or other documentation marked "Confidential" by
a party and made available to the other parties shall not be made available to
any third party without the written consent of the disclosing party. The parties
shall consult with one another regarding the contents of any proposed press
release relating to this Agreement or the 1992 Agreement prior to issuing such
press release.
12. Audit Rights.
12.1 Company (or its representatives) shall have the right
at any time during the term of this Agreement, during normal business hours and
upon seventy- two (72) hours' notice, to examine Operator's pertinent books and
records, which books and records shall be kept and maintained in accordance with
generally accepted accounting principles consistently applied, to determine
whether all invoices and other charges submitted to Company by Operator are in
all respects in accordance with this Agreement. Operator (or its
representatives) shall have the right, at any time during the term of this
Agreement during normal business hours and upon seventy-two (72) hours' notice,
to examine Company's pertinent books and records, which books and records shall
be kept and maintained in accordance with generally accepted accounting
principles consistently applied, to determine whether Company has paid all
royalties due to Operator in accordance with this Agreement.
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12.2 In the event a discrepancy is discovered during an
audit referred to in 12.1 above, the discovering party shall provide written
notice to the other party explaining such asserted discrepancy in detail. In the
event the other party agrees with such asserted discrepancy, appropriate
reimbursement shall be promptly made. In the event the other party disagrees
with the asserted discrepancy, such dispute shall be submitted to a firm of
nationally recognized independent certified public accountants mutually
acceptable to Company and Operator, and the decision of such firm shall be
binding. The losing party shall be solely responsible for the fees and expenses
of such independent accounting firm. The provisions of this paragraph shall
survive the expiration or termination of this Agreement.
12.3 For a period of two (2) years following the
termination of this Agreement, Operator shall maintain such books and records
(collectively, "Records") as are necessary (i) to substantiate that all invoices
and other charges submitted to Company for payment hereunder were valid and
proper, and (ii) to determine whether any payments have been made, directly or
indirectly, by or on behalf of Operator to or for the benefit of any Company
employee or agent who may reasonably be expected to influence either Company's
decision to enter into this Agreement or the amount to be paid by Company
pursuant hereto. (As used herein, "payments" shall include money, property,
services and all other forms of consideration.) All Records shall be maintained
in accordance with generally accepted accounting principles consistently
applied. Company and/or its representative shall have the right at any time
during normal business hours, upon twenty-four (24) hours' notice, to examine
said Records. The provisions of this paragraph shall survive the expiration or
earlier termination of this Agreement.
13. Notices.
All notices, requests, demands, claims and other communications
required or permitted to be given pursuant to this Agreement shall be in writing
and shall be deemed duly given when delivered personally or three business days
after having been sent by registered airmail or when received by facsimile
transmission, in each case addressed as follows:
If to Operator:
AIRSHIP INTERNATIONAL LTD.
7380 Sand Lake Road
Orlando, Florida 32819
Attn: Louis J. Pearlman, President
Fax 407-345-0888
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If to Company:
ANHEUSER-BUSCH COMPANIES, INC.
One Busch Place
St. Louis, Missouri 63118
Attn: Carl E. Henke
Fax: 314-532-2574
The parties may at any time change their addresses or telefax numbers for the
purpose hereof by giving notice to the others in the manner specified above.
14. Liability and Indemnity.
Operator hereby assumes liability for, and hereby agrees to
indemnify, reimburse, protect, save and hold harmless Company, its subsidiaries,
affiliates and related entities, their successors, assigns, officers, agents,
employees and servants, from and against, and to pay Company promptly upon
demand the amount of, any and all liabilities, obligations, losses, damages,
penalties, fines, claims, actions, suits, legal proceedings, whether civil or
criminal, costs, expenses and disbursements, including legal fees and expenses,
of whatsoever kind and nature, imposed on, incurred by or asserted against
Company or any other indemnified entity, in any way relating to, connected with
or arising out of (i) the ownership, use or operation of the Airship or its
ground support vehicles and equipment (or any component thereof) pursuant to
this Agreement, whether in the air or on the ground; or (ii) the death of, or
injury to, or damages to, any person or property, including, but not limited to,
the property of Company, its officers, employees, agents, invitees, guests or
clients, caused by, arising out of or in any way connected with the possession,
use, operation or maintenance of the Airship and its ground support vehicles and
equipment. The obligations contained in this Section shall continue in full
force and effect, notwithstanding the expiration or other termination of this
Agreement.
15. Independent Contractors.
15.1 The parties shall be and act as independent
contractors, and under no circumstances shall this Agreement be construed as one
of agency, partnership, joint venture or employment between the parties. Each
party acknowledges and agrees that it neither has nor will give the appearance
or impression of having any legal authority to bind or commit the other party in
any way.
15.2 Notwithstanding anything in this Agreement to the
contrary, the parties hereto acknowledge that the essential purpose of this
Agreement is aerial advertising and promotion on behalf of Company and its
affiliates and that Company undertakes and shall have no greater responsibility
or liability with respect to the Airship
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(including all support equipment and staff) than it would in acquiring any other
advertising space.
16. Governing Law.
The interpretation, validity and performance of this Agreement
shall be governed by the laws of the State of New York.
17. No Assignment; Company Subsidiaries Included.
Neither party shall assign its rights and/or obligations under
this Agreement without the prior written approval of the other party. This
agreement and all of the terms and provisions hereof will be binding upon, and
will inure to the benefit of, the parties hereto and their respective successors
and approved assigns. Notwithstanding the foregoing, (i) Operator acknowledges
and agrees that all references to "Company" in this Agreement shall include, at
the option of Anheuser- Busch Companies, Inc., any of its direct or indirect
subsidiaries; provided, however, that Anheuser-Busch Companies Inc. shall be
ultimately responsible for the due and punctual performance of all obligations
of "Company" herein; and (ii) Company acknowledges that Operator's right to
receive the Monthly Fee and/or any other payments due from Company may be
assigned by Operator to a bank which is financing the Airship.
18. Miscellaneous.
18.1 This Agreement is the only agreement existing between
the parties hereto regarding BUD I Airship, and there are no representations,
covenants, warranties or agreements between the parties hereto concerning the
BUD I Airship which are not contained herein and set forth in full herein. Any
prior agreements or understandings regarding the BUD I Airship are hereby
revoked and canceled. This Agreement may be amended only by an agreement in
writing executed by both parties.
18.2 The failure of either party to object to or to take
affirmative action with respect to any conduct of the other party which is in
violation of the terms of this Agreement shall not be construed as a waiver
thereof, nor of any future breach or subsequent wrongful conduct.
18.3 Except as otherwise specifically provided in this
Agreement, each party shall be responsible for any expenses it incurs in
connection with performance of its obligations under this Agreement.
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18.4 The rights and remedies set forth herein are intended
to be cumulative, and the exercise of any one right or remedy by either party
shall not preclude or waive its exercise of any other rights or remedies
hereunder or pursuant to law or equity.
18.5 The Section headings set forth herein are for
convenience only and do not constitute a substantive part of this Agreement.
18.6 The rights and privileges granted to Company
hereunder are special, unique, extraordinary and impossible of replacement,
which gives them a peculiar value, the loss of which could not be reasonably or
adequately compensated in damages in an action at law, and Operator's failure or
refusal to perform its obligations hereunder would cause Company irreparable
loss and damage. If Operator fails or refuses to perform such obligations,
Company shall be entitled to injunctive or other equitable relief against
Operator to prevent the continuance of such failure or refusal or to prevent
Operator from granting rights to others in violation of this Agreement. In no
event, however, shall Company be entitled to consequential damages arising from
the loss of use of the Airship, including but not limited to sales revenues or
profits which may have been lost due to loss of the Airship for advertising and
promotional purposes.
18.7 Notwithstanding termination of this Agreement
pursuant to any provision hereof, such termination shall not relieve any party
of any obligation hereunder which, by its terms, survives or is to be performed
after such termination, including without limitation those relating to
exclusivity as set forth in Section 7 above.
18.8 This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which, taken
together, shall be one and the same instrument.
18.9 The 1992 Agreement shall terminate on the Effective
Date.
18.10 Nothing in this Agreement shall be deemed to modify,
supersede or replace any provision or term of the Airship Advertising Agreement
between the parties dated January 1, 1991.
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IN WITNESS WHEREOF, this Agreement is executed on behalf of the
parties hereto by their duly authorized representatives as of the day and year
first above written.
AIRSHIP INTERNATIONAL LTD.
By: /s/ LOUIS J. PEARLMAN
-------------------------
Name: Louis J. Pearlman
Title: President
ANHEUSER-BUSCH COMPANIES, INC.
By: /s/ TONY PONTURO
--------------------------
Name: Tony Ponturo
Title: Vice President: Corporate
Media & Sports Marketing
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AIRCRAFT LEASE AGREEMENT
This AIRCRAFT LEASE AGREEMENT (the "Agreement") is entered
into this 15th day of December, 1994, by and between AIRSHIP INTERNATIONAL LTD.,
a New York corporation (hereinafter referred to as "AIL") and MASTELLONE HNOS.,
S.A., a corporation existing under the laws of Argentina (hereinafter referred
to as "MASTELLONE").
R E C I T A L S
A. AIL is the owner of all right, title and interest in and to
that certain airship Skyship 500-HL, FAA Registration Number N-601-LP to be
assembled in Buenos Aires, Argentina, described on Exhibit "A" attached hereto
and made a part hereof (the "Airship") and of the ground support equipment for
the Airship ("GSE").
B. AIL is desirous of leasing the Airship and GSE to MASTELLONE,
and MASTELLONE is desirous of leasing the same from AIL, subject to the terms
and conditions set forth herein.
W I T N E S S E T H
NOW, THEREFORE, for and in consideration of the mutual
covenants herein contained, the sums of money to be paid hereunder and for such
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto covenant, stipulate and agree as
follows, to wit:
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ARTICLE I - LEASE AND OPERATION
1.1 RECITALS. The above recitals are true and correct and incorporated
by reference as if set forth in full herein.
1.2 LEASE OF AIRSHIP. Subject to the terms and conditions set forth
herein, AIL hereby agrees to lease to MASTELLONE hereunder, and MASTELLONE
hereby agrees to lease from AIL hereunder, the Airship and GSE for the Term
described herein.
1.3 OPERATION. AIL and MASTELLONE hereby agree that the Airship and GSE
will be operated by Airship Operations, Inc. (hereinafter referred to as "AOI")
pursuant to such terms and conditions as the parties to that certain Airship
Operations Agreement dated the date hereof between MASTELLONE and AOI (the
"Airship Operations Agreement") agree.
ARTICLE II - TERM AND RENEWAL OPTION
2.1 TERM. The Term of this Agreement shall be for four months
immediately following the Effective Date (the "Initial Term").
2.2 RENEWAL OPTION. Upon irrevocable written notice to AIL, not less
than 30 days prior to expiration of the Initial Term, MASTELLONE shall have the
right and ability to extend the Initial Term for an additional term of ten
months (the "Renewal Term"); provided that:
(a) any such notice shall not be binding on AIL if an Event of
Default or Default shall have occurred or be continuing on
the
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date of such notice or on the commencement date of the
Renewal Term.
(b) any such notice shall be of no effect unless MASTELLONE
has extended the Airship Operation Agreement for a term at
least equal to the Renewal Term pursuant to which this
Agreement is extended.
ARTICLE III - RENT
3.1 RENT. MASTELLONE shall pay to AIL the sum of Five Hundred
Sixty-Eight Thousand and 00/100 Dollars ($568,000) (the "Initial Payment") upon
signing this agreement (which payment shall cover the rent for the first and
fourth month of the Term); and, thereafter, the sum of Two Hundred Eighty-Four
Thousand and 00/100 Dollars ($284,000) as monthly rent (the "Monthly Fee"). The
above amounts include the twelve percent (12%) governmental tax that MASTELLONE,
as retention agent, must retain and deposit on the behalf of the Argentinean
government. After allowance for such tax, the net amount to be received by AIL
hereunder is: (a) $500,000 with respect to the Initial Payment; and (b) $250,000
with respect to each Monthly Fee payment. All sums described herein are due and
payable by the fifth day of each month of the Term (excluding the rental
payments for the first and fourth months of the Term). Notwithstanding the
foregoing, the Monthly Fee during the Renewal Term shall be Two Hundred Fifty
One Thousand and 00/100 Dollars ($251,000).
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3.2 EXPIRATION. Upon expiration of the Term, MASTELLONE shall
immediately authorize AOI to relinquish possession of the Airship and GSE to
AIL. MASTELLONE acknowledges that AOI will have sole operational control of the
Airship and GSE during the Term of this Agreement. MASTELLONE shall also
authorize AOI to return the Airship to AIL subject to the terms and conditions
set forth in the Airship Operations Agreement.
ARTICLE IV - OBLIGATIONS OF AIL
AIL agrees to do, or cause to be done, each of the following:
4.1 (a) Deliver the Airship in perfect flying condition (and to maintain
such condition during the entire duration of this Agreement); properly
disassembled and conditioned for transport to Argentina; and
(b) provide the support vehicles on land ("GSVs") described in
Appendix A, the helium gas and the special paint for the art designated by
MASTELLONE to decorate the Airship. The GSVs will embark already painted with
the colors and designs that MASTELLONE designates.
4.2 Send the professional personnel and technicians needed to assemble
the Airship and cause it to be functional until its delivery to its designated
operator, AOI.
4.3 At its expense, as soon as practicable, provide the documentation or
other assistance necessary for the Airship to be certified by the National
Director of Aerial Navigation (DNA).
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4.4 Technically and mechanically assist AOI with any damaged and/or
missing parts and/or with other problems which may arise during the Term of this
Agreement.
4.5 Provide the special tools for the Airship's maintenance, as well as
those tools not available in Argentina.
4.6 Disassemble and condition the Airship and the GSVs at the end of the
Term such that it may be reshipped to its origin at a time to be determined by
the parties, at which time MASTELLONE shall take whatever actions are required
by the Temporary Import Administration relating to the export of the Airship to
the United States.
4.7 Deliver to MASTELLONE the guarantee of Louis J. Pearlman and
Transcontinental Airlines, Inc. attached hereto as Appendix B.
4.8 Maintain during the Term the following insurance policies:
(a) Insurance against third parties and/or material damages
which could arise during the operation of the Airship, in the amount of Fifty
Million United States Dollars.
(b) Insurance covering injury or damage to each person
transported in the Airship (including luggage) in the amount of Fifteen Million
United States dollars. This insurance will be provided by Lloyd's of London.
(c) Insurance for the GSVs against third parties, material
damages and injury to persons transported.
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Copies of each of the insurance policies referred to above are attached
hereto as Appendix C.
4.9 Deliver the Airship ready to fly to AOI during the first week of
February 1995.
4.10 Paint the exterior and interior of the Airship and the GSVs in
accordance with the art designated by MASTELLONE.
4.11 Provide for the illumination system NIGHTSIGN to make it function
according to the tests and/or designs chosen by MASTELLONE.
4.12 Comply with the laws and regulations of local flights as provided
by local authorities.
4.13 Pay directly all personnel, (including lodging and travel, as
provided in the Airship Operations Agreement). This shall be the exclusive
responsibility of AIL and MASTELLONE shall be exempt for any type of
responsibility from any judicial and/or administrative claims with regard to
these matters.
4.14 Pay directly to AOI the costs related to inflating the Airship and
its support vehicles
4.15 Inspect the hangar whenever necessary.
ARTICLE V - OBLIGATIONS OF MASTELLONE
MASTELLONE agrees to do, or cause to be done, each of the following:
5.1 Pay on time all sums indicated in Article 3 hereof.
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5.2 Pay the costs related to the Airship and of the GSVs, the helium and
the transport of the paint to decorate the Airship from Miami (USA) to the
Airship's place of assembly in Argentina which shall be designated by
MASTELLONE.
5.3 AIL confirms that it has approved the terms and conditions of the
Airship Operations Agreement.
5.4 Pay all amounts relating to the hangar and for the auxiliary
technical personnel necessary to collaborate with the technical and professional
personnel AIL designates for the assembly and disassembly of the apparatus
(which AIL agrees shall number no more than 5).
5.5 Provide for the required retention of income tax and deliver the
required certificate corresponding to each lease payment to be made hereunder,
all as required by the United States Internal Revenue Service.
ARTICLE VI - GENERAL CONSIDERATIONS
6.1 Either party hereto may terminate this Agreement in the event of
breach or failure the other party in the due observance or performance of any
material term, covenant, warranty, representation or agreement contained in this
Agreement, which breach or failure continues unremedied or uncorrected for a
period of ten days after written notice thereof from the non-breaching party,
which notice specifies such breach or failure in reasonable detail and requires
it to be remedied; provided that, such ten-day period shall be extended if (i)
such breach or failure is not capable of being remedied within such ten-day
period, (ii) the breaching party has diligently and
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in good faith commenced efforts to remedy the same within such ten-day period,
and (iii) such breach or failure is remedied within 30 days after such notice.
ARTICLE VII- ASSIGNMENT AND SUBLEASE
7.1 MASTELLONE will be able to assign or transfer its rights under this
Agreement, in whole or in part. MASTELLONE may enter into a sublease with
respect to the Airship.
ARTICLE VIII- ADDITIONAL AGREEMENTS
AIL further agrees as follows:
8.1 AIL agrees to immediately send or otherwise provide all
documentation pertaining to AIL to the Argentinean aerial authorities described
herein and to the DNA, including all documentation and/or complete clarification
which may be requested by such authorities.
8.2 AIL agrees that Westinghouse Airship Inc. ("Westinghouse") may send
the technical personnel to supervise the assembly and shipment of the Airship if
so requested by the FAA and/or DNA.
8.3 AIL agrees that it shall deliver or cause Westinghouse to deliver a
"Type Certificate" satisfactory to DNA relating to the Airship.
ARTICLE IX- INITIAL PAYMENT
9.1 In accordance with Article III, MASTELLONE gives AIL and AIL
receives the agreed sum of U.S. $500,000, after the payment of the corresponding
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taxes, representing the lease payments with respect to the first and fourth
months of this Agreement, this serving as receipt.
ARTICLE X - MISCELLANEOUS
10.1 NOTICES. All notices, demands, requests, claims and other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and shall be deemed duly given when delivered personally or
three business days after having been sent registered air mail or when received
by facsimile transmission, in each case addressed as follows:
If to Operator:
Airship International Ltd.
7380 Sand Lake Road
Suite 200
Orlando, Florida 32519
Attn: Louis J. Pearlman
Fax: (407) 345-0888
With a copy to:
Baer Marks & Upham
805 Third Avenue
New York, New York 10022
Attn: Joseph A. Marinello, Esq.
If to Company:
Mastellone Hnos, S.A.
Av. L.N. Alem 720
1001 Buenos Aires
Republica Argentina
Fax: 54-1-3136822
54-1-3121560
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The parties may at any time change their addresses of telefax numbers for the
purpose hereof by giving notice to the other parties in the manner specified
above.
10.2 GOVERNING LAW; VENUE. This Agreement will be interpreted and
construed under the laws of the State of Florida, regardless of the domicile of
any party, and will be deemed for such purposes to have been made, executed and
performed in the State of Florida.
10.3 COUNTERPART EXECUTION. This Agreement may be executed in several
counterparts, each of which shall be fully effective as an original and all of
which together shall constitute one and the same instrument.
10.4 CONSTRUCTION. The words "herein", "hereof", "hereunder", and other
similar compounds of the word "here" when used in this Agreement shall refer to
the entire Agreement and not to any particular provision or section. If the last
day of any time period stated herein shall fall on a Saturday, Sunday or legal
holiday, then the duration of such time period shall be extended so that it
shall end on the next succeeding day which is not a Saturday, Sunday or legal
holiday.
10.5 INVALID PROVISION. If any one or more of the provisions of this
Agreement, or the applicability of any such provision to a specific situation,
shall be held invalid or unenforceable, such provision shall be modified to the
minimum extent necessary to make it or its application valid and enforceable,
and the validity and enforceability of all other provisions of this Agreement
and all other applications of any such provision shall not be affected thereby,
provided that this section will be
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valid only if no alteration to the intention and/or the spirit and/or the
philosophy and/or the application that the parties hereto had at the moment of
agreement.
10.6 BINDING EFFECT AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of AIL and MASTELLONE and their respective heirs,
personal representatives, successors and assigns. Except as expressly provided
herein, nothing in this Agreement is intended to confer on any person, other
than the parties hereto and their respective heirs, personal representatives,
successors and assigns, any rights or remedies under or by reason of this
Agreement.
10.7 DATE OF AGREEMENT. As used herein, the phrase "Effective Date"
shall mean the date upon which operations of the Airship begin pursuant to the
terms of Section 1.2 of the Airship Operations Agreement. That date shall be
entered as the Effective Date at the top of the first page hereof.
10.8 TIME OF ESSENCE. It is expressly agreed by both parties that time
is of the essence of this Agreement and in the performance of all conditions,
covenants, requirements, obligations and warranties to be performed or satisfied
by the parties hereto. Waiver of performance or satisfaction of timely
performance or satisfaction of any condition, covenant, requirement, obligation
or warranty by one party shall not be deemed to be a waiver of the performance
or satisfaction of any other condition, covenant, requirement, obligation or
warranty unless specifically consented to in writing.
10.9 INDEPENDENT CONTRACTORS. AIL's and MASTELLONE's relationship is
that of independent contractors and nothing contained in this Agreement shall be
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deemed to create a partnership or joint venture between AIL and MASTELLONE, or
to cause AIL or MASTELLONE to be liable or responsible in any way for the
actions, liabilities, debts or obligations of the other.
10.10 PREPARATION OF DOCUMENT. This Agreement shall not be construed
more strongly against either party regardless of who is responsible for its
preparation and the parties acknowledge that each contributed and are equally
responsible for its preparation.
10.11 SURVIVAL. All representations, warranties, covenants and
agreements contained in this Agreement shall survive the execution and delivery
of this Agreement.
Signed, sealed and delivered:
AIRSHIP INTERNATIONAL LTD.
By: LOUIS J. PEARLMAN
---------------------------------------
Louis J. Pearlman, President
MASTELLONE HNOS, S.A.
By: DR. GUILLERMO LOZANO
---------------------------------------
Dr. Guillermo Lozano, General Counsel
JOSE ALDO MALTAGLIATI
---------------------------------------
Jose Aldo Maltagliati, Accountant
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AIRSHIP OPERATIONS AGREEMENT
THIS AGREEMENT is made as of the 15th day of December, 1994, by
and between AIRSHIP OPERATIONS, INC., a Florida corporation with its principal
office at 2642 Michigan Avenue, Unit B, Kissimmee, Florida 34744 ("Operator"),
and MASTELLONE HNOS, S.A., a corporation existing under the laws of Argentina
with its principal office at Avda L.N. Alem No. 720, 1001 Buenos Aires,
Republica Argentina ("Company").
(A) Operator declares that Airship International Ltd.
("AIL") is the owner of a SKYSHIP 500-HL aircraft, FAA Registration Number
N-601-LP to be assembled in Buenos Aires, Argentina described in Exhibit "A"
attached hereto and made a part hereof (the "Airship") and of the ground support
equipment for the Airship.
(B) Company wishes to have the exclusive use of the
Airship for advertising and promotional purposes pursuant to the terms and
conditions hereof, and Operator wishes to make the Airship available to Company
for such purposes.
NOW THEREFORE, it is hereby agreed as follows:
1. Exclusive Use; Term.
1.1 During the Term (as hereinafter defined), Operator
shall use and operate the Airship at such locations within Argentina and/or
Uruguay as are designated by Company (the "Territory") exclusively for the
purposes set forth in Section 1.3 below. Operator shall operate all equipment,
instruments, engines, computers and other appurtenances used or required for
operation of the Airship, as well as ground support vehicles, mooring masts,
fuel, personnel (including pilots, ground crew, and all other required
personnel, and all other facilities, equipment and supplies necessary for
fulfilling its obligations enumerated herein), subject to the terms and
conditions of this Agreement.
1.2 The term of this Agreement (the "Term") shall commence
on or about February 10, 1995 (the "Delivery Date"), and shall continue through
June 10, 1995. Company shall have the right and ability to extend the Term for
an additional ten month term (the "Additional Term") upon thirty (30) day
advance written notice to Operator during the Term.
1.3 Throughout the term of this Agreement the Airship
shall be operated on behalf of Company exclusively for the following purposes:
(a) Advertising and promoting the products, goods,
services or businesses of Company and/or any of its subsidiaries or other
affiliates (as
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determined exclusively by Company) by over-flight of heavily populated areas,
including stadiums, open-air theaters, outdoor concerts, sporting events,
amusement parks, theme parks and other large public gatherings;
(b) Aerial filming of events for telecast and other
uses, as and when directed by Company, and
(c) The carriage of passengers, subject to the
following limitations:
(i) Only invited guests of Company may
be carried as passengers on the Airship;
(ii) Passenger flights shall originate
and terminate at the same point;
(iii) Company's passengers shall not
pay for their carriage, nor will payment be made or accepted on their
behalf; and
(iv) The number of passenger flights
per week shall be determined by Company, subject to safety and weather
conditions as determined by the Airship pilot and applicable rules and
regulations of all governmental agencies within the Territory, if any.
2. Delivery of Airship; Designated Base of Airship; Design and
Color Scheme.
2.1 Operator is obligated to cause the Airship to be in a
serviceable, fully operational and airworthy condition on the Delivery Date. The
parties agree that the initial base of operations for the Airship will be at
Buenos Aires, Argentina at a specific location to be designated by Company (the
"Designated Base"), subject to the reasonable approval of Operator.
2.2 Prior to the Delivery Date, Operator shall obtain a
Certificate of Airworthiness from the FAA and shall maintain such Certificate of
Airworthiness in effect throughout the Term.
2.3 Company's proposal for the design and color scheme of
the exterior of the Airship shall be delivered to and accepted by Operator
within 14 days upon signing of this agreement. Operator agrees to execute the
Company's design and color scheme (the "Work") on the exterior of the Airship.
The execution of the design and color scheme shall be considered a
work-made-for-hire within the meaning of the United States Copyright Act. All
sketches and any other graphic material for the Work,
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whether preliminary or in partial or final form, shall be the exclusive property
of the Company, and Operator assigns all right, title and interest therein,
including the copyright, to the Company. Any design problems or difficulties
relating to the proposed exterior design shall be resolved by discussion between
the parties hereto, it being understood that Company's artistic and design
preferences and Operator's experience in the field of Airship exterior design
are of paramount importance. If Company requires any changes in the exterior
design after initial acceptance during the Term, it shall notify Operator and
provide artwork on a timely basis. Company shall pay to Operator the actual cost
of each such change in the exterior design within 30 days of receipt of an
invoice for such amount from Operator.
2.4 Operator shall install and maintain to Company's
specifications, at no cost to Company, electric sign graphics (the "Night Sign")
on each side of the Airship to display such advertising, promotion or other copy
as may be directed by Company from time to time. The electric sign graphics
shall be displayed using state-of-the-art computerized lights in four colors
operated from the Airship's gondola. The space for such electric sign graphics
on the Airship shall have a dimension of approximately 118 feet x 29 feet.
3. Airship Operations.
3.1 Operator shall obtain, and maintain in effect
throughout the Term, all requisite permits, certificates and authorizations as
required by the FAA Company shall be responsible for obtaining all requisite
permits, certificates and authorizations from all governmental agencies within
the Territory, including but not limited to the National Airship Board of
Argentina ("DNA").
3.2 Operator shall provide personnel to perform all
maintenance, servicing and repair required to be performed on the Airship during
the Term in accordance with the Airship flight operations manual and the Airship
maintenance manual and in compliance with standards prescribed by the FAA.
Except as otherwise provided herein, Operator shall also provide the necessary
ground and flight crew for the Airship and shall pay all costs associated with
the ownership, use or operation of the Airship. Such costs shall include, but
shall not be limited to, the following:
(a) The helium necessary for the complete operation
of the Airship will be provided by Operator in appropriate export packages in
any port on the east coast of the United States. Company will be responsible for
the transport of the helium to Argentina and the payment of the import duties
that the Argentinian government will require;
(b) All operational and administrative personnel;
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(c) All ground support equipment (painted with the
colors and designs designated by Company) and personnel (provided that
the number of ground crewmen shall not exceed twelve) required for the
operation and maintenance of the Airship;
(d) All insurance, maintenance and repair costs
(excluding sales taxes, if any, which shall be borne by Company);
(e) Lubricating oil; and
(f) Fuel.
Company shall be responsible for all Airship mooring fees,
costs of delivery of the Airship and all equipment used or required for the
Airship as described in Section 1 above to the Designated Location at the
beginning and end of the Term, the costs to provide and replenish helium gas as
set forth in Section 3.2(a) above. All other fees and costs not outlined
hereinabove shall be borne by Company including, but not limited to, costs
related to disassembly and return of the Airship (including insurance on
shipment), ground support vehicles and related equipment to Miami, Florida.
Operator will provide necessary personnel in order to perform disassembly.
3.3 Operator shall not be required to operate the Airship
in any manner which violates any law or regulation of any governmental agency of
Argentina and/or Uruguay, the country of registration of the Airship or any
country or state to, from or over which the Airship flies.
3.4 In addition to the sums specified in Section 4,
Company shall pay for, provide or reimburse Operator (within 30 days of receipt
of an invoice for same accompanied by adequate documentation) for any sum
Operator shall expend on the following:
(a) The actual cost of any change in the Airship's
exterior design required by Company after the date hereof (except as otherwise
provided in Sections 2.3 and 2.4 above); and
(b) Any special equipment not part of the normal
equipment of the Airship (other than the electric sign graphics referred to in
Section 2.4) which is required by Company for advertising or any other mutually
agreed purposes.
3.5 (a) Company shall determine from time to time the
dates, times and locations for flight operations of the Airship, which shall be
set forth on a schedule of operations of the Airship (the "Schedule"). The
initial Schedule, covering the first thirty (30) days of operation, shall be
submitted by Company to Operator at least ten (10) days prior to the Delivery
Date. Thereafter, thirty-day
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Schedules shall be submitted by Company to Operator at least ten (10) days prior
to the expiration of the previous Schedule. The Schedule may be amended by
Company from time to time during the Term, upon reasonable notice to Operator.
Operator shall adhere to the flight plan established by Company in the Schedule,
subject only to the physical constraints of adverse weather conditions as
determined by Operator's pilot, design limitations of the Airship and applicable
governmental regulations in effect from time to time. Operator will cooperate
with Company in making Airship flights during the times of the day and days of
the week to meet the Schedule. Changes in the geographic location of the Airship
(300 miles or more) from the location in the Schedule shall be given to Operator
at least ten (10) days in advance of the changes; provided, however, that
Operator shall use its best efforts to accommodate Company when Company requests
a change in location on shorter notice. Company shall provide Operator
reasonable assistance in locating lodging facilities for the Airship's crew when
travel is requested on short notice.
(b) The Schedule and any amendments thereto shall
be subject to the reasonable approval of Operator based upon operational
considerations.
(c) Company and Operator shall, on a weekly or bi-
weekly basis, establish the local flight schedule in the Designated Base area
and hours of operation of the Airship. Any changes by Company in the local
flight schedule shall be submitted to Operator at least forty-eight hours prior
to the proposed effective date and time of such changes. Any changes required by
Company in the Schedule which will require the geographic relocation of the
ground crew and support vehicles (but within 300 miles of the Designated Base)
will be submitted at least ten (10) days in advance for clearance with the
appropriate governmental agencies and to make appropriate ground arrangements.
Operator will use its best efforts to accommodate all Schedule changes when
requested by Company and to fly the Airship in accordance with the Schedule.
3.6 (a) Operator shall make the Airship available for
operation according to the Schedule up to six days per week. Company shall be
entitled to schedule flights on weekends, with the "off day" being a week day
(normally Monday). Operator shall provide, and Company will schedule, eight (8)
hours per day of flight time. Scheduled flight time for any given day shall be
measured from the first departure from the Airship's mooring mast until its
mooring at said mast at the completion of such day's operation and will include
airborne flight time for the purposes set forth in Section 1.3 above, as well as
time between flights for operational requirements such as refueling, crew
changes, and pick-up or drop-off of passengers, and time spent travelling to and
from Operator's closest maintenance facility. The Airship's pilots' log and
maintenance and repair records will be available for review by Company at all
reasonable times upon reasonable prior notice from Company. A representative of
Company, if available, shall also sign the log at the completion of each day's
flights.
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With respect to time lost from the Schedule for reasons
beyond Operator's reasonable control, Operator shall use its best efforts to
re-schedule such time as soon as reasonably practical thereafter.
(b) Notwithstanding the preceding paragraph (a)
above during each six month period of the Term, Operator shall have the right to
withdraw the Airship from service for scheduled maintenance and service when
necessary for a period of fifteen (15) days, no fewer than ten of which shall be
consecutive days (each such period a "Maintenance Period" and each day of any
such Maintenance Period a "Maintenance Day"), taking into consideration
inspections or maintenance which is mandated by Federal Aviation Regulations
("FARs"), the manufacturer's maintenance manual or the instruction manual (as
may be required for continued airworthiness) or by the Operator's approved
inspection and maintenance program. There shall be no reduction in any Monthly
Fee payment payable hereunder with respect to any such withdrawal of the Airship
for maintenance in accordance with this Section.
3.7 (a) Operator shall provide all necessary flight and
ground crew personnel necessary to accommodate the Schedule.
(b) Operator shall comply with the reasonable
requests of Company to the best of its ability in order that Company may obtain
the optimum utilization of the Airship with respect to its advertising and
promotional activities, provided that all crew activities shall be within
Operator's pilots' sole discretion. Notwithstanding the foregoing, the parties
acknowledge that Operator has full operational control of the Airship, and
Company shall have no liability whatsoever for any loss of or damage to the
Airship.
(c) Except when the authorized and licensed pilots
are at the flight controls or on duty, the ground crew chief shall be in command
of the Airship.
(d) No flight of the Airship shall take place
unless Operator's pilots on board shall be satisfied as to the prevailing
weather conditions and any geographical limitations, the load required to be
carried and the proposed places of take-off and landing. Operator's pilots shall
have the absolute right to cancel, terminate or divert any flights when such
action is deemed by them to be necessary due to the weather or to other
conditions beyond their control. Said pilots shall also have absolute discretion
to prohibit any goods or passengers on the Airship if, in the pilots' opinion,
they may adversely affect the safe flight of the Airship.
(e) Company shall provide, at its sole cost and
expense, (i) all uniforms which must be worn by Operator's flight and ground
crew members, (ii) any decals or painted logos (and replacements thereof) which
Company requires Operator to use on Operator's ground support vehicles, and
(iii) the patches and other logos for
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crew members' uniforms. Such uniforms, painted logos and decals shall be cleaned
from time to time by Operator in order to maintain a neat and clean appearance
to the public. All registered trademarks, trade names and other proprietary
property used in connection with such uniforms, as well as painted logos and
decals, shall remain the exclusive property of Company.
3.8 On reasonable notice from Company, Operator shall
cause a camera to be temporarily installed on the Airship when permissible by
law for use in taping television commercials, televising sporting or other
events, or other photographic or filming purposes. Company shall reimburse
Operator for any actual incremental costs it may incur in providing the camera
for use in the Airship.
4. Consideration; Reimbursement of Expenses.
4.1 (a) In consideration of all services to be provided
and obligations to be performed by Operator hereunder, Company agrees to pay to
Operator (i) the sum of Two Hundred Sixty Thousand and 00/100 U.S. Dollars
($260,000) upon signing of this Agreement (which payment shall cover the first
and fourth month of the Term); and (ii) thereafter, the sum of One Hundred
Thirty Thousand and 00/100 U.S. Dollars ($130,000) per month (which amounts
include governmental taxes calculated at a maximum rate of twenty seven percent
(27%)) plus travel reimbursement (the "Monthly Fee"). All amounts described
herein are due and payable on the first day of each month of the Term (except
for the Monthly Fee covering the first and fourth months of the Term).
(b) In the event that the Company exercises its
option to extend the Term in accordance with Section 1.2, the Monthly Fee
payable during the Additional Term shall be One Hundred Fifteen Thousand and
00/100 U.S. Dollars ($115,000) plus travel reimbursement.
Travel reimbursement will consist of 100% of hotel costs in
addition to a weekly expense allowance of $350 for each member of the Airship's
crew including the groundcrew and each pilot.
5. Representations, Warranties and Covenants.
5.1 Operator represents, warrants and covenants to Company
that:
(a) The Airship will be certificated as a standard
type aircraft under the laws of the United States of America;
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(b) As of the Delivery Date, Operator shall have a
valid Certificate of Airworthiness issued for the Airship by the United States
of America, and Operator shall take all necessary actions to ensure the
continued effectiveness of the Airship's Airworthiness Certificate as set forth
in FAR Section 21.181(a)(1), so that a valid Certificate of Airworthiness for
the Airship is maintained at all times. The Airship is, or will be on the
Delivery Date, in airworthy condition and technically and legally usable for the
purposes contemplated by this Agreement;
(c) Registration of the Airship under the laws of
the United States of America shall be maintained, and Operator shall obtain and
maintain (or cause to be obtained and maintained) in effect all required
approvals of the FAA. Company shall be responsible for any other governmental
registrations of governmental agencies having jurisdiction over the use and
operation of the Airship within the Territory, including, but not limited to,
DNA.
(d) Operator shall be responsible for performance
of all Airship overhaul, engine overhaul and maintenance required during the
Term, if under the FAR'S, as well as any applicable airworthiness directives
requiring modifications to each component of the Airship, and shall make such
alterations and modifications in each component of the Airship as may be
required from time to time to meet the standards of the FAA; and
(e) Operator shall maintain all records, logs and
other materials required by the FAA or other governmental authority having
jurisdiction over the Airship and shall permit Company or its duly authorized
agents or representatives or any other person designated by Company to inspect
the Airship and its flight logs and maintenance records at any reasonable time
and shall furnish Company and its duly authorized agents or representatives any
information with regard to the operation of the Airship as any of them may
reasonably request.
5.2 The Company represents and warrants to Operator that
it has obtained or shall obtain and maintain in effect throughout the Term all
permits, certificates and authorizations as are required by DNA or any
governmental agency having jurisdiction over the use, operation and flight of
the Airship in the Territory.
5.3 Each party hereto represents and warrants to the other
that:
(a) It is a duly organized and valid entity in good
standing under the laws of its jurisdiction of organization and has full
authority to conduct its business as presently conducted and to enter into and
perform its obligations under this Agreement;
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(b) Each of the persons executing this Agreement is
a duly authorized officer or agent of such entity and has been duly authorized
by all necessary action to execute and deliver this Agreement; and
(c) This Agreement has been duly and validly
executed and delivered by such party and constitutes a valid and binding
agreement of such party, enforceable in accordance with its terms, except as may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights generally or by the principles
governing the availability of equitable remedies.
6. Licensing.
6.1 Upon the termination of this Agreement, Operator
shall, at Company's expense, remove from all ground support vehicles and
equipment all trademarks, logo designs, color schemes and signage belonging to
the Company or any of its subsidiaries, affiliates or related entities. Operator
shall not allow the Airship, vehicles or equipment to be used commercially until
the design graphics and other materials of Company are removed, which shall
occur as soon as practicable following the termination of this Agreement. In any
event, Company shall be responsible for all expenses incurred as a result of
exporting the Airship to Miami, Florida, including, but not limited to,
Argentinian personnel.
7. Insurance.
7.1 Operator shall, during the Term, procure and maintain,
at its sole cost and expense, a policy or policies of insurance in form and
content and with responsible insurers reasonably acceptable to Company, in the
following types and amounts:
(a) Comprehensive aviation liability insurance
placed through Lloyd's of London with respect to the use and operation of the
Airship, having a combined single limit of not less than $50,000,000, insuring
and covering Operator and, as an additional insured pursuant to Section 7.2(a),
Company, as their interests may appear, against all liability for injury, damage
or claims caused by or arising out of, or in connection with, ownership,
operation, maintenance or use of the Airship, including injuries to or deaths of
passengers or third persons or damage to property.
(b) Automobile liability insurance or other general
liability insurance covering all owned, non-owned and leased automobiles,
trucks, trailers, and other vehicles and ground support equipment used by
Operator in the performance of its duties under this Agreement. Such insurance
shall provide coverage of not less than that provided for in the Standard
Comprehensive Automobile Liability
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Policy in limits of not less than $10,000,000 combined single limit each
occurrence for bodily injury and property damage.
7.2 All insurance required hereby shall include the
following:
(a) Company and its subsidiaries, affiliates and
licensees and their respective assigns, officers, directors and employees shall
be included as additional insureds as their interests may appear;
(b) With respect to liability arising out of work
performed by Operator under this Agreement, the insurance afforded the Company
as additional insured shall be primary, and any insurance maintained by Company
shall be excess and not contributing with Operator's insurance;
7.3 Operator shall, from time to time as Company shall
reasonably request, and prior to each renewal date of the insurance, furnish to
Company certificates evidencing that the foregoing insurance is in full force
and effect with financially sound and responsible insurers.
8. Termination; Force Majeure.
8.1 The occurrence of any of the following events will be
deemed to be, and shall be treated as, a default under this Agreement and just
cause for its termination by the non-defaulting party, which termination shall
be effective upon notice given in accordance with Section 10 hereof, and/or, at
Company's option, if Company is the non-defaulting party, abatement by Company
or reimbursement to Company of the compensation to be paid by Company pursuant
to this Agreement or previously paid but unearned:
(a) Breach or failure by either party in the due
observance or performance of any material term, covenant, warranty,
representation or agreement contained in this Agreement, which breach or failure
continues unremedied or uncorrected for a period of ten days after written
notice thereof from the nonbreaching party, which notice specifies such breach
or failure in reasonable detail and requires it to be remedied; provided that,
such ten-day period shall be extended if (i) such breach or failure is not
capable of being remedied within such ten-day period, (ii) the breaching party
has diligently and in good faith commenced efforts to remedy the same within
such ten-day period, and (iii) such breach or failure is remedied within 30 days
after such notice.
(b) Either party shall admit in writing its
inability to pay its debts, or shall make a general assignment for the benefit
of creditors; or any
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proceeding shall be instituted by or against such party seeking to adjudicate it
a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or
composition of its debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, or seeking appointment of a receiver,
trustee or other similar official for said party or for any substantial part of
its property, and such proceeding shall not have been dismissed within ninety
(90) days; or either party shall take any action to authorize any of the actions
set forth above in this subsection.
8.2 (a) The provisions of this Agreement are binding upon
the parties hereto except where performance by a party, or the ability to
achieve the material purposes set forth in Section 1.3(a), is prevented, delayed
or interfered with by causes beyond the reasonable control of the non-performing
party, including, without limitation, riot, war or hostilities between nations,
governmental action (other than action taken in response to Operator's or
Company's violation of any law or governmental regulation, in which case the
party at fault shall not be permitted to claim the benefit of this Section 8.2),
acts of God, mechanical or equipment failures caused by foreign objects, fire,
accidents, strikes or adverse weather conditions (collectively, force majeure)
provided however, that force majeure shall not include mechanical or equipment
failures (other than as provided above) or unavailability of flight crew or
ground crew personnel unless attributable to act(s) of God.
(b) The party affected by force majeure shall give
notice to the other party of said force majeure event promptly after the
occurrence thereof, stating therein the nature of the suspension of performance
and reasons therefor. Such party shall use its best efforts to resume
performance as soon as reasonably possible. Upon restoration of the affected
party's ability to perform its obligations hereunder, the affected party will
give immediate notice to the other party.
(c) If a force majeure condition which prevents a
party's performance hereunder shall continue for a period of 60 days, and after
such 60 day period there shall be no reasonable prospect for the prompt cure
thereof despite the best efforts of the affected party to cure the same, then
either party shall have the right to terminate this Agreement in its entirety
upon 30 days' prior notice to the other party; provided that such termination
shall be effective as of the date on which the non-performing party ceased
performing hereunder due to a force majeure condition, and upon such termination
(i) Operator shall return any payments advanced but unearned as of the
termination date, (ii) Company shall make any payments earned but not paid as of
such termination date, and (iii) neither party hereto shall have any further
liability or obligation whatsoever to the other, other than under the terms of
those provisions which specifically survive the termination of this Agreement.
8.3 Notwithstanding anything to the contrary in this
Agreement, if during the Term it becomes necessary to cancel operations pursuant
to this Agreement due to the inability of Operator to maintain necessary permits
or authorizations from the
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FAA, DOT or any other governmental agency having jurisdiction over the Airship
or its use or operation, such cancellation of operations shall continue for a
period of 60 days, and after such 60-day period there shall be no reasonable
prospect for the prompt cure thereof despite the best efforts of the Operator to
remedy the same, then Company shall have the right after such 60 day period to
terminate this Agreement in its entirety upon 30 days' notice to Operator,
whereupon (i) Operator shall return any payments advanced but unearned as of the
termination date, (ii) Company shall make any payments earned but not paid as of
such termination date, and (iii) neither party hereto shall have any further
liability or obligation whatsoever to the other, other than under the terms of
those provisions which specifically survive the termination of this Agreement.
If such condition is remedied within the aforementioned 60 day period, the
Agreement shall continue in effect for the remainder of the Term provided that
the Term shall be extended by the number of days during which such condition
existed, and the respective obligations of the parties shall be abated for that
same period. If an event or circumstance which would otherwise constitute a
default with respect to the Company under Section 8.1(a) also is subject to this
Section 8.3, it shall be governed by this Section 8.3 and will not constitute a
default.
9. Confidentiality.
Except as may be required by law or to obtain a permit or other
authorization for the operation of the Airship, no party to this Agreement shall
divulge to any third party the contents of this Agreement or any other agreement
between the parties or any information (which is not publicly available) gained
in the performance of this Agreement or such other agreements, except to the
extent necessary, normal or appropriate for the purposes contemplated hereunder,
and information by way of plans or other documentation marked "Confidential" by
a party and made available to the other parties shall not be made available to
any third party without the written consent of the disclosing party. The parties
shall consult with one another regarding the contents of any proposed press
release relating to this Agreement prior to issuing such press release.
10. Notices.
All notices, requests, demands, claims and other communications
required or permitted to be given pursuant to this Agreement shall be in writing
and shall be deemed duly given when delivered personally or three business days
after having been sent by registered airmail or when received by facsimile
transmission, in each case addressed as follows:
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If to Operator:
Airship Operations, Inc.
2642 Michigan Avenue,
Unit B
Kissimmee, FL 34744
Attention: Frank Sicoli
Fax: 407-345-0888
with a copy to:
Baer Marks & Upham
805 Third Avenue
New York, New York 10022
Attn: Joseph A. Marinello, Esq.
If to Company:
Mastellone Hnos S.A.
Avda L.N. Alem 720
1001 Buenos Aires
Republica Argentina
Attn: Dr. Guillermo Lozano
Fax: 54-1-3136822
54-1-3121560
The parties may at any time change their addresses or telefax numbers for the
purpose hereof by giving notice to the others in the manner specified above.
11. Liability and Indemnity.
(a) Operator hereby assumes liability for, and hereby
agrees to indemnify, reimburse, protect, save and hold harmless Company, its
subsidiaries, affiliates and related entities, their successors, assigns,
officers, agents, employees and servants, from and against, and to pay Company
promptly upon demand the amount of, any and all liabilities, obligations,
losses, damages, penalties, fines, claims, actions, suits, legal proceedings,
whether civil or criminal, costs, expenses and disbursements, including legal
fees and expenses, of whatsoever kind and nature (collectively, "Damages"),
imposed on, incurred by or asserted against Company or any other indemnified
entity, in any way relating to, connected with or arising out of (i) the
ownership, use or operation of the Airship or its ground support vehicles and
equipment (or any component thereof) pursuant to this Agreement, whether in the
air or on the ground (except for damages resulting from failure of Company to
obtain or maintain any
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governmental approvals or licenses that it is required to obtain or maintain
pursuant to the terms of this Agreement); or (ii) the death of, or injury to, or
damages to, any person or property, including, but not limited to, the property
of Company, its officers, employees, agents, invitees, guests or clients, caused
by, arising out of or in any way connected with the possession, use, operation
or maintenance of the Airship and its ground support vehicles and equipment.
(b) Company hereby assumes liability for, and hereby
agrees to indemnify, reimburse, protect, save and hold harmless Operator, its
subsidiaries, affiliates and related entities, their successors, assigns,
officers, agents, employees and servants, from and against, and to pay Operator
promptly upon demand, Damages imposed on, incurred by or asserted against
Operator or any other indemnified entity, in any way relating to, connected with
or arising out of failure by Company to obtain or maintain any governmental
approvals or licenses that it is required to obtain or maintain hereunder.
The obligations contained in this Section shall continue in full force
and effect, notwithstanding the expiration or other termination of this
Agreement.
12. Independent Contractors.
12.1 The parties shall be and act as independent
contractors, and under no circumstances shall this Agreement be construed as one
of agency, partnership, joint venture or employment between the parties. Each
party acknowledges and agrees that it neither has nor will give the appearance
or impression of having any legal authority to bind or commit the other party in
any way.
12.2 Notwithstanding anything in this Agreement to the
contrary, the parties hereto acknowledge that the essential purpose of this
Agreement is aerial advertising and promotion on behalf of Company and its
affiliates and that Company undertakes and shall have no greater responsibility
or liability with respect to the Airship (including all support equipment and
staff) than it would in acquiring any other advertising space.
13. Governing Law/Venue.
The interpretation, validity and performance of this Agreement
shall be governed by the laws of the State of Florida regardless of the domicile
of any party, and will be deemed for such purposes to have been made, executed
and performed in Florida.
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14. Assignment.
14.1 Company may assign or transfer its rights under this
Agreement, in whole or in part.
14.2 Operator shall not assign its rights and/or obligations
under this Agreement without the prior written approval of Company. This
agreement and all of the terms and provisions hereof will be binding upon, and
will inure to the benefit of, the parties hereto and their respective successors
and approved assigns.
15. Miscellaneous.
15.1 The parties hereto acknowledge a separate Lease
Agreement by and between AIL as owner of the Airship and its related ground
support vehicles and Mastellone Brothers dated the date hereof relating to the
Airship. Notwithstanding the foregoing, this Agreement is the only agreement
existing between the parties hereto regarding the operation of the Airship, and
there are no representations, covenants, warranties or agreements between the
parties hereto concerning the Airship which are not contained herein and set
forth in full herein. Any prior agreements or understandings regarding the
Airship are hereby revoked and canceled. This Agreement may be amended only by
an agreement in writing executed by both parties.
15.2 The failure of either party to object to or to take
affirmative action with respect to any conduct of the other party which is in
violation of the terms of this Agreement shall not be construed as a waiver
thereof, nor of any future breach or subsequent wrongful conduct.
15.3 Except as otherwise specifically provided in this
Agreement, each party shall be responsible for any expenses it incurs in
connection with performance of its obligations under this Agreement.
15.4 The rights and remedies set forth herein are intended
to be cumulative, and the exercise of any one right or remedy by either party
shall not preclude or waive its exercise of any other rights or remedies
hereunder or pursuant to law or equity.
15.5 The Section headings set forth herein are for
convenience only and do not constitute a substantive part of this Agreement.
15.6 The rights and privileges granted to Company
hereunder are special, unique, extraordinary and impossible of replacement,
which gives them a peculiar value, the loss of which could not be reasonably or
adequately compensated in
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damages in an action at law, and Operator's failure or refusal to perform its
obligations hereunder would cause Company irreparable loss and damage. If
Operator fails or refuses to perform such obligations, Company shall be entitled
to injunctive or other equitable relief against Operator to prevent the
continuance of such failure or refusal or to prevent Operator from granting
rights to others in violation of this Agreement. In no event, however, shall
Company be entitled to consequential damages arising from the loss of use of the
Airship, including but not limited to sales revenues or profits which may have
been lost due to loss of the Airship for advertising and promotional purposes.
15.7 Notwithstanding termination of this Agreement
pursuant to any provision hereof, such termination shall not relieve any party
of any obligation hereunder which, by its terms, survives or is to be performed
after such termination.
15.8 This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which, taken
together, shall be one and the same instrument.
IN WITNESS WHEREOF, this Agreement is executed on behalf of the
parties hereto by their duly authorized representatives as of the day and year
first above written.
AIRSHIP OPERATIONS, INC.
By: FRANK SICOLI
Name: Frank Sicoli
Title: Vice President
MASTELLONE HNOS, S.A.
By: DR. GUIllERMO LOZANO
Name: Dr. Guillermo Lozano
Title: General Counsel
By: JOSE ALDO MALTAGLIATI
Name: Jose Aldo Maltagliati
Title: Accountant
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January 24, 1994
PASSENGER AIRSHIP AGREEMENT
THIS AGREEMENT is made as of the 2nd day of January, 1994, by and between
AIRSHIP INTERNATIONAL LTD., a New York corporation, with its principal office at
7380 Sand Lake Road, Orlando, Florida 32819 ("Operator"), and ANHEUSER-BUSCH
COMPANIES, INC., a Delaware corporation, with its principal office at One Busch
Place, St. Louis, Missouri 63118 ("Company").
RECITALS
(A) Operator is the owner of a SKYSHIP 500 H/L aircraft, United States
Federal Aviation Administration ("FAA") Registration No. 601LP (the "Airship").
(C) Operator desires to operate the Airship for passenger sight-seeing
trips pursuant to the terms and conditions of this Agreement, while the Airship
bears trademarks owned by Company's Sea World theme park ("Sea World").
(D) Company is, on its own behalf or through its affiliated company, Sea
World, Inc., ("SWI"), owner of the following service marks and copyrights: SEA
WORLD, SHAMU, AIRSHIP SHAMU, Whale Logo and the configuration of the design and
color scheme of the Airship (collectively, the "Service Marks and Copyright
Works"), which Company wishes to license to Operator, and Operator wishes to use
in connection with the offer and sale of sight-seeing trip services.
NOW, THEREFORE, it is hereby agreed as follows:
1. Term
1.1 During the Term (as hereinafter defined), Operator shall operate
the Airship (i) within the southwest Orlando "attractions" area, encompassing
the Disney World, Universal Studios, Sea World and International Drive tourist
areas (the "Territory"), (ii) in other areas permitted by Company from time to
time in writing, and (iii) outside the Territory as provided for in Section 3.7
hereof, all on the terms and conditions set forth herein. Operator shall provide
and be fully responsible for all equipment, instruments, engines and other
appurtenances used or required for operation of the Airship, which shall be
fully operational with ground support vehicles, mooring masts, fuel, personnel
(including pilots, ground crew, security and all other required personnel),
facilities, equipment and supplies necessary for fulfilling its obligations
enumerated herein, subject to the terms and conditions of this Agreement.
1.2 The term of this Agreement (the "Term") shall be deemed to have
commenced on January 2, 1994, and shall continue through December 31, 1994. The
Term may be extended upon mutual agreement of the parties.
1.3 Throughout the Term the Airship shall be operated exclusively for
the following purposes:
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(a) Advertising and promoting Sea World and its products, goods,
services or businesses by over-flight of the Territory and, upon exercise of the
Option (as hereinafter defined), outside the Territory;
(b) The carriage of passengers, subject to the following
limitations:
(i) Only passengers paying a fee to the Operator for
sight-seeing in the Territory may be carried as passengers on the Airship;
(ii) Passenger flights for fee-paying passengers shall
originate and terminate at the Landing Area (as hereinafter defined)
(iii) The passenger flights shall be performed with due
consideration for safety and weather conditions as determined by the Airship
pilot and applicable FAA regulations.
1.4 Passenger flights of the Airship shall commence on a date mutually
agreeable to Operator and Company, which the parties anticipate shall be on or
about January 24, 1994, provided that if regularly scheduled passenger flights
have not commenced by February 15, 1994, either party may terminate this
Agreement upon at least 14 days' written notice, unless regularly scheduled
passenger flights have commenced during such 14-day notice period.
1.5 Each party hereto shall have the right to terminate this Agreement
at any time and for any reason by giving the other party hereto at least
fourteen (14) days' prior written notice of its intent to do so.
2. Passenger Base and Landing Area
2.1 (a) Initial operations of the Airship shall be from the Kissimmee
Airport (the "Landing Area"). Company will make an effort to lease a suitable
site closer to Sea World for use as a landing area and shall allow Operator the
use of this site pursuant to terms of a mutually-agreed amendment to this
Agreement to be entered into at such time. Operator shall pay the cost of any
improvements it desires to make to the site, plus utilities and taxes on any
improvements. Operator shall comply with all conditions of Company's land
lease as a condition of use. In the event Company's leased site becomes
unavailable or unusable, Company shall have the right but not be obligated to,
substitute a replacement site, subject to the consent of Operator, which shall
not be unreasonably withheld.
(b) In order to protect the interests of Company, Company shall
have the right to inspect the Landing Area.
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3. Airship Operations
3.1 Operator has provided Company with a copy of the flight manual for
the Airship approved by the FAA, and shall provide Company with a copy of the
Operator's Airship operations manual. Operator shall maintain its FAA
Certificate of Airworthiness for the Airship in effect throughout the Term.
Operator shall obtain and maintain in effect throughout the Term all requisite
permits, certificates and authorizations from all governmental agencies having
jurisdiction over the use, operation and flight of the Airship within the
Territory. Operator shall also use its best efforts to obtain all relevant
permits and authorizations as may be required from any supervising governmental
agency. Operator shall not operate the Airship in any manner which violates any
law or regulation of any governmental agency of the United States or any state
thereof, the country of registration of the Airship or any country or state to,
from or over which the Airship flies. Operator has represented to Company that
it is conversant with all such laws and regulations.
3.2 Company shall approve the execution of the design and color scheme
for the Airship, which design and color scheme (the "Work") shall be considered
a work-made-for-hire within the meaning of the United States Copyright Act. All
sketches and any other graphic material for the Work, whether preliminary or in
partial or final form, shall be the exclusive property of Company, and Operator
assigns all right, title and interest therein, including the copyright, to
Company. If Company requires any changes in the exterior design during the Term,
it shall notify Operator and provide art work on a timely basis. Any design
problems or difficulties relating to a proposed change in the exterior design
shall be resolved by discussion between the parties hereto, it being understood
that Company's artistic and design preferences and Operator's experience in the
field of Airship exterior design are of paramount importance. Company shall pay
to Operator the actual cost of each such change in the exterior design within
ten days of receipt of an invoice for such amount from Operator. Upon the
expiration or early termination of this Agreement, Operator shall not operate
the Airship (except for trips to its maintenance hangar or for other
refurbishing) unless the work has been deleted.
3.3 Operator, in its sole discretion, shall have the right to operate
and maintain, at no cost to Company, an electric sign on each side of the
Airship (collectively, the "Signs") which display the advertising, promotion or
other copy as may be requested, but not required, by Company from time to time;
provided, however, that at least twenty-five percent (25%) of the Signs'
operating time shall be used for Company's messages. Company's use of the Signs
shall be non-exclusive and shall not preclude Operator from advertising the
passenger services and displaying other advertising on the Signs, provided that
all advertising shall be approved in advance by Company. The Signs' graphics
shall be displayed using state-of-the-art computerized lights in four colors
operated from the Airship's gondola. The space for the Signs' graphics on the
Airship shall have a dimension of approximately 118 feet x 29 feet.
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3.4 Operator shall provide FAA certified and approved personnel to
perform all maintenance, servicing and repair required to be performed on the
Airship during the Term in accordance with the Airship flight operations manual
and the Airship maintenance manual and in compliance with standards prescribed
by the FAA and all other governmental agencies having jurisdiction over the
Airship, its use, operation and flights within the Territory. Operator shall
also provide the necessary ground and flight crew for the Airship and shall pay
all costs associated with the ownership, use or operation of the Airship. Such
costs shall include, but shall not be limited to, the following:
(a) Helium gas replenishments;
(b) All operational and administrative personnel;
(c) All ground support equipment and personnel required for the
operation, maintenance and security of the Airship;
(d) All insurance, taxes, maintenance and repair costs;
(e) Lubricating oil;
(f) Fuel;
(g) Airship mooring fees (if any) incurred away from the Base;
and
(h) All travel accommodation, subsistence, and other expenses
associated with the provision and removal of the personnel and facilities
provided by Operator, except as otherwise set forth below.
3.5 In addition to the sums specified in Section 3.2, Company shall
pay for, provide or reimburse Operator (within 10 days of receipt of an invoice
for same accompanied by adequate documentation) for any sum it shall expend on
the following:
(a) The actual cast of any change in the Airship's exterior design
required by Company;
(b) Any special equipment not part of the normal equipment of the
Airship, other than the Sign referred to in Section 3.3, which is required by
Company for advertising or any other mutually agreed purposes.
3.6 (a) Operator shall schedule passenger flight operations of the
Airship pursuant to the terms set forth in Section 3.6(b) below upon the earlier
of:
(i) One hundred twenty (120) days after commencement of
passenger flights of the Airship by Operator; or
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(ii) Operator and Company entering into an amendment to this
Agreement pursuant to Section 2.1(a) hereof.
(b) Operator shall determine from time to time the dates and
times for passenger flight operations of the Airship, which shall be set forth
on a schedule of operations (the "Schedule"), which Schedule shall normally
include a minimum of eight flight hours per day over a six day week (subject to
whether the Airship is providing passenger rides or non-Company paid advertising
on the Signs; provided, however, that Operator shall provide Airship a minimum
of eight hours per day over a six day week once Operator and Company shall have
entered into an amendment to this Agreement pursuant to Section 2.1(a) hereof).
The Schedule may be amended by Operator from time to time during the Term upon
reasonable notice to Company, so long as it includes a minimum of flight hours
as set forth in the preceding sentence. Operator shall adhere to the flight plan
established in the Schedule, subject only to the physical constraints of adverse
weather conditions as determined by Operator's pilot, design limitations of the
Airship, and applicable governmental regulations in effect from time to time.
Operator will consult with Company in establishing the Schedule. Except as
otherwise set forth below, all operations pursuant to the Schedule shall begin
and end at the Passenger Base and be limited to flights over the Territory.
(c) Scheduled flight time shall be measured from departure from
the Airship's mooring mast at the commencement of the day's operation until its
mooring at said mast at the completion of the day's operation and will include
airborne flight time, as well as time between flights for operational
requirements such as refueling, crew changes, and pick-up or drop-off of
passengers. The Airship's flight meter, pilots' log, and maintenance and repair
records will be available for review by Company at all reasonable times.
(d) Notwithstanding the preceding paragraphs, Operator shall have
the right to withdraw the Airship from service for scheduled maintenance and
service when necessary for periods not in excess of 30 days in the aggregate
(excluding travel time to and from Operator's maintenance facility), taking into
consideration inspections or maintenance which is mandated by the FAR's
(hereinafter defined), the manufacturer's maintenance manual, or the instruction
manual (as may be required for continued airworthiness) or by the Operator's
approved inspection and maintenance program. There shall be no penalty for the
flight time lost on such days.
3.7 (a) Company shall have the option ("Option") to request Operator,
so long as such request does not conflict with any of Operator's scheduled
passenger flight or Sign advertising commitments, to operate the Airship away
from the Territory for the exclusive use of Company upon 30 days' written
notice. Such notice shall include the date of and purpose for the exercise of
the Option.
(b) Company shall determine the dates, times and locations for
flight operations of the Airship pursuant to the Option, which shall be set
forth on a schedule of operations (the "Option Schedule"). Option Schedules
shall be submitted by Company to
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Operator 30 days prior to the scheduled departure of the Airship pursuant to
such Option Schedule. The Option Schedule may be amended by Company from time to
time upon reasonable notice to Operator. Operator shall adhere to the flight
plan established by Company in the Option Schedule, subject only to the physical
constraints of adverse weather conditions as determined by Operator's pilot,
design limitations of the Airship and applicable governmental regulations in
effect from time to time. Operator will cooperate with Company in making Airship
flights during the times of the day and days of the week to meet the Option
Schedule. Company shall provide Operator reasonable assistance, if requested, in
locating lodging facilities for the Airship's crew.
(c) The Option Schedule and any amendments thereto shall be
subject to the reasonable approval of Operator based upon operational and
economic considerations.
(d) When the Airship is operating away from the Territory,
Operator shall provide, and Company shall be allowed to schedule, eight (8)
hours per day of flight time. If requested by Company, Operator may, in its sole
discretion, schedule more than eight (8) hours of flight time per day. Scheduled
flight time shall be measured from departure from the Airship's mooring mast in
the morning until its mooring at said mast at the completion of the day's
operation and will include airborne flight time, as well as time between flights
for operational requirements such as refueling, crew changes, and pick-up or
drop-off of passengers. Company (and not Operator) shall be responsible for
obtaining any permits required by any organizer or sponsor of any special event
over which Company asks Operator to fly the Airship.
(e) Upon receipt by the Company of an invoice and appropriate
substantiating documentation, Company shall pay Operator within 10 days for each
exercise of the Option the following (the "Option Fee"):
(i) $15,000 per day from the day the Airship departs the
Territory until the day the Airship returns; plus
(ii) $2000 per day for traveling expenses.
(f) If force majeure conditions (as defined in Section 9.2
below), which would not have occurred but for Operator's being required to
operate the Airship away from the Territory, preclude Operator from adhering to
the Schedule, there shall be no reduction in the Option Fee.
(g) Simultaneously with delivery of an Option Schedule, Company
may request Operator to temporarily install a camera on the Airship for use in
taping television commercials, televising sporting or other events, or other
photographic or filming purposes. Company shall reimburse Operator for any costs
it may incur in providing the camera for use in the Airship, such reimbursement
to be made within 10 days of receipt of
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an invoice and documentation for same from Operator. Company shall have the
option to install and operate its own camera system, at Company's expense,
without charge by or to Operator.
3.8 (a) Operator shall provide all necessary flight and ground crew
personnel necessary to accommodate the Schedule. All crew members shall obtain
and maintain all licenses required by the FAA and any other governmental
agencies having jurisdiction over the Airship or its use and flight within the
Territory during the Term. Each member of the crew shall be acceptable to
Company in the reasonable exercise of its judgment.
(b) Operator shall comply with the reasonable requests of Company
to the best of its ability in order that Company may obtain the optimum
utilization of the Airship with respect to its advertising and promotional
activities, provided that all crew activities shall be within the discretion of
Operator's pilots. Notwithstanding the foregoing, the parties acknowledge that
Operator has full operational control of the Airship, and Company shall have no
liability whatsoever for any loss of or damage to the Airship.
(c) The Airship shall be piloted only by FAA licensed pilots.
(d) Except when the authorized and licensed pilots are at the
flight controls or on duty, the ground crew chief shall be in command of the
Airship.
(e) No flight of the Airship shall take place unless Operator's
pilots on board shall be satisfied as to the prevailing weather conditions and
any geographical limitations, the load required to be carried and the proposed
places of take-off and landing. Operator's pilots shall have the absolute right
to cancel, terminate or divert any flights when such action is deemed by them to
be necessary due to the weather or to other conditions beyond their control. The
said pilots shall also have absolute discretion to prohibit any goods or
passengers on the Airship if, in the pilots' opinion, they may adversely affect
the safe flight of the Airship.
(f) Notwithstanding any of the foregoing provisions of this
Section 3.8, Operator expressly undertakes the obligation to have available and
on call such back-up pilot or pilots as may be necessary to guarantee the
performance of the Schedule. Operator acknowledges its obligation to monitor the
number of hours being flown by each of its pilots in a given month so as to make
certain that if a replacement pilot will be necessary due to the number of hours
projected to be flown, a replacement pilot will be made available promptly so
that the Schedule shall be maintained. Operator further undertakes to provide a
replacement pilot within 24 hours after it learns that any regular pilot is
unavailable due to illness or any other non-planned absence.
(g) Operator further acknowledges that its operations are subject
to regulation by the FAA as described in the Federal Aviation Regulations
("FAR's").
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Operator hereby certifies that it has made a full and complete investigation of
all applicable FAR'S. It further certifies that it has such certificate or
certificates as may be required under the FAR's to engage in the operation
contemplated herein. Operator agrees to furnish copies of current certificates
to Company on request.
(h) Operator will establish an alcohol testing program for all
employees who are in any way involved with the maintenance or operation of the
Airship under the provisions of this Agreement, specifically including all
pilots, ground support mechanics and riggers, and any other crew members, which
program shall be, in all respects, subject to applicable law. The testing
program shall be conducted in such manner as to ensure that the crew members of
the Airship are at all times in compliance with the requirements of FAR
91.17(a)(1), (2), (3) and (4) and that all other employees, when performing any
function required by the provisions of this Agreement, shall not have consumed
any alcoholic beverages within the preceding 8 hours; are not under the
influence of alcohol; and do not have a blood alcohol concentration (BAC) of .04
percent or more.
The testing shall be conducted (1) upon a violation of an
FAR; (2) upon reasonable suspicion of a Company representative or one or more
supervisors of the employee that the employee's ability to perform his functions
is impaired; and (3) on a random basis.
There shall be a screening test and, if necessary, a
confirmation test. The screening portion of the test shall involve the use of
devices, selected by the Operator and approved by the Company, that give an
immediate indication either of positive or negative. Anyone testing positive on
the screening shall be immediately removed from any duties relating to the
maintenance or operation of the Airship. Employees testing positive shall
immediately agree to allow a blood sample to be taken or to provide, under
reasonable supervision, a urine sample. The blood sample or urine sample shall
be sent to a qualified laboratory for determination of BAC level. If the
laboratory result indicates that the employee was in compliance with the
requirements set forth above, he may be allowed to resume duties related to the
Airship. If an employee refuses to provide the blood or urine sample, or by the
confirmation test, is determined not to have been in compliance with
requirements set forth above, that employee shall not be permitted to perform
any functions under this Agreement.
At Company's request, Operator shall provide a copy of its
testing procedures, meeting the requirements set forth above, for Company's
approval. Operator agrees to amend said procedures as reasonably required by
Company.
If during the Term the FAA or U.S. Department of
Transportation ("DOT") adopts regulations relating to alcohol testing, Operator
agrees to comply with those requirements, not only as to employees whose
specific functions are described in the regulations, but also as to all
employees that are in any way related to the operation or maintenance of the
Airship under this Agreement.
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(i) Operator agrees, whether or not otherwise required to do so
under the FAR's or other statutory or regulatory provisions, that Operator shall
engage in drug testing of all its employees and contractors as Company may
reasonably request from time to time, following procedures similar to those used
in the Company's drug testing program for its own employees. Operator agrees to
include in such drug testing all employees and contractors who are involved in
any manner in the operation or maintenance of the Airship under the provisions
of this Agreement, specifically including all pilots, ground support mechanics
and riggers and any other member of the ground crew. Notwithstanding the
foregoing provisions of this paragraph (i), if Operator wishes to use an
alternative drug testing program, it may do so if such program has been approved
by Company in writing. Such drug testing program shall be, in all respects,
subject to applicable law.
(j) Company, in its discretion, may require Operator's flight
crews and/or ground support personnel to wear uniforms displaying Company's
trademark, tradenames, painted logos or decals. Company shall provide Operator
only with such uniforms that Company requires Operator personnel to wear. All
uniforms, painted logos and decals shall conform to Company's requirements and
shall be cleaned from time to time by Operator in order to maintain a neat and
clean appearance to the public consistent with other personnel of Sea World. All
registered trademarks, trade names and other proprietary property used in
connection with such uniforms, as well as painted logos and decals, shall remain
the exclusive property of Company.
3.9 (a) Copy of advertising and promotion of the name of Company or
its services, products or businesses for use on the Airship's Sign shall be
submitted to Operator forty-eight (48) hours prior to the display when possible.
For complex graphics and logos, the material shall be submitted by Company to
Operator ten (10) days in advance of the date required for use when possible.
(b) All of Company's advertising copy shall be in good taste and
conform to community standards. Operator shall have the right to refuse to
display copy that does not comply with such standards.
4. Consideration
The parties agree that until the date that other than special fees as
set forth elsewhere in this Agreement, no monthly fee shall be paid for the
services rendered hereunder.
5. Loss of Airship
5.1 (a) The risk of loss or damage with respect to the Airship shall
be solely upon Operator. If there shall occur a loss of all or substantially all
of the Airship, or if the Airship is grounded due to an accident or other damage
to the Airship, then the
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parties' respective obligations hereunder shall abate until such time as the
Airship has been repaired or replaced, at which time this Agreement shall
continue in effect for the remainder of the Term, which Term shall be extended
by the abatement period; provided however, that if the abatement period exceeds
one hundred fifty (150) days, then this Agreement shall, at Company's option, be
deemed to have been terminated as of the date of the loss or damage, and none of
the parties shall have any further obligations to the other parties.
(b) If this Agreement is terminated pursuant to the preceding
paragraph (a) and the Airship shall thereafter be repaired and is prepared to be
placed in service within ninety (90) days of said termination, then, before
making any agreement(s) with any other party for the use of the Airship,
Operator shall first notify the Company that the Company has the right and
option to acquire the exclusive use of the Airship for a period of time equal to
the unexpired portion of the Term at the time of termination on the same terms
and conditions as are contained in this Agreement. Such option shall be
exercised, if at all, within fifteen (15) days following Company's receipt of
such notice.
6. Representations, Warranties and Covenants
6.1 Operator represents, warrants and covenants to Company that:
(a) The Airship is certificated as a standard type aircraft under
the laws of the United States of America;
(b) A valid Certificate of Airworthiness has been issued for the
Airship by the United States of America, and Operator shall take all necessary
actions to ensure the continued effectiveness of the Airship's Airworthiness
Certificate as set forth in FAR 21.181(a)(1), so that a valid Certificate of
Airworthiness for the Airship is maintained at all times. The Airship is in
airworthy condition and usable for the purposes contemplated by this Agreement;
(c) The execution of this Agreement by operator will not
constitute a breach of any other agreement to which Operator is a party or which
involves the Airship;
(d) Registration of the Airship under the laws of the U.S. shall
be maintained, and Operator shall obtain and maintain (or cause to be obtained
and maintained) in effect all required approvals of the FAA, DOT and any other
governmental authorities having jurisdiction over use and operation of the
Airship in the Territory;
(e) Operator shall be responsible for performance of all Airship
overhaul, engine overhaul and maintenance required during the Term, under the
FAR's, as well as any applicable airworthiness directives requiring
modifications to the Airship, and shall make such alterations and modifications
in each component of the Airship as may be required from time to time to meet
the standards of the FAA or any other governmental authority having jurisdiction
over the Airship;
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(f) Operator shall maintain all records, logs and other materials
required by the FAA or other governmental authority having jurisdiction over the
Airship and shall permit Company or its duly authorized agents or
representatives or any other person designated by Company to inspect the Airship
and its flight logs and maintenance records at any reasonable time and shall
furnish Company and its duly authorized agents or representatives any
information with regard to the operation of the Airship as any of them may
reasonably request;
(g) Operator shall maintain the paint and decals on the Airship
in a clean and orderly condition to Company's reasonable satisfaction during the
Term;
(h) Operator shall maintain, service, operate, repair and test
the Airship (i) so as to keep each component of the Airship in good operating
condition, (ii) so as to meet the requirements of the maintenance plans
recommended by the manufacturers of the engines, envelope and gondola comprising
the Airship, (iii) so as to keep the Airship duly certified as airworthy by the
FAA or any other governmental agencies having jurisdiction over the Airship,
(iv) so as to comply with any FAA or other governmental authority airworthiness
directives, as well as "mandatory" and "recommended" service bulletins
applicable to the Airship, as well as licensing and relicensing with respect
thereto which may be required by any governmental agencies having jurisdiction
over the Airship, and (v) so as to keep the Airship clean and in top condition
and repair suitable to provide the services required of Operator hereunder to
Company's reasonable satisfaction;
(i) Operator shall maintain, service, operate, repair and test
all ground support vehicles and equipment supplied by Operator hereunder so as
(i) to keep the components thereof in good operating condition, (ii) to meet all
required maintenance schedules, (iii) to keep such vehicles and equipment
properly licensed, and (iv) to keep, the vehicles and equipment clean and in
good condition and repair, suitable to provide the services required of Operator
hereunder to Company's reasonable satisfaction; and
(j) Operator has taken all action (including, without limitation,
the giving of notices and the obtaining of consents, licenses and permits)
required by any governmental authority as a condition to the execution and
delivery of this Agreement, its validity and enforceability, and the
consummation of any of the transactions contemplated hereby.
6.2 Each party hereto represents and warrants to the other that:
(a) It is a duly organized and valid entity in good standing
under the laws of its jurisdiction of organization and has full authority to
conduct its business as presently conducted and to enter into and perform its
obligations under this Agreement;
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(b) Each of the persons executing this Agreement is a duly
authorized officer or agent of such entity and has been duly authorized by all
necessary action to execute and deliver this Agreement;
(c) This Agreement has been duly and validly executed and
delivered by such party and constitutes a valid and binding agreement of such
party, enforceable in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights generally or by the principles governing the
availability of equitable remedies; and
(d) No consent or approval of any third party is required for
such party's execution, delivery or performance of this Agreement.
7. Exclusivity
7.1 Operator hereby covenants and agrees that during the period
beginning the date hereof and ending on the termination of this Agreement (the
"Exclusivity Period"), it will not, directly or indirectly, sell, lease or
operate any lighter-than-air aircraft, or otherwise provide any lighter-than-air
aircraft, which is used or is expected to be used to advertise or promote any
amusement park or theme park, any malt beverage or any snack food, other than
the amusement parks or theme parks, malt beverages and snack foods owned,
operated or produced by Company or its subsidiaries; provided, however, that (i)
nothing herein shall prevent Operator from operating another aircraft on behalf
of another client in or about an amusement park or theme park so long as such
aircraft does not promote an amusement park or theme park, a malt beverage or a
snack food product; (ii) the exclusivity granted to Company hereunder with
respect to malt beverages applies only in the United States and Mexico; snack
foods only in the United States; and amusement parks and theme parks only in the
United States, Canada and Mexico; (iii) nothing herein shall prevent Operator
from operating either its blimp parking area in Kissimmee, Florida or a
blimp-oriented theme park. The provisions of this Section shall apply
notwithstanding any early termination or cancellation of the Term, including but
not limited to termination under Section 9.3.
7.2 As used herein "snack foods" means salted snacks such as potato
chips, corn chips, peanuts, pretzels, cheese curls, popcorn and similar items.
It does not include candy or fast-food such as hamburgers, french fries or basic
meal items.
7.3 Operator represents and warrants to Company that it has not
previously entered into any agreement with any third party which, if performed
after the date hereof, would violate the exclusivity granted to Company in
Section 7.1.
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8. Insurance
8.1 Operator shall, during the Term, procure and maintain, at its sole
cost and expense, a policy or policies of insurance in form and content and with
responsible insurers reasonably acceptable to Company, insurance in the
following types and amounts:
(a) Comprehensive aircraft and premises liability insurance with
respect to the use and operation of the Airship, Passenger Base and Landing Area
having a combined single limit of not less than $150,000,000, insuring and
covering Operator and Company, as their interests may appear, against all
liability for injury, damage or claims caused by or arising out of, or in
connection with, ownership, operation, maintenance or use of the Airship
Passenger Base and Landing Area, including injuries to or deaths of passengers
or third persons or damage to property.
(b) Automobile liability insurance or other general liability
insurance covering all owned, non-owned and leased automobiles, trucks,
trailers, and other vehicles and ground support equipment used by Operator in
the performance of its duties under this Agreement. Such insurance shall provide
coverage of not less than that provided for in the Standard Comprehensive
Automobile Liability Policy in limits of not less than $10,000,000 combined
single limit each occurrence for bodily injury and property damage.
(c) Worker's compensation insurance in conformity with the
statutory limits of the states in which Operator shall be required to carry such
insurance. Employer's liability shall be carried with a limit of not less than
$1,000,000 for accident or disease.
8.2 All insurance required hereby shall include the following:
(a) Company and its subsidiaries, affiliates and licensees and
their respective assigns, officers, directors and employees shall be included as
additional insureds as their interests may appear (excluding coverage under
Section 8.1(c) above);
(b) The insurers shall agree to waive their rights of subrogation
against Company and its parent companies, subsidiaries, affiliates and licensees
and their respective agents, assigns, officers, directors and employees;
(c) The inclusion of more than one corporation, person,
organization, firm or entity as insured or additional insured under the policy
of insurance shall not in any way affect the rights of any claim, demand, suit
or judgment made, brought or recovered, by or in favor of any employee of such
other insured. Each policy shall protect each corporation, person, organization,
firm or entity in the same manner, as though a separate policy had been issued
to each, but nothing herein shall operate to increase the insurer's liability as
set forth as limits to the policy beyond the amount or amounts for which the
insurers would have been liable if only one person or interest had been named as
insured;
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(d) With respect to such insurance as is afforded the additional
insureds specified above, this insurance shall be primary without right of
contribution from any other insurance which is carried by any additional
insured;
(e) Insurers agree that, in the event they cancel or materially
change such insurance policies, they will give thirty (30) days' advance written
notice of such cancellation or material change to Company; and
(f) The geographic limits of such insurance shall include at a
minimum the entire Territory.
8.3 Operator shall, upon execution of this Agreement and from time to
time as Company shall reasonably request, and prior to each renewal date of the
insurance, furnish to Company certificates evidencing that the foregoing
insurance is in full force and effect with financially sound and responsible
insurers.
9. Termination; Force Majeure
9.1 The occurrence of any of the following events will be deemed to
be, and shall be treated as, a default under this Agreement and just cause for
its termination by the nondefaulting party, which termination shall be effective
upon notice given in accordance with Section 13 hereof, and/or, at Company's
option, if Company is the non-defaulting party, extension by this Agreement:
(a) Breach or failure by either party in the due observance or
performance of any material term, covenant, warranty, representation or
agreement contained in this Agreement, which breach or failure continues
unremedied or uncorrected for a period of ten (10) days after written notice
thereof, specifying such breach and requiring it to be remedied, shall have been
given to the breaching party.
(b) Either party shall admit in writing its inability to pay its
debts, or shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against such party seeking to adjudicate it
a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or
composition of its debts under any law relating to bankruptcy, insolvency,
reorganization, or relief of debtors, or seeking appointment of a receiver,
trustee or other similar official for said party or for any substantial part of
its property, and such proceeding shall not have been dismissed within ninety
(90) days; or either party shall take any action to authorize any of the actions
set forth above in this subsection.
9.2 (a) The provisions of this Agreement are binding upon the parties
hereto except where performance by a party, or the ability to achieve the
material purposes set forth in Section 1.3, is prevented, delayed or interfered
with by causes beyond the reasonable control of the non-performing party,
including without limitation, riot, war or
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hostilities between nations, governmental action (other than action taken in
response to Operator's or Company's violation of any law or governmental
regulation, in which case the party at fault shall not be permitted to claim the
benefit of this Section 9.2), acts of God, mechanical or equipment failures
caused by foreign objects, fire, accidents, strikes or adverse weather
conditions ("force majeure"); provided however, that force majeure shall not
include mechanical or equipment failures (other than as provided above) or
unavailability of flight crew or ground crew personnel unless attributable to
act(s) of God.
(b) The party affected by force majeure shall give notice to the
other party of said force majeure event promptly after the occurrence thereof,
stating therein the nature of the suspension of performance and reasons
therefor. Such party shall use its best efforts to resume performance as soon as
reasonably possible. Upon restoration of the affected party's ability to perform
its obligations hereunder, the affected party will give immediate notice to the
other party.
(c) Subject to Section 5.1(a), if a force majeure condition which
prevents a party's performance hereunder shall continue for a period of 60 days,
and after such 60-day period there shall be no reasonable prospect for the
prompt cure thereof despite the best efforts of the affected party to cure the
same, then either party shall have the right to terminate this Agreement in its
entirety upon 30 days' prior notice to the other party, provided that such
termination shall be effective as of the date on which the non-performing party
ceased performing hereunder due to a force majeure condition, and upon such
termination neither party hereto shall have any further liability or obligation
whatsoever to the other, other than under the terms of those provisions which
specifically survive the termination of this Agreement.
9.3 Notwithstanding anything to the contrary in this Agreement, if
during the Term it becomes necessary to cancel operations pursuant to this
Agreement due to the inability of Operator to maintain necessary permits or
authorizations from the FAA, DOT or any other governmental agency having
jurisdiction over the Airship or its use or operation, such cancellation of
operations shall continue for a period of 60 days, and after such 60-day period
there shall be no reasonable prospect for the prompt cure thereof despite the
best efforts of the Operator to remedy the same, then Company shall have the
right after such 60-day period to terminate this Agreement in its entirety upon
30 days' notice to Operator, whereupon neither party hereto shall have any
further liability or obligation whatsoever to the other, other than under the
terms of those provisions which specifically survive the termination of this
Agreement. If such condition is remedied within the aforementioned 60-day
period, the Agreement shall continue in effect for the remainder of the Term,
provided that the Term shall be extended by the number of days during which
such condition existed, and the respective obligations of the parties shall
be abated for that same period. If an event or circumstance which would
otherwise constitute a default with respect to the Company under Section 9.1(a)
also is subject to this Section 9.3, it shall be governed by this Section 9.3
and will not constitute a default.
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9.4 Upon the termination of this Agreement, Operator shall, at its
expense, remove from the Airship and all ground support vehicles and equipment
all trademarks, logo designs, color schemes and signage belonging to Company or
any of its subsidiaries, affiliates or related entities. Operator shall not
allow the Airship, vehicles or equipment to be used commercially until the
design graphics and other materials of Company are removed, which shall occur as
soon as practicable following the termination of this Agreement. All rights to
manufacture, promote, advertise or market any merchandise bearing any of the
Service Marks and Copyright Works shall expire upon the termination of this
Agreement; provided, however, that this provision shall not preclude Operator
from disposing of such merchandise on hand as of the date of termination of this
Agreement.
10. Service Marks and Copyright Works
10.1 Company grants to Operator, subject to the terms and conditions
of this Agreement, the non-exclusive, non-transferable and non-sublicensable
right to use the Service Marks and Copyright Works in connection with Operator's
use and operation of the Airship in accordance herewith (such use and operation
referred to herein as the "Services"). Nothing in this Agreement shall be deemed
to give Operator any rights to sell or distribute promotional goods or premium,
including, but not limited to, toys, games, models, banners and the like,
bearing any of the trademarks or service marks or Copyright Works owned by
Company on its own behalf or through one of its affiliated companies, including
Sea World, Inc., except as expressly approved in writing by Company. The terms
"promotional material" as used throughout this Section shall be deemed not to
include such promotional goods or premium, but includes only brochures,
billboards, pamphlets, television or radio advertisements and the like.
10.2 In order to maintain the quality reputation of the Service Marks
and the rights in the Copyright Works, all Services and promotional material
relating to the Services must receive the prior written approval of the Company,
which approval shall not be unreasonably withheld.
10.3 If requested, Operator shall provide a pre-service flight, at
Operator's own expense, to individuals designated by the Company at a mutually
agreed upon time prior to the offering of the Services for sale to the public.
The Operator shall submit at its own cost proposed promotional material relating
to the Services prior to the Services being offered for sale to the public. The
Operator shall not offer for sale to the public the Services without first
obtaining in writing the Company's approval of Services, promotional material
and facilities. Within ten (10) days of the aforementioned pre-service flight,
submission of promotional materials and inspection of facilities, the Company
shall provide the Operator, in writing, with approval or disapproval of the
Services, promotional material or facilities.
10.4 (a) Operator shall maintain the same quality of Services,
promotions and facilities relating to the Services as that offered to and
approved by the Company. Operator agrees to provide upon prior request, the
opportunity for representatives of the
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Company to take a reasonable number of flights on the Airship. Operator shall
also provide to the Company the opportunity to inspect the facilities at
reasonable periodic intervals at the prior request of the Company and at no cost
to the Company. Operator also agrees to provide upon demand a reasonable number
of samples of the promotional material relating to the Services at no cost to
the Company for the periodic quality control inspection of the promotional
materials.
(b) If during the term of this Agreement there is to be any
change in the Services, the promotion of the Services, or in the facilities
where the Services are being offered, the Operator must comply with the
provisions of Section 10.3 for the changed Services, promotion materials or
facilities before the change is made.
(c) Operator shall not sell, offer for sale, market, distribute
or use for any purpose, or permit any third party to sell, offer for sale,
market, distribute or use for any purpose, Services or promotional materials
relating to the Services which are defective or otherwise fail to meet Company's
specifications, previously approved quality standards, or the service mark and
copyright usage and notice requirements of this agreement. If, in the Company's
reasonable judgment, the Services, or any promotional material or facilities
relating to the Services, are defective or otherwise fail to meet the previously
approved quality standards of the Company or the service mark or copyright usage
and notice requirements of this Agreement, then, upon Company's demand, Operator
will cease the sale and the offering for sale of the Services and will cease
distribution of such promotional materials until the failure is corrected and
Company's written approval of the correction is given, which approval shall not
be unreasonably withheld. If requested by the Company, Operator will recall any
substandard promotional material relating to the Services to Operator's
facilities at Operator's sole expense.
10.5 (a) Operator covenants and agrees not to make any unlicensed uses
or to file any application for registration of any of the Service Marks,
Copyright Works or any marks or works similar thereto.
(b) Operator acknowledges the validity of and Company's title, on
its own behalf or through its affiliated company, Sea World, Inc., to the
Service Marks and the Copyright Works and shall not at any time do or suffer to
be done any act or thing which will in any way impair the rights of Company in
and to the Service Marks and Copyright Works. Company and Operator understand
and agree that Operator shall not acquire and shall not claim any title to the
Service Marks or Copyright Works by virtue of the license granted to Operator or
through Operator's use of the Service Marks or Copyright Works.
10.6 (a) If Operator learns of any infringements of the Service Marks
or Copyright Works or of the existence, use or promotion of any mark or design
similar to the Service Marks or the Copyright Works, Operator shall promptly
notify Company. Company has the right to decide at Company's sole discretion
what legal proceedings or other action, if any, shall be taken, by whom, how
such proceedings or other action shall be conducted
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and in whose name such proceedings or other action shall be performed. Any legal
proceedings or other action instituted pursuant to this section shall be for the
sole benefit, and at the sole expense, of Company.
(b) Operator agrees to cooperate with Company in the prosecution
of any Service Mark or Copyright Works applications that Company may desire to
file or in the conduct of any litigation relating to the Service Marks or
Copyright Works, at the cost of Company. Operator shall supply to Company such
sales information, invoices, promotional materials, advertisements, photograph
and similar material and, upon Company's request, shall procure evidence, give
testimony and cooperate with Company as may reasonably be required in connection
with any such application or litigation. Furthermore, if Company makes
modifications in the appearance of any of the Service Marks, the Operator, if
required by Company, shall use only the new version of the modified Service
Mark. Operator shall also provide Company with a duplicate original of invoices,
receipts or other evidence showing sales of the Services were actually
completed.
10.7 (a) Operator's use of any of the Service Marks shall, depending
upon the directions provided by Company, in every instance be combined with one
of the following notices: (i) Reg. U.S. Pat. & TM. Off.; (ii) 'r';
(iii) Service Mark of Sea World, Inc.; or (iv) such other similar language
as shall have the prior, written approval of Company. Operator shall not use
any language or display the Service Marks in such a way as to create the
impression that the Service Marks belong to Operator. Operator waives all
claims to any rights in Operator's use, advertising or display of the Service
Marks beyond the limited permission to use the Service Marks granted in this
Agreement.
(b) Operator's use of any of the Copyright Works shall display in
every instance the appropriate copyright notice as provided by Company. Operator
shall not use any language or display the Copyright Works in such a way as to
create the impression that the Copyright Works belong to Operator. Operator
waives all claims to any rights in Operator's use, advertising or display of the
Copyright Works beyond the limited permission to use the Copyright Works granted
in this Agreement.
(c) In addition to the provisions set forth in Section 3.2
hereof, Company and Operator agree and intend that all artwork and designs
created by Operator or any other entity and used with the Service Marks or in
the sale of the Services are works made for hire within the meaning of the
United States Copyright Act and shall be the property of the Company which shall
be entitled to use and license others to use such artwork and designs subject to
the provisions of this Agreement. To the extent any artwork or design created by
Operator or any other entity and used with the Service Marks are not works made
for hire, Operator assigns to Company the copyright in such artwork or designs.
Upon request, Operator will provide Company with a writing acknowledging that
artwork and designs created by Operator or any other entity and used with the
Service Marks or in the sale of the Services are works made for hire. Likewise,
upon request, Operator will provide Company with a writing assigning the
copyrights in any artwork and designs created
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by Operator or any other entity and used with the Service Marks or in the sale
of the Services. One of the following notices (or such other notice as shall
have the prior, written approval of Company) shall appear at least once on each
piece of promotional material for the Service using such artwork or designs used
with the Service Marks or in the sale of the Services: (i) 'c' (year of first
publication) Sea World, Inc.; (ii) 'c' (year of first publication)
Anheuser-Busch Companies, Inc.
(d) The use of any word, name, symbol or device to identify or
distinguish the Services shall inure to the benefit of Company. The use of any
such word, name, symbol or device in connection with the Services shall be made
only with Company's prior written approval. All service mark rights in any such
work, name, symbol or device shall belong to Company and shall be exercised by
Operator only pursuant to Company's prior written approval.
11. Confidentiality
Except as may be required by law or to obtain a permit or other
authorization for the operation of the Airship, no party to this Agreement shall
divulge to any third party the contents of this Agreement or any information
(which is not publicly available) gained in the performance of this Agreement,
except to the extent necessary, normal or appropriate for the purposes
contemplated hereunder, and information by way of plans or other documentation
marked "Confidential" by a party and made available to the other parties shall
not be made available to third party without the written consent of the
disclosing party. Neither party shall issue any press release or otherwise
publicly divulge any information relating to this Agreement without the prior
approval of the other party, which approval shall not be unreasonably withheld.
12. Audit Rights
12.1 Company (or its representatives) shall have the right at any time
during the Term during normal business hours, upon seventy-two (72) hours'
notice, to examine Operator's pertinent books and records which books and
records shall be kept and maintained in accordance with generally accepted
accounting principles consistently applied, to determine whether all invoices
and other charges submitted to Company by Operator are in all respects in
accordance with this Agreement.
12.2 In the event a discrepancy is discovered during an audit referred
to in 12.1 above, the discovering party shall provide written notice to the
other party explaining such asserted discrepancy in detail. In the event the
other party agrees with such asserted discrepancy, appropriate reimbursement
shall be promptly made. In the event the other party disagrees with the asserted
discrepancy, such dispute shall be submitted to a firm of nationally recognized
independent certified public accountants mutually acceptable to Company and
Operator, and the decision of such firm shall be binding. The losing party shall
be solely responsible for the fees and expenses of such independent accounting
firm.
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The provisions of this paragraph shall survive the expiration or termination of
this Agreement.
12.3 For a period of two (2) years following the termination of this
Agreement, Operator shall maintain such books and records (collectively,
"Records") as are necessary to substantiate that (i) all in invoices and other
charges submitted to Company for, payment hereunder were valid and proper and
(ii) no payments have been made, directly or indirectly, by or on behalf of
Operator to or for the benefit of any Company employee or agent who may
reasonably be expected to influence either Company's decision to enter into this
Agreement or the amount to be paid by Company pursuant hereto. (As used herein,
"payments" shall include money, property, services and all other forms of
consideration.) All Records shall be maintained in accordance with generally
accepted accounting principles consistently applied. Company and/or its
representative shall have the right at any time during normal business hours,
upon twenty-four (24) hours' notice, to examine said Records. The provisions of
this paragraph shall survive the expiration or earlier termination of this
Agreement.
13. Notices
All notices, requests, demands, claims and other communications
required or permitted to be given pursuant to this Agreement shall be in writing
and shall be deemed duly given if delivered personally or sent by registered
airmail, overnight courier, telecopy or telex addressed as follows.
If to Operator:
AIRSHIP INTERNATIONAL LTD.
7380 Sand Lake Road
Orlando, Florida 32819
Attn: Louis J. Pearlman
Fax: 407-351-0978
with a copy to:
Baer Marks & Upham
805 Third Avenue
New York, NY 10022
Attn: Samuel F. Ottensoser, Esq.
Fax: 212-702-5797
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<PAGE>
If to Company:
ANHEUSER-BUSCH COMPANIES, INC. - Flight Operations
18130 Edison
Chesterfield, Missouri 63005
Attn: Carl E. Henke
Fax: 314-532-2574
with a copy to:
ANHEUSER-BUSCH COMPANIES, INC.
One Busch Place
St. Louis, Missouri 63118
Attn: James E. Schobel, Esq.
Fax: 314-577-0776
The parties may at any time change their address, telex or telefax
numbers for the purpose hereof by giving notice to the others in the manner
specified above. Notices shall be effective upon the date of transmission in the
case of a telex or fax, seventy-two (72) hours after mailing in the case of a
registered letter, and the day after mailing in the case of overnight courier.
14. Liability and Indemnity
14.1 Operator hereby assumes liability for, and hereby agrees to
indemnify, reimburse, protect, save and hold harmless the Company, its
subsidiaries and affiliates and their successors, assigns, agents, employees and
servants from and against, all claims, actions, suits or legal proceedings, in
connection with the design, manufacture, purchase, ownership or operation of the
aircraft, ground support vehicles and equipment. This indemnity shall not
however extend to (i) claims arising from the advertising and promotion of the
Company's advertising copy on the Airship or; (ii) any injury due solely to the
negligence or intentional acts of the Company or its officers, directors, agents
or employees.
14.2 The Company hereby assumes liability for and hereby agrees to
indemnify, reimburse, protect, save and hold harmless Operator, its successors,
assigns, agents, employees and servants, from and against, any and all claims,
actions, suits, or legal proceedings, in any way related to the advertising and
promotion of Client's and its third-party advertiser's advertising copy on the
Airship or, any injury due solely to the negligence or intentional acts of the
Company or its officers, directors, agents or employees.
15. Independent Contractors
15.1 The parties shall be and act as independent contractors, and
under no circumstances shall this Agreement be construed as one of agency,
partnership, joint venture
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or employment between the parties. Each party acknowledges and agrees that it
neither has nor will give the appearance or impression of having any legal
authority to bind or commit the other party in any way.
15.2 Notwithstanding anything in this Agreement to the contrary, the
parties hereto acknowledge that the essential purpose of this Agreement is
aerial advertising and promotion on behalf of Company and its affiliate and that
Company undertakes and shall have no greater responsibility or liability with
respect to the Airship (including all support equipment and staff) than it would
in acquiring any other advertising space.
16. Governing Law
The interpretation, validity and performance of this Agreement shall
be governed by the laws of the State of New York.
17. No Assignment: Company Subsidiaries Included
Neither party shall assign its rights and/or obligations under this
agreement without the prior written approval of the other party. This agreement
and all of the terms and provisions hereof will be binding upon, and will inure
to the benefit of, the parties hereto and their respective successors and
approved assigns. Notwithstanding the foregoing, (i) Operator acknowledges and
agrees that all references to "Company" in this Agreement shall include, at the
option of Anheuser-Busch Companies, Inc., any of its direct or indirect
subsidiaries; provided, however, that Anheuser-Busch Companies Inc. shall be
ultimately responsible for the due and punctual performance of all obligations
of "Company" herein; and (ii) Company acknowledges that Operator may assign
Operator's right to receive any payments due from Company.
18. Miscellaneous
18.1 This Agreement is the only agreement existing between the parties
hereto regarding the subject matter hereof and there are no other
representations, covenants, warranties or agreements between the parties hereto
not therein contained and set forth in full. Any prior agreements and
understandings regarding the subject matter hereof are hereby revoked and
cancelled. This Agreement may be amended only by an agreement in writing
executed by all parties.
18.2 The failure of any party to object to or to take affirmative
action with respect to any conduct of any other party which is in violation of
the terms of this Agreement shall not be construed as a waiver thereof, nor of
any future breach or subsequent wrongful conduct.
22
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18.3 Except as otherwise specifically provided in this Agreement, each
party shall be responsible for any expenses incurred by such party in connection
with performance of its obligations under this Agreement.
18.4 The rights and remedies set forth herein are intended to be
cumulative, and the exercise of any one right or remedy by either party shall
not preclude or waive its exercise of any other rights or remedies hereunder or
pursuant to law or equity.
18.5 The Section headings set forth herein are for convenience only
and do not constitute a substantive part of this Agreement.
18.6 The rights and privileges granted to Company hereunder are
special, unique, extraordinary and impossible of replacement, which gives them a
peculiar value, the loss of which could not be reasonably or adequately
compensated in damages in an action at law, and Operator's failure or refusal to
perform its obligations hereunder would cause Company irreparable loss and
damage. If Operator fails or refuses to perform such obligations, Company shall
be entitled to injunctive or other equitable relief against Operator to prevent
the continuance of such failure or refusal or to prevent Operator from granting
rights to others in violation of this Agreement. In no event, however, shall
Company be entitled to consequential damages arising from the loss of use of the
Airship, including but not limited to sales revenues or profits which may have
been lost due to loss of the Airship for advertising and promotional purposes.
18.7 Notwithstanding termination of this Agreement pursuant to any
provision hereof, such termination shall not relieve any party of any obligation
hereunder which, by its terms, survives or is to be performed after such
termination, including without limitation those relating to exclusivity as set
forth in Section 7 above and the Passenger Base as set forth in Section 2.1
above.
18.8 This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original and all of which, taken together, shall be
one and the same instrument.
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IN WITNESS WHEREOF, this Agreement is executed on behalf of the parties
hereto by their duly, authorized representatives as of the day and year first
above written.
AIRSHIP INTERNATIONAL LTD.
/s/ LOUIS J. PEARLMAN
By:_______________________________
President
Title:_____________________________
ANHEUSER-BUSCH COMPANIES, INC.
/s/ Carl E. Henke
By:_______________________________
Title:_____________________________
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SCHEDULE A
Royalties
The sale of any Airship merchandise by Operator or the royalties on the
sale of any Airship Merchandise by Company shall be subject to the Permission
Agreement, dated as of January 1, 1994, between Operator and Anheuser-Busch,
Incorporated.
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<PAGE>
ORIX USA Corporation
600 Wilshire Boulevard
Suite 1460
Los Angeles, CA 90017
TEL 213-955-6500/FAX: 213-955-6530
January 11, 1994
Louis Pearlman, President
Airship International Ltd.
7380 Sandlake Road
Suite 200
Orlando, Florida 32801
Re: Airship N600LP; Lease No. 25232,
Letter Agreement Modification to payment terms
Dear Lou:
At your request, we have presented a request for a reduction in
monthly payments for the months of December, 1993, January, February and March,
1994.
Your request being reasoned on the fact of reduction in monthly cash
flow occasioned by the cancellation of the "MetLife" aerial advertising
agreement and six-month interruption in the Cumberland ("Gulf") aerial
advertising agreement.
ORIX has agreed as follows:
1. Monthly payments will be reduced from $121,000 to $80,000 for
12/93, 1/94, 2/94 and 3/94.
2. Full payments of $121,000 per month will resume in April, 1994.
3. Commencing (a) concurrent with revenue generating contracts for
four airships, whether these contracts are month to month or longer fixed term,
or (b) on July 4, 1994, whichever comes first, the monthly payments shall be
increased by $20,000 per month until such time as the total of the prior
reductions have been brought current (4 mos. x $41M = $164 due divided by $20M =
8 months at $141,000 and 1 month @ 125,000).
4. In addition, provided there are no defaults under the terms of this
Letter Agreement, no late charges will be assessed during the months of reduced
payments.
<PAGE>
<PAGE>
January 10, 1994
Page 2
We sincerely wish you every success in finalization of the Sony
contract, resolution of the Cumberland contract, and a swift determination for a
long term commitment on Shamu.
Very truly yours,
Byron Southey
SVP, Credit & Operations
Agreed to and accepted this
13th day of January, 1994.
Airship International Ltd. Louis Pearlman, as
Individual Guarantor
/s/ Louis J. Pearlman /s/ Louis J. Pearlman
______________________________ ____________________________
Louis Pearlman, President
<PAGE>
<PAGE>
AMENDMENT TO LEASE
THIS AMENDMENT TO LEASE dated as of May 10, 1994 between AIRSHIP
INTERNATIONAL LTD., a New York corporation ("Airship") and ORIX USA CORPORATION
("ORIX").
WHEREAS, Airship and ORIX are parties to a Lease Agreement dated
as of November 2, 1989, as amended by the Letter Agreement between Airship and
ORIX dated January 11, 1994, pursuant to which Airship leases from ORIX Airship
N600LP (the "Lease");
WHEREAS, Airship and ORIX desire to further amend the Lease;
NOW, THEREFORE, in consideration the agreements and covenants set
forth below, Lessor and Lessee hereby agree to amend the Lease as follows:
1. Terms. All capitalized terms used herein which are not defined
herein shall have the same meaning as in the Lease. Except as provided herein or
in the Lease, all terms of the Lease, as amended, shall continue in full force
and effect.
2. Elimination of Certain Insurance. Effective May 10, 1994,
Lessee shall no longer be required to maintain in effect the insurance required
by Section 13(b) of the Lease (entitled "Insurance Against Loss or Damage to
Airship").
3. Security Interest in Airship. Airship shall execute and
deliver to ORIX a Collateral and Security Agreement pursuant to which Airship's
obligations under the Lease shall be secured through the grant of a security
interest in the following aircraft:
One (1) Airship Industries Model 500-HL Skyship (the
"Aircraft"), Manufacturer's Serial Number 1214/06, FAA
Registration Number N 601LP (the "Collateral").
4. Deferral of Lease Payments; Payment of Interest on Balance.
Rent payable pursuant to Section 5 of the Lease for the month of April 1994
shall be payable in two installments, the first for $60,000 shall be due and
payable on the date hereof, and the second for $61,000 shall be due and payable
on June 10, 1994. The Rent payable pursuant to Section 5 of the Lease for the
months of May 1994, June 1994, July 1994 and August 1994 shall be deferred and
shall not be due and payable until such later dates as are set forth below (the
Rent payable for such months being collectively referred to herein as the
"Deferred Payments").
1
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In consideration for such deferral, until the Resumption Date (as
defined below) Airship shall pay interest, at the rate of 8% per annum, to ORIX
on the total balance of Rent payments payable for the remainder of the first
Renewal Term of the Lease (not including any future Renewal Term) ("Deferral
Interest"). It is hereby agreed that such balance, including amounts due and
payable in the future, is $4,024,950, resulting in a monthly interest payment
until the Resumption Date of $26,833. The interest payment with respect to the
deferral of May 1994 Rent shall be made on June 15, 1994, for the June 1994
Rent, on June 24, 1994, for the July 1994 Rent, on July 24, 1994, and for the
August 1994 Rent, on August 24, 1994 (collectively, the "Interest Payments").
Commencing upon the occurrence of (the "Resumption Date") the
earlier of (i) September 12, 1994 or (ii) completion of a public offering by
Airship (the "Public Offering") of its securities, payments of Rent shall be
paid in accordance with the Lease; provided, however, that the payment of Rent
for September and October 1994 shall be deferred (and Deferral Interest paid
thereon) if in the view of Airship on such date, it and the Underwriter of the
Public Offering are proceeding in good faith toward completion of the Public
Offering and a registration statement for which has been filed with the
Securities and Exchange Commission (the "S.E.C.") or is expected to be filed
with the S.E.C. within 60 days.
No late charges shall be assessed with respect to the revision in
the Rent payment schedule set forth in this Amendment.
5. Payments from Possible Offering. Airship agrees that in the
event that it completes a Public Offering of its securities by September 12,
1994, that a portion of the net proceeds of the Public Offering shall be used to
pay Rent under the Lease, including the Deferred Payments; provided, however,
that the amount of such payment shall be determined by Airship and the
underwriter of the Public Offering but shall not be less than approximately
$1,000,000.
Any portion of the Deferred Payments not paid with the proceeds
of the Public Offering shall be paid, commencing on the Resumption Date, pro
rata over the remaining term of the Lease.
6. Representations and Warranties of Airship.
(a) Absence of Liens and Encumbrances. Airship has good
and marketable title to the Aircraft, free and clear of
all liens, security interests and encumbrances.
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(b) Due Organization. Airship is a corporation duly
organized, validly existing and in good standing under the
laws of New York, with full corporate power and authority
to execute, deliver and perform this Amendment to Lease.
7. Counterparts. This Amendment to Lease may be signed in any
number of counterparts with the same effect as if the signatures thereto and
hereto were upon the same instrument.
8. Termination.
(a) Upon payment in full of all of Airship's payment obligations
under the Lease, the liens and security interests created by this Amendment to
Lease shall terminate forthwith and all right, title and interest of ORIX in and
to the Collateral shall revert to Lessee, its successors and assigns.
(b) Upon the termination of the security interest and the release
of the Collateral in accordance with Section 8(a) of this Amendment to Lease,
ORIX will promptly, at Lessee's written request and expense, (i) execute and
deliver to Lessee such documents as Lessee shall reasonably request to evidence
the termination of such security interest or the release of the Collateral and
(ii) deliver or cause to be delivered to Lessee all property of Lessee then held
by ORIX.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to Lease to be duly executed by their respective authorized officers as of the
day and year first above written.
AIRSHIP INTERNATIONAL LTD.
By LOUIS J. PEARLMAN
--------------------------------
Name: Louis J. Pearlman
Title: President
ORIX USA CORPORATION
By BYRON M. SOUTHEY
--------------------------------
Name: Byron M. Southey
Title: Sr. V.P.
3
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<PAGE>
COLLATERAL AND SECURITY AGREEMENT
By and Between
AIRSHIP INTERNATIONAL LTD.
and
ORIX USA CORPORATION
Dated as of May 10, 1994
<PAGE>
<PAGE>
COLLATERAL AND SECURITY AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE 1............................................................1
ARTICLE 2............................................................2
2.1 Grant of Collateral....................................2
2.2 Collateral as Security Only............................3
ARTICLE 3............................................................3
3.1 Title..................................................3
3.2 Preservation of Rights.................................3
3.3 Perfection of Liens....................................3
3.4 Other Assurances.......................................3
3.5 Maintenance of Name, etc...............................4
3.6 No Other Financing Statements..........................4
3.7 Maintenance of Records.................................4
3.8 Schedules and Reports..................................5
3.9 Maintenance of Office..................................5
3.10 No Negotiable Documents................................5
3.11 Taxes and Assessments..................................5
3.12 Notices................................................5
3.13 Release of Collateral..................................5
ARTICLE 4............................................................6
4.1 Maintenance and Repair.................................6
4.2 Right of Inspection....................................6
ARTICLE 5............................................................6
5.1 Events of Default......................................6
5.2 Remedies Generally.....................................7
5.3 Application of Moneys..................................9
ARTICLE 6...........................................................10
6.1 Notices...............................................10
6.2 No Waivers............................................10
6.3 Amendments............................................11
6.4 Indemnification.......................................11
6.5 Headings..............................................11
6.6 Severability..........................................11
6.7 Successors and Assigns................................11
6.8 Governing Law.........................................12
6.9 Counterparts..........................................12
6.10 Termination...........................................12
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COLLATERAL AND SECURITY AGREEMENT
THIS COLLATERAL AND SECURITY AGREEMENT is entered into as of May 10,
1994, by and between AIRSHIP INTERNATIONAL LTD., a New York corporation
(together with all of its subsidiaries and its successors and assigns,
"Lessee"), and ORIX USA CORPORATION ("Secured Party").
Capitalized terms used herein but not herein defined shall have the
meanings given in the Loan Agreement (as hereafter defined).
W I T N E S S E T H:
WHEREAS, Lessee, as borrower, has entered into a Lease Agreement (as
amended by the Letter Agreement dated January 11, 1994 and the Amendment to
Lease dated as of May 10, 1994) (the "Lease") dated as of November 2, 1989 with
Secured Party, as Lessor, pursuant to which Lessee has leased Airship No.
N600LP; and
WHEREAS, the Amendment to Lease requires, the execution and delivery of
this Collateral and Security Agreement ("Collateral and Security Agreement") in
order to secure performance by Lessee of all its obligations under the Lease and
under this Collateral and Security Agreement ("Secured Obligations").
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms used herein but not defined herein shall have the
meanings given in the Loan Agreement. The following terms shall have the
respective meanings set forth below:
"Aircraft Security Agreement" shall mean the Aircraft Security
Agreement between Lessee and Secured Party, substantially in the form of
Exhibit A to this Collateral and Security Agreement.
"Chattel Paper" shall have the meaning given to such term in the
Code.
"Code" shall mean the Uniform Commercial Code as in effect in any
applicable jurisdiction.
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"Collateral" shall have the meaning given in section 2.1.
"Contracts" shall mean all contracts, leases, undertakings or
agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which Lessee may now or hereafter have any
right, title or interest that do not specifically relate to the
ownership operation, maintenance or leasing of a specific airship (other
than the airship to which the Aircraft Security Agreement relates).
"Customer Contracts" shall mean all Contracts entered into
between Lessee and customers of Lessee.
"Lessee" shall mean Airship International Ltd., 7380 Sand Lake
Road, Suite 200, Orlando, FL 32819.
"Distribution Date" shall have the meaning given in Section
6.3(a).
"Documents" shall have the meaning given to such term in the
Code.
"Document of Title" shall have the meaning given in the Code.
"Equipment" shall have the meaning given in Section 2.1(a).
"Instrument" shall mean any "instrument," as such term is defined
in the Code.
"Other Assurances" shall have the meaning given in Section 3.4.
"Sale Proceeds" shall have the meaning given in section 2.1(d).
"Secured Party" shall mean ORIX USA CORPORATION, 600 Wilshire
Blvd, Suite 1460, Los Angeles, CA 90017.
ARTICLE 2
COLLATERAL
2.1 Grant of Collateral. In order to secure the due and punctual payment
and performance of each of the Secured Obligations, Lessee hereby, and by its
execution and delivery of this Collateral and Security Agreement, grants,
transfers, warrants, conveys, assigns and mortgages to Secured Party, and grants
to Secured Party a security interest in, the following property, wherever
located, including without limitation all present and future proceeds and
products of, increases, replacements and accessions to, and rights to insurance
and documents covering or received by Lessee on account of any such property,
all for the benefit and security of Secured Party:
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<PAGE>
The Airship Industries Model 500-HL Skyship, Serial No. 1214/06,
FAA Registration Number N 601LP, as more specifically described in the
Aircraft Security Agreement attached as Exhibit A to this Collateral and
Security Agreement (the "Collateral").
2.2 Collateral as Security Only. The grant of Collateral to Secured
Party hereunder is as security only and shall not subject Secured Party to, or
transfer or in any way affect or modify, any obligation or liability of Lessee
under any of the Collateral or any transactions which gave rise thereto.
ARTICLE 3
LESSEE'S GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Lessee represents, warrants, covenants and agrees to and with Secured
Party as follows:
3.1 Title. Lessee has and will at all times have and maintain good title
to all Collateral that is owned by Lessee free of all security interests, liens
and encumbrances; the liens and security interests hereunder will be perfected
on or prior to the Closing Date and otherwise will be and remain perfected.
3.2 Preservation of Rights. Lessee shall at its expense protect, warrant
and defend forever its rights in the Collateral, and the rights of Secured Party
therein and thereto against the claims and demands of all persons whomsoever,
and this covenant shall not be extinguished by any exercise of power of sale,
foreclosure or sale thereof or other remedy hereunder or provided by law.
3.3 Perfection of Liens. Lessee has caused and shall cause this
Collateral and Security Agreement to be filed, registered or recorded and to be
kept, filed, registered or recorded in such manner and in such places as may be
required by any present or future law in order to publish notice of and fully to
protect, perfect and continue the liens and security interests hereof upon, and
the rights and interest of Secured Party in, the Collateral.
3.4 Other Assurances. Without limiting the provisions of Section 3.3,
Lessee (i) shall do, execute, acknowledge and deliver all and every such further
acts, deeds, conveyances, supplemental agreements, assignments, instruments,
notices of assignments, financing statements, continuation statements,
assignments of rents or leases, transfers, assurances and other instruments,
documents, writings and agreements as Secured Party may from time to time deem
necessary or advisable, for the better assuring, conveying, assigning,
transferring, hypothecating, pledging and confirming unto Secured Party the
Collateral and rights hereby granted, conveyed or assigned, or which Lessee may
be or may hereafter become bound to convey or assign to, or for carrying out the
intention of or facilitating the performance of the
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<PAGE>
terms of this Collateral and Security Agreement, or for filing, registering or
recording this Collateral and Security Agreement or subjecting any portion of
the Collateral to the lien and security interest hereof with the priority
therefor required hereunder, or for facilitating Secured Party's exercise of its
rights and remedies hereunder; and (ii) hereby irrevocably appoints Secured
Party to be its attorney for and in its name and on its behalf for such
purposes, and generally to use its name in the exercise of all or any of the
powers hereby conferred on Secured Party with full power of substitution. The
power and authority hereby given and granted by Lessee to Secured Party shall be
deemed coupled with an interest and shall not be revocable by Lessee until
termination pursuant to Section 7.10 of the security interests created in the
Collateral hereby.
3.5 Maintenance of Name, etc. Lessee will not change its name, identity
or corporate structure in any manner which might make any financing or
continuation statement filed in respect of the Collateral seriously misleading
within the meaning of Section 9-402(7) (or any other then applicable provision)
of the Code unless Lessee shall have given Secured Party at least 30 days' prior
written notice thereof.
3.6 No Other Financing Statements. Without the prior written consent of
Secured Party, Lessee will not file or authorize or permit to be filed in any
jurisdiction any financing statement or like instrument covering or relating to
any Collateral in which Secured Party is not named as the secured party.
3.7 Maintenance of Records. Lessee shall keep and maintain at its own
cost and expense satisfactory and complete records of the Collateral, including,
without limitation, a record of any and all payments received and any and all
credits granted with respect to the Collateral and all other dealings with the
Collateral. Lessee shall take such steps as may be necessary to make employees
of Lessee aware of this Collateral and Security Agreement and the security
interests granted hereby. For Secured Party's further security, Lessee agrees
that Secured Party shall have a special property interest in all of the Lessee's
books and records pertaining to the Collateral and, upon the occurrence and
during the continuation of any Event of Default, Lessee shall deliver and turn
over any such books and records to Secured Party or its representative at any
time upon demand of Secured Party. Prior to the appearance of an Event of
Default and upon reasonable notice from Secured Party, Lessee shall permit any
representative of Secured Party to inspect such books and records and shall
provide photocopies thereof to Secured Party.
3.8 Schedules and Reports. Lessee shall furnish to Secured Party from
time to time, as promptly as feasible upon Secured Party's reasonable request,
schedules identifying and describing the Collateral (including, without
limitation, the locations thereof) and other reports in connection with the
Collateral, all as Secured Party may reasonably request.
3.9 Maintenance of Office. Lessee represents and warrants that its chief
executive office is located at 7380 Sand Lake Road, Suite 200, Orlando, FL
32819.
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<PAGE>
Lessee will not change the location of its chief executive office unless Lessee,
at least 30 days prior to such change, notifies Secured Party of such change and
takes all action necessary or that Secured Party may reasonably request to
preserve, perfect, confirm and protect (to the extent contemplated hereby and by
the Loan Agreement) Secured Party's liens and security interests in the
Collateral. Lessee will at all times maintain its chief executive office within
one of the states in the 48 contiguous states (other than Maryland or
Tennessee), in which Article 9 of the Code (Secured Transactions) is in effect.
3.10 No Negotiable Documents. Lessee shall not deposit any Collateral in
exchange for a negotiable Document of Title.
3.11 Taxes and Assessments. Lessee shall furnish to Secured Party such
official receipts as Secured Party may reasonably request evidencing the payment
in full, when required hereby or by the Lease, of all general taxes and
assessments, special taxes, special assessments, and all other charges against
the Collateral.
3.12 Notices. Lessee shall advise Secured Party promptly, in reasonable
detail, of any material lien or other encumbrance attaching to or asserted
against any of the Collateral.
3.13 Release of Collateral. Lessee shall have the right to sell or
dispose of Collateral only to the extent and subject to the conditions set forth
herein. In the event of any such permitted sale or disposition, the lien and
security interest created by this Collateral and Security Agreement shall be
released from the property so disposed of, and Secured Party shall execute and
deliver any releases, instruments or documents necessary to accomplish the
foregoing, provided that any such release, execution or delivery shall be
without recourse or warranty of any kind.
ARTICLE 4
MAINTENANCE, REPAIR AND INSPECTION
4.1 Maintenance and Repair. Lessee shall keep the Collateral in
sufficient operating order, repair and condition for the performance of its
business.
4.2 Right of Inspection. Upon reasonable notice to Lessee, Secured Party
and its representatives shall also have the right to enter into and upon any
premises where any of the Collateral is located for the purposes of inspecting
the same, observing its use or otherwise protecting Secured Party's interest
therein.
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ARTICLE 5
DEFAULT
5.1 Events of Default. For all purposes of this Collateral and Security
Agreement, the term "Event of Default" shall have the meaning given to it in the
Lease. Notwithstanding anything herein, and without limiting any other rights
provided hereunder or by law, upon the occurrence of an Event of Default,
Secured Party may execute and cause to be recorded a notice or other declaration
of default required by any applicable laws providing for a cure or other
moratorium before the Collateral or any portion thereof may be foreclosed
judicially or nonjudicially; provided, however, that any notice of intention to
accelerate indebtedness contained in said notice or other declaration of default
shall refer to acceleration no sooner than the later of the cure or other period
provided by any applicable laws or any applicable period provided by the Lease
or this Collateral and Security Agreement.
5.2 Remedies Generally. After an Event of Default has occurred and is
continuing (and has not been rescinded, cured or waived), in addition to, and
not by way of limitation of, any right which Secured Party may have hereunder or
under applicable law or otherwise:
(a) Secured Party shall have all of the rights and remedies of a
secured party under the Code, including without limitation, the right
and power to sell, or otherwise dispose of, any personal property
constituting Collateral, wherever situated, and remove the same without
being deemed guilty of trespass and without liability for damages
thereby occasioned, or, at its option and upon its demand, to cause
Lessee to assemble any Collateral and make it available at the place and
time designated in such demand. Secured Party without notice to or
demand upon Lessee, may make such payments and do such acts as Secured
Party deems necessary to protect the lien and security interest hereof
(including without limitation paying, purchasing, contesting or
compromising any encumbrance, charge or lien which is prior to or
superior to the lien and security interest granted hereunder), and in
exercising any such powers or authority may pay all expenses incurred in
connection therewith, and shall be entitled to hold, maintain, preserve
and prepare any Collateral for sale, and may render such Collateral
unusable and dispose of it on any premises. Notice of any sale or other
disposition of any Collateral shall be given to Lessee by notice via
certified mail at Lessee's address for notice under this Collateral and
Security Agreement at least ten days before the time of the sale or
disposition.
(b) Secured Party may, with or without entry, personally or by
its agents or attorneys, insofar as applicable:
(i) sell the Collateral and all estate, right, title and
interest, claim and demand therein, and any right of redemption
thereof, at one
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or more sales as an entirety or in parcels, and at such times and
places and after such notices thereof as may be required or
permitted by law at private sale or at a public auction to the
highest bidder for cash, in lawful money of the United States,
payable at the time of such private or public sale;
(ii) apply to any court of competent jurisdiction for the
appointment of a receiver or receivers for Collateral or any
portion thereof, and of all the rents thereof, and Lessee hereby
consents to such appointment; or
(iii) take such steps to protect and enforce its rights,
whether by action, suit or proceeding in equity or at law, for
the specific performance of any covenant, condition or agreement
in this Collateral and Security Agreement or in any agreements
governing, instruments evidencing or documents securing Secured
Obligations, or in aid of the execution of any power herein or
therein granted, or for the enforcement of any other appropriate
legal or equitable remedy or otherwise as Secured Party shall
elect.
(c) Secured Party may file such proofs of claim and other papers
or documents as may be deemed necessary or advisable in order to have
the claims of Secured Party allowed in any judicial proceedings relative
to Lessee or the creditors, or property, of Lessee.
(d) Secured Party may adjourn from time to time any sale by it to
be made under or by virtue of this Collateral and Security Agreement by
announcement at the time and place appointed for such sale or for such
adjourned sale or sales; and, except as otherwise provided by any
applicable provision of law, without further notice or publication, may
make such sale at the time and place to which the same shall be so
adjourned.
(e) Upon the completion of any sale or sales made by Secured
Party under or by virtue of this Article, Secured Party shall execute
and deliver to the accepted purchaser or purchasers a good and
sufficient instrument, or good and sufficient instruments, conveying,
assigning and transferring all estate, right, title and interest in and
to the property and rights sold, but without any covenant or warranty,
express or implied. The recitals in such instrument of any matters or
facts shall be conclusive proof of the truthfulness thereof. Any such
sale or sales made under or by virtue of this Article 5 whether made
under the power of sale herein granted or under or by virtue of judicial
proceedings or of a judgement or decree of foreclosure and sale shall
operate to absolutely divest all the estate, right, title, interest,
claim and demand whatsoever, whether at law or in equity, of Lessee in
and to the properties and rights so sold, and shall be a perpetual bar
both at law and in equity against Lessee and against any and all persons
claiming or who may claim the same,
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or any part thereof from, through or under Lessee, and to the extent
permitted by law Lessee hereby specifically waives all rights of
redemption, stay or appraisal which it has or may have under any rule of
law or statute now existing or hereafter in force.
(f) Lessee on its own behalf and on behalf of its successors and
assigns hereby expressly waives all rights to require (i) a marshalling
of assets by Secured Party or (ii) Secured Party to first resort to some
or any portion of the Collateral before foreclosing upon and selling any
other portion thereof.
5.3 Application of Moneys.
(a) All moneys held by Secured Party or proceeds received by
Secured Party pursuant to this Section 5, to the extent available for
distribution, shall be distributed by Secured Party on the last business
day of each calendar month (the "Distribution Date") in the following
order of priority, to the extent permitted by law:
First: To Secured Party for any unpaid fees and other amounts
payable to the Secured Party under the Lease, in an amount equal
to such unpaid amounts on such Distribution Date;
Second: Any surplus then remaining shall be distributed without
recourse or warranty to the Person or Persons entitled thereto.
(b) Secured Party may, to the extent permitted by law, make
distributions hereunder in cash or in kind or in any combination
thereof.
(c) All distributions made by Secured Party pursuant to this
Section 5.3 shall be final. However, if at any time Secured Party
determines a distribution previously made pursuant to this Section 5.3
was based on a mistake of fact, Secured Party shall adjust subsequent
distributions hereunder so that on a cumulative basis Secured Party and
all other persons shall receive the distributions to which they would
have been entitled it such mistake of fact had not been made.
ARTICLE 6
MISCELLANEOUS
6.1 Notices. Any notice which the Lessee or the Secured Party may be
required or may desire to give to the other party under any provision of this
Collateral and Security Agreement shall be in writing and shall be delivered by
hand or transmitted by electronic facsimile transmission and shall be deemed to
have been given or made when so delivered or transmitted and addressed as
follows:
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To the Lessee: Airship International Ltd.
7380 Sand Lake Road, Suite 200
Orlando, FL 32819
Attention: Louis J. Pearlman
Telecopier: (407) 345-0888
Copies to: Louis J. Pearlman
9235 Ridge Pine Trail
Orlando, FL 32819
Telecopier: (407) 876-0468
and
Baer Marks & Upham
805 Third Avenue
New York, New York 10022
Attention: Samuel F. Ottensoser, Esq.
Telecopier: (212) 702-5941
To the Secured
Party: ORIX USA CORPORATION
600 Wilshire Blvd, Ste 1460
Los Angeles, CA 90017
Attention: Byron Southey
Telecopier: (213) 955-6530
Any party may change the address to which all notices, requests and
other communications are to be sent to it by giving written notice of such
address change to the other parties in conformity with this paragraph, but such
change shall not be effective until notice of such change has been received by
the other parties.
6.2 No Waivers. No failure on the part of Secured Party to exercise, no
course of dealing with respect to, and no delay in exercising, any right, power
or privilege under this Collateral and Security Agreement shall operate as a
waiver thereof nor shall any single or partial exercise of any such right, power
or privilege preclude any other or further exercise thereof or the exercise of
any other right, power or privilege.
6.3 Amendments. This Collateral and Security Agreement may not be
amended or modified except by an instrument in writing signed by Lessee and
Secured Party.
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6.4 Indemnification.
(a) Lessee shall pay, indemnify, and hold Secured Party harmless from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgements, suits, costs, expenses (including, without limitation, the
reasonable fees of counsel) or disbursements of any kind or nature whatsoever
with respect to the execution, delivery, enforcement, performance and
administration of this Collateral and Security Agreement unless arising from the
gross negligence or willful misconduct of the Secured Party (including, without
limitation, indemnification of Secured Party for liabilities of Secured Party
for the net amount of taxes (after taking account of any deduction, credit or
other tax reduction or benefit available by reason of the imposition of any such
tax) in any jurisdiction in which such Secured Party would not otherwise be
subject to tax except by reason of its acting under this Collateral and Security
Agreement (directly or through any agent, co-agent or trustee) and any filing
fee or excise tax paid by Secured Party pursuant hereto. As security for
payments under the aforesaid indemnity, Secured Party shall have a lien upon all
the Collateral.
(b) In any suit, proceeding or action brought by Secured Party under or
with respect to the Collateral for any sum owing hereunder or to enforce any
provisions hereof, Lessee will save, indemnify and keep Secured Party harmless
from and against all expense, loss or damage suffered by reason of any defense,
offset, counterclaim, recoupment or reduction of liability whatsoever of the
obligor thereunder, arising out of a breach by Lessee or any of its affiliates
of any obligation thereunder or arising out of any other agreement, indebtedness
or liability at any time owing to or in favor of such obligor or its successors
from Lessee, and all such obligations of Lessee shall be and remain enforceable
against and only against Lessee and shall not be enforceable against Secured
Party, its agents or employees.
6.5 Headings. The table of contents and the headings of Articles and
Sections have been included herein for convenience only and shall not be
considered in interpreting this Collateral and Security Agreement.
6.6 Severability. Any provision of this Collateral and Security
Agreement which is prohibited or unenforceable in any jurisdiction shall not
invalidate the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
6.7 Successors and Assigns. This Collateral and Security Agreement shall
be binding upon and inure to the benefit of the parties hereto and shall inure
to the benefit of Secured Party and its respective successors and assigns, and
nothing herein is intended or shall be construed to give any other Person any
right, remedy or claim under, to or in respect of this Collateral and Security
Agreement or any Collateral.
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6.8 Governing Law. This Collateral and Security Agreement shall be
governed by, and construed and interpreted in accordance with, the internal laws
of the State of New York (disregarding any conflict of laws rule which might
result in the application of laws of any other jurisdiction). All judicial
proceedings brought against Lessee with respect to this Collateral and Security
Agreement may be brought in any State or federal court of competent jurisdiction
in the State of New York, and Lessee accepts for itself and its assets and
properties, generally and unconditionally, the nonexclusive jurisdiction of the
aforesaid courts.
6.9 Counterparts. This Collateral and Security Agreement may be signed
in any number of counterparts with the same effect as if the signatures thereto
and hereto were upon the same instrument.
6.10 Termination.
(a) Upon payment in full of all Secured Obligations, the liens and
security interests created by this Collateral and Security Agreement shall
terminate forthwith and all right, title and interest of Secured Party in and to
the Collateral shall revert to Lessee, its successors and assigns.
(b) Upon the termination of Secured Party liens and security interest
and the release of the Collateral in accordance with Section 6.10 (a) , Secured
Party will promptly, at Lessee I s written request and expense, (i) execute and
deliver to Lessee such documents as Lessee shall reasonably request to evidence
the termination of such security interest or the release of the Collateral and
(ii) deliver or cause to be delivered to Lessee all property of Lessee then held
by Secured Party.
IN WITNESS WHEREOF, the parties hereto have caused this Collateral and
Security Agreement to be duly executed by their respective authorized officers
as of the day and year first above written.
AIRSHIP INTERNATIONAL LTD.
By /s/ LOUIS J. PEARLMAN
---------------------------
Name:
Title: President
ORIX USA CORPORATION
By /s/ Byron M. Southey
---------------------------
Name:
Title: Senior Vice President
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<PAGE>
Exhibit A
to
Collateral and Security Agreement
DEPARTMENT OF TRANSPORTATION
FEDERAL AVIATION ADMINISTRATION
FAA AIRCRAFT REGISTRY
P.O. Box 25504
Oklahoma City, Oklahoma 73125
AIRCRAFT SECURITY AGREEMENT
NAME & ADDRESS OF DEBTOR
AIRSHIP INTERNATIONAL LTD.
7380 Sand Lake Road, Ste 200
Orlando, FL 32819
NAME & ADDRESS OF SECURED PARTY
ORIX USA CORPORATION
600 Wilshire Blvd, Ste 1460
Los Angeles, CA 90017
NAME OF SECURED PARTY'S ASSIGNOR
NOT APPLICABLE
Date: May 10, 1994
Complete description of collateral being mortgaged:
AIRCRAFT (FAA registration number, manufacturer, model, and serial number):
One (1) Airship Industries UK LTD Model 500-HL Skyship, Manufacturer's
Serial Number 1214/06, FAA Registration Number N 601LP.
ENGINES (manufacturer, model, and serial number):
[See Aircraft above]
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<PAGE>
PROPELLERS (manufacturer, model, and serial number):
[See Aircraft above]
SPARE PARTS LOCATIONS (air carrier's name, city and state)
Not Applicable
together with all equipment and accessories attached thereto or used in
connection therewith, all of which are included in the term aircraft as used
herein.
The above described aircraft is hereby mortgaged to the secured party for the
purpose of securing in the order named:
FIRST: The performance by Debtor of its obligations under the Lease
Agreement dated as of November 2, 1989, as amended, between Debtor and the
Secured Party.
SECOND: The prompt and faithful discharge and performance of each
agreement of the debtor herein contained or made with or for the benefit of the
secured party in connection with the indebtedness to secure which this
instrument is executed and the repayment of any sums expended or advanced by the
Secured Party for the maintenance or preservation of the property mortgaged
hereby or in enforcing his rights hereunder.
Said debtor hereby declares and hereby warrants to the said secured party that
he is the absolute owner of the legal and beneficial title to the said aircraft
and in possession thereof, and that the same is free and clear of all liens,
encumbrances, and adverse claims whatsoever.
It is the intention of the parties to deliver this instrument in the State of
New York.
Provided, however, that if the debtor, his heirs, administrators, successors, or
assigns shall pay said note and the interest thereon in accordance with the
terms thereof and shall keep and perform all and singular the terms, covenants,
and agreements in this security agreement, then this security agreement shall be
null and void.
Time is of the essence of this security agreement. It is hereby agreed that, if
default be made in the payment of any part of the principal or interest of the
Lease secured hereby at the time and in the manner therein specified, or if any
breach be made of any obligation or promise of the Debtor herein contained or
secured hereby, or if any or all of the property covered hereby be hereafter
sold, leased, transferred, mortgaged, or otherwise encumbered without first
obtaining the written consent of the Secured Party, or in the event of the
seizure of the Aircraft under execution or other legal process, or if for any
other reason the secured party may deem himself insecure, then the whole
principal sum unpaid upon said Lease, with the interest accrued
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thereon, or advanced under the terms of this security agreement, or secured
thereby, and the interest thereon, shall immediately become due and payable at
the option of the Secured Party.
Upon default, the Secured Party may at once proceed to foreclose this mortgage
in any manner provided by law, or he may at his option, and he is hereby
empowered so to do, with or without foreclosure action, enter upon the premises
where the said aircraft may be and take possession thereof, and remove and sell
and dispose of the same at public or private sale, and from the proceeds of such
sale retain all costs and charges incurred by him in the taking or sale of said
aircraft, including any reasonable attorney's fees incurred; also all sums due
him on said Lease, under any provisions thereof, or advanced under the terms of
this security agreement or the Collateral and Security Agreement dated the date
hereof between debtor and the Secured Party, and interest thereon, or due or
owing to the Secured Party, under any provisions of this security agreement, or
secured hereby, with the interest thereon, and any surplus of such remaining
shall be paid to the debtor, or whomever may be lawfully entitled to receive the
same. If a deficiency occurs, the debtor agrees to pay such deficiency
forthwith.
The Secured Party or its agent may bid and purchase at any sale made under this
mortgage or herein authorized, or at any sale made upon foreclosure of this
mortgage.
In witness whereof, the debtor has hereunto set its hand and seal on the day and
year first above written.
ACKNOWLEDGMENT:
(If required by
applicable law)
SIGNATURE(S)
---------------------------------------------
(In ink) (If executed for co-ownership, all must sign)
TITLE
---------------------------------------------
(If signed for a corporation, partnership, owner, or agent)
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AIRCRAFT COLLATERAL FUNDING REPAYMENT AGREEMENT
This AIRCRAFT COLLATERAL FUNDING REPAYMENT AGREEMENT (as
modified, supplemented or amended from time to time, this "Aircraft CFR
Agreement") dated as of November 16, 1994, is entered into by and between
Allstate Financial Corporation ("AFC"), and AIRSHIP INTERNATIONAL LTD.
("Client"). Unless otherwise defined herein, capitalized terms used herein shall
have the meanings provided in the Accounts Receivable Factoring and Security
Agreement dated November 16, 1994, by and between AFC and Client (as modified,
supplemented, amended, restated or superseded from time to time, the "Factoring
Agreement").
WITNESSETH
WHEREAS, AFC and Client have entered into the Factoring Agreement
providing for the making of certain financial accommodations as contemplated
therein;
WHEREAS, Client has requested, pursuant to Paragraph 6 of the Factoring
Agreement, that AFC make a prefunding (as defined in the Factoring Agreement) to
Client;
WHEREAS, it is a condition to the making of the prefunding referred to
in the immediately preceding paragraph that Client execute and deliver this
Aircraft CFR Agreement;
WHEREAS, Client desires to execute and deliver this Aircraft CFR
Agreement in order to satisfy the condition described in the immediately
preceding paragraph;
NOW, THEREFORE, it is agreed:
SECTION 1. AMOUNT AND TERMS OF THE PREFUNDING
(a) Net Cash Amount of Prefunding; Etc. Subject to and upon the
terms and conditions set forth in the Factoring Agreement and in Section 1(b)
below, AFC agrees to make, on a single date (such date, the "Prefunding Date") a
prefunding (the "Prefunding"), provided, that the initial amount of the
Prefunding shall in no event exceed the Funding Base (as defined in Section 2(c)
below). The Prefunding and the discounts earned by AFC in connection with the
Prefunding (the "Earnings") shall be repaid in full in accordance with Section 2
below. Once repaid, no portion of the Prefunding may be reincurred. If Client
desires additional prefundings (as defined in the Factoring Agreement) from time
to time, such prefundings shall be made and governed exclusively by the terms
and conditions of the Factoring Agreement and any supplemental agreements
entered into in connection with the Factoring Agreement and related to such
prefundings.
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(b) Conditions Precedent. In addition to and without in any way
limiting any conditions set forth in the Factoring Agreement, the obligation of
AFC to make the Prefunding on the Prefunding Date is subject to the satisfaction
(in AFC's sole discretion) of each of the following conditions:
(i) Client shall have duly authorized, executed and
delivered this Aircraft CFR Agreement, the Factoring Agreement, the Aircraft
Security Agreement to be executed concurrently herewith between AFC and Client
(the "Aircraft Agreement"), and the agreements and instruments related hereto
and thereto, and such agreements and instruments shall be in full force and
effect;
(ii) AFC shall have completed its review of the
results of its onsite collateral review of Client and such results shall be
satisfactory to AFC (in its sole discretion) in all respects;
(iii) AFC shall have received an appraisal from an
appraiser acceptable to AFC (the "Appraisal") in form and substance satisfactory
to AFC in its sole discretion setting forth a forced liquidation value of
Client's Aircraft Collateral (as defined in the Aircraft Agreement);
(iv) AFC shall have received evidence satisfactory to
it demonstrating that Client owns all of the Aircraft Collateral outright, free
and clear of liens and encumbrances (other than the lien in favor of AFC) and
that the Aircraft Collateral currently held by Client is the same as the
Aircraft Collateral listed in the Appraisal;
(v) AFC shall have received evidence satisfactory in
its sole discretion that all representations of Client under the Aircraft
Agreement are true and correct;
(vi) Client shall have duly authorized, executed and
delivered to AFC UCC1 financing statements in form, substance and number
satisfactory to AFC (the "Financing Statements") and AFC shall have received
evidence satisfactory to it that the Financing Statements have been filed under
the Uniform Commercial Code of each jurisdiction as may be necessary or, in the
judgement of AFC, desirable to perfect the security interests purported to be
created by the Factoring Agreement and the Aircraft Agreement including, without
limitation, AFC's security interest in the Aircraft Collateral. To the extent
any additional filings or actions by Client (including, without limitation, the
execution and filing of any documents or notices in connection with any state or
federal statute regarding certificates of title) may be deemed by AFC to be
necessary or desirable to perfect the interest of AFC in any Collateral
including, without limitation, the Aircraft Collateral, Client shall have duly
authorized, executed and delivered all such documents, notices and any other
writings and done all such acts as AFC may deem necessary or desirable for such
purpose;
(vii) Each of Louis J. Pearlman, Trans Continental
Airlines, Inc. and such other persons or entities may require. (the
"Guarantors") shall have duly executed and
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delivered to AFC a Guaranty in form and substance satisfactory to AFC (each as
modified, supplemented or amended from time to time, individually, a "Guaranty"
and collectively, the "Guaranties") , each Guaranty shall be in full force and
effect and AFC shall have received such security for the obligations of the
Guarantors under the Guaranties as AFC may deem necessary or desirable in its
sole discretion;
(viii) Each of the Guarantors and Client shall have
duly executed and delivered a Subordination Agreement in form and substance
satisfactory to AFC subordinating any rights of the Guarantors to receive
payments from Client to the rights of AFC (the "Subordination Agreement");
(ix) AFC shall, to the extent deemed necessary or
desirable by AFC (in its sole discretion) , have received an opinion of counsel
for Client, which counsel shall be satisfactory to AFC and which opinion shall
be in form and substance satisfactory to AFC (in its sole discretion) and shall
cover such matters incident to this Aircraft CFR Agreement, the Aircraft
Agreement and the Factoring Agreement as AFC may (in its sole discretion)
request;
(x) Client shall have paid all fees and expenses
incurred by Client and/or AFC in connection with this Aircraft CFR Agreement,
the Aircraft Agreement and the Factoring Agreement, without limitation,
appraisal fees and expenses, filing and recordation fees insurance premiums and
legal fees and expenses;
(xi) on the Prefunding Date, both before and after
giving effect to the Prefunding (A) there shall exist no Event of Default (as
defined below) and (B) all representations and warrants contained herein, in the
Aircraft Agreement and in the Factoring Agreement shall be true and correct in
all material respects;
(xii) Any and all unpaid tax obligations and/or tax
liens (whether arising by operation of law, the filing of a lien or a notice of
lien or otherwise) , which could, in AFC's opinion, affect any of the Collateral
(as defined in the Factoring Agreement) and the Aircraft Collateral shall have
been released in full, subordinated in a manner acceptable to AFC (in its sole
discretion) or otherwise resolved in a manner acceptable to AFC (in its sole
discretion);
(xiii) AFC shall have made an initial purchase of
accounts receivable of Client under the Factoring Agreement; and
(xiv) AFC shall have received such financial or other
information and copies of all documents, papers, instruments, agreements,
including records of corporate proceedings and governmental or other public
records and approvals, as AFC may have requested or received in connection with
this Aircraft CFR Agreement, the Factoring Agreement, or the agreements referred
to herein or therein or in connection with the transactions contemplated herein
or therein, and all of the foregoing shall be satisfactory in form and substance
to AFC.
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SECTION 2. EARNINGS; PAYMENT OF EARNINGS; REPAYMENT OF
PREFUNDING; ETC.
(a) Earnings; Payment of Earnings. Notwithstanding anything to
the contrary contained in the Factoring Agreement (or any document or other
written instrument related thereto), Earnings with respect to the Prefunding
shall be charged (commencing on the Prefunding Date) on the outstanding amount
of the Prefunding based on the CFR Earnings Rate Schedule attached hereto as
Exhibit A. Earnings accrued during each calendar month shall be due and payable
in full on or before the fifth calendar day of the immediately succeeding
calendar month.
(b) Voluntary Prepayments. Client may, at any time or from time
to time, without premium or penalty, prepay all or a portion of the Prefunding.
(c) Mandatory Prepayments. Notwithstanding anything to the
contrary contained herein, on any day on which the dollar amount of the
Prefunding exceeds the Funding Base, then Client shall immediately prepay the
Prefunding in an amount that reduces the dollar amount of the Prefunding to not
more than the Funding Base. As used in this Aircraft CFR Agreement, the Funding
Base means on any day an amount equal to the lesser of (i) 50% of the forced
liquidation value of the Aircraft Collateral as set forth in the Appraisal (or
any updated or additional appraisal of the Aircraft Collateral that may be
required by AFC in its sole discretion in form and substance satisfactory to AFC
in its sole discretion) and (ii) an amount which equals $1,750,000.00 minus all
other amounts outstanding under the other agreements between Client and AFC
(including, without limitation, accrued and unpaid fees, discount and earnings).
(d) Scheduled Prefunding Repayment. Notwithstanding anything to
the contrary contained herein or in the Factoring Agreement, unless sooner
repaid under the terms hereof or of the Factoring Agreement (whether upon the
occurrence of an Event of Default or otherwise), the Prefunding and all accrued
but unpaid Earnings and other amounts due from Client under this Aircraft CFR
Agreement shall be repaid to AFC in full no later than the earlier of (i) the
last day of the Sale Period (as defined in the Factoring Agreement) and (ii)
November 16, 1996.
(e) Methods of Payment. Except as otherwise specifically provided
herein, any payment required or permitted to be made pursuant to this Aircraft
CFR Agreement may, at the option of Client be made by one or any combination of
the following methods: (i) Client may make such payment in cash (including,
without limitation, by wire transfer of immediately available funds); (ii)
Client may authorize and direct AFC to apply all or a portion of amounts, if
any, otherwise due Client under the Factoring Agreement to such payment; and/or
(iii) Client may authorize and direct AFC to apply all or a portion of the
proceeds from the purchases (s) of Accounts by AFC pursuant to the Factoring
Agreement (which proceeds have not theretofore been paid to (or on behalf of)
Client) to such payment.
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If Client fails to pay all or any portion of the Prefunding or
Earnings when due (including, without limitation, following the acceleration of
the maturity thereof in accordance with the terms hereof), Client shall be
deemed to have irrevocably authorized and directed AFC to make such payment in
accordance with clause (ii) and/or (iii), as determined by AFC, of the
immediately preceding paragraph, and Client shall remain liable for any
deficiency in such payment.
Whenever any payment to be made hereunder shall be stated to be
due (or required to be made) on a day which is not a Business Day (as defined
below), the due date thereof shall be extended to the next succeeding Business
Day and, with respect to repayments of the Prefunding (but not Earnings),
Earnings shall continue to accrue during such extension. For purposes hereof,
"Business Day" shall mean any day other than Saturday, Sunday and any other day
on which AFC is not open for business.
SECTION 3. REPRESENTATIONS AND WARRANTIES
In order to induce AFC (i) to enter into this Aircraft t CFR Agreement
and to make the Prefunding and (ii) to enter into the Factoring Agreement and to
make advances and other financial accommodations thereunder, Client makes the
following representations, warranties and agreements with respect to itself as
of the Prefunding Date and at all times thereafter, all of which shall survive
the execution and delivery of this Aircraft CFR Agreement and the making of the
Prefunding:
(a) Execution of Agreement. This Aircraft CFR Agreement, the
Aircraft Agreement and the Factoring Agreement have been duly authorized,
executed and delivered by the Client and constitute the legal, valid and binding
obligations of the Client enforceable in accordance with their respective terms.
(b) No Violation. Neither the execution, delivery or performance
by the Client of this Aircraft CFR Agreement, the Aircraft Agreement or the
Factoring Agreement, nor compliance by the Client with the terms hereof or
thereof, nor the use of the proceeds of the Prefunding (x) will contravene any
provision of any law, statute, rule or regulation or any order, writ, injunction
or decree of any court or governmental instrumentality, (y) will conflict or be
inconsistent with or result in any breach of any of the terms, covenants,
conditions or provisions of, or constitute a default under, or result in the
creation of imposition of (or the obligation to create or impose) any lien
(except pursuant to this Aircraft CFR Agreement, the Factoring Agreement or the
Aircraft Agreement) upon any of the property or assets of the Client pursuant to
the terms of any indenture, mortgage, deed of trust, credit agreement, loan
agreement or any other agreement, contract or instrument to which any of them is
a party or by which any of them or any of their property or assets is bound or
to which any of them may be subject or (z) will violate any provision of the
Certificate or Articles of Incorporation or ByLaws of the Client.
(b) True and Complete Disclosure. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on behalf of
Client in writing to AFC
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including, without limitation, all information contained herein, in the Aircraft
Agreement or in the Factoring Agreement for purposes of or in connection with
any transaction contemplated herein or therein is, and all other such factual
information (taken as a whole) hereafter furnished by or on behalf of the Client
in writing to AFC will be, true and accurate in all material respects on the
date as of which such information is dated or certified and not incomplete by
omitting to state any fact necessary to make such information (taken as a whole)
not misleading at such time in light of the circumstances under which such
information was provided.
SECTION 4. AFFIRMATIVE COVENANTS
Client covenants and agrees that on and after the Prefunding Date and
until the Prefunding together with Earnings and all other obligations incurred
hereunder and under the Factoring Agreement are paid in full:
(a) Performance of Obligations. Client will perform all of its
obligations under the terms hereof, of the Factoring Agreement, the Aircraft
Agreement and each and every mortgage, indenture, security agreement, debt
instrument and other contract by which it is bound.
(b) Further Assurances. Client, shall at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to AFC from time to time such
vouchers, invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, instruments
and documents, and take such further steps relating to the Collateral covered by
the Factoring Agreement and the Aircraft Collateral covered by the Aircraft
Agreement, as AFC may require.
SECTION 5. EVENTS OF DEFAULT
Upon the occurrence of any of the following specified events (each an
"Event of Default"):
(i) Payments. Client shall default in the payment when due of all or
any portion of the Prefunding, Earnings or any other amounts owing hereunder,
under the Factoring Agreement, under the Aircraft Agreement or under any other
Collateral Funding Repayment Agreement entered into from time to time by and
between Client and AFC; or
(ii) Representations, etc. Any representation, warranty or statement
made by Client in the Factoring Agreement, the Aircraft Agreement, this Aircraft
CFR Agreement, in any other Collateral Funding Repayment Agreement by and
between one or more of the Clients and AFC, or in any certificate delivered
pursuant hereto or thereto shall prove to be untrue in any material respect on
the date as of which made; or
(iii) Covenants. Client shall default in the due performance or
observance of any term, covenant or agreement (other than those referred to in
clause (i) or (ii) of this Section
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6) contained in this Aircraft CFR Agreement, in the Aircraft Agreement or in
any other Collateral Funding Repayment Agreement by and between Client and AFC,
or the Factoring Agreement; or
(iv) Security Documents. Any one of the Factoring Agreement, the
Aircraft Agreement and/or any mortgage granted to AFC as security for the
obligations of any Guarantor shall cease to be in full force or effect, or shall
cease to give AFC (or a trustee for the benefit of AFC), the liens, lien
priorities, rights, remedies, powers and privileges purported to be created
thereby (including, without limitation, a perfected security interest in, and
lien on, the collateral described therein; or
(v) Guaranties. One or more of the Guaranties or any provision
thereof shall cease to be in full force or effect, or any Guarantor (or any
person or entity acting by or on behalf of any Guarantor) shall deny or
disaffirm the obligations of such Guarantor under a Guaranty, or any Guarantor
shall default in the due performance or observance of any term, covenant or
agreement on its part to be performed or observed pursuant to a Guaranty or any
mortgage granted as security for the obligations of such Guarantor; or
(vi) Judgments. One or more judgments or decrees shall be entered
after the date hereof against Client involving in the aggregate a liability of
$10,000.00 or more, and all such judgments or decrees shall not have been
vacated, discharged, or stayed or bonded pending appeal within 30 days after the
entry thereof; or
(vii) Default Under Other Agreements. Client shall (i) default in any
payment of any material indebtedness or obligations (other than obligations
incurred hereunder, under the Aircraft Agreement or under the Factoring
Agreement) beyond the period of grace, if any, provided in the instrument or
agreement under which such indebtedness or obligation was created or (ii)
default in the observance or performance of any agreement or condition relating
to any material indebtedness or obligation (other than obligations incurred
hereunder, under the Aircraft Agreement or under the Factoring Agreement) or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit the holder or
holders of such indebtedness or obligation (or a trustee or agent on behalf of
such holder or holders) to cause (determined without regard to whether any
notice is required), any such indebtedness or obligation to become due prior to
its stated maturity; or any material indebtedness or obligation of any of the
parties shall be declared to be due and payable, or required to be prepaid other
than by a regularly scheduled required prepayment, prior to the stated maturity
thereof;
(viii) Bankruptcy, etc. Client shall commence a voluntary case
concerning itself under Title 11 of the United States Code entitled
"Bankruptcy," as now or hereafter in effect, or any successor thereto (the
"Bankruptcy Code"); or an involuntary case is commenced against it, and the
petition is not controverted within 10 days, or is not dismissed within 30 days,
after commencement of the case; or a custodian (as defined in the Bankruptcy
Code) is appointed for,
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or takes charge of, all or substantially all of the property of Client or Client
commences any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar
law of any jurisdiction whether now or hereafter in effect relating to Client,
or there is commenced against Client any such proceeding which remains
undismissed for a period of 30 days, or Client is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or Client suffers any appointment of any custodian or the
like for it or any substantial part of its property to continue undischarged or
unstayed for a period of 30 days; or Client makes a general assignment for the
benefit of creditors; or any corporate, partnership or other action is taken by
Client for the purpose of effecting any of the foregoing;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, AFC may, by written notice to Client, take any or all
of the following actions (provided, that, if an Event of Default specified in
Section 6 (six) shall occur with respect to Client, the result which would occur
upon the giving of written notice by AFC to Client as specified below shall
occur automatically without the giving of any such notice) (i) declare the
Prefunding and any accrued Earnings in respect thereof and all obligations owing
hereunder, under the Aircraft Agreement and any other Collateral Funding
Repayment Agreement by and between Client and AFC and under the Factoring
Agreement to be, whereupon the same shall become, forthwith due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by Client, and (ii) exercise any and all of its rights,
remedies and powers under the Factoring Agreement, the Aircraft Agreement and/or
the Guaranties. Without limiting the generality of the foregoing, Client
acknowledges and agrees that AFC may, at any time or from time to time following
the occurrence and during the continuation of an Event of Default, apply any and
all amounts which may otherwise be due (or may otherwise from time to time
become due) to Client under the Factoring Agreement to obligations of Client to
AFC hereunder or otherwise, at such times and in such manner as AFC, in its sole
discretion, shall determine.
Client hereby expressly waives any and all rights to require a
marshalling of assets upon the foreclosure (or other realization) by AFC upon
any of its liens on, or security interests, in the real or personal property of
Client or of any guarantors of the obligations of Client.
SECTION 6. THE AIRCRAFT CFR AGREEMENT AND THE FACTORING
AGREEMENT.
Except as expressly set forth herein, this Aircraft CFR Agreement shall
not constitute a modification, acceptance or waiver of any provision of the
Factoring Agreement or any other document or instrument related thereto. Without
in any way limiting the foregoing, to the extent this Aircraft CFR Agreement
expressly modifies any provision of the Factoring Agreement such modification
shall apply to the Factoring Agreement only as such modification relates to the
Prefunding.
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SECTION 7. MAXIMUM PERMITTED EARNINGS
To the extent that the Earnings payable hereunder exceed any applicable
maximum rate permitted by law, the charge applied under Section 2(a) to the
Prefunding shall be deemed at all times since the Prefunding Date to have been
equal to the maximum permitted rate, and any amount collected by AFC in excess
of the maximum permitted rate shall be credited to payment of the Prefunding
and/or other obligations of Client to AFC hereunder or under any other agreement
or document between AFC and Client. It is the express intent of the parties
hereto that Client shall not pay, and AFC shall not receive, directly or
indirectly, Earnings in excess of what may be lawfully paid by Client or
received by AFC under applicable law.
SECTION 8. REIMBURSEMENT AND INDEMNITY
Client shall: (i) whether or not transactions herein contemplated are
consummated, pay all reasonable out-of-pocket costs and expenses of (x) AFC
(including, without limitation, the reasonable fees and disbursements of counsel
for AFC) in connection with the preparation, execution and delivery of this
Aircraft CFR Agreement and the documents and instruments referred to herein and
any amendment, waiver or consent relating hereto or thereto and (y) AFC in
connection with the enforcement of this Aircraft CFR Agreement and the documents
and instruments referred to herein (including, without limitation, the
reasonable fees and disbursements of counsel for AFC); (ii) pay and hold AFC
harmless from and against any and all present and future stamp and other similar
taxes with respect to the foregoing matters and save AFC harmless from and
against any and all liabilities with respect to or resulting from any delay or
omission to pay such taxes; and (iii) indemnify AFC, its officers, directors,
employees, representatives and agents from and hold each of them harmless
against any and all liabilities,' obligations, losses, damages, penalties,
claims, actions, judgments, suits, costs, expenses and disbursements incurred by
any of them as a result of, or arising out of, or in any way related to, or by
reason of, any investigation, litigation or other proceeding (whether or not AFC
is a party thereto) related to the entering into and/or performance of this
Aircraft CFR Agreement, the Aircraft Agreement and/or the Factoring Agreement or
the use of the proceeds of the Prefunding or the consummation of any of the
transactions contemplated herein or therein (including, without limitation, the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation, litigation or other proceeding, whether or not AFC is a
party thereto) , including, without limitation, any and all liabilities,
obligations, losses, damages, penalties, claims, actions, judgments, suits,
costs, expenses and disbursements resulting from, arising out of or based upon
the presence, release, use, manufacture, installation, generation, discharge,
storage or disposal at any time of hazardous materials (as such terms or any
similar terms may be defined under or in connection with any and all applicable
local, state or federal law) including, without limitation, any and all
chemicals, materials or substances, the exposure to which is regulated, limited
or prohibited by any governmental authority or applicable law, on, under, in or
about, or the transportation of any such material to or from, any of the real
property owned, leased or operated by Client (but, excluding any such
liabilities, obligations, losses, etc. , to the extent incurred by reason of the
gross negligence or willful misconduct of the person or entity to be
indemnified). The provisions of this Section 9 shall
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survive the repayment of the Prefunding and the termination, if any, of this
Aircraft CFR Agreement, the Aircraft Agreement and/or the Factoring Agreement.
SECTION 9. MISCELLANEOUS
(a) Counterparts. This Aircraft CFR Agreement may be executed in
any number of counterparts and by the different parties hereto on separate
counterparts, each of which counterpart when executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. A complete set of counterparts shall be lodged with Client and AFC.
(b) Governing Law; Waiver of Jury Trial; Consent to Jurisdiction.
This Aircraft CFR Agreement and the rights and obligations of the parties
hereunder shall be construed in accordance with and governed by the law of the
Commonwealth of Virginia (without giving effect to the conflict of laws
principles thereof). The Client, who is represented by counsel, in recognition
of the greater costs and delays incurred by a jury trial, hereby waives any and
all right to a jury in any jurisdiction in any court in any action brought by
AFC with respect hereto. In any such action, the Client hereby consents to the
exclusive jurisdiction of any court of competent jurisdiction of the
Commonwealth of Virginia and of any Federal Court located in such Commonwealth
and venue in either the United States District Court for the Eastern District of
Virginia or the Circuit Court for the County of Arlington or the General
District Court of Arlington County for a determination of any dispute as to any
matters whatsoever arising out of or in any way connected with this Aircraft CFR
Agreement and the Client hereby authorizes the service of process on it at its
address set forth in the Factoring Agreement.
(b) Effectiveness. This Aircraft CFR Agreement shall become
effective as of the date first above written when each of the parties hereto
shall have signed a copy hereof (whether the same or different copies) and shall
have delivered (including by way of telecopier) the same to AFC at its offices
in Arlington, Virginia.
(c) Benefit of Agreement. This Aircraft CFR Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; provided, however, that Client may
not assign or transfer any of its rights or obligations hereunder without the
prior written consent of AFC and, provided further, that AFC may assign or
transfer all or any portion of its rights hereunder without the consent of
Client.
(d) No Waiver; Remedies Cumulative. No failure or delay on the
part of AFC in exercising any right, power or privilege hereunder or under the
Factoring Agreement, any other Collateral Funding Repayment Agreement by and
between Client and AFC and/or the Guaranties, and no course of dealing between
Client and AFC, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or under the
Factoring Agreement and/or the Guaranties, preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights,
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powers and remedies herein and in the Factoring Agreement and/or the Guaranties
are cumulative and not exclusive of any rights, powers or remedies which AFC may
otherwise have. No notice to or demand on Client in any case shall entitle
Client to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of AFC to any other or
further action in any circumstances without notice or demand.
(e) Headings Descriptive. The headings of the several sections
and subsections of this Aircraft CFR Agreement are inserted for convenience only
and shall not in any way effect the meaning of construction of any provision of
this Aircraft CFR Agreement.
(f) Amendment or Waiver. Neither this Aircraft CFR Agreement nor
any terms hereof may be changed, waived, discharged or terminated unless such
change, waiver, discharge or termination is in writing and signed by Client and
AFC.
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Aircraft CFR Agreement to be duly executed and delivered as of the date
first above written.
AIRSHIP INTERNATIONAL LTD.
By: /s/ LOUIS J. PEARLMAN
----------------------------
Louis J. Pearlman, President
ALLSTATE FINANCIAL CORPORATION
By: /s/
----------------------------
Name:
Title:
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EXHIBIT A
CFR EARNINGS RATE SCHEDULE
Earnings to be charged under the Aircraft Collateral Funding Repayment Agreement
dated November 16, 1994, by and between Airship International Ltd. and Allstate
Financial Corporation shall be based on the outstanding amount of the Prefunding
made thereunder.
The earnings will be charged on the highest outstanding amount of the Prefunding
during the relevant period set forth below, and will be calculated based on the
number of days from and including the Prefunding Date to and including the fifth
business day following receipt of payment on the Prefunding, as follows:
1 - 30 Days ....................................... 3.125% Earnings
31 - 45 Days ....................................... 4.688% Earnings
46 - 60 Days ....................................... 6.251% Earnings
61 - 75 Days ....................................... 7.814% Earnings
76 - 90 Days ....................................... 9.377% Earnings
Plus an additional 1.563% for each additional 15 day period, or portion thereof
thereafter.
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ADDENDUM
In addition to the provisions of the Accounts Receivable Factoring and
Security Agreement (together with all documents related thereto as modified,
amended or supplemented from time to time, the "Agreement") executed by and
between Allstate Financial Corporation ("AFC") and Airship International Ltd.
("Client") on or about November 16, 1994, the parties do hereby acknowledge and
agree with each other as follows:
1. Subject to the terms and conditions of the Agreement, AFC has
committed to Client the availability of up to $1,750,000.00 net funds
outstanding to Client at any one time. In consideration of this commitment
Client has agreed to pay AFC a fee of .125% per month (or any fraction thereof)
payable monthly in arrears no later than the fifth calendar day of each month
with respect to the immediately preceding calendar month calculated on the
higher of the highest net funds outstanding on any day during such preceding
month and $1,750,000.00. The term "net funds outstanding to Client" and/or "net
funds outstanding" as used herein shall include the sum total at any given time
of (i) advances made by AFC to Client (whether or not made under the Agreement
or any Collateral Funding Repayment Agreement), (ii) discount and other fees and
charges then accrued (but not yet collected) pursuant to the terms of the
Agreement, (iii) all contingent obligations of Client under or in respect of any
Letter of Guaranty or Letter of Credit issued by (or arranged for by) AFC for
Client, and (iv) any other amounts due to AFC (whether under the Agreement or
otherwise) which have not then been paid or repaid to AFC. AFC may deduct any
commitment fee or fees provided for herein from Client's subsequent funding or
fundings or as otherwise provided in the Agreement. Client acknowledges and
agrees that the available amount (and therefore the permitted "net funds
outstanding") shall
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decrease automatically by $75,000.00 on the first day of each month beginning on
December 1, 1994 and Client shall pay to AFC all amounts required so that the
net funds outstanding in each month do not exceed the available amount for such
month.
2. Client understands and agrees that notwithstanding any other
provisions hereof or of the Agreement or any other agreement or document entered
into between AFC and Client, it is intended that AFC receive no less than
$75,000.00 each month in collections from Debtors or from Client directly. Such
collections shall be applied by AFC first to accrued and unpaid fees and
expenses of AFC payable to AFC and to accrued and unpaid earnings with respect
to any and all Accounts purchased and any outstanding prefunds in any order in
the sole discretion of AFC and next to outstanding advances made in connection
with the purchase of Accounts or the making of any prefunding. In the event AFC
does not receive collections totalling $75,000.00 in any month either from
Debtors or from Client, then and in such event (and without limiting or
modifying any terms or provisions hereof or of the Agreement), a default shall
be deemed to have occurred under the Agreement.
3. Client further understands and agrees that notwithstanding the
provision for an availability of up to $1,750,000.00 under paragraph 1 above,
any amounts advanced by AFC in excess of $1,500,000.00 shall be held in a form
acceptable to AFC in its sole discretion and shall be put under the control of
AFC in a manner acceptable to AFC in its sole discretion.
4. Client and certain guarantors of the obligations of Client have
executed and delivered to AFC in connection herewith certain Confessed Judgment
Demand Notes each in an amount equal to the amount of the commitment referenced
above ($1,750,000.00) plus ten percent (100%). In the event the net funds
outstanding ever exceeds $1,750,000.00, then and
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in such event, Client and such guarantors shall enter into new Confessed
Judgment Demand Notes as requested by AFC in its sole discretion each in an
amount equal to the increased amount plus ten percent (10%). Client acknowledges
and confirms that any failure or delay by Client or any guarantor to execute a
new Confessed Judgment Demand Note on request by AFC shall be a default under
the terms of the agreement.
4. Client has paid to AFC a nonrefundable closing fee of $10,000.00 (the
"Closing Fee"). Client shall in addition to the Closing Fee, pay to (or
reimburse) AFC for any additional costs incurred by AFC during the initial audit
of Client, to include but not be limited to the cost of travel, hotel and meals
for one auditor and any additional costs related to the perfection of AFC's
interests in the Collateral or any other property in which AFC is granted an
interest in connection with any transactions between the Client and AFC,
including without limitation, the filing of UCC financing statements beyond the
initial filings against Client's corporate name and headquarters address, the
searching of records related to any name other than Client's corporate name
and/or locations beyond Client's corporate headquarters and/or all costs
and disbursements (including all attorney fees and disbursements) related to
the perfection of AFC's security interest in the Aircraft Collateral (as defined
in the Aircraft Security Agreement of even date herewith) (collectively,
"Additional Expenses"). Any unpaid Additional Expenses shall be paid out of the
initial funding of Client. If a determination is made that no funding shall take
place, then Client shall be immediately responsible for payment of all
Additional Expenses and shall make immediate payment to AFC therefor.
5. The Client may repurchase all Accounts and repay in full all
obligations outstanding hereunder at any time. In the event Client wishes to
repurchase all Accounts and
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repay all amounts outstanding hereunder, Client shall notify AFC in writing of
its intent to do so not less than 15 days prior to the date on which such
repurchase and repayment is to be made (the "Repayment Date") On the Repayment
Date, Client shall pay to AFC in full all outstanding advances under the
Agreement and any Collateral Funding Repayment Agreement entered into in
connection therewith or otherwise, all accrued and unpaid discount and all other
fees and expenses (including without limitation supplemental discount for each
of the remaining unused months of the Sale Period) payable to AFC under the
Agreement and any Collateral Funding Repayment Agreement entered into in
connection therewith or otherwise. Upon receipt of (i) all such amounts and (ii)
Mutual Releases in form and substance satisfactory to AFC in its sole discretion
executed by Client, AFC agrees that this Agreement shall be terminated as
described in Section 17(a) Agreement.
6. Notwithstanding any other provision hereof or of the Agreement or
any other agreement or document entered into in connection herewith or
therewith, unless and until a default shall have occurred and be continuing
under the Agreement, AFC shall not notify or otherwise attempt to directly
collect payments from any Debtors of Client.
7. Except as modified hereby all other terms and conditions of the
Agreement remain the same and in full force and effect.
IN WITNESS WHEREOF the parties execute this Addendum this 16th day of
November, 1994.
AIRSHIP INTERNATIONAL LTD.
By: LOUIS J. PEARLMAN
----------------------------
Louis J. Pearlman, President
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ALLSTATE FINANCIAL CORPORATION
By:
----------------------------
Name:
Title:
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STATE OF VIRGINIA
COUNTY OF ARLINGTON
On this 16th day of November, 1994, before me, a Notary Public,
personally appeared Louis J. Pearlman as President of Airship International
Ltd., a corporation, and that as such officer he is authorized to execute and
acknowledge the foregoing instrument on behalf of said corporation for the
purposes contained therein, by signing the name of the corporation by himself as
President and that he in fact so executed and acknowledged the instrument before
me on the date written above.
---------------------------------
Notary Public
My Commission expires:
STATE OF VIRGINIA
COUNTY OF ARLINGTON
On this 16th day of November, 1994, before me, a Notary Public, personally
appeared _______________________ of ALLSTATE FINANCIAL CORPORATION a corporation
and that as such officer he(she) is authorized to execute and acknowledge the
foregoing instrument on behalf of said corporation for the purposes contained
therein, by signing the name of the corporation by himself(herself) as
_______________________________________ and that he(she) in fact so executed and
acknowledged the instrument before me on the date written above.
---------------------------------
Notary Public
My Commission expires:
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<PAGE>
AMENDED AND RESTATED GUARANTY
BY
LOUIS A. PEARLMAN
IN FAVOR OF
ORIX USA CORPORATION (FORMERLY KNOWN AS
ORIX COMMERCIAL CREDIT CORPORATION)
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AMENDED AND RESTATED GUARANTY
This Amended and Restated Guaranty is delivered as of June 2, 1995 by
LOUIS J. PEARLMAN, an individual ("Guarantor"), in favor of ORIX USA
CORPORATION (FORMERLY KNOWN AS ORIX COMMERCIAL CREDIT CORPORATION), a Delaware
Corporation ("Lessor").
RECITALS
A. AIRSHIP INTERNATIONAL LTD., a New York corporation ("Lessee,,), and
Lessor entered into a Lease Agreement dated as of November 2, 1989 (the
"Original Lease") for the lease of a 600 Series Skyship.
B. Lessee and Lessor have amended and restated the Original Lease as of
the date hereof pursuant to an Amended and Restated Lease Agreement in the form
of a Conditional Sales Agreement (the "Lease").
C. Lessee's obligations related to the original Lease were guarantied by
Guarantor pursuant to an agreement dated November 2, 1989 (the "Original
Guaranty").
D. it is a condition to the making of the Lease that Lessee's
Obligations be guarantied by Guarantor.
E. Guarantor is willing irrevocably and unconditionally to guaranty the
Obligations of Lessee pursuant to the terms of this Amended and Restated
Guaranty.
NOW, THEREFORE, based upon the foregoing and ocher good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
and in order to induce Lessor to enter into the Lease, Guarantor hereby agrees
with Lessor as follows:
SECTION 1. DEFINITIONS
1.1 Certain Defined Terms. As used in this Guaranty, the following terms
shall have the following meanings, unless the context otherwise requires:
"Airship" means the Gondola, the Envelope, the Engines and Propellers
all as more specifically described in the Amended and Restated Lease
Supplement dated the date hereof for the Airship together with the
equipment, components, written materials, data and accessories installed
thereon or delivered therewith, including the Buyer Furnished Equipment,
the Night Sign, the Spare Equipment and any replacements and
substitutions thereof as permitted under the Lease.
"Guaranty" means this Amended and Restated Guaranty of Guarantor, as it
may be amended, modified or supplemented.
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"Obligations" has the meaning assigned to that term in subsection 2.1.
"Payment in full", "paid in full" or any such similar term means payment
in full of the Obligations including, without limitation, all principal,
interest, costs, fees and expenses (including, without limitation,
legal fees and expenses) of Lessor as required under the Lease.
All capitalized terms used herein and not otherwise defined herein shall have
the meanings given such terms in the Lease.
SECTION 2. THE GUARANTY
2.1 Guaranty of the Obligations. Guarantor hereby irrevocably and
unconditionally guaranties the due and punctual payment in full and performance
otherwise of all Obligations when the same shall become due, whether at stated
maturity, by required prepayment, acceleration, demand or otherwise. The word
"Obligations" includes
(a) all obligations of Lessee arising out of the Lease;
(b) any and all other agreements, indebtedness, fees, costs, expenses
(including, without limitation, legal fees and expenses of counsel),
indemnities and liabilities of Lessee now or hereafter made, incurred or
created, whether absolute or contingent, liquidated or unliquidated, whether
due or not due, and however arising out of the Lease whether recovery upon such
Obligations may be or hereafter become barred by any statute of limitations, or
whether such Obligations may be or hereafter become otherwise unenforceable;
(c) an amount equal to interest on the foregoing monetary amounts
(including any interest that would have accrued but for the commencement of a
case or proceeding under the federal bankruptcy laws) at the Overdue Interest
Rate as defined in the Lease;
(d) those expenses set forth in Section 7 hereof; and
(e) all or any portion of the foregoing obligations that are paid, to
the extent all or any part of such payment is avoided or recovered directly or
indirectly from Lessor as a preference, fraudulent transfer or otherwise.
2.2 Liability of Guarantor. Guarantor agrees that his obligations
hereunder are irrevocable, absolute, independent and unconditional and shall
not be affected by any circumstance which constitutes a legal or equitable
discharge of a guarantor or surety other than indefeasible payment and
performance in full of the Obligations. in furtherance of the foregoing,
Guarantor agrees as follows:
(a) This Guaranty is a guaranty of payment and performance and not of
collectibility and is not conditional or contingent upon the genuineness,
validity,
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regularity or enforceability of the Lease or the pursuit by Lessor of any
remedies that it now has or may hereafter have under the Lease, at law, in
equity or otherwise.
(b) Lessor may enforce this Guaranty upon the occurrence of an Event
of Default under the Lease, notwithstanding (i) the existence of any
dispute between Lessor and Lessee with respect to the existence'. of an
Event of Default; (ii) any counterclaim, set-off or other claim which
Lessee may allege against Lessor with respect thereto; or (iii) any defect
in the title, compliance with specifications, condition, design, operation
or fitness for use of, or any damage to or loss or destruction of, or any
redelivery, repossession, surrender or other interruption or cessation in
the use of, the Airship by the Lessee or any other person for any reason
whatsoever (including, without limitation, any governmental prohibition or
restriction, condemnation, requisition, seizure or any other act an the
part of any governmental or military authority, or any act of God or of the
public enemy) regardless of the duration thereof (even though such duration
would otherwise constitute a frustration of a lease), whether or not
resulting from accident and whether or not without fault on the part of the
Lessee or any other person.
(c) The obligations of Guarantor hereunder are independent of the
obligations of Lessee under the Lease, and a separate action or actions may
be brought and prosecuted against Guarantor whether or not any action is
brought against Lessee or whether or not Lessee is joined in any such
action or actions. Guarantor's liability under this Guaranty shall not be
reduced by virtue of any partial payment or other performance by Lessee of
any amount due or obligation owing under the Lease, except to the extent of
any such payment that is not avoided or recovered directly or indirectly
from Lessor as a preference, fraudulent transfer or otherwise, or by
recourse to any collateral or security.
(d) Guarantor's payment or performance of a portion, but not all, of
the Obligations shall in no way limit, affect, modify or abridge
Guarantor's liability for that portion of the Obligations which is not paid
or performed. Without limiting the generality of the foregoing, if Lessor
is awarded a judgment in any suit brought to enforce Guarantor's covenant.
to pay or perform a portion of the Obligations, such judgment shall not be
deemed to release Guarantor from his covenant to pay or perform the portion
of the Obligations that is not the subject of such suit.
(e) Lessor, upon such terms as it deems appropriate, without notice or
demand and without affecting Guarantor's liability hereunder, from time to
time may (i) renew, extend, accelerate or otherwise change the time, place,
manner or terms of payment or performance of the Obligations; (ii) settle,
compromise, release, discharge, or accept or refuse any offer of
performance with respect to, or substitutions for, the Obligations or any
agreement relating thereto and/or subordinate the payment of the same to
payment of other obligations; (iii) take and hold security for the payment
or performance of this Guaranty or the Obligations, and enforce any such
security consistent with any applicable security agreement; (iv) release,
surrender, exchange, compromise, settle, rescind, waive, subordinate or
modify, any security for payment or performance of the Obligations, any
other guaranties of the Obligations, or any other obligation of any
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Person with respect to the Obligations; (v) elect to abstain from
repossessing the Airship or taking advantage of or realizing upon any
security interests or other guaranty; (vi) elect to repossess the Airship
or to foreclose on any security held by or for the benefit of Lessor by one
or more judicial or nonjudicial sales or exercise any other right or remedy
Lessor may have against Lessee, the Airship or any security, even though
any such election operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of Guarantor against
Lessee or any security for the Obligations; (vii) re-lease or sell the
Airship or apply any security and direct the order or manner of sale
thereof as Lessor in its discretion may determine consistent with the Lease
and any applicable security agreement; (viii) release or substitute any one
or more endorsers or guarantors of the Obligations; and (ix) exercise any
rights available to it under the Lease.
(t) This Guaranty shall be valid and enforceable and shall not be
impaired or affected by the occurrence of any of the following, whether or
not Guarantor shall have had notice or knowledge of any of them: (i.) any
failure or omission to enforce or agreement not to enforce, or the stay or
enjoining by order of court, by operation of law or otherwise, of the
exercise of, any right, power or remedy with respect to the obligations or
any agreement relating thereto, or with respect to any security for the
payment or performance of the Obligations; (ii) any amendment or waiver,
whether or not in accordance with the terms of the Lease, of any right,
power or remedy or of any default with respect to the obligations or any
agreement relating thereto, or with respect to any security for the
obligations; (iii) the obligations, or any agreement relating thereto, at
any time being found to be illegal, invalid or unenforceable in any
respect; (iv) the application of payments received from any source (other
than payments received pursuant to the payment of indebtedness other than
the Obligations), even though Lessor might have elected to apply such
payment to any part or all of the Obligations; (v) LESSOR'S acceptance of
new or additional documents, instruments or agreements relating to the
Obligations; (vi) Lessor's consent to the change, reorganization or
termination of the corporate structure or existence of Lessee and to any
corresponding restructuring of the obligations; (vii) any failure to
perfect or continue perfection of a security interest in any collateral;
and (viii) any defenses which Lessee may assert on the underlying
indebtedness or agreements.
2.3 Waivers by Guarantor. Guarantor hereby waives for the benefit of
Lessor:
(a) any right to require Lessor, as a condition of payment or
performance by Guarantor to (i) proceed against Lessee or any other Person,
(ii) proceed against or exhaust any security held from Lessee, or any other
Person, or (iii) pursue any other remedy in the power of Lessor whatsoever;
(b) any defense arising by reason of the incapacity, lack of authority
or any disability or other defense of Lessee including, without limitation,
any defense based on or arising out of the lack of validity or the
unenforceability of the Obligations or any agreement or instrument relating
thereto or by reason of the cessation from any cause of the liability of
Lessee other than indefeasible payment and performance in full of the
Obligations;
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(c) any defense based upon any statute or rule of law which provides
that the obligation of a surety must be neither larger in amount nor in
other respects more burdensome than that of the principal, or based upon
Lessor's errors or omissions in the administration of the Obligations,
except behavior which amounts to bad faith;
(d) any (i) principles or provisions of law, statutory or otherwise,
which are or might be in conflict with the terms of this Guaranty, any
legal or equitable discharge of its obligations hereunder and the benefit
of any statute of limitations affecting its liability hereunder or the
enforcement hereof, (ii) rights to set-offs, recoupments and counterclaims,
rights to deferral or modification of Guarantor's obligations hereunder by
reason of any bankruptcy, reorganization, arrangement, moratorium or other
debtor relief proceeding, (iv) promptness, diligence and any requirement
that Lessor protect, secure, perfect or insure any security interest or
lien or any property subject thereto, or exhaust any right or take any
action against Lessee, any other Person, the Airship or any collateral.;
and
(e) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including
acceptance of this Guaranty, notices of default under the Lease or any
agreement or instrument related thereto, notices of any renewal, extension
or modification of the Obligations or any agreement related thereto,
notices of any other extension of credit to Lessee and notices of any of
the matters referred to in Section 2.2 and any right to consent to any
thereof.
2.4 Subrogation. Until the Obligations shall have been indefeasibly paid
and performed in full, Guarantor shall withhold exercise of (a) any right of
subrogation, (b) any right to enforce any remedy which Lessor now has or may
hereafter have against Lessee (c) any right of contribution Guarantor may have
against any other guarantor of any of the Obligations under any other guaranty
relating to the Lease, or (d) any benefit of, and any right to participate in,
(i) any sale or re-lease of the Airship or (ii) any security now or hereafter
held by Lessor; provided, however, that once the Obligations have been
indefeasibly paid and performed in full Guarantor shall be entitled to exercise
any right of subrogation available to it against Lessee.
2.5 Subordination of Other Obligations. Any indebtedness of Lessee for
borrowed money now or hereafter held by Guarantor and any right of Guarantor to
subrogation against Lessee, shall in all respects be subordinated in right of
payment to the Obligations, and in the event Lessee shall default in the payment
or performance of the obligations, any indebtedness of-Lessee to Guarantor
collected or received by Guarantor shall be held in trust for Lessor and shall
be paid over to Lessor.
2.6 Bankruptcy. The obligations of Guarantor under this Guaranty shall
not be altered, limited or affected by any proceeding, voluntary or involuntary,
involving the bankruptcy, insolvency, receivership, reorganization, liquidation
or arrangement of Lessee or by any defense which Lessee may have by reason of
the order, decree or decision of any court or administrative body resulting from
any such proceeding. Guarantor acknowledges and agrees that any interest on the
Obligations which accrues after the commencement of any such proceeding (or, if
interest on any portion of the Obligations ceases to accrue by operation of law
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by-reason of the commencement of said proceeding, such interest as would have
accrued on any such portion of the Obligations if said proceedings had not been
commenced) shall be included in the Obligations because it is the intention of
the parties that the Obligations which are guaranteed by Guarantor pursuant to
this Guaranty should be determined without regard to any rule of law or order
which may relieve. Lessee of any portion of such Obligations.
SECTION 3. REPRESENTATIONS AND WARRANTIES
In order to induce Lessor to accept this Guaranty and enter into the
Lease, Guarantor hereby represents and warrants to Lessor that the following
statements are true and correct:
3.1 Existence. Guarantor is an individual resident in the state of
Florida and has the legal capacity to own his assets and to transact the
business in which he is now engaged.
3.2 Authorization. Enforceable Obligations. Guarantor has the authority
and legal right to execute, deliver and perform this Guaranty on the terms and
conditions hereof. No consent of any other Person including, without limitation,
creditors of Guarantor, and no license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or declaration with,
any governmental authority is required by Guarantor in connection with this
Guaranty or the execution, delivery, performance, validity or enforceability of
this Guaranty and all obligations required hereunder. This Guaranty has been,
and each instrument or document required hereunder will be, duly executed and
delivered, and this Guaranty constitutes, and each instrument or document
required hereunder when executed and delivered hereunder will constitute, the
legal, valid and binding obligation of Guarantor enforceable against Guarantor
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and subject, as to enforceability to general
principles of equity, regardless of whether enforcement is sought in equity or
at law.
3.3 No Legal Bar to this Guaranty. The execution, delivery and
performance of this Guaranty and the documents or instruments required
hereunder, will not violate any provision of any existing law or regulation
binding on Guarantor, or any order, judgment, award or decree of any court,
arbitrator or governmental authority binding on Guarantor, or of any mortgage,
indenture, lease, contract or other agreement, instrument or undertaking to
which Guarantor is a party or by which Guarantor or any of his assets may be
bound, the violation of which would have a material adverse effect on the assets
or financial condition of Guarantor and will not result in, or require, the
creation or imposition of any lien on any of his property, assets or revenues
pursuant to the provisions of any such mortgage, indenture, lease, contract or
other agreement, instrument or undertaking.
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SECTION 4. ADDITIONAL COVENANTS. SO LONG AS GUARANTOR MAY BE OBLIGATED
to perform or make any payment hereunder, Guarantor will duly perform and
observe the following covenants and agreements.
4.1 Periodic Information. Guarantor will furnish to Lessor:
(i) by April 20 each year, or if Guarantor has obtained,an extension
of the date for filing without incurring a penalty for late payment or filing,
within five days of filing or the end of such extension, whichever occurs first,
copies of federal income tax returns of Guarantor for the prior year.
(ii) from time to time, such other information regarding the
business and properties or the condition, financial or otherwise, of Guarantor
as Lessor may reasonably request.
4.2 Consents. Guarantor will promptly obtain from time to time any and
all such consents, approvals, licenses and authorizations and make any and all
such filings and registrations as shall now or hereafter be required under
applicable law and regulations for the making and performance by Guarantor of
this Guaranty and will promptly furnish copies thereof to Lessor.
4.3 Compliance with Laws. Guarantor will comply with the requirements of
all applicable laws, rules, regulations and orders of any governmental agency or
authority having jurisdiction other than requirements being contested in good
faith and by proper proceedings, provided that such noncompliance is not in any
event likely to result in any material adverse effect on Guarantor.
4.4 Taxes. Guarantor will pay and discharge any and all taxes,
assessments and governmental charges or levies imposed upon him or on his income
or profits or on any of his property or assets prior to the date on which
penalties attach thereto, except that Guarantor shall not be required to pay any
such tax, assessment, charge or levy the payment of which is being contested in
good faith and by proper proceedings.
4.5 Notice. Guarantor will promptly give notice in writing to Lessor of
any material adverse change in Guarantor's financial condition or Guarantor's
ability to perform this Guaranty.
SECTION 5. LESSOR MAY PERFORM. If Guarantor fails to perform any
agreement contained herein, Lessor may itself perform, or cause performance of,
such agreement, and the expenses of Lessor incurred in connection therewith
shall be payable by Guarantor under Section 7.
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SECTION 6. RIGHTS CUMULATIVE. The rights, powers and remedies given to
Lessor by this Guaranty are cumulative and shall be in addition to and
independent of all rights, powers and remedies given to Lessor by virtue of any
statute or rule of law or in the Lease. Any forbearance or failure to delay by
Lessor in exercising any right, power or remedy hereunder shall not preclude the
further exercise thereof.
SECTION 7. EXPENSES. Guarantor agrees to pay, or cause to be paid, and
to save Lessor harmless against liability for its reasonable out-of-pocket
expenses (including fees and expenses of counsel), incurred or expended in
connection with the enforcement of or preservation of rights under this
Guaranty.
SECTION 8. MISCELLANEOUS
8.1 Survival of Warranties. All agreements, representations and
warranties made herein shall survive the execution and delivery Of this
Guaranty, and the execution and delivery of the Lease.
8.2 Severability. The illegality or unenforceability of any provision of
this Guaranty or any instrument or agreement contemplated hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Guaranty or any instrument or agreement contemplated
hereunder. In case any provision in or obligation under this Guaranty shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of such provision or obligation or of the remaining
provisions or obligations in any other jurisdiction shall not in any way be
affected or impaired thereby.
8.3 Headings. Section and subsection headings in this Guaranty a r e
included herein for convenience of reference only and shall not constitute a
part of this Guaranty for any other purpose or be given any substantive effect.
8.4 Applicable Law. THIS GUARANTY IS BEING DELIVERED IN THE STATE OF NEW
YORK. THIS GUARANTY, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORCE, SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (DISREGARDING ANY CONFLICT OF
LAWS RULE WHICH MIGHT RESULT IN THE APPLICATION OF THE LAWS OF ANY OTHER
JURISDICTION).
8.5 Successors and Assigns. This Guaranty shall be binding upon the
Guarantor and his heirs, executors, estate, successors and assigns. This
Guaranty shall inure to the benefit of Lessor and its successors and assigns.
Guarantor shall not assign this Guaranty or any of the rights or obligations of
Guarantor hereunder without the prior written consent of Lessor. The terms and
provisions of this Guaranty shall inure to the benefit of any assignee or
transferee of Lessor's interest in the Lease, and in the event of such transfer
or assignment, the rights and privileges herein conferred upon Lessor shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof.
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8.6 consent to Jurisdiction: Waiver of Immunities. Guarantor hereby
irrevocably submits to the jurisdiction of any state or federal court of
competent jurisdiction in the State of New York in any action or proceeding
arising out of or relating to this Guaranty, and Guarantor hereby irrevocably
agrees chat all claims in respect of such action or proceeding may be heard and
determined in such New York state or federal court. Guarantor hereby irrevocably
waives, to the fullest extent it may effectively do so, the defense of an
inconvenient forum to the maintenance of such action or proceeding. Guarantor
hereby irrevocably appoints Samuel F. Ottensoser, Esq., Baer, Marks & Upham, 805
Third Avenue, New York, New York 10022, as its agent to receive on behalf of
Guarantor and his property service of copies of the summons and complaint and
any other process which may be served in any such action or proceeding. Such
service may be made by mail or delivering a copy of such process to Guarantor in
care of the agent named above, and Guarantor hereby irrevocably authorizes and
directs such agent to accept such service on his behalf. As an alternative
method of service, Guarantor also irrevocably consents to the service of any and
all process in any such action or proceeding by the mailing of copies of such
process to Guarantor at his address as specified in the Lease.
8.7 No Other Writing. This writing is intended by the parties as the
final expression of this Guaranty and is also intended as a complete and
exclusive statement of-the terms of their agreement. No course of dealing,
course of performance or trade usage, and no parol evidence of any nature, shall
be used to supplement or modify any terms.
8.8 Further Assurances. Guarantor agrees that at any time and from time
to time, at the expense of Guarantor, Guarantor will promptly execute and
deliver all further instruments and documents, and take all further actions,
that may be necessary or desirable, or that Lessor may request, in order to
effect fully the purposes of this Guaranty or to enable Lessor to exercise and
enforce its rights and remedies hereunder.
IN WITNESS WHEREOF, Guarantor has duly executed this Guaranty as of the
date first above written.
By: /s/ LOUIS J. PEARLMAN
__________________________________
LOUIS J. PEARLMAN
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GUARANTY
This Guaranty is delivered as of June 2, 1995 by TRANS
CONTINENTAL AIRLINES, INC., a Florida corporation ("Guarantor"), in favor of
ORIX USA CORPORATION, a Delaware Corporation ("Lessor").
RECITALS
A. AIRSHIP INTERNATIONAL LTD., a New York corporation ("Lessee"),
and Lessor have entered into an Amended and Restated Lease Agreement in the form
of a Conditional Sales Agreement dated as of the date hereof (the "Lease") for
the lease of a 600 Series Skyship.
B. It is a condition to the making of the Lease that Lessee's
Obligations be guarantied by Guarantor.
C. Guarantor is willing irrevocably and unconditionally to
guaranty the Obligations of Lessee pursuant to the terms of this Guaranty.
NOW, THEREFORE, based upon the foregoing and other good and valuable
consideration, the receipt and sufficiency, of which are hereby acknowledged,
and in order to induce Lessor to enter into the Lease, Guarantor hereby agrees
with Lessor as follows:
SECTION 1. DEFINITIONS
1.1 Certain Defined Terms. As used in this Guaranty, the following
terms shall have the following meanings, unless the context otherwise requires:
"Airship" means the Gondola, the Envelope, the Engines and
Propellers all as more specifically described in the Lease Supplement
dated the date hereof for the Airship together with the equipment,
components, written materials, data and accessories installed thereon
or delivered therewith, including the Buyer Furnished Equipment, the
Night Sign, the Spare Equipment and any replacements and substitutions
thereof as permitted under the Lease.
"Guaranty" means this Guaranty of Guarantor, as it may be
amended, modified or supplemented.
"Obligations" has the meaning assigned to that term in subsection
2.1.
"Payment in full", "paid in full" or any such similar term means
payment in full of the Obligations including, without limitation, all
principal, interest, costs, fees and expenses (including, without
limitation, legal fees and expenses) of Lessor as
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required under the Lease.
All capitalized terms used herein and not otherwise defined herein shall have
the meanings given such terms in the Lease.
SECTION 2. THE GUARANTY
2.1 Guaranty of the Obligations. Guarantor hereby irrevocably and
unconditionally guaranties the due and punctual payment in full and performance
otherwise of all Obligations when the same shall become due, whether at stated
maturity, by required prepayment, acceleration, demand or otherwise. The word
"Obligations" includes:
(a) all obligations of Lessee arising out of the Lease;
(b) any and all other agreements, indebtedness, fees, costs,
expenses (including, without limitation, legal fees and expenses of
counsel), indemnities and liabilities of Lessee now or hereafter made,
incurred or created, whether absolute or contingent, liquidated or
unliquidated, whether due or not due, and however arising out of the
Lease whether recovery upon such Obligations may be or hereafter
become barred by any statute of limitations, or whether such
obligations may be or hereafter become otherwise unenforceable;
(c) an amount equal to interest on the foregoing monetary amounts
(including any interest that would have accrued but for the
commencement of a case or proceeding under the federal bankruptcy
laws) at the Overdue Rate as defined in the Lease;
(d) those expenses set forth in Section 7 hereof, and
(e) all or any portion of the foregoing Obligations that are
paid, to the extent all or any part of such payment is avoided or
recovered directly or indirectly from Lessor as a preference,
fraudulent transfer or otherwise.
2.2 Liability of Guarantor. Guarantor agrees that its obligations
hereunder are irrevocable, absolute, independent and unconditional and shall not
be affected by any circumstance which constitutes a legal or equitable discharge
of a guarantor or surety other than indefeasible payment and performance in full
of the Obligations. In furtherance of the foregoing, Guarantor agrees as
follows:
(a) This Guaranty is a guaranty of payment and performance and
not of collectibility and is not conditional or contingent upon the
genuineness, validity, regularity or enforceability of the Lease or
the pursuit by Lessor of any remedies that it now has or may hereafter
have under the Lease, at law, in equity or otherwise.
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(b) Lessor may enforce this Guaranty upon the occurrence of an
Event of Default under the Lease, notwithstanding (i) the existence of
any dispute between Lessor and Lessee with respect to the existence of
an Event of Default; (ii) any counterclaim, set-off or other claim
which Lessee may allege against Lessor with respect thereto; or (iii)
any defect in the title compliance with specifications, condition,
design, operation or fitness for use of, or any damage to or loss or
destruction of, or any redelivery, repossession, surrender or other
interruption or cessation in the use of, the Airship by the Lessee or
any other person for any reason whatsoever (including, without
limitation, any governmental prohibition or restriction, condemnation,
requisition, seizure or any other act on the part of any governmental
or military authority, or any act of God or of the public enemy)
regardless of the duration thereof (even though such duration would
otherwise constitute a frustration of a lease), whether or not
resulting from accident and whether or not without fault on the part
of the Lessee or any other person.
(c) The obligations of Guarantor hereunder are independent of the
obligations of Lessee under the Lease, and a separate action or
actions may be brought and prosecuted against Guarantor whether or not
any action is brought against Lessee or whether or not Lessee is
joined in any such action or actions. Guarantor's liability under this
Guaranty shall not be reduced by virtue of any partial payment or
other performance by Lessee of any amount due or obligation owing
under the Lease, except to the extent of any such payment that is not
avoided or recovered directly or indirectly from Lessor as a
preference, fraudulent transfer or otherwise, or by recourse to any
collateral or security.
(d) Guarantor's payment or performance of a portion, but not all,
of the Obligations shall in no way limit, affect, modify or abridge
Guarantor's liability for that portion of the Obligations which is not
paid or performed. Without limiting the generality of the foregoing,
if Lessor is awarded a judgment in any suit brought to enforce
Guarantor's covenant to pay or perform a portion of the Obligations,
such judgment shall not be deemed to release Guarantor from its
covenant to pay or perform the portion of the Obligations that is not
the subject of such suit.
(e) Lessor, upon such terms as it deems appropriate, without
notice or demand and without affecting Guarantor's liability
hereunder, from time to time may (i) renew, extend, accelerate or
otherwise change the time, place, manner or terms of payment or
performance of the Obligations; (ii) settle, compromise, release,
discharge, or accept or refuse any offer of performance with respect
to, or substitutions for, the Obligations or any agreement relating
thereto and/or subordinate the payment of the same to payment of other
obligations; (iii) take and hold security for the payment or
performance of this Guaranty or the Obligations, and enforce any such
security consistent with any applicable security agreement; (iv)
release, surrender, exchange, compromise, settle, rescind, waive,
subordinate or modify, any security for payment or performance of the
Obligations, any other guaranties of the
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Obligations, or any other obligation of any Person with respect to the
obligations; (v) elect to abstain from repossessing the Airship or
taking advantage of or realizing upon any security interests or other
guaranty; (vi) elect to repossess the Airship or to foreclose on any
security held by or for the benefit of Lessor by one or more judicial
or nonjudicial sales or exercise any other right or remedy Lessor may
have against Lessee, the Airship or any security, even though any such
election operates to impair or extinguish any right of reimbursement
or subrogation or other right or remedy of Guarantor against Lessee or
any security for the Obligations; (vii) re-lease or sell the Airship
or apply any security and direct the order or manner of sale thereof
as Lessor in its discretion may determine consistent with the Lease
and any applicable security agreement; (viii) release or substitute
any one or more endorsers or guarantors of the Obligations; and (ix)
exercise any rights available to it under the Lease.
(f) This Guaranty shall be valid and enforceable and shall not be
impaired or affected by the occurrence of any of the following,
whether or not Guarantor shall have had notice or knowledge of any of
them: (i) any failure or omission to enforce or agreement not to
enforce, or the stay or enjoining by order of court, by operation of
law or otherwise, of the exercise of, any right, power or remedy with
respect to the Obligations or any agreement relating thereto, or with
respect to any security for the payment or performance of the
obligations; (ii) any amendment or waiver, whether or not in
accordance with the terms of the Lease, of any right, power or remedy
or of any default with respect to the Obligations or any agreement
relating thereto, or with respect to any security for the Obligations;
(iii) the obligations, or any agreement relating thereto, at any time
being found to be illegal, invalid or unenforceable in any respect;
(iv) the application of payments received from any source (other than
payments received pursuant to the payment of indebtedness other than
the obligations), even though Lessor might have elected to apply such
payment to any part or all of the Obligations; (v) Lessor's acceptance
of new or additional documents, instruments or agreements relating to
the Obligations; (vi) Lessor's consent to the change, reorganization
or termination of the corporate structure or existence of Lessee and
to any corresponding restructuring of the Obligations; (vii) any
failure to perfect or continue perfection of a security interest in
any collateral; and (viii) any defenses which Lessee may assert on the
underlying indebtedness or agreements.
2.3 Waivers by Guarantor. Guarantor hereby waives for the benefit of
Lessor:
(a) any right to require Lessor, as a condition of payment or
performance by Guarantor to (i) proceed against Lessee or any other
Person, (ii) proceed against or exhaust any security held from Lessee,
or any other Person, or (iii) pursue any other remedy in the power of
Lessor whatsoever;
(b) any defense arising by reason of the incapacity, lack of
authority or any disability or other defense of Lessee including,
without limitation, any defense based
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on or arising out of the lack of validity or the unenforceability of
the Obligations or any agreement or instrument relating thereto or by
reason of the cessation from any cause of the liability of Lessee
other than indefeasible payment and performance in full of the
Obligations;
(c) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in
amount nor in other respects more burdensome than that of the
principal, or based upon Lessor's errors or omissions in the
administration of the Obligations, except behavior which amounts to
bad faith;
(d) any (i) principles or provisions of law, statutory or
otherwise, which are or might be in conflict with the terms of this
Guaranty, any legal or equitable discharge of its obligations
hereunder and the benefit of any statute of limitations affecting its
liability hereunder or the enforcement hereof, (ii) rights to
set-offs, recoupments and counterclaims, (iii) rights to deferral or
modification of Guarantor's obligations hereunder by reason of any
bankruptcy, reorganization, arrangement, moratorium or other debtor
relief proceeding, (iv) promptness, diligence and any requirement that
Lessor protect, secure, perfect or insure any security interest or
lien or any property subject thereto, or exhaust any right or take any
action against Lessee, any other Person, the Airship or any
collateral; and
(e) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including
acceptance of this Guaranty, notices of default under the Lease or any
agreement or instrument related thereto, notices of any renewal,
extension or modification of the Obligations or any agreement related
thereto, notices of any other extension of credit to Lessee and
notices of any of the matters referred to in Section 2.2 and any right
to consent to any thereof.
2.4 Subrogation. Until the Obligations shall have been indefeasibly
paid and performed in full, Guarantor shall withhold exercise of (a) any right
of subrogation, (b) any right to enforce any remedy which Lessor now has or may
hereafter have against Lessee, (c) any right of contribution Guarantor may have
against any other guarantor of any of the Obligations under any other guaranty
relating to the Lease, or (d) any benefit of, and any right to participate in,
(i) any sale or re-lease of the Airship or (ii) any security now or hereafter
held by Lessor; provided, however, that once the Obligations have been
indefeasibly paid and performed in full Guarantor shall be entitled to exercise
any right of subrogation available to it against Lessee.
2.5 Subordination of Other Obligations. Any indebtedness of Lessee
for borrowed money now or hereafter held by Guarantor and any right of Guarantor
to subrogation against Lessee, shall in all respects be subordinated in right of
payment to the Obligations, and in the event Lessee shall default in the payment
or performance of the obligations, any indebtedness of Lessee to Guarantor
collected or received by Guarantor shall be held in trust for Lessor and shall
be paid over to Lessor.
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2.6 Bankruptcy. The obligations of Guarantor under this Guaranty
shall not be altered, limited or affected by any proceeding, voluntary or
involuntary, involving the bankruptcy, insolvency, receivership, reorganization,
liquidation or arrangement of Lessee or by any defense which Lessee may have by
reason of the order, decree or decision of any court or administrative body
resulting from any such proceeding. Guarantor acknowledges and agrees that any
interest on the obligations which accrues after the commencement of any such
proceeding (or, if interest on any portion of the obligations ceases to accrue
by operation of law by reason of the commencement of said proceeding, such
interest as would have accrued on any such portion of the Obligations if said
proceedings had not been commenced) shall be included in the Obligations because
it is the intention of the parties that the Obligations which are guaranteed by
Guarantor pursuant to this Guaranty should be determined without regard to any
rule of law or order which may relieve Lessee of any portion of such
obligations.
SECTION 3. REPRESENTATIONS AND WARRANTIES
In order to induce Lessor to accept this Guaranty and enter into the
Lease, Guarantor hereby represents and warrants to Lessor that the following
statements are true and correct:
3.1 Existence. Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
has the power to own its assets and to transact the business in which it is now
engaged and is qualified as a foreign corporation and in good standing under the
laws of each jurisdiction where its ownership or lease of property or the
conduct of its business requires such qualification, except for failure to be so
qualified, authorized or licensed that would not in the aggregate have a
material adverse effect on the business, operations, assets or financial
condition of Guarantor.
3.2 Authorization; Enforceable Obligations. Guarantor has the
power, authority and legal right to execute, deliver and perform this Guaranty
on the terms and conditions hereof and has taken all necessary action to
authorize its Guaranty hereunder on the terms and conditions hereof and its
execution, delivery and performance of this Guaranty and all obligations
required hereunder. No consent of any other Person including, without
limitation, stockholders and creditors of Guarantor, and no license, permit,
approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any governmental authority is required
by Guarantor in connection with this Guaranty or the execution, delivery,
performance, validity or enforceability of this Guaranty and all obligations
required hereunder. This Guaranty has been, and each instrument or document
required hereunder will be, duly executed and delivered by a duly authorized
officer of Guarantor, and this Guaranty constitutes, and each instrument or
document required hereunder when executed and delivered hereunder will
constitute, the legal, valid and binding obligation of Guarantor enforceable
against Guarantor in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally and subject, as to enforceability to
general principles of equity, regardless of whether enforcement is sought in
equity or at law.
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3.3 No Legal Bar to this Guaranty. The execution, delivery and
performance of this Guaranty and the documents or instruments required
hereunder, will not violate any provision of any existing law or regulation
binding on Guarantor, or any order, judgment, award or decree of any court,
arbitrator or governmental authority binding on Guarantor, or of any mortgage,
indenture, lease, contract or other agreement, instrument or undertaking to
which Guarantor is a party or by which Guarantor or any of its assets may be
bound, or of the Certificate of Incorporation or By-Laws of Guarantor, the
violation of which would have a material adverse effect on the assets or
financial condition of Guarantor and will not result in, or require, the
creation or imposition of any lien on any of its property, assets or revenues
pursuant,to the provisions of any such mortgage, indenture, lease, contract or
other agreement, instrument or undertaking.
SECTION 4. ADDITIONAL COVENANTS.
So long as Guarantor may be obligated to perform or make any payment
hereunder, Guarantor will duly perform and observe the following covenants and
agreements.
4.1 Corporate Existence, Etc. Guarantor will at all times preserve
and keep in full force and effect its corporate existence and all rights and
franchises material to its business.
4.2 Restriction on Fundamental Changes. Guarantor will not enter into
any merger or consolidation, or liquidate, wind-up or dissolve (or suffer any
liquidation or dissolution), discontinue its business or convey, sell, transfer
or otherwise dispose of, in one transaction or in a series of transactions, all
or any substantial part of its business or property, whether now or hereafter
acquired.
4.3 Periodic Information. Guarantor will furnish to Lessor:
(i) within 90 days after the end of each fiscal year of Guarantor,
annual financial statements of Guarantor certified by Cohen & Siegel or
independent certified public accountants of recognized national standing
selected by Guarantor and acceptable to Lessor;
(ii) within 45 days after the end of each of the first
three-quarters of each fiscal year, quarterly financial statements of Guarantor;
(iii) from time to time, such other information regarding the
business and properties or the condition, financial or otherwise, of Guarantor
as Lessor may reasonably request.
4.4 Consents. Guarantor will promptly obtain from time to time any
and all such consents, approvals, licenses and authorizations and make any and
all such filings and registrations as shall now or hereafter be required under
applicable law and regulations for the making and performance by Guarantor of
this Guaranty and will promptly furnish copies thereof to Lessor.
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4.5 Compliance with Laws. Guarantor will comply with the requirements
of all applicable laws, rules, regulations and orders of any governmental agency
or authority having jurisdiction other than requirements being contested in good
faith and by proper proceedings, provided that such noncompliance is not in any
event likely to result in any material adverse effect on Guarantor.
4.6 Taxes. Guarantor will pay and discharge airy and all taxes,
assessments and governmental charges or levies imposed upon it or on its income
or profits or on any of its property or assets prior to the date on which
penalties attach thereto, except that Guarantor shall not be required to pay any
such tax, assessment, charge or levy the payment of which is being contested in
good faith and by proper proceedings.
4.7 Notice. Guarantor will promptly give notice in writing to Lessor
of any material adverse change in Guarantor's financial condition or Guarantor's
ability to perform this Guaranty.
SECTION 5. LESSOR MAY PERFORM. If Guarantor fails to perform any agreement
contained herein, Lessor may itself perform, or cause performance of, such
agreement, and. the expenses of Lessor incurred in connection therewith shall be
payable by Guarantor under Section 7.
SECTION 6. RIGHTS CUMULATIVE. The rights, powers and remedies given to Lessor by
this Guaranty are cumulative and shall be in addition to and independent of all
rights, powers and remedies given to Lessor by virtue of any statute or rule of
law or in the Lease. Any forbearance or failure to delay by Lessor in exercising
any right, power or remedy hereunder shall not preclude the further exercise
thereof.
SECTION 7. EXPENSES. Guarantor agrees to pay, or cause to be paid, and to save
Lessor harmless against liability for its reasonable out-of-pocket expenses
(including fees and expenses of its respective counsel), incurred or expended in
connection with the enforcement of or preservation of rights under this
Guaranty.
SECTION 8. MISCELLANEOUS
8.1 Survival of Warranties. All agreements, representations and
warranties made herein shall survive the execution and delivery of this
Guaranty, and the execution and delivery of the Lease.
8.2 Severability. The illegality or unenforceability of any provision
of this Guaranty or any instrument or agreement contemplated hereunder shall not
in any way affect or impair the legality or enforceability of the remaining
provisions of this Guaranty or any instrument or agreement contemplated
hereunder. In case any provision in or obligation under this Guaranty shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of such provision or obligation or of the remaining
provisions or
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obligations in any other jurisdiction shall not in any way be affected or
impaired thereby.
8.3 Headings. Section and subsection headings in this Guaranty are
included herein for convenience of reference only and shall not constitute a
part of this Guaranty for any other purpose or be given any substantive effect.
8.4 Applicable Law. THIS GUARANTY IS BEING DELIVERED IN THE STATE OF
NEW YORK. THIS GUARANTY, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (DISREGARDING ANY CONFLICT OF
LAWS RULE WHICH MIGHT RESULT IN THE APPLICATION OF THE LAWS OF ANY OTHER
JURISDICTION).
8.5 Successors and Assigns. This Guaranty shall be binding upon the
Guarantor and its successors and assigns. This Guaranty shall inure to the
benefit of Lessor and its successors and assigns. Guarantor shall not assign
this Guaranty or any of the rights or obligations of Guarantor hereunder without
the prior written consent of Lessor. The terms and provisions of this Guaranty
shall inure to the benefit of any assignee or transferee of Lessor's interest in
the Lease, and in the event of such transfer or assignment, the rights and
privileges herein conferred upon Lessor shall automatically extend to and be
vested in such transferee or assignee, all subject to the terms and conditions
hereof.
8.6 Consent to Jurisdiction; Waiver of Immunities. Guarantor hereby
irrevocably submits to the jurisdiction of any state or federal court of
competent jurisdiction in the State of New York in any action or proceeding
arising out of or relating to this Guaranty, and Guarantor hereby irrevocably
agrees that all claims in respect of such action or proceeding may be heard and
determined in such New York state or federal court. Guarantor hereby irrevocably
waives, to the fullest extent it may effectively do so, the defense of an
inconvenient forum to the maintenance of such action or proceeding. Guarantor
hereby irrevocably appoints Samuel F. Ottensoser, Esq., Baer Marks & Upham, 805
Third Avenue, New York, New York 10022, as its agent to receive on behalf of
Guarantor and its property service of copies of the summons and complaint and
any other process which may be served in any such action or proceeding. Such
service may be made by mail or delivering a copy of such process to Guarantor in
care of the agent named above, and Guarantor hereby irrevocably authorizes and
directs such agent to accept such service on its behalf. As an alternative
method of service, Guarantor also irrevocably consents to the service of any and
all process in any such action or proceeding by the mailing of copies of such
process to Guarantor at its address as specified in the Lease.
8.7 No Other Writing. This writing is intended by the parties as the
final expression of this Guaranty and is also intended as a complete and
exclusive statement of the terms of their agreement. No course of dealing,
course of performance or trade usage, and no parol.evidence of any nature, shall
be used to supplement or modify any terms.
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8.8 Further Assurances. Guarantor agrees that at any time and from
time to time, at the expense of Guarantor, Guarantor will promptly execute and
deliver all further instruments and documents, and take all further actions,
that may be necessary or desirable, or that Lessor may request, in order to
effect fully the purposes of this Guaranty or to enable Lessor to exercise and
enforce its rights and remedies hereunder.
IN WITNESS WHEREOF, Guarantor has duly executed this Guaranty as of
the date first above written.
TRANS CONTINENTAL AIRLINES, INC.
By: /s/ LOUIS J. PEARLMAN
_________________________________
Name:
_________________________________
Title: President
_________________________________
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AIRCRAFT LEASE AGREEMENT
dated as of May 31, 1995
between
TRANS CONTINENTAL LEASING, INC., as Lessor
and
AIRSHIP INTERNATIONAL LTD., as Lessee
True Lease of One (1) 1991 Airship Industries
Series 500HL Skyship Registration Number N50lLP,
Manufacturer's Serial Number 1214-04
CERTAIN RIGHTS OF THE LESSOR UNDER THIS AIRCRAFT LEASE
AGREEMENT AND IN THE AIRCRAFT COVERED HEREBY HAVE BEEN ASSIGNED TO,
AND ARE SUBJECT TO A SECURITY INTEREST IN FAVOR OF PHOENIXCOR, INC.
UNDER A LOAN AND SECURITY AGREEMENT, DATED AS OF MAY 31, 1995. THE
ONE AND ONLY ORIGINAL OF THIS AIRCRAFT LEASE AGREEMENT IS MARKED
"ORIGINAL" AT THE TOP OF THIS PAGE AND SHALL CONSTITUTE THE ONLY
CHATTEL PAPER ORIGINAL HEREOF FOR THE PURPOSES OF ARTICLE 9 OF THE
UNIFORM COMMERCIAL CODE. EACH OTHER SIGNED VERSION IS MARKED
"DUPLICATE."
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TABLE OF CONTENTS
1. AGREEMENT TO LEASE; TERM . . . . . . . . . . . . . . . . 1
2. RENT; NET LEASE . . . . . . . . . . . . . . . . . . . . 1
3. LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS . . . 3
4. FINANCIAL INFORMATION; FURTHER ASSURANCES . . . . . . . 6
5. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . 6
6. DELIVERY; INSPECTION AND ACCEPTANCE BY LESSEE . . . . . 10
7. IDENTIFICATION OF AIRCRAFT . . . . . . . . . . . . . . 10
8. REGISTRATION, USE AND MAINTENANCE . . . . . . . . . . . 10
9. DISCLAIMER OF WARRANTIES. . . . . . . . . . . . . . . . 13
10. FEES AND TAXES . . . . . . . . . . . . . . . . . . . . 14
11. INTENT; TITLE; GRANT OF SECURITY INTEREST IN ANHEUSER
BUSCH COLLATERAL. . . . . . . . . . . . . . . . . . . . 16
12. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . 18
13. LOSS AND DAMAGE . . . . . . . . . . . . . . . . . . . . 20
14. REDELIVERY. . . . . . . . . . . . . . . . . . . . . . . 23
15. RESERVED. . . . . . . . . . . . . . . . . . . . . . . . 25
16. RESERVED. . . . . . . . . . . . . . . . . . . . . . . . 26
17. INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . 26
18. DEFAULT; REMEDIES . . . . . . . . . . . . . . . . . . . 27
19. ASSIGNMENT BY LESSOR AND LESSEE . . . . . . . . . . . . 31
20. QUIET POSSESSION . . . . . . . . . . . . . . . . . . . 32
21. LESSOR'S RIGHT TO PERFORM FOR LESSEE. . . . . . . . . . 32
22. NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . 33
23. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 33
24. CONNECTICUT LAW GOVERNS; JURISDICTION . . . . . . . . . 34
25. TRUE LEASE. . . . . . . . . . . . . . . . . . . . . . . 34
26. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . 34
27. TRUTH-IN-LEASING. . . . . . . . . . . . . . . . . . . . 35
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AIRCRAFT LEASE AGREEMENT
THIS AIRCRAFT LEASE AGREEMENT (this "Lease Agreement") is made as of the
31st day of May, 1995, by and between TRANS CONTINENTAL LEASING, INC., a New
York corporation ("Lessor"), as lessor, and AIRSHIP INTERNATIONAL LTD., a New
York corporation ("Lessee").
Lessee desires to sell to and lease back from Lessor the Aircraft (as
defined in Section 1 of this Lease Agreement); Lessor is willing to purchase
from Lessee the Aircraft and lease to Lessee the Aircraft pursuant to the terms
and conditions herein.
Lessor intends to borrow the purchase price of the Aircraft from
Phoenixcor, Inc. (together with its successors and assigns, "Lender") pursuant
to a Loan and Security Agreement or even date herewith (the "Loan Agreement")
between Lender, as lender, and Lessor, as borrower. The loan to be made by
Lender to Lessor pursuant to the Loan Agreement shall be evidenced by Lessor's
Promissory Note ("Note") dated the Closing Date (as defined in Section 5) in an
original principal amount equal to the loan made by Lender to Lessor on such
date.
In order to secure its obligations under the Loan Agreement, the Note
and the other documents executed and delivered by Lessor in connection
therewith, Lessor has granted and assigned to Lender, among other things, a
first priority security interest in the Aircraft and all of its right, title and
interest in, to and under the Lease (as defined in Section 1.1), and certain
other collateral described therein, pursuant to the terms and conditions of the
Loan Agreement ("Lender's Lien").
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, and such other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. AGREEMENT TO LEASE; TERM.
1.1 AGREEMENT TO LEASE. The parties agree that on the Closing Date
Lessee shall lease from Lessor, the property, together with all components,
parts, additions, accessions and attachments incorporated therein (collectively
referred to as the "Aircraft") described in the Equipment Schedule to be
executed pursuant hereto (the "Equipment Schedule", and collectively with this
Lease Agreement, "the Lease" or "this Lease"), subject to the terms and
conditions set forth in the Equipment Schedule and herein. All capitalized terms
used without definition herein shall HAVE THE MEANINGS PROVIDED FOR SUCH
CAPITALIZED TERMS IN THE Equipment Schedule.
1.2 TERM. THE TERM OF THIS LEASE WITH RESPECT TO ANY item comprising the
Aircraft ("Item") shall consist of the term set
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forth in the Equipment Schedule; provided, however, that THIS LEASE
Agreement shall be effective from and after the date of execution hereof.
2. RENT; NET LEASE.
2.1 RENT. Lessee shall pay Lessor rent for the Aircraft in the aggregate
amounts specified in Section 3 of the Equipment Schedule (the "Base Rent" or
"rent") and all other amounts due hereunder, without any deduction or setoff and
without prior notice or demand, promptly as such rent and other amounts shall
become due and owing.
2.2 NET LEASE. This is a non-cancelable net lease, and Lessee shall not
be entitled to any abatement or reduction of rent or any other amounts due
hereunder for any reason. Without limiting the foregoing, Lessee's obligation to
pay rent and any other amounts due hereunder, and to otherwise perform its
obligations under the Lease, are and shall be absolute and unconditional until
this Lease terminates in accordance with its terms and shall not be affected by
any circumstances, including: (a) any setoff, counterclaim, recoupment,
deduction, defense or other right which Lessee may have against Lessor, Lender,
any holder of the Note, the manufacturer or vendor of the Aircraft, or anyone
else for any reason whatsoever; (b) any defect in the title, or other ownership
interests, condition, design, operation, merchantability or fitness for use of
the Aircraft; (c) the existence of any liens, with respect to the Aircraft,
whether or not resulting from claims against Lessor not related to the ownership
of the Aircraft or Lender not related to the Lender's Lien; (d) any loss,
destruction or contamination of, or damage to, the Aircraft or any interruption
or cessation in the use or possession thereof for any reason whatsoever and of
whatever duration; (e) the invalidity or unenforceability of the Lease, any of
the Operative Documents (as hereafter defined in this Section 2.2) or any other
infirmity therein or any lack of power or authority of Lessor, Lessee, Lender or
any other person to enter into the Lease or any Operative Document; (f) any
insolvency, bankruptcy, reorganization or similar proceedings by or against
Lessee, Lessor, Lender or any other person; or (g) any other circumstances,
happenings or events whatsoever, whether or not similar to any of the foregoing.
For the purposes of the Lease, the term "Operative Documents" shall mean the
Loan Agreement, the Note, the Individual Guaranty of even date herewith by Louis
J. Pearlman in favor of Lender, the Corporate Guaranty of even date herewith by
Trans Continental Airlines, Inc. in favor of Lender, all Lease Documents and
each other document, instrument or certificate executed and delivered in
connection with the Loan Agreement, the Lease and the transactions contemplated
thereby.
2.3 MANNER OF PAYMENT. Rent is payable as and when specified in the
Equipment Schedule by wire transfer of immediately available funds to Lender's
Account No. 52-40409 at First Chicago National Bank, Chicago, Illinois, ABA
Routing No. 071-000-013, or
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by mailing the same to Lender at 65 Water Street, South Norwalk, Connecticut
06854 or at such other address as Lender shall from time to time designate in
writing to Lessee; and shall be effective upon receipt. All rent and any other
amounts due hereunder shall be payable directly to Lender until Lessee shall
have received notice from Lender that the Lender's Lien has been discharged,
after which date all payments of rent due shall be paid to Lessor at its payment
address provided below its signature hereto or at such other address as Lessor
may direct by notice in writing to Lessee.
2.4 LATE CHARGES. Time is of the essence. If any payment due hereunder
is not paid on the due date, Lessor may collect, and Lessee agrees to pay, a
charge calculated as the product of the Late Charge Rate (as such term is
defined in the Equipment Schedule) and the amount in arrears for the period such
amount remains unpaid (or such lesser amount as may be permitted by law).
2.5 SUFFICIENCY. Notwithstanding any provision to the contrary in this
Lease or in any of the other Lease Documents, in all events any computation of
Base Rent, Stipulated Loss Value or monetary damages payable pursuant to Section
18.2 hereof, including without limitation any liquidated damages (all such
monetary damages, "Lease Damages") shall provide for payment in respect of Base
Rent, Stipulated Loss Value or Lease Damages, as the case may be, on any date on
which payment thereof is due, in an amount (and in any event the amount of any
such payment due by Lessee hereunder shall in all cases be not less than an
amount) which is at least sufficient to pay in full, as of such date, any
payments of principal, interest, premium, acceleration fee and other
Indebtedness (as defined in the Loan Agreement) then required to be made in
respect of the Note and the Loan Agreement.
3 . LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Lessee
represents, warrants and covenants that:
3.1 DUE ORGANIZATION. Lessee is a corporation duly organized and validly
existing in good standing under the laws of the state of its incorporation, has
the full corporate power and authority to carry on its business as currently
conducted, and has full power and authority to hold property under lease and to
enter into, and to perform its obligations under, this Lease Agreement, the
Equipment Schedule and each other document, instrument or certificate to which
it is a party, including without limitation, those referenced in Section 5.1
hereof (collectively, the "Lease Documents"). Lessee is in good standing as a
foreign corporation in each jurisdiction where failure to so qualify would have
a material adverse effect on Lessee, Lessee's business or financial condition or
its ability to perform and comply with the provisions of the Lease Documents.
Lessee is and will continue to be a "citizen of the United States" within the
meaning of 49 U.S.C. 40102(a)(15).
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3.2 DUE AUTHORIZATION ETC. The execution, delivery and performance of
the Lease and the other Lease Documents, (a) have been duly authorized by all
necessary corporate action on the part of Lessee; (b) do not require the consent
of any stockholder, trustee or holders of any indebtedness of Lessee except such
as have been duly obtained; and (c) do not and will not contravene any law,
governmental rule, regulation or order now binding on Lessee, or the charter or
by-laws of Lessee, or contravene the provisions of, or constitute a default
under, or result in the creation of any lien or encumbrance upon the property of
Lessee under, any indenture, mortgage, contract or other agreement to which
Lessee is a party or by which it or its property is bound.
3.3 NO CONSENT. Neither the execution and delivery by Lessee of the
Lease and all of the other Lease Documents, nor the consummation of any of the
transactions by Lessee contemplated hereby or thereby, nor the establishment or
perfection of the right, title or interest of Lessor under the Lease or in and
to the Aircraft, requires the consent or approval of, the giving of notice to,
the registration with, or the taking of any other action in respect of, any
Federal, state or foreign governmental authority or agency, except as further
provided herein.
3.4 ENFORCEABLE. The Lease and all other of the other Lease Documents,
when entered into, will constitute legal, valid and binding obligations of
Lessee enforceable against Lessee, in accordance with the terms hereof and
thereof.
3.5 NO PENDING ACTION ETC. (a) There are no pending actions or
proceedings to which Lessee is a party, and there are no other pending or
threatened actions or proceedings of which Lessee has actual knowledge, before
any court, arbitrator or administrative agency, and there are no final
judgments of record against Lessee of which Lessee has actual knowledge, which,
either individually or in the aggregate, would materially adversely affect the
financial condition of Lessee, or the ability of Lessee to perform its
obligations under the Lease or under the other Lease Documents; (b) Lessee is
not in default under any material obligation for the payment of borrowed money,
for the deferred purchase price of property or for the payment of any rent
which, either individually or in the aggregate, would have the same such effect
nor is Lessee in violation of any law, order, injunction, decree, rule or
regulation applicable to Lessee of any court or administrative body, which
violation would materially and adversely affect the financial condition of
Lessee; and (c) no event has occurred and is continuing which, under the
provisions of any indenture, mortgage, loan agreement or other material
agreement or instrument, with the lapse of time or the giving of notice, or
both, would constitute a default thereunder which, either individually or in
the aggregate, would materially adversely affect Lessee's ability to perform
its obligations hereunder.
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3.6 ERISA. Lessee is not entering into the Lease or the transaction
contemplated hereby, directly or indirectly in connection with any arrangement
or understanding by it in any way involving any employee benefit plan (other
than a governmental plan) with respect to which it is a party in interest, all
within the meaning of the Employee Retirement Income Security Act of 1974, as
amended.
3.7 FINANCIAL STATEMENTS. The financial statements of Lessee (copies of
which have been furnished to Lessor) have been prepared in accordance with
generally accepted accounting principles consistently applied ("GAAP"), and
accurately and completely present Lessee's financial condition in all material
respects and the results of its operations in all material respects as of the
date of and for the period covered by such statements, and since the date of
such statements there has been no material adverse change in such conditions or
operations.
3.8 CHIEF EXECUTIVE OFFICE. The address stated below the signature of
Lessee is the chief place of business and chief executive office (as either of
such terms is used in Article 9 of the Uniform Commercial Code of Florida) of
Lessee and Lessee agrees to give Lessor and Lender prior written notice of any
relocation of said chief executive office or chief place of business from its
present location. Lessee does not conduct business under a trade, assumed or
fictitious name.
3.9 SALE-LEASEBACK. The Full Warranty Bill of Sale of even date herewith
(the "Warranty Bill of Sale") from Lessee to Lessor transfers to Lessor valid
title to the Aircraft and the equipment described therein free and clear of any
and all encumbrances, liens, charges or defects. No filing or recordation must
be made, no notice must be given, and no other action must be taken with respect
to any state or local jurisdiction, or any person, in order to preserve to
Lessor all the rights transferred by the Warranty Bill of Sale.
3.10 ANHEUSER BUSCH COLLATERAL. (a) The Anheuser Busch Contract (as
defined in Section 5.1.11) has been duly and validly authorized, executed and
delivered by Lessee and Anheuser; is in full force and effect with respect to
Lessee and Anheuser; and constitutes legal, valid and binding obligations of
Lessee and Anheuser, enforceable against each such party by the other in
accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally, and by applicable laws (including any applicable
common law and equity) and judicial decisions which may affect the remedies
provided therein. (b) To Lessee's knowledge, no default or event which, with the
giving of notice or lapse of time or both, would become a default, has occurred
under the Anheuser Busch Contract. (c) The copy of the Anheuser Busch Contract
delivered to Lessor pursuant to Section 5.1.11 hereof constitutes the entire
agreement of the
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parties with respect to the transactions evidenced thereby. (d) Lessee is the
sole owner of, and has not heretofore assigned or pledged or caused, permitted
or suffered to exist any lien, claim or encumbrance against, the Anheuser Busch
Collateral (as defined in Section 11.4). (e) The Anheuser Busch Contract is not
subject to any defense, claim, counterclaim, set-off or any right to
cancellation or termination. (f) The grant of security interest in Section 11.4
hereof creates in favor of Lessor a first priority perfected security interest
in the Anheuser Busch Collateral, effective against all persons; Lessor's rights
as secured party pursuant to such grant were assigned to Lender pursuant to the
Loan Agreement; and any filing, recordation or any other action or procedure
permitted or required by law to perfect and give first priority to Lender's
security interest in the Anheuser Busch Collateral has been accomplished. (g)
Lessee has no knowledge of any facts impairing the value or validity of the
Anheuser Busch Contract, any rights created thereby, the Anheuser Busch
Collateral or this Lease.
4. FINANCIAL INFORMATION; FURTHER ASSURANCES.
4.1 FINANCIAL INFORMATION. Lessee will furnish Lessor (a) within ninety
(90) days after the end of each fiscal year of Lessee, a balance sheet for
Lessee as at the end of such year, and the related statement of income and
statement of cash flows of Lessee, prepared in accordance with GAAP, all in
reasonable detail and certified by independent certified public accountants of
recognized standing selected by Lessee and reasonably acceptable to Lessor; (b)
within sixty (60) days after the end of each quarter of each of Lessee's fiscal
years, a balance sheet for Lessee as at the end of such quarter, and the related
statement of income and statement of cash flows of Lessee, prepared in
accordance with GAAP; and (c) within thirty (30) days after the date on which
they are filed, all regular periodic reports, forms and other filings required
to be made by Lessee to the Securities and Exchange Commission.
4.2 FURTHER ASSURANCES. Lessee promptly will execute and deliver to
Lessor and Lender such further documents, instruments and assurances and take
such further action as Lessor or Lender from time to time reasonably requests to
carry out the intent and purpose of the Lease and the other Operative Documents
and to establish and protect the rights and remedies intended to be created in
favor of Lessor and Lender hereunder and thereunder. Lessee, forthwith upon
delivery of the Aircraft under the Lease, shall cause the Aircraft to be duly
registered, and at all times thereafter to remain duly registered, in the name
of Lessor under Title 49 of the United States Code, as amended (such title,
including all future amendments thereto, and any similar legislation of the
United States enacted in substitution or replacement thereof, "Title 49"), and,
subject to the Lender's Lien until discharged.
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5. CONDITIONS PRECEDENT. Lessor's obligations hereunder and under the
other Lease Documents are conditioned upon satisfaction of all of the following
on the dates and in the manner provided below:
5.1 RECEIPT OF DOCUMENTS, ETC. Lessor having received the following, in
form and substance satisfactory to Lessor prior to May 31, 1995, or on such
other date mutually agreed to by the parties in writing as the closing date (the
"Closing Date"), all dated as of such date (or by such other date provided for
below):
5.1.1 Secretary's Certificate. Certificate of the Secretary
or an Assistant Secretary of Lessee certifying: (a) resolutions of the Board of
Directors or validly authorized Executive Committee of Lessee duly authorizing
the sale and leasing of the Aircraft hereunder, the collateral assignment and
grant of security interests hereunder and the execution, delivery and
performance of the Lease and all related instruments and documents; and (b) the
incumbency and signature of the officers of Lessee authorized to execute such
documents.
5.1.2 Insurance. Evidence as to due compliance with the
insurance provisions hereof.
5.1.3 UCCs. Uniform Commercial Code financing statements as
required by Lessor.
5.1.4 Opinion of Lessee's Counsel. An opinion of counsel
for Lessee as to each of the matters set forth in Sections 3.1 through 3.5 and
3.9, or in form otherwise acceptable to Lessor.
5.1.5 Chattel Paper. The chattel paper designated original
of this Lease Agreement and the Equipment Schedule (marked as being the
"Original" thereof).
5.1.6 FAA Opinions. Certain opinions by telephone on the
Closing Date (with a letter to following after recordation) from Crowe &
Dunlevy, P.C., special FAA counsel ("FAA Counsel") regarding the status of the
title to the airframe comprising a portion of the Aircraft (the "Airframe") and
each engine comprising a portion of the Aircraft (each, an "Engine"), the filing
of the Lease Agreement and the Equipment Schedule and various other matters
related thereto.
5.1.7 Bills of Sale. The Warranty Bill of Sale pursuant to
which Lessee shall convey to Lessor good and marketable title to the Aircraft
and the equipment described therein, free and clear of all claims, liens and
legal processes (other than the rights of Lessee under the Lease); and such
instruments and documents as reasonably may be required to permit registration
of the Aircraft in the name of Lessor, including AC Form 8050-2 Aircraft Bill of
Sale with respect to the Aircraft. Lessee shall also provide Lessor with copies
of the bills of sale and other
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evidence of its having acquired good title to the aircraft, and an assignment by
Lessee to Lessor of all warranties provided by the vendor with respect thereto
(and an acknowledgment of such assignment).
5.1.8 Airworthiness Certificate. Evidence that:
(a) the Aircraft has been duly certified as to type
and airworthiness by the Federal Aviation Administration ("FAA") and fully
conforms to such type certificate; and
(b) Lessee shall be operating the Aircraft pursuant
to an operating certificate and appropriate operations specifications issued
under Part 91 of the Federal Aviation Requlations.
5.1.9 Appraisal. A report from an appraiser selected by Lessor
containing such information and opinions as Lessor deems appropriate.
5.1.10 Transaction Costs. An amount equal to all of the
transaction costs incurred by Lessor and Lender in connection with this
transaction, including without limitation, the costs of making the filings and
recordings required hereunder (including, without limitation, the fees and
disbursements of FAA Counsel and special counsel for each such party), which
costs, Lessee hereby acknowledges and agrees, shall be the sole responsibility
of, and paid to Lessor and Lender, respectively (or their respective designees,
as the case may be) in good collected funds on such date by, Lessee; provided,
however, with respect to any such costs that are accrued and/or invoiced after
the Closing Date, Lessee shall remain responsible for and pay or reimburse
Lessor or Lender, as applicable, for the same immediately upon receiving such
person's written instructions, and in accordance therewith.
5.1.11 Anheuser Busch Contract. A copy of the Bud I
Advertising Agreement dated March 12, 1992, as amended and restated on July 8,
1994, between Lessee and Anheuser Busch Companies, Inc. ("Anheuser") and any and
all amendments, supplements or modifications thereto (as the same has or may at
any time and from time to time be amended, supplemented or modified, the
"Anheuser Busch Contract") certified by a duly authorized officer of Lessee as
being a true, correct and complete copy thereof.
5.1.12 Notice, Acknowledgement and Agreement. A notice,
acknowledgement and agreement executed and delivered by Anheuser, in form and
substance satisfactory to Lessor, whereby, among other things, Anheuser
acknowledges the collateral assignment and grant of security interest described
in Section 11.4 of this Lease Agreement, the further assignment thereof by
Lessor to Lender pursuant to the Loan Agreement, and Lessor's and Lender's
respective rights relating thereto.
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5.2 FAA AND OTHER FILINGS. The following shall have been complied
with to Lessor's satisfaction on the dates set forth below:
5.2.1 Delivery to FAA Counsel. Two (2) manually executed
original counterparts of this Lease Agreement and the Equipment Schedule, each
marked as being the "Duplicate" thereof, shall have been delivered to FAA
Counsel at least one (1) business day prior to the Closing Date.
5.2.2 Filings. On the Closing Date, such duplicate
counterpart documents and all such other filings shall have been filed for
recordation at the FAA and at such other appropriate filing offices, each in
recordable form, and delivered together with all filing fees, recordation and
other taxes and all other charges required to be paid as a condition to their
being so filed and recorded.
5.2.3 Termination of Allstate Lien. A release of lien, in
recordable form, executed and delivered by Allstate Financial Corporation
("Allstate") which releases all of Allstate's security interests, collateral
assignments and any other rights, title or interests in, under and relating to
the Aircraft and the Anheuser Busch Contract (including, without limitation, all
proceeds thereof) and the execution and delivery of any other documents,
agreements or instruments, including but not limited to, Uniform Commercial Code
termination statements, that Lessor may request for the purpose of effectuating
such release.
5.3 REPRESENTATIONS AND WARRANTS. The representations and
warranties contained in Section 3 hereof being true and accurate on and as of
the date hereof and the effective date of the Equipment Schedule as though made
on and as of such dates, except to the extent that such representations and
warranties expressly relate solely to an earlier date and Lessee's execution of
such documents shall be deemed a certification by each such party of the
foregoing.
5.4 OTHER CONDITIONS. Lessee shall have delivered any and all
other documents, and complied with or caused to have been complied with any and
all of the other requirements set forth in the closing memorandum prepared by
Lender and distributed to Lessee and Lessor prior to the date on which the
advance of the loan evidenced by the Note is anticipated.
6. DELIVERY; INSPECTION AND ACCEPTANCE BY LESSEE. Upon tender of
delivery, Lessee shall cause an inspection of the Aircraft to be made and, if
the same is found to be in good order Lessee shall accept delivery of the same
and shall execute and deliver to Lessor the Equipment Schedule containing a
complete description of each item comprising the Aircraft so delivered and
accepted; whereupon, as between Lessor and Lessee, the same shall be deemed to
have been finally accepted by Lessee pursuant to this Lease Agreement.
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7. IDENTIFICATION OF AIRCRAFT. Lessee will cause the Aircraft to be
continually marked, in a plain, distinct and conspicuous manner adjacent to the
airworthiness certificate with (a) the name of Lessor followed by the words
"Owner and Lessor", or other appropriate words designated by Lessor on a metal
nameplate, and (b) until the Lender's Lien is discharged, the name of Lender
followed by the words "Secured Party", or other appropriate words designated by
Lender on a metal nameplate; with appropriate changes thereof and additions
thereto as from time to time may be required in order to protect the title of
Lessor to the Aircraft and Lessor's rights under this Lease, and the first
priority security interest of the Lender's Lien on the Aircraft and Lender's
rights under the Operative Documents. Lessee shall maintain and prominently
display the "N" number specified on the Schedule of Aircraft attached to the
Equipment Schedule.
8. REGISTRATION, USE AND MAINTENANCE.
8.1 REGISTRATION, USE AND MAINTENANCE. During the term of this Lease,
Lessee, at its own cost and expense, shall (a) cause the Aircraft to be duly
registered in the name of Lessor under the Title 49 and shall not register the
Aircraft under the laws of any other country; (b) maintain, inspect, service,
repair, overhaul and test the Aircraft and in accordance with (i) all
maintenance manuals initially furnished with the Aircraft, including any
subsequent amendments or supplements to such manuals issued by the manufacturer
from time to time, (ii) all mandatory service bulletins with respect to the
Aircraft issued, supplied or available by or through the manufacturer and/or the
manufacturers of any engine or part, (iii) all airworthiness alerts and
directives issued by the FAA or similar regulatory agency having jurisdictional
authority, and as promptly as possible causing compliance with such
airworthiness alerts and directives to be completed through corrective
modification in lieu of operating manual restrictions, (iv) the manufacturer's
approved maintenance program (as modified and supplemented from time to time);
(c) maintain all records, logs and other materials required by the FAA, or any
other governmental authority having jurisdiction, to be maintained in respect of
the Aircraft or by the manufacturer thereof for enforcement of any warranties;
(d) promptly furnish to Lessor such information as may be required to enable
Lessor to file any reports required by any governmental authority as a result of
Lessor's ownership of the Aircraft; (e) operate the Aircraft solely within the
territory of the United States of America; (f) keep at appropriate levels under
applicable government guidelines and pay for all oil, fuel and lubricants
consumed by and required for the operation of the Aircraft; (g) make such
alterations, modifications and additions to the Aircraft as may be required from
time to time under any law, rule, or any airworthiness directive, or alert,
regulation or order of the FAA, or other governmental authority having
jurisdiction or mandatory service bulletin or similar notice issued by the
manufacturer thereof; (h) comply with (i) all Federal Aviation Regulations
("FARs") and any amendments, supplements, or
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changes thereto and all other governmental requirements, rules and regulations,
within the applicable compliance period thereof, including all airworthiness
directives promulgated or issued by the FAA and any other governmental authority
having jurisdiction over the Aircraft or Lessee's operation thereof, (ii) the
operating certificate and operation specifications specified in Section 5.1.8
and (iii) with all maintenance manuals (including any subsequent amendments or
supplements to such manuals) issued by the manufacturer from time to time, and
all service bulletins and similar notices issued or supplied by or available
through the manufacturer of the Aircraft, engines or any part (a "Part"); (i)
maintain corrosion control through its maintenance program and any supplemental
inspection programs or directives established or issued by the manufacturer or
the FAA; and (j) without limiting any of the requirements set forth in clauses
(a) through (i) above, or otherwise under this Section 8, keep the Aircraft in
at least as good condition as when delivered to Lessee hereunder (reasonable
wear and tear from normal and proper use consistent with the terms of this Lease
excepted), and in such condition as may be necessary to enable the airworthiness
certificate of such Aircraft to be maintained in good standing at all times
under Title 49. All maintenance procedures required herein shall be undertaken
and completed in accordance with manufacturer's recommended procedures and
applicable FARs and all other applicable laws, and only by properly trained,
licensed, and certificated maintenance sources and maintenance personnel.
Throughout the term of this Lease, the possession, use and maintenance of the
Aircraft shall be at the sole risk and expense of Lessee and the Aircraft shall
be based and properly hangared at the hangar location set forth in the Equipment
Schedule. Lessee shall not attach or incorporate any Item to or in any other
item of equipment in such a manner that such Item comprising the Aircraft
becomes or may be deemed to have become an accession to or a part of such other
item of equipment.
8.2 REPLACEMENTS AND ALTERATIONS.
8.2.1 Emplacements. Lessee, at its own expense, will
within a reasonable time replace, or cause to be replaced, any and all Parts
that from time to time become worn out, lost, destroyed, damaged beyond repair
or otherwise permanently rendered unfit for use, or are removed pursuant to the
terms of this Lease, including without limitation, the airship envelope being
used as a part of the Aircraft on the Closing Date. In furtherance of the
foregoing, Lessee agrees that it shall replace such airship envelope with the
replacement airship envelope referenced in the Schedule of Equipment; and each
of the original airship envelope and replacement airship envelope shall be
deemed a "Part" for all purposes of this Lease. All such replacement Parts
and/or accessories must be free and clear of all liens, encumbrances or rights
of others (except, so long as the Lender's Lien shall not have been discharged,
the Lender's Lien) and be in a condition and have a value and utility equal to
the greater of (a) the Parts replaced or (b) the value, condition and utility of
such replaced
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Parts would have had if maintained in the condition and repair required by the
terms hereof. All Parts at any time removed from the Aircraft shall remain the
property of Lessor and subject to the Lender's Lien, no matter where located,
until such time as such Parts shall be replaced by parts which have been
incorporated or installed in or attached to the Aircraft and which meet the
requirements for replacement Parts specified above. Immediately upon any
replacement Part becoming incorporated or installed in or attached to the
Aircraft as above provided, without further act, (i) title to the removed Part
shall thereupon vest in Lessee, on an "as is, where is" and "with all faults"
basis, free and clear of all rights of Lessor and shall no longer be deemed a
Part hereunder, (ii) title to such replacement Part shall thereupon vest in
Lessor and become subject to the Lender's Lien, and (iii) such replacement Part
shall become subject to this Lease and be deemed part of the Aircraft, for all
purposes hereof to the same extent as the Parts originally incorporated or
installed in or attached to the Aircraft. Lessee agrees to prepare, execute and
file, at its own expense, such documents as may be reasonably required to
create, protect and/or perfect Lessor's ownership or other interest in any such
replacement Part and the Lender's Lien in any such replacement Part.
8.2.2 Alterations. Except as provided in Section 8.4 hereof,
Lessee shall not make any material alterations to the Aircraft without the prior
written consent of Lessor, which consent shall not be unreasonably withheld;
provided, however, that until the Lender's Lien has been discharged, any such
material alterations shall require Lender's prior written consent.
8.3 INSPECTION. Upon reasonable advance notice, Lessor and Lender
shall have the right to inspect the Aircraft and all logs, flight manuals, and
maintenance records and any other books and records identified by Lessor and/or
Lender with respect thereto, at any reasonable time during normal business
hours; provided, that Lessor and Lender shall not have any duty to inspect and
shall not incur any liability or obligation by reason of not making any such
inspection.
8.4 COMPLIANCE WITH LAWS. Without limiting the generality of
Section 8.l hereof, Lessee agrees that the Aircraft will be maintained, used
and operated in compliance with any and all statutes, laws, rules, ordinances,
regulations and all directives and mandatory standards issued by any
governmental agency applicable to the Aircraft.
9. DISCLAIMER OF WARRANTIES.
9.1 DISCLAIMER. LESSEE HEREBY ACKNOWLEDGES AND AGREES
THAT: NEITHER LESSOR NOR LENDER IS A SELLER (AS SUCH TERM IS DEFINED IN THE
UNIFORM COMMERCIAL CODE) NOR A SELLER'S AGENT, AND THE AIRCRAFT AND THE RIGHTS
AND INTERESTS CONVEYED HEREIN WITH RESPECT THERETO ARE BEING CONVEYED AND
DELIVERED TO LESSEE "AS IS"
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AND "WHERE IS" WITHOUT ANY RECOURSE TO LESSOR OR LENDER, AND LESSOR AND LENDER
HAVE NOT MADE, AND HEREBY DISCLAIM, LIABILITY FOR, AND LESSEE HEREBY WAIVES ALL
RIGHTS AGAINST LESSOR AND LENDER RELATING TO, ANY AND ALL WARRANTIES,
GUARANTIES, REPRESENTATIONS OR OBLIGATIONS OF ANY KIND WITH RESPECT TO THE
AIRCRAFT (OR ANY PART), EITHER EXPRESS OR IMPLIED, ARISING BY APPLICABLE LAW
(INCLUDING ANY ENVIRONMENTAL LAW) OR OTHERWISE, INCLUDING (a) ANY EXPRESS OR
IMPLIED WARRANTIES, GUARANTIES, REPRESENTATIONS OR OBLIGATIONS OF OR ARISING
FROM OR IN (i) MERCHANTABILITY OR FITNESS FOR PARTICULAR USE OR PURPOSE, (ii)
COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE, OR (iii) TORT
(WHETHER OR NOT ARISING FROM THE ACTUAL, IMPLIED OR IMPUTED NEGLIGENCE OF LESSOR
OR LENDER OR STRICT LIABILITY) OR UNDER THE UNIFORM COMMERCIAL CODE OR OTHER
APPLICABLE LAW WITH RESPECT TO THE AIRCRAFT, INCLUDING ITS TITLE (INCLUDING ANY
WARRANTY OF GOOD OR MARKETABLE TITLE OR FREEDOM FROM LIENS), FREEDOM FROM
TRADEMARK, PATENT OR COPYRIGHT INFRINGEMENT, LATENT DEFECTS (WHETHER OR NOT
DISCOVERABLE), CONDITION, MANUFACTURE, DESIGN, SERVICING OR COMPLIANCE WITH
APPLICABLE LAW (INCLUDING ALL ENVIRONMENTAL LAWS) AND (b) ALL OBLIGATIONS,
LIABILITIES, RIGHTS AND REMEDIES, HOWSOEVER ARISING UNDER ANY APPLICABLE LAW
(INCLUDING ANY ENVIRONMENTAL LAW) WITH RESPECT TO THE MATTERS WAIVED AND
DISCLAIMED, INCLUDING FOR LOSS OF USE, REVENUE OR PROFIT WITH RESPECT TO THE
EQUIPMENT, OR ANY LIABILITY OF LESSEE, LESSOR OR LENDER TO ANY THIRD PARTY, OR
ANY OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES (AS SUCH TERMS ARE USED IN
THE UNIFORM COMMERCIAL CODE, OR OTHER APPLICABLE LAW), ALL SUCH RISKS, AS
BETWEEN LESSOR, LENDER AND LESSEE, ARE TO BE BORNE BY LESSEE.
9.2 FURTHER ACKNOWLEDGEMENTS. Lessee further acknowledges and agrees
that: Lessor has made the Aircraft available to Lessee for examination prior to
Lessee's entering into the Lease, and demanded that Lessee inspect the Aircraft
using a professional in the field of inspections pertaining to aircraft of this
type, and Lessee has pursuant to such demand examined the Aircraft (using such
an experienced inspector); the Aircraft was selected by Lessee on the basis of
its own respective judgment; Lessee has not asked for, been given or relied upon
any statements, representations, guaranties or warranties of Lessor; Lessor is
not in the business of manufacturing or assembling aircraft (including the
Aircraft) or otherwise in the business of being a vendor or supplier, but is
instead in the business of providing financial accommodations including lease
financing; and Lessor's agreement to enter into this Lease is in reliance upon
the freedom from liability or responsibility for the matters waived and
disclaimed herein. Without limiting the foregoing, disclaimers, acknowledgements
and agreements, Lessor is not responsible or liable for any direct, indirect,
incidental or consequential damage to or losses arising in connection with the
Aircraft or any Part, including, without limitation, any of the same resulting
from the manufacture, installation, operation, use, service, testing,
inspection, alteration, modification or other undertaking with respect to the
aircraft or any part thereof.
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9.3 WARRANTIES. All assignable warranties made by the manufacturer or
supplier to Lessor are hereby assigned to Lessee for and during the term of this
Lease, subject to Lender's Lien and Lender's rights arising thereunder with
respect to such warranties, and Lessee agrees to resolve all such claims
directly with the manufacturer or supplier. Provided that Lessee is not then in
Default (as hereinafter defined) hereunder, Lessor shall cooperate fully with
Lessee with respect to the resolution of such claims, in good faith and by
appropriate proceedings at Lessee's expense. Any such claim shall not affect in
any manner the unconditional obligation of Lessee to make rent payments
hereunder.
10. FEES AND TAXES.
10.1 INDEMNIFICATION. To the extent permitted by law and except as
otherwise provided herein, Lessee shall file any necessary report and return
for, shall pay promptly when due, shall otherwise be liable to reimburse Lessor
and Lender (on an after-tax basis) for, and agrees to indemnify and hold Lessor
and Lender harmless from: (a) all titling, recordation, documentary stamp and
other similar fees; (b) taxes (other than Income Taxes as defined herein),
including but not limited to sales, use and personal property taxes; and (c)
assessments and all other charges or withholdings of any nature (other than
Income Taxes as defined herein) (together with any penalties, fines or interest
thereon); any and all of the foregoing, arising at any time upon or relating to
the Aircraft, this Lease or any other Operative Document or with respect to the
acquisition, ownership, use, operation, leasing, delivery, return or other
disposition of the Aircraft, or upon the rentals payable hereunder, whether the
same be assessed to Lessor, Lender or Lessee.
10.2 CONTESTS AND REFUNDS. If any report or return for, or property
listing in connection with, or any, fee, tax or assessment described in Section
10.1 hereof ("Imposition") for which Lessee is responsible hereunder is, by law,
required to be filed by, assessed or billed to, or paid by, Lessor or Lender,
Lessee at its own expense will do any and all things required to be done by
Lessor and/or Lender (to the extent permitted by law) in connection therewith
and is hereby authorized by Lessor and/or Lender, as the case may be, to act on
behalf of Lessor and/or Lender, as the case may be, in any and all respects,
including (but not limited to), after obtaining the prior written consent of
Lessor and/or Lender, as the case may be, (which shall not unreasonably be
withheld), the contest or protest, in good faith and by appropriate proceedings,
of the validity of any Imposition or the amount thereof. Lessor and Lender agree
fully to cooperate with Lessee in any such contest, and Lessee agrees promptly
to indemnify Lessor and/or Lender, as the case may be, for all reasonable
expenses incurred by Lessor and/or Lender, as the case may be, in the course of
such cooperation. A claim for an Imposition shall be paid, subject to refund
proceedings, if failure to pay would adversely affect the title or rights of
Lessor
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hereunder or Lender under the Operative Documents. Provided that Lessee is not
then in Default (or if such Default is subsequently cured, upon such cure), if
Lessor or Lender, as the case may be, shall obtain a refund of any such
Imposition which has been paid (by Lessee or, by Lessor and for which Lessor has
been reimbursed by Lessee, or by Lender and for which Lender has been reimbursed
by Lessor), Lessor or Lender, as the case may be, promptly shall pay such refund
to Lessee.
10.3 OWNERSHIP. Lessee will cause all billings relating to such
Impositions to Lessor to be made to Lessor in care of Lessee and will, in
preparing any report or return required by law, show the ownership of the
Aircraft in Lessor, and shall send a copy of any such report or return to
Lessor.
10.4 LESSORS RIGHT TO PERFORM. If Lessee fails to pay any such
charges when due, except any Imposition being contested in good faith and by
appropriate proceedings as above provided, Lessor or Lender, as the case may be,
at their option may do so, in which event the amount so paid (including any
penalty or interest incurred as a result of Lessee's failure), plus interest
thereon at the Late Charge Rate, shall be paid by Lessee to Lessor or Lender,
as the case may be, with the next periodic payment of rent.
10.5 EXCLUSIONS. The provisions of Section 10.1 shall not apply: (a)
to any Imposition imposed as a result of a voluntary transfer or disposition by
Lessor or Lender, or their respective successors or assigns, of all or any
portion of Lessor's equitable legal or equitable ownership interest or Lender's
first priority security interest in the Aircraft, the Airframe, the Engines, any
Item, this Lease or any Operative Documents, unless such transfer or disposition
is being made pursuant to any provisions of this Lease (other than Section 19.2)
or any Operative Document; or (b) to any Imposition that Lessee is contesting in
good faith and permitted to do so by the provisions of this Lease until the
conclusion of such contest; except, that Lessee's right to contest any
Imposition and thereby avoid its obligation to pay any such Imposition, is
conditioned upon such contest not involving any material danger of the sale,
forfeiture or loss of the Aircraft (including the Airframe or any Engine or any
material Part).
10.6 "INCOME TAX". For purposes of this Section 10, the term "Income
Tax" means any tax based on or measured by or with respect to gross or net
income (including, without limitation, capital gains taxes, minimum taxes,
income taxes collected by withholding and taxes on tax preference items) or
receipts (provided, however, that sales, use, rental, license, ad valorem or
property taxes, or taxes imposed in lieu of such taxes, shall not constitute an
Income Tax) and taxes that are capital, doing business, franchise, excess
profits, net worth taxes or taxes imposed in lieu of an Income Tax, as well as
any and all interest, additions to tax, penalties or other charges in respect
thereof.
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10.7 PERFORMANCE OF INDEMNITIES. Unless otherwise expressly provided,
all payments to be made by Lessee under this Section 10 or Section 17 hereof or
otherwise under the Operative Documents will be free of withholdings and of
expense to Lessor, Lender or any Indemnitee for collection or other charges.
Lessee's obligations under the indemnities provided for in this Lease shall be
those of a primary obligor whether or not Lessor, Lender or any Indemnitee shall
also be indemnified with respect to the same matter under the terms of any other
agreement contemplated hereby, or any other document or instrument whether or
not related to the transactions contemplated hereby, and the persons seeking
indemnification from Lessee pursuant to any provisions of this Lease or the
other Operative Documents may proceed directly against Lessee without first
seeking to enforce any other right of indemnification.
11. INTENT; TITLE; GRANT OF SECURITY INTEREST IN ANHEUSER BUSCH
COLLATERAL.
11.1 TRUE LEASE. It is the express intent of the parties that this
agreement constitute a true lease and in no event shall this agreement be
construed as a sale of the Aircraft. Title to the Aircraft shall at all times
remain in Lessor, and Lessee shall acquire no ownership, title, property, right,
equity, or interest in the Aircraft other than its leasehold interest solely as
Lessee subject to all the terms and conditions hereof. The parties agree that
this Lease is a "Finance Lease" as defined in Article 2A -- Leases of the
Uniform Commercial Code as adopted in any applicable jurisdiction ("Article
2A"). Lessee acknowledges that Lessee has selected the Supplier (as defined in
Article 2A) and directed Lessor to purchase the goods from the Supplier. To
the extent permitted by applicable law, Lessee hereby waives any and all rights
and remedies conferred upon a lessee in Article 2A and Lessee also hereby
waives any rights now or hereafter conferred by statute or otherwise which may
limit or modify any of Lessor's rights or remedies under Section 18.2 of
this Lease.
11.2 CONDITIONAL GRANT. Notwithstanding the express intent of the
parties, should a court of competent jurisdiction determine that this Lease is
not a true lease, but rather one intended as security, then solely in that event
and for the expressly limited purposes thereof, Lessee shall be deemed to have
hereby granted Lessor a security interest in this Lease, the Aircraft, and all
accessions thereto, substitutions and replacements therefor, and proceeds
(including insurance proceeds) thereof (but without the power of Lessee to
dispose of the Aircraft); to secure the prompt payment and performance as and
when due of all obligations and indebtedness of Lessee (or any affiliate of
Lessee) to Lessor, now existing or hereafter created.
11.3 NO LIENS. Lessee agrees to maintain the Aircraft free from all
claims, liens and legal processes of creditors of Lessee other than the Lender's
Lien and liens for fees, taxes,
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levies, duties or other governmental charges of any kind, liens of mechanics,
materialmen, laborers, employees or suppliers and similar liens arising by
operation of law incurred by Lessee in the ordinary course of business for sums
that are not yet delinquent or are being contested in good faith by negotiations
or by appropriate proceedings which suspend the collection thereof (provided,
however, that such proceedings do not involve any substantial danger of the
sale, forfeiture or loss of the Aircraft or any interest therein). Lessee will
defend, at its own expense, Lessor's title to the Aircraft and the Lender's Lien
from such claims, liens or legal processes. Lessee shall also notify Lessor and
Lender immediately upon receipt of notice of any lien, attachment or judicial
proceeding affecting the Aircraft in whole or in part. Lessee shall not create,
incur, assume or suffer to exist any mortgage, lien, pledge or other encumbrance
or attachment of any kind whatsoever upon, affecting or with respect to this
Lease or any of the other Operative Documents or any of Lessor's interests
hereunder or of Lender's interest under any of the Operative Documents.
11.4 ANHEUSER BUNCH COLLATERAL.
11.4.1 Collateral Assignment and Grant of Security Interest. In order
to secure the prompt payment and performance as and when due of all obligations
and indebtedness of Lessee (or any other affiliate of Lessee) to Lessor, now
existing or hereafter created, Lessee hereby pledges, assigns and grants to
Lessor a continuing first priority lien and security interest in and to all of
Lessee's right, title and interest in, to and under the Anheuser Busch Contract
and any Substitute Agreement (as defined in Section 18 of this Lease Agreement),
including without limitation, all payments due thereunder, together with any and
all cash and noncash proceeds thereof (all such property being herein
collectively referred to as the "Anheuser Busch Collateral"). The collateral
assignment of, and security interest granted in, the Anheuser Busch Collateral
hereunder are being made to secure Lessee's obligations to Lessor and shall not
subject Lessor to, or transfer or in any way affect or modify, any obligation or
liability of Lessee with respect to any of the Anheuser Busch Collateral or any
transaction relating thereto.
11.4.2 No Unpermitted Dispositions. Without the prior written consent
of Lessor and (until the Lender's Lien is discharged) Lender, Lessee will
neither (a) sell, assign, transfer, dispose of, pledge or grant or permit a
lien, security interest or other encumbrance to exist on, the Anheuser Busch
Collateral, other than the Lender's Lien, nor (b) amend, supplement or modify
the Anheuser Busch Contract or any Substitute Agreement. Upon the request of
Lessor and/or Lender, as the case may be, Lessee will immediately deliver to the
Lessor and Lender all records, agreements and any other papers constituting,
evidencing or relating to any of the Anheuser Busch Collateral or any such
Substitute Agreement, as the case may be.
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11.4.3 Continuing Rights. Until Lessee's authority to do so is
terminated by the Lessor pursuant to sub-subsection 11.4.4 below, Lessee shall
have the authority, and Lessee agrees (a) at Lessee's sole cost and expense and
in accordance with the collection practices customary in Lessee's business, to
enforce and collect payment of all amounts due and payable on or in respect of
the Anheuser Busch Contract or any Substitute Agreement on Lessor's behalf and
for Lessor's account as Lessor's property in trust for Lessor and (b) to use the
proceeds of all such payments for Lessee's general business purposes so long as
such use is not inconsistent with the provisions of this Lease.
11.4.4 Lessor's Rights. At any time upon or after the occurrence of a
Default, Lessor, in addition to any other of its rights and remedies, may
terminate the authority given to Lessee in sub-subsection 11.4.3 above,
whereupon (a) Lessor shall have the right to notify and direct, and/or require
the Lessee to notify and direct, Anheuser Busch or the obliger ("Substitute
Obligor") under any Substitute Agreement to make all payments on or in respect
of the Anheuser Busch Contract or such Substitute Agreement, as the case may be,
directly to Lessor for deposit into a special account maintained by Lessor over
which Lessor has exclusive dominion, control and power of access and withdrawal
(the "Collection Account"); (b) unless otherwise agreed by Lessor, any cash,
checks, instruments or other remittances on or with respect to the Anheuser
Busch Contract or such Substitute Agreement, as the case may be, received by
Lessee shall be delivered to Lessor within one day of receipt thereof by Lessee
for deposit to the Collection Account in precisely the form in which received,
except for the addition thereto of the endorsement of Lessee where required for
collection of any checks, instruments or other remittances which endorsement
Lessee agrees to make and with respect thereto Lessee hereby waives notice of
presentment, protest and non-payment; (c) pending such deposit, Lessee will not
commingle any such cash, checks, instruments or other remittances with other
funds or property but will hold them separate and apart and in trust for Lessor
subject to the security interests hereunder; and (d) Lessor shall have the
right at any time and from time to time to apply funds held by it in the
Collection Account to the payment of all or any part of the obligations secured
hereunder, whether matured or unmatured, in such order and manner as Lessor may
determine in its sole discretion. Without limiting the generality of the
provisions of Section 15, until the Lender's Lien has been discharged, all of
Lessor's rights hereunder, including without limitation, the right to maintain
the Collection Account, to receive remittances and to apply funds in the
Collection Account, shall be held and exercised by Lender, to the exclusion of
Lessor.
12. INSURANCE.
12.1 CASUALTY INSURANCE. Lessee shall maintain in effect, at its own
expense, with insurers having a rating of A + VIII or better in AM Best Co.,
Best Insurance Reports - Property-
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Casualty, all-risk ground and flight aircraft hull insurance covering the
Aircraft, including F.O.D. (foreign object damage), fire and explosion coverage,
ingestion and lightning and electrical damage, and with respect to any engines
or other Parts while removed from the Aircraft, and with respect to any engines
or parts while temporarily installed on the Aircraft, provided that such
insurance shall at all times be for an amount which, when paid, will be for not
less than the greater of the full replacement value or the Stipulated Loss Value
(as defined in Section 13 hereof).
12.2 LIABILITY INSURANCE. Lessee shall also carry public liability
insurance, both bodily injury and property damage (including, without
limitation, third party aircraft liability insurance, passenger legal liability
insurance and property damage liability insurance), covering the Aircraft, with
a combined limit of not less than One Hundred Fifty Million Dollars
($150,000,000.00) per occurrence (or such higher amount as may from time to time
be required by the insurer for geographical coverage or by any applicable
authority in any jurisdiction within which the Aircraft is flown, including the
airport authority of any airport into which the Aircraft is flown), or such
lesser amount as Lessor may from time to time permit on notice to Lessee. Lessee
shall obtain and maintain such insurance at its own expense and with carriers
having the rating required in Section 12.1 above.
12.3 POLICY TERMS AND ENDORSEMENTS. Each insurance policy and its
respective cover amounts obtained in accordance with the requirements set forth
in this Section 12 shall (a) be primary without right of contribution from any
other insurance which is carried by Lessor or Lender, (b) as to the coverage
required by Section 12.2 hereof, expressly provide that all of the provisions
thereof, except the limits of liability, shall operate in the same manner as if
there were a separate policy covering each insured, (c) waive any right of the
insurers to any set-off or counterclaim or any other deduction, by attachment or
otherwise, in respect of Lessor, Lender or Lessee other than in respect of
premiums, and (d) provide that Lessor or Lender shall not be required to pay or
be liable for any premiums with respect to such insurance. All insurance for
loss or damage to the Aircraft shall provide that losses shall be payable solely
to Lessor (or, so long as the Lender's Lien shall not have been discharged,
Lender), and Lessee shall utilize its best efforts to have all checks relating
to any such losses delivered promptly to Lessor (or, so long as the Lender's
Lien shall not have been discharged, Lender). Lessor and Lender shall each be
named as an additional insured with respect to all such liability insurance.
Lessee shall cause to be provided to Lessor and Lender, not less than thirty
(30) days prior to the scheduled expiration or lapse of such insurance coverage,
evidence satisfactory to Lessor and Lender of renewal or replacement coverage.
Each insurer shall agree, by endorsement upon the policy or by independent
instrument furnished to Lessor and Lender, (a) that it will give each of Lessor
and Lender thirty (30) days' prior written notice of the effective date of any
material
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alteration or cancellation of such policy; (b) that insurance as to the interest
of any named additional insured or loss payee other than Lessee shall not be
invalidated by any actions, inactions, breach of warranty or conditions or
negligence of Lessee or other person (other than such additional insured) with
respect to such policy or policies; and (c) that it waives any rights of
subrogation against each additional insured. All insurance carried in accordance
with this Section 12 shall be in full force and effect throughout any
geographical areas at any time traversed by the Aircraft. The proceeds of such
insurance payable as a result of loss of or damage to the Aircraft shall be
applied as required by the provisions of Section 13 hereof and the Loan
Agreement.
13. LOSS AND DAMAGE.
13.1 RISK OF LOSS. Lessee assumes the entire risk of direct and
consequential loss and damage to the Aircraft from all causes during the term of
this Lease. Except as provided in this Section for discharge upon payment of the
Stipulated Loss Value and other required amounts, no loss or damage to the
Aircraft or any part thereof shall release or impair any obligations of Lessee
under this Lease, which shall continue in full force and effect and shall be
absolute during the term hereof. Lessee agrees that Lessor shall not incur any
liability to Lessee for any loss of business, loss of profits, expenses, or any
other damages resulting to Lessee by reason of any failure of or delay in
delivery or any delay caused by any non-performance, defective performance, or
breakdown of the Aircraft, nor shall Lessor at any time be responsible for
personal injury or the loss or destruction of any other property resulting from
the Aircraft.
13.2 REPAIRS. In the event of loss or damage to any Item (including,
without limitation, any engine or the airship envelope) which does not also
constitute a Total Loss (as hereinafter defined) of the Aircraft, Lessee shall,
at its sole cost and expense, promptly repair and restore such Item to the
condition required by this Lease. Provided that Lessee is not then in Default
(or if such Default is subsequently cured, upon such cure), upon receipt of
evidence reasonably satisfactory to Lessor (or, so long as the Lender's Lien
shall not have been discharged, Lender) of completion of such repairs, Lessor
shall (or, so long as the Lender's Lien shall not have been discharged, cause
Lender to) apply any insurance proceeds received by Lessor or Lender, as the
case may be, on account of such loss or damage to the cost of such repairs;
provided, however, in the event Lessee is required to pay for such repairs in
stages as repairs are being made, Lessor shall, or shall cause Lender to, apply
any insurance proceeds received by Lessor or Lender, as the case may be, on
account of such loss or damage to the cost of such stages of repairs.
13.3 TOTAL LOSS. Upon the occurrence of: (a) the actual or
constructive total loss of the Aircraft; or (b) (i) the loss, disappearance,
theft or destruction of the Aircraft, or (ii)
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damage to the Aircraft to such extent as shall make repair thereof uneconomical
or shall render it permanently unfit for normal use for any reason whatsoever;
or (c) the condemnation, or other taking of title to the Aircraft (as
established to the reasonable satisfaction of Lessor (or, so long as the
Lender's Lien shall not have been discharged, Lender); or (d) the confiscation,
seizure or requisition of use of the Aircraft for a period in excess of ninety
(90) consecutive days or for a period which continues beyond the date on which
Lessee is required to return the Aircraft upon the termination of this Lease; or
(e) as a result of any rule, regulation, order or other action by the FAA, the
use of the Aircraft in the normal course of Lessee's business shall have been
prohibited for a period of three (3) consecutive months, or beyond the date on
which this Lease is scheduled to expire; any such occurrence being herein
referred to as a "Total Loss"; and for the purposes of Section 13.7, the Term
"Total Loss" shall also mean the occurrence of any of the events specified in
clauses (a), (b), (c), (d) or (e) above, solely with respect to the airship
envelope or any engine. Upon the occurrence of any Total Loss during the term of
this Lease, Lessee shall give prompt notice thereof to Lessor and Lender.
13.4 TOTAL LOSS PAYMENT. Not later than the earlier of (a) the
thirtieth (30th) day following the occurrence of such Total Loss or (b) the
second (2nd) day following receipt by the loss payee of the insurance proceeds
in respect of such Total Loss (the "Payment Due Date"), Lessee shall pay to
Lessor (or, so long as the Lender's Lien shall not have been discharged, Lender)
the rent and any other amounts which would have been due on that date pursuant
to the terms of this Lease, plus the Stipulated Loss Value of the Aircraft,
calculated as of the next scheduled rent payment date after such Total Loss (the
"Calculation Date"), plus interest thereon, at the Late Charge Rate from the
Payment Due Date until such amount is paid in full (less any net insurance
proceeds or net condemnation award actually paid). Without waiving Lessee's
obligation to pay such amounts on a timely basis, Lessee shall continue to make
all scheduled rent and other payments to Lessor (or, so long as the Lender's
Lien shall not have been discharged, Lender) on the due date therefor until the
Stipulated Loss Value is fully and finally paid; and Lessee shall be entitled to
a credit against its obligation to pay the Stipulated Loss Value in the amount
of any rental payments payable and received in good collected funds after the
Calculation Date or with respect to any period after the Payment Due Date.
13.5 LESSOR'S CONVEYANCE. Upon Lessor's (or, so long as the Lender's
Lien shall not have been discharged, Lender's) receipt of all of the amounts
specified in Section 13.4 in good collected funds in respect of the Aircraft,
this Lease and the obligation to make future Base Rent payments shall terminate
and (to the extent applicable) Lessee thereupon shall become entitled to the
Aircraft "as is" and "where is," without recourse to Lessor or Lender, and
without representation or warranty, express or implied, with
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respect to any matter whatsoever. Lessor shall deliver to Lessee a bill of sale
transferring and assigning to Lessee, all of Lessor's title and interest in and
to the Aircraft without recourse or warranty except (as to Lessor's title) in
respect of Lessor's acts. Except as expressly provided herein, Lessor shall not
be required to make and may specifically disclaim any representation or warranty
as to the condition of the Aircraft or any other matters whatsoever.
Notwithstanding the foregoing, the Aircraft shall not be conveyed to Lessee, and
Lender's rights, title and interests with respect thereto shall not be conveyed,
terminated or otherwise affected by its receipt of the amounts to be paid upon a
Total Loss unless such payment results in the discharge of the Lender's Lien
pursuant to the Loan Agreement.
13.6 CALCULATION OF SLV. As used herein. "Stipulated Loss Value"
shall mean the product of the Total Invoice Cost (as designated on the
appropriate Equipment Schedule) of the Aircraft and the applicable percentage
factor set forth on the Schedule of Stipulated Loss Values attached to the
Equipment Schedule. The Stipulated Loss Value shall be calculated in accordance
with Section 13.4.
13.7 LOSS OF ENGINES OR ENVELOPE. Notwithstanding anything to the
contrary contained in this Section 13:
13.7.1 Notice. Upon the occurrence of a Total Loss with respect to
any engine or airship envelope comprising the Aircraft, provided such occurrence
does not constitute or happen in connection with a Total Loss with respect to
the Aircraft as provided herein, Lessee shall give written notice thereof to
Lessor and Lender within fifteen (15) days of the occurrence thereof.
13.7.2 Replacement. As promptly as is reasonably practicable, but
no later than one hundred twenty (120) days after such Total Loss, Lessee shall
duly convey to Lessor, as replacement for such Item having suffered a Total
Loss, good and marketable title to another engine or envelope, as the case may
be, of the same manufacturer and of the same or an improved model, as suitable
for installation and use on the Aircraft as the engine or envelope, as the case
may be, being so replaced. Such replacement engine or envelope shall be free and
clear of all liens (except that it shall immediately become subject to the
Lender's Lien upon Lessee's conveyance thereof to Lessor) and have a value and
utility at least equal to, and be in as good condition as, such engine or
envelope, as the case may be, immediately prior to such Total Loss, assuming
such engine or envelope was in the condition and repair required by Section 8
hereof prior to such Total Loss.
13.7.3 Additional Requirements. Lessee shall also at its expense
promptly furnish to Lessor and Lender such documents, instruments, certificates,
and agreements and take such other action as may be necessary or as Lessor
and/or Lender, as the case may be, may reasonably request in order that such
replacement
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engine or envelope, as the case may be, be duly and properly titled in Lessor,
subject to the Lender's Lien, covered by the insurance policies required under
Section 12 hereof and leased hereunder to the same extent as the engine or
envelope, as the case may be, having suffered such Total Loss. No Total Loss
with respect to any engine or envelope, as the case may be, under the
circumstances contemplated by the terms of this Section 13.7 shall result in any
reduction of rent with respect to the Aircraft.
14. REDELIVERY.
14.1 REDELIVERY. Upon Lessor's demand pursuant to Section 18.2
hereof, Lessee shall, at its own expense, return the Aircraft to Lessor to such
place within the Continental United States as Lessor shall specify, (a) in the
condition specified herein, (b) in flight ready status, and (c) free and clear
of all liens, encumbrances or rights of others whatsoever, except (i) liens or
encumbrances resulting from claims against Lessor, the responsibility for which
have not been delegated to Lessee under this Lease, or (ii) the Lender's Lien
(provided that Lessee shall have complied with all of its accrued obligations
set forth in the Operative Documents). Until the Aircraft is returned to Lessor
pursuant to the provisions of this Section 14, all of the provisions of this
Lease with respect thereto shall continue in full force and effect. Lessee shall
pay all reasonable costs and expenses in connection with or incidental to the
return of the Aircraft, including, without limitation, the cost of insuring and
transporting the Aircraft. Lessee shall also execute, if requested by Lessor, a
lease termination statement.
14.2 RETURN CONDITION. Upon return of the Aircraft, all of the
following shall have been complied with to Lessor's satisfaction:
14.2.1 Airworthy. The Aircraft shall be duly certificated as an
airworthy aircraft by the FAA and have a currently valid airworthiness
certificate issued by the FAA (and be in such a condition to be eligible
therefor).
14.2.2 Good Condition. The Aircraft shall be in good condition
(ordinary wear and tear from proper and normal use thereof excepted) and in the
same configuration as when delivered to Lessee hereunder and in such condition
and configuration as is capable of performing its originally intended use; and
Lessee shall have permanently repaired any damages to the Aircraft.
14.2.3 Cosmetic Condition. The Aircraft shall be clean, its
interior and exterior appearance cosmetically acceptable, interior complete and
prepared to place into United States normal business usage; and Lessee shall, at
its own expense, remove from the exterior of the Aircraft all insignias and
other distinctive markings in a workmanlike manner, and such areas on the
Aircraft shall be repainted in a good quality paint of the same
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color as the surrounding area so as to produce a uniform appearance.
14.2.4 Due Registration. The Airframe shall be duly registered in
accordance with the terms of Title 49 in the name of Lessor.
14.2.5 Continuously Maintained. The Aircraft shall have been
continuously and currently maintained in compliance with this Lease, all alert
bulletins and other service bulletins, supplemental inspection programs (or
other aging aircraft requirements), the manufacturer's maintenance program and
all other requirements of the Aircraft (and other applicable) manufacturers, and
all "on condition" and "condition monitored" components shall be serviceable.
14.2.6 Fully Equipped. The Aircraft shall (a) comply with the
manufacturer's original type certificate specifications therefor, as revised up
to the date of return hereunder, (b) be complete and fully equipped for
operation under applicable FARs, and (c) function and perform in accordance with
the manufacturer's specifications and all discrepancies noted during the
pre-return inspections and acceptance flights shall be corrected in accordance
with the manufacturers' manuals.
14.2.7 Acceptable Repairs. (a) All Parts and Engines shall be
documented to have been repaired or overhauled by certified FAA repair stations
or by those approved by the FAA through reciprocal agreements; (b) all overhaul
and repair procedures shall be further verified to meet all FAA requirements for
quality and documentation necessary to enable immediate transferral to operation
within the continental limits of the United States under applicable FARs; and
(c) all major repairs performed since the delivery, and which are still in
existence on the Aircraft, (i) are in conformity with the manufacturer's
structural repair manual and have received or are immediately eligible to
receive FAA approval, if so required by Lessor, and (ii) shall be accompanied by
all data and documentation necessary to substantiate their certification and
approval, as required by Lessor.
14.2.8 Modifications. All modifications (a) performed since the
delivery which deviate from the certified configuration and which are still in
existence on the Aircraft shall have FAA approval or certification or be removed
by Lessee unless otherwise deemed acceptable in writing by Lessor in its sole
discretion, and (b) shall be accompanied by complete data and documentation
necessary to substantiate their certification and approval.
14.2.9 Compliance with Laws. Btc.. All applicable laws, including
without limitation, all FAA Airworthiness Directives, Part 91 of the FARs and
any other FARs applicable to
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the Aircraft during the term hereof, shall have been complied with, by
terminating action (and without Lessee availing itself of any waiver, deviation,
exemption or right to defer by inspection) in accordance with the issuing
agency's specific instructions.
14.2.10 Records, Etc. All records necessary and required by the
FAA, the Department of Transportation, or any other government agency, or by
applicable law, shall be (i) in English and delivered with the Aircraft, and if
hard, noncomputerized copies of maintenance records are not available, then
Lessee shall take action with pertinent regulatory agencies to ensure that
Lessor and the FAA are provided with all requested guarantees of methods of
compliance, component overhaul and management, quality control, serial number
verification, etc., and (ii) all inclusive to the Aircraft and, as a minimum,
shall extend to include all activities associated with each of the last
completed maintenance checks, repairs, scheduled inspections and functional
tests, and overhauls performed to Lessee's MSR. All Parts identified with safe
life limits shall be identified with their service histories, accumulated cycles
or flight hours, as applicable, and remaining service lives on a separate
listing. All components and assemblies which are identified on the maintenance
records by part numbers and serial numbers other than the manufacturers shall be
provided with interchange or cross reference listing necessary to establish
complete traceability.
14.2.11 FAA Condition. Lessee will be responsible for ensuring that
the Aircraft meets all conditions necessary to facilitate transference of the
FAA certificate of airworthiness.
14.3 Storage. If Lessor so requests, Lessee will provide Lessor, or
cause Lessor to be provided, with hangered storage for the Aircraft, at Lessee's
risk and at Lessee's cost for maintenance for a period not exceeding ninety (90)
days commencing on the date of such termination, at the return location. Lessee
will, if possible and upon written request from Lessor, maintain, in the name of
Lessor but at Lessee's sole expenes, insurance for the Aircraft during such
period, as may be customarily obtained during storage periods for the Aircraft
by Lessee. If so requested by Lessor, Lessee shall provide Lessor with up to
thirty (30) additional days storage pursuant to the foregoing terms.
15. RESERVED.
16. RESERVED.
17. INDEMNITY. Lessee assumes and agrees to indemnify, defend, and keep
harmless Lessor, Lender, any holder of the Note, and their respective agents and
employees (individually, an "Indemnitee" and collectively, the "Indemnitees"),
from and against any and all losses, damages, injuries, claims, demands and
expenses, including legal expenses (other than such as may directly and
proximately result from the negligence or willful misconduct of
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an Indemnitee), whether or not such Indemnitee shall also be indemnified as to
any such claim by any other person, in any way relating to or arising on account
of (i) the Lease, the Equipment Schedule, any other Operative Document, or any
other documents, instrument or certificate delivered in connection with this
Lease or any other Operative Document, (ii) in any way related to or arising out
of the offer, sale, delivery or resale of the Note, or (iii) the Aircraft, any
engine, or Part, including without limitation, the ordering, acquisition,
delivery, installation or rejection of the Aircraft, the possession,
maintenance, use, condition (including without limitation, latent and other
defects and whether or not discoverable by Lessor, Lessee, Lender or any other
person, any claim in tort for strict liability, and any claim for patent,
trademark or copyright infringement) or operation of any Item, and by whomsoever
used or operated, during the term of this Lease with respect to that Item, the
loss, damage, destruction, removal, return, surrender, sale or other disposition
of the Aircraft, or any item thereof or for whatever other reason whatsoever.
Each Indemnitee shall give Lessee prompt notice of any claim or liability
suffered by it and the subject of this indemnity and Lessee shall be entitled to
control the defense thereof, so long as Lessee is not in Default hereunder;
provided, however, such Indemnitee shall have the right to approve defense
counsel selected by Lessee.
18. DEFAULT; REMEDIES.
18.1 DEFAULTS. Lessee shall be deemed to be in default hereunder
("Default") if (a) Lessee shall fail to make any payment of rent or any other
payment hereunder within five (5) days after the same shall have become due; or
(b) Lessee shall fail to obtain and maintain the insurance required herein; or
(c) Lessee shall fail to perform or observe any other covenant, condition or
agreement to be performed or observed by it hereunder and such failure shall
continue unremedied for a period of thirty (30) days after the earlier of the
actual knowledge of Lessee or written notice thereof to Lessee by Lessor; or
(d) Lessee shall (i) be generally not paying its debts as they become due, or
(ii) take action for the purpose of invoking the protection of any bankruptcy or
insolvency law, or any such law is invoked against or with respect to Lessee or
its property and such petition filed against Lessee is not dismissed within
sixty (60) days; or (e) Lessee shall make or permit any unauthorized assignment
or transfer of this Lease, the Aircraft or any interest therein; or (f) any
certificate, statement, representation, warranty or audit contained herein or
heretofore or hereafter furnished with respect hereto by or on behalf of Lessee
proving to have been false in any material respect at the time as of which the
facts therein set forth were stated or certified (or at any time, with respect
to any representations or warranties that are continuing in nature), or having
omitted any substantial contingent or unliquidated liability or claims against
Lessee; or (g) Lessee shall be in default under any material obligation for the
payment of borrowed money, for the
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deferred purchase price of property or for the payment of any rent under any
lease agreement, and the applicable grace period with respect thereto shall have
expired; or (h) Lessee shall have terminated its corporate existence,
consolidated with, merged into, or conveyed or leased substantially all of its
assets as an entirety to (such action as being referred to as an "Events"), any
person, unless: (i) such person is organized and existing under the laws of the
United States or any state and is a "citizen of the United States" within the
meaning of 49 U.S.C. 40102(a)(15), and not less than thirty (30) days prior to
such Event, executes and delivers to Lessor and Lender an agreement containing
an effective assumption by such person of the due and punctual performance of
this Lease, and all of the other documents and instruments to which it is a
party; and (ii) Lessor and Lender are reasonably satisfied as to the
creditworthiness of such person; or (i) there is an anticipatory repudiation of
Lessee's obligations under the Lease, or any other document or instrument
delivered pursuant hereto to which Lessee is a party; or (j) the Anheuser Busch
Contract expires, or is terminated, cancelled or materially modified in a manner
that reduces its collateral value, unless, within sixty (60) days thereof,
Lessee enters into an agreement ("Substitute Agreement") having terms and
conditions (including, but not limited to, the term of such agreement and the
payments to be made thereunder) substantially the same as the Anheuser Busch
Contract as determined in the reasonable discretion of Lessor and Lender, and
with a Substitute Obligor having a creditworthiness and meeting such other
requirements as Lessor and Lender may then require (in their reasonable
discretion); or (k) Lessee shall fail to perform or observe any agreement set
forth in Section 11.4.2(a) or (b).
18.2 REMEDIES. Upon the occurrence of a Default, Lessor (or if the
Lender's Lien has not been discharged, Lender; it being understood and agreed
that, any reference hereinafter in this Section 18.2 to Lessor shall be deemed
to mean Lender, as long as the Lender's Lien has not been discharged) may, at
its option, declare this Lease to be in default with or without written notice
to Lessee (such notice to be given, if at all, at Lessor's sole option) (without
election of remedies), and at any time thereafter, may do any one or more of the
following, all of which are hereby authorized by Lessee:
18.2.1 Return the Aircraft. Require Lessee to return the Aircraft
at the location to which the Aircraft was delivered or the location to which
such Aircraft may have been moved by Lessee or such other location in reasonable
proximity to either of the foregoing as Lessor shall designate; and/or to return
promptly, at Lessee's expense, the Aircraft to Lessor at the location, in the
condition and otherwise in accordance with all of the terms of Section 14
hereof; and/or take possession of and render unusable by Lessee the Aircraft,
wherever it may be located, without any court order or other process of law and
without liability for any damages occasioned by such taking of possession (any
such taking of possession shall constitute an
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automatic cancellation of this Lease as it applies to those items taken without
further notice, and such taking of possession shall not prohibit Lessor from
exercising its other remedies hereunder).
18.2.2 Liquidated Damages. Sell, re-lease or otherwise dispose of
the Aircraft, whether or not in Lessor's possession, in a commercially
reasonable manner at public or private sale with notice to Lessee (the parties
agreeing that ten (10) days' prior written notice shall constitute adequate
notice of such sale), with the right of Lessor to purchase and apply the net
proceeds of such disposition, after deducting all costs of such disposition
(including but not limited to costs of transportation, possession, storage,
refurbishing, advertising and brokers' fees), to the obligations of Lessee
pursuant to this Section 18.2, with Lessee remaining liable for any deficiency
and with any excess being retained by Lessor; or retain any or all of the
Aircraft, and recover from Lessee damages, not as a penalty, but herein
liquidated for all purposes as follows:
(a) if Lessor elects to dispose of the Aircraft pursuant to a
lease which is substantially similar to this Lease: in an amount equal to the
sum of (i) any accrued and unpaid rent under this Lease as of the date of
commencement (the "Commencement Date") of the term of the new lease, and (ii)
(A) the present value as of the Commencement Date of the total rent for the then
remaining term of this Lease, minus (B) the present value as of the Commencement
Date of the rent under the new lease applicable to that period of the new lease
term which is comparable to the then remaining term of this Lease, and (iii) any
incidental damages allowed under Article 2A, less expenses saved by Lessor in
consequence of the Default ("Incidental Damages");
(b) if Lessor elects to retain the Aircraft or to dispose of
the Aircraft by sale, by re-lease (pursuant to a lease which is not
substantially similar to this Lease), or otherwise: in an amount equal to the
sum of (i) any accrued and unpaid rent as of the date Lessor repossesses the
Aircraft or such earlier date as Lessee tenders possession of the Aircraft to
Lessor, (ii) (A) the present value as of the date determined under clause (i) of
the total rent for the then remaining term of this Lease, minus (B) the present
value as of the same date of the "market rent" (as defined in Article 2A) at the
place where the Aircraft was located on that date computed for the same lease
term, and (iii) any Incidental Damages (provided, however, that if the measure
of damages provided is inadequate to put Lessor in as good a position as
performance would have, the damages shall be the present value of the profit,
including reasonable overhead, Lessor would have made from full performance by
Lessee, together with any incidental damages allowed under Article 2A, due
allowance for costs reasonably incurred and due credit for payments or proceeds
of disposition); and/or
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(c) if Lessor has not repossessed the Aircraft, or if Lessor
has repossessed the Aircraft or Lessee has tendered possession of the Aircraft
to Lessor and Lessor is unable after reasonable effort to dispose of the
Aircraft at a reasonable price or the circumstances reasonably indicate that
such an effort will be unavailing: in an amount equal to the sum of (i) accrued
and unpaid rent as of the date of entry of judgment in favor of Lessor, (ii) the
present value as of the date determined under clause (i) of the rent for the
then remaining term of this Lease, and (iii) any Incidental Damages. Lessor may
dispose of the Aircraft at any time before collection of a judgment for damages.
If the disposition is before the end of the remaining term of this Lease,
Lessor's recovery against Lessee for damages will be governed by Section
18.2.2(a) or (b) (as applicable), and Lessor will cause an appropriate credit to
be provided against any judgment for damages to the extent that the amount of
the judgment exceeds the applicable recovery pursuant to Section 18.2.2(a)
or (b).
18.2.3 Other Liquidated Damages. In lieu of the damages specified
in Section 18.2.2, Lessor may recover from Lessee, as liquidated damages for
loss of a bargain and not as a penalty, an amount calculated as the sum of: (a)
the greater of either (i) the Stipulated Loss Value of the Aircraft (determined
as of the next date on which a payment is or would have been due after the
declaration of a Default), together with all other sums due hereunder as of such
determination date with respect to such Aircraft, or (ii) all sums due and to
become due under the Lease for the full term of the Lease, including any tax
indemnities becoming due as a result of the Default (provided that all sums
becoming due after the declaration of Default shall be discounted to present
value as of the date of payment by Lessee), plus Lessor's estimated residual
interest in the Aircraft; plus (b) the amount of all commercially reasonable
costs and expenses incurred by Lessor in connection with repossession, recovery,
storage, repair, sale, re-lease or other disposition of the Aircraft, including
reasonable attorneys' fees and costs incurred in connection therewith or
otherwise resulting from Lessee's default; minus (c) if Lessor has repossessed
the Aircraft, the amount calculated pursuant to clause (ii)(B) of paragraph (a)
or paragraph (b) (as applicable) of Section 18.2.2.
18.2.4 Cancellation. Cancel this Lease as to the Aircraft.
18.2.5 Specific Performance and Other Remedies. Proceed by
appropriate court action, either at law or in equity, to enforce performance by
Lessee or to recover damages for the breach hereof; or exercise any other right
or remedy available to Lessor pursuant to Article 2A of the Uniform Commercial
Code as then in effect in the applicable jurisdiction or otherwise available at
law or in equity. Without limiting the generality of any of the foregoing
provisions, the return of the Aircraft as hereinbefore
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provided is of the essence of this Lease, and upon application to any court of
equity having jurisdiction in the premises, Lessor shall be entitled to a decree
against Lessee requiring specific performance of the covenants of Lessee so to
return the Aircraft, and otherwise fully comply with Section 14 and this Section
18.
18.2.6 Present Value and Other Considerations. All amounts to be
present valued shall be discounted at a rate equal to six percent (6%) per
annum. Unless otherwise provided above, a cancellation hereunder shall occur
only upon written notice by Lessor to Lessee. Except with respect to such a
cancellation, this Lease shall remain in full force and effect and Lessee shall
be and remain liable for the full performance of all its obligations hereunder;
and any such cancellation shall not relieve Lessee from any payment or other
obligations arising in connection with events occurring prior to such
cancellation.
18.2.7 Costs of Enforcement. In addition, and without limiting the
generality of Section 17 hereof, Lessee shall be liable for (a) all of Lessor's
and Lender's legal fees and other costs and expenses (including all reasonable
attorneys' fees, court costs and other legal expenses) incurred by reason of any
Default or the exercise of lessor's remedies, including all out-of-pocket costs
and expenses incurred in connection with the repossession, recovery, storage,
repair, sale, re-lease or other disposition of the Aircraft, or otherwise
relating to the return of any Aircraft in accordance with the terms of Section
14 hereof or in placing such Aircraft in the condition required by said Section,
plus (b) interest at the Late Charge Rate on any and all amounts payable under
this Section 18, from and after the due date thereof and until all such amounts
are fully and finally paid. Unless the context expressly requires otherwise, no
right or remedy referred to in this Section is intended to be exclusive, but
each shall be cumulative, and shall be in addition to any other remedy referred
to above or otherwise available at law or in equity, and may be exercised
concurrently or separately from time to time.
18.2.8 No Waiver. The failure of Lessor to exercise the rights
granted hereunder upon any Default by Lessee shall not constitute a waiver of
any such right upon the continuation or reoccurrence of any such Default. In no
event shall the execution of an Equipment Schedule constitute a waiver by Lessor
of any pre-existing Default in the performance of the terms and conditions
hereof.
18.2.9 Anheuser Busch Collateral. Upon and after the occurrence of
a Default, Lessor, without notice or demand other than as expressly provided for
under the provisions of this Lease, may exercise in any jurisdiction in which
enforcement hereof is sought, the rights and remedies available to Lessor under
the other provisions of this Lease, the rights and remedies of a secured party
under the applicable Uniform Commercial Code and all other rights and remedies
available to Lessor under applicable law, all
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such rights and remedies being cumulative and enforceable alternatively,
successively or concurrently, including, but not limited to, the right (and
Lessee hereby irrevocably designates and appoints Lessor and its designees as
the attorney-in-fact of Lessee, with power of substitution and with power and
authority in Lessee's name, Lessor's name or otherwise and for the use and
benefit of Lessor) (a) to notify Anheuser Busch or any Substitute Obligor to
make payments or other remittances on or with respect to the Anheuser Busch
Collateral directly to Lessor, (b) to perform any provision of any document,
agreement or other instrument relating to the Anheuser Busch Collateral and/or
cure any default under any such document, agreement or other instrument and (c)
to assign or otherwise dispose of any or all of the Anheuser Busch Collateral on
such terms and conditions as Lessor, in its sole discretion, may determine.
19. ASSIGNMENT BY LESSOR AND LESSEE.
19.1 NO ASSIGNMENT, SUBLEASE, ETC. BY LESSEE. LESSEE WILL NOT ASSIGN
OR IN ANY WAY DISPOSE OF ALL OR ANY OF ITS RIGHTS OR OBLIGATIONS HEREUNDER,
SUBLET THE AIRCRAFT OR OTHERWISE PERMIT THE AIRCRAFT TO BE OPERATED OR USED BY,
OR TO COME INTO OR REMAIN IN THE POSSESSION OF, ANYONE BUT LESSEE; and no
attempted assignment or sublease, shall relieve Lessee of its obligations
hereunder and Lessee shall remain primarily liable hereunder.
19.2 LESSOR'S ASSIGNMENT, TRANSFER, ETC.
19.2.1 Generally. LESSOR MAY AT ANY TIME ASSIGN OR TRANSFER ANY OR
ALL OF ITS RIGHTS, OBLIGATIONS, TITLE AND INTEREST HEREUNDER, OR LESSOR'S
INTEREST IN THE AIRCRAFT, TO ANY OTHER PERSON. LESSOR AGREES TO PROVIDE NOTICE
OF ANY SUCH ASSIGNMENT OR TRANSFER TO LESSEE. If Lessee is given notice of any
such assignment, Lessee shall acknowledge receipt thereof in writing. In the
event Lessor retains the obligations of the lessor hereunder in any such
assignment, Lessor's assignee shall not be obligated to perform any duty,
covenant or condition required to be performed by the lessor under the terms of
this Lease (other than the covenant of quiet enjoyment specified in Section 20
hereof); and no breach or default by Lessor hereunder or pursuant to any other
agreement between Lessor and Lessee, should there be one, shall excuse
performance by Lessee of any provision hereof; it being understood that in the
event of a default or breach by Lessor that Lessee shall pursue any rights on
account thereof solely against Lessor. Lessee acknowledges that any assignment
or transfer by Lessor shall not materially change Lessee's duties or obligations
under this Lease nor materially increase the burdens or risks imposed on Lessee.
19.2.2 Consent to Assignment of Lease. Lessee hereby acknowledges,
and consents in all respects to, the assignment of this Lease by Lessor to
Lender under and pursuant to the Loan Agreement and acknowledges and agrees as
follows:
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(a) Lessee agrees that it shall make each payment of Base Rent
and any other amounts payable by Lessee under the Lease, whenever due or to
become due under the Lease, directly to Lender pursuant to the instructions set
forth in Section 2.3 hereof, unless and until Lessee has received written notice
to the contrary from Lender.
(b) Recovery of Payments. Lessee agrees that it shall not seek
to recover any payment (other than a payment made in mistake) made to Lender in
accordance with the Loan Agreement once such payment is made.
(c) Lessee acknowledges and agrees that (i) notwithstanding any
provision of this Lease, or elsewhere, to the contrary, this Lease is expressly
subject and subordinate to the Lender's Lien in, under and to this Lease, the
Aircraft and the other collateral described in the Loan Agreement, and all of
Lenders rights and remedies under the Loan Agreement; (ii) upon the occurrence
of any Default as defined in the Loan Agreement (a "Loan Default"), Lender may,
at its option, exercise any and all of such rights and remedies under the Loan
Agreement as it may then (in its sole and absolute discretion) deem appropriate,
irrespective of Lessee's rights under this Lease, and any leasehold interest
created hereby; and (iii) without limiting the generality of the foregoing, upon
the occurrence of any Loan Default, Lender may, at its option, cancel this Lease
and require that Lessee, and Lessee shall, return the Aircraft in accordance
with Section 14 of the Lease, and exercise all such other rights and remedies
available to it under the Lease or any of the other Operative Documents or at
law or in equity (including the equitable remedy of specific performance).
(d) As long as the Lender's Lien shall not have been
discharged, Lender shall have the exclusive right to make all decisions and take
all actions reserved to "Lessor" under the Lease, whether or not expressly
reserved to Lender herein, including, without limitation, the right to give any
consent, waiver, authorization or approval hereunder, the right (but not the
obligation) to perform Lessee's obligations hereunder or the right to execute,
endorse or deliver any documents and checks or drafts under any power of
attorney granted to "Lessor" hereunder.
(e) Lender shall be deemed a third party beneficiary of all of
the representations, warranties and covenants made herein for its benefit,
whether directly or as Lessor's assignee, notwithstanding its not being a
signatory to this Lease.
19.3 SUCCESSORS AND ASSIGNS. Subject always to the foregoing, the
Lease inures to the benefit of, and is binding upon, the successors and assigns
of the parties hereto.
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20. QUIET POSSESSION. Lessor represents and covenants to Lessee that
Lessor has full authority to enter into this Lease, and that, conditioned upon
Lessee performing all of the covenants and conditions hereof, as to claims of
Lessor or persons claiming under Lessor, Lessee shall, except as provided in
Section 19.2., peaceably and quietly hold, possess and use the Aircraft during
the term of this Lease subject to the terms and provisions hereof. Any action by
Lessee against Lessor for any default by Lessor under this Lease, including
breach of this representation and covenant, shall be commenced within one (1)
year after Lessee is deprived of possession and use of the Aircraft in violation
of this Section 20.
21. LESSOR'S RIGHT TO PERFORM FOR LESSEE.
21.1 RIGHT TO PERFORM. If Lessee fails to perform or comply with any
of its obligations hereunder, Lessor or Lender, as the case may be, shall have
the right, but shall not be obligated, to effect such performance, and the
amount of any out of pocket expenses and other reasonable expenses of Lessor or
Lender, as the case may be, incurred in connection with such performance,
together with interest thereon at the Late Charge Rate, shall be payable by
Lessee to such party upon demand.
21.2 POWER OF ATTORNEY. Lessee hereby irrevocably appoints Lessor
as Lessee's attorney-in-fact (which power shall be deemed coupled with an
interest) to execute, endorse and deliver any documents and checks or drafts
relating to or received in payment for any loss or damage under the policies of
insurance required by the provisions of Section 12 hereof, but only to the
extent that the same relates to the Aircraft.
22. NOTICE. All notices (excluding billings and communications in the
ordinary course of business) hereunder shall be in writing, personally
delivered, sent by facsimile or by certified mail, return receipt requested,
addressed to the other party at its respective address stated below the
signature of such party or at such other address as such party shall from time
to time designate in writing to the other party; and shall be effective from the
date of receipt.
23. MISCELLANEOUS.
23.1 ENTIRE AGREEMENT. This Lease Agreement and the Equipment
Schedule collectively constitute the entire agreement between the parties with
respect to the subject matter hereof and shall not be amended or altered in any
manner except by a document in writing executed by both parties.
23.2 SEVERABLE. Any provision of this Lease which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
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jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
23.3 JURY TRIAL WAIVER. LESSEE HEREBY WAIVES TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO WHICH LESSEE AND LESSOR MAY BE PARTIES ARISING OUT OF OR
IN ANY WAY PERTAINING TO THIS LEASE OR ANY OTHER OPERATIVE DOCUMENT. IT IS
HEREBY AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY
JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING
CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS LEASE OR ANY OTHER OPERATIVE
DOCUMENT. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY LESSEE
AND LESSEE HEREBY ACKNOWLEDGES THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE
BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY
TO MODIFY OR NULLIFY ITS EFFECT. LESSEE FURTHER ACKNOWLEDGES THAT IT HAS BEEN
REPRESENTED IN THE SIGNING OF THIS LEASE AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD
THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
23.4 SURVIVAL. The representations, warranties and covenants of
Lessee herein and in any other Operative Document shall be deemed to be
continuing and to survive the closing hereunder. Each execution by Lessee of an
Equipment Schedule shall be deemed a reaffirmation and warranty that there shall
have been no material adverse change in the business or financial condition of
Lessee from the date of execution hereof. The obligations of Lessee under
Sections 10, 14, 17, and 18 which arise in connection with events occurring
during the term of the Lease (or occurring after any cancellation or termination
by Lessor pursuant to Section 18.2), shall survive the termination or
cancellation of the Lease.
23.5 CAPTIONS; LAWS. The captions in this Lease are for convenience
of reference only and shall not define or limit any of the terms or provisions
hereof. All references in this Lease to any rules, regulations or statutes
shall also mean as hereafter amended and succeeded, from time to time.
24. CONNECTICUT LAW GOVERNS; JURISDICTION.
24.1 GOVERNING LAW. THIS LEASE SHALL NOT BE EFFECTIVE UNLESS AND
UNTIL ACCEPTED BY EXECUTION BY AN OFFICER OF LESSOR, AND COUNTERSIGNED BY LENDER
IN THE STATE OF CONNECTICUT, AND, IN FURTHERANCE OF THE FOREGOING, AND AS AN
INDUCEMENT TO LENDER TO MAKE THE LOAN TO LESSOR EVIDENCED BY THE NOTE, THIS
LEASE SHALL BE DEEMED TO HAVE BEEN DELIVERED IN THE STATE OF CONNECTICUT, FOR
ALL PURPOSES. ACCORDINGLY, THIS LEASE AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CONNECTICUT, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE
AIRCRAFT.
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24.2 JURISDICTION. The parties agree that any action or proceeding
arising out of or relating to this Lease may be commenced in any state or
Federal court of competent jurisdiction in the State of Connecticut and each
party agrees that a summons and complaint commencing an action or proceeding in
any such court shall be properly served and shall confer personal jurisdiction
if served personally or by certified mail to it at its address designated
pursuant hereto, or as otherwise provided under the laws of the State of
Connecticut. The parties hereto acknowledge and agree that (a) the parties have
agreed to have this Lease governed by the laws of, and permit the commencement
of proceedings in, the State of Connecticut at the request of Lender and that
such choice of governing law and jurisdiction was a condition precedent to
Lender's execution and delivery of the Loan Agreement, (b) Lender has required
the law of the State of Connecticut to govern this Lease so that, among other
things, the provisions of this Lease, the Loan Agreement and the Note will be
interpreted in a consistent manner, and (c) the choice of law herein bears a
reasonable relationship to this Lease and the transactions contemplated hereby.
25. TRUE LEASE. Lessor and Lessee acknowledge and agree that they intend
that this Lease be a true lease and not a "conditional sale" within the meaning
provided in Title 49.
26. COUNTERPARTS. This Lease Agreement, the Equipment Schedule and any
other schedules, riders, supplements, amendments, and attachments delivered
pursuant to this Lease may be executed in one or more counterparts, each such
executed counterpart of any such document shall be deemed an original, but all
such executed counterparts of any such document together shall constitute one
and the same instrument; provided, however, the only copy of any such document
that shall constitute the "chattel paper" thereof, shall be that certain copy
marked as the "Original".
27. TRUTH-IN-LEASING.
27.1 COMPLIANCE WITH PART 91. LESSEE HAS REVIEWED THE AIRCRAFT'S
MAINTENANCE AND OPERATING LOGS SINCE ITS DATE OF MANUFACTURE AND HAS FOUND THAT
THE AIRCRAFT HAS BEEN MAINTAINED AND INSPECTED UNDER PART 91 OF THE FEDERAL
AVIATION REGULATIONS LESSEE CERTIFIES THAT THE AIRCRAFT PRESENTLY COMPLIES WITH
THE APPLICABLE MAINTENANCE AND INSPECTION REQUIREMENTS OF PART 91 OF THE FEDERAL
AVIATION REGULATIONS.
27.2 LESSEE'S RESPONSIBILITY. LESSEE CERTIFIES THAT LESSEE, AND NOT
LESSOR, IS RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT UNDER THIS LEASE
DURING THE TERM HEREOF. LESSEE FURTHER CERTIFIES THAT LESSEE UNDERSTANDS ITS
RESPONSIBILITY FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS.
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27.3 MAINTENANCE AND CONTROL. LESSEE CERTIFIES THAT THE AIRCRAFT WILL
BE MAINTAINED AND INSPECTED UNDER PART 91 OF THE FEDERAL AVIATION REGULATIONS
FOR OPERATIONS TO BE CONDUCTED UNDER THIS LEASE. LESSEE UNDERSTANDS THAT AN
EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FEDERAL
AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS
DISTRICT OFFICE.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Aircraft Lease
Agreement to be duly executed as of the day and year first above set forth.
TRANS CONTINENTAL LEASING, INC. AIRSHIP INTERNATIONAL LTD.
Lessor Lessee
By: /s/ LOUIS J. PEARLMAN By: /s/ ALAN SIEGEL
---------------------------- --------------------------
Name: Louis J. Pearlman Name: Alan Siegel
-------------------------- -----------------------
Title: President Title: Secretary
------------------------ ----------------------
7380 Sand Lake Road 7380 Sand Lake Road
Suite ??? Suite ???
Orlando, Florida 32819 Orlando, Florida 32819
[SIGNATURE PAGE]
<PAGE>
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ORIGINAL/DUPLICATE
CERTAIN RIGHTS OF THE LESSOR UNDER THIS EQUIPMENT SCHEDULE NO. 1 AND IN
THE AIRCRAFT COVERED HEREBY HAVE BEEN ASSIGNED TO, AND ARE SUBJECT TO A
SECURITY INTEREST IN FAVOR OF PROENIXCOR, INC. UNDER A LOAN AND SECURITY
AGREEMENT, DATED AS OF MAY 31, 1995. THE ONE AND ONLY ORIGINAL OF THIS
EQUIPMENT SCHEDULE IS MARKED "ORIGINAL" AT THE TOP OF THIS PAGE AND SHALL
CONSTITUTE THE ONLY CHATTEL PAPER ORIGINAL FOR THE PURPOSES OF ARTICLE 9 OF THE
UNIFORM COMMERCIAL CODE. EACH OTHER SIGNED VERSION IS MARKED "DUPLICATE".
EQUIPMENT SCHEDULE
NO. 1
forming a part of Aircraft Lease Agreement
dated as of May 31, 1995
This Equipment Schedule is entered into between TRANS CONTINENTAL
LEASING, INC., as lessor ("Lessor") and AIRSHIP INTERNATIONAL LTD., as lessee
("Lessee"), effective as of the date set forth below, pursuant to the Aircraft
Lease Agreement dated as of May 31, 1995, between Lessor and Lessee (the "Lease
Agreement"). Capitalized terms used without definition in this Equipment
Schedule shall have the meanings ascribed to them in the Lease Agreement. The
Lease Agreement is hereby incorporated into, and shall be deemed a part of this
Equipment Schedule. The Aircraft described below is hereby leased by Lessor to
Lessee on the terms and conditions of the Lease Agreement, this Equipment
Schedule and any other documents and agreements entered into by both parties in
connection herewith.
1. AIRCRAFT. The Aircraft leased hereunder shall be as set forth in the
Schedule of Equipment attached hereto and made a part hereof (the "Schedule").
TOTAL INVOICE COST: $2,060,000.00
2. TERM. Upon and after the effective date hereof, the Aircraft shall be
subject to the terms and conditions provided herein and in the Lease Agreement.
A full term of lease with respect to said Aircraft shall commence on the date
hereof and shall extend for sixty (60) months after the thirty-first day of May,
1995 (the "Commencement Date").
3. BASE RENT. The "Base Rent" shall be comprised of and paid as follows:
3.1 [RESERVED]
3.2 Monthly Rent. From and after the Commencement Date, the monthly
rent for said Equipment during the term of this Lease shall be $44,741.97. Rent
payments shall be made, in advance, on
<PAGE>
<PAGE>
the first day of the month for each month during the term of the Lease.
4. LESSEE'S CONFIRMATION. Lessee hereby confirms and warrants to Lessor
that the Aircraft: (a) was duly delivered to Lessee at Executive Airport,
Orlando, Florida; (b) has been received, inspected and determined to be in
compliance with all applicable specifications and that the Aircraft is hereby
accepted for all purposes of the Lease; and (c) is a part of the "Aircraft"
referred to in the Lease and is taken subject to all terms and conditions
therein and herein provided.
5. LATE CHARGE RATE. The "Late Charge Rate" shall be two (2) percent per
month of the amount in arrears for the period such amount remains unpaid (or
such lesser amount as may be permitted by law).
6. SCHEDULE OF STIPULATED LOSS VALUES. The Schedule of Stipulated Loss
Values attached hereto is incorporated herein by reference, and shall be
applicable solely to the Aircraft described in this Equipment Schedule.
7. COUNTERPARTS. This Equipment Schedule may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument; provided, however, the
only copy of this Equipment Schedule that shall constitute the "chattel paper"
hereof, shall be that certain copy marked as the "Original".
[INTENTIONALLY LEFT BLANK]
2
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Equipment
Schedule No. 1 to be duly executed as of the 31st day of May, 1995.
TRANS CONTINENTAL LEASING, INC. AIRSHIP INTERNATIONAL LTD.
Lessor Lessee
By: LOUIS J. PEARLMAN By: ALAN SIEGEL
---------------------------- --------------------------
Name: Louis J. Pearlman Name: Alan Siegel
-------------------------- -----------------------
Title: President Title: Secretary
------------------------ ----------------------
3
<PAGE>
<PAGE>
STIPULATED LOSS VALUE SCHEDULE
TO AND A PART OF
EQUIPMENT SCHEDULE NO. 1
between
TRANS CONTINENTAL LEASING, INC.
as lessor
and
AIRSHIP INTERNATIONAL LTD.
as lessee
[Lessor - please prepare]
<PAGE>
<PAGE>
SCHEDULE OF EQUIPTMENT
TO AND A PART OF
EQUIPMENT SCHEDULE NO. 1
between
TRANS CONTINENTAL LEASING, INC.
as lessor
and
AIRSHIP INTERNATIONAL LTD.
as lessee
For the purposes of Equipment Schedule No. 1 (to which this Schedule is
attached and a part of) and that certain Aircraft Lease Agreement, between TRANS
CONTINENTAL LEASING, INC., as lessor ("Lessor"), and AIRSHIP INTERNATIONAL LTD.
as lessee ("Lessee"), dated May 31, 1995 (the "Lease") unless the context
otherwise requires, the following terms shall have the following meanings (the
following definitions to be equally applicable both to the singular and plural
forms of the terms herein defined):
"Aircraft" means the 1991 Airship Industries Series 500HL Skyship having
Federal Aviation Administration registration number N501LP and manufacturer's
serial number 1214-04, to be delivered and leased under the Lease together with
the engines initially installed thereon described herein (or any engine
substituted for any of such engines hereunder, as the case may be), whether or
not any of such initial or substituted engines, as the case may be, may from
time to time be installed thereon or may be installed on any other aircraft, any
and all Parts so long as the same shall be incorporated or installed in or
attached to the Aircraft, or so long as title thereto or any interest therein
shall remain vested in Lessor in accordance with the terms of the Lease after
removal from the Aircraft, and all books, records, documents, logs, manuals,
cards, printouts, notices, bulletins, correspondence, and general intangibles
(including all licenses, patents, copyrights, maskworks and trade secrets)
pertaining to the Aircraft and/or the avionics whether required to be or
voluntarily kept pursuant to the Lease or the other documents executed in
connection therewith.
"Engine" means (i) each of the two (2) Porsche 930 engines, having serial
numbers 63C4932 (port engine) and 6313496 (starboard engine) with less than
750/horsepower (each engine has 225/horsepower) relating to the Aircraft on
which such engines are initially installed, whether or not from time to time
installed on such Aircraft or installed on any other aircraft, and (ii) any
engine which may from time to time be substituted, pursuant to the Lease, for an
engine leased under the Lease; together in each case with any and all Parts
incorporated or installed in or attached thereto or any and all Parts removed
therefrom so long as title thereto or any interest therein shall remain vested
in Lessor in accordance with the terms of the Lease after removal from such
engine. The term engines means, as of the date of determination,
<PAGE>
<PAGE>
if the context so requires, all engines then leased under the Lease.
"Parts" means the Replacement Envelope (as hereinafter defined), the
airship envelope incorporated in the Aircraft at this time and the avionics and
all parts, appliances, components, instruments, accessories and furnishings
which may from time to time be installed in or attached to the Aircraft, the
airship envelope incorporated in the Aircraft at this time, the Replacement
Envelope, the avionics or any engine, including, but not limited to, the Parts
described in Exhibit A hereto.
"Replacement Envelope" means the Aerazur airship envelope with serial
number 500HL and any and all Parts now and hereafter incorporated or installed
in or attached thereto.
2
<PAGE>
<PAGE>
EXHIBIT A
[AIRSHIP INTERNATIONAL LTD. LOGO]
Airship International Skyship Statistics
Dimensions:
Length 194 feet
Height 67 feet
Width 63 feet
Volume 235,400 cubic feet
Lifting Gas: Helium (non-flammable)
Maximum Passenger Capacity: Six, plus captain and co-pilot
Performance:
Cruising Speed 35 mph
Maximum Speed 62 mph
Two Porsche 930 Engines 225 hp each
Cruising Altitude 1,000 to 3,000 feet
Maximum Altitude 10,000 feet
Range 300 miles
Gondola Dimensions:
Length 38.3 feet
Width 8.4 feet
Headroom 6.3 feet
Envelope Fabric: Polyurethane-coated Polyester Synthetic
NightSign 'TM':
Height of Sign 29 feet
Length of Sign 118 feet
Readability 1 mile
Colors Blue, Green, Red, Yellow
[LETTERHEAD LOGO OF AIRSHIP
INTERNATIONAL LTD.]
<PAGE>
<PAGE>
EXHIBIT A
(CONTINUED)
N 501 LP AT 6676.7 HOURS DATE 12/6/94
<TABLE>
<CAPTION>
COMPONENT NAME S/N POSITION REMOVE HRS RUN REMAIN
<S> <C> <C> <C> <C> <C>
1 ENGINE 63C4932 PORT 6742.6 1163.6 67.9
2 ENGINE 6313496 STRB 7408.7 516.0 734
3 PROP PITCH ACTUATOR 175 PORT 7253.9 420.8 579.2
4 PROP PITCH ACTUATOR 138 STRB 7396.9 277.8 722.2
5 GENERATOR S098906.0 PORT 7103.8 320.9 429.1
6 GENERATOR G0185.02 STRB 6908.7 515.0 224
7 FUEL PUMP 125 X/PORT 6958.7 516.0 284
8 FUEL PUMP 129 X/STRB 7299.5 186.2 615.8
9 PROPELLER V-175 PORT 7606.8 567.9 932.1
10 PROPOLLER Y-200 STRB 7606.8 557.3 932.1
11 G/BOX ADC3187 PORT 7606.8 567.8 932.1
12 G/BOX ABD1927 STRB 7606.8 567.9 932.1
13 VECT G/BOX 0022/R PORT 7337.1 1337.6 662.4
14 VECT G/BOX 0028/R STRB 7413.8 1260.9 739.1
15 VECT MOTOR 101530 PORT 7340.4 334.3 668.7
16 VECT MOTOR 105916 STRB 7413.4 259.3 740.7
17 LIQUID SPRING EVA070173 6798.8 386.1 124.1
18 IGN BOX 1086 PORT 7506.6 168.1 831.9
19 IGN BOX 1066 STRB 7521.6 153.1 846.9
20 BAL FAN RELAY N/A PORT MAY 2, 1997 4158.9 N/A
21 BAL FAN RELAY STRB MAY 2, 1997 4158.9 N/A
22 NOSE PROBE KA-7N APR 15, 1993 2822.1 N/A
23 ENG FIRE EXTINGUISH 09975A1 PORT AUG 19, 1996 5199.5 N/A
24 ENG FIRE EXTINGUISH 09973A1 STRB AUG 19, 1996 5195.5 N/A
25 LIFEJACKETS N/A OCT 31, 1995 194.2 N/A
26 CABIN FIRE EXTINGUISH N/A FRB 27, 1995 516.0 N/A
27 BATT CAP CHECK G01530886 DEC 28, 1994 184.2 N/A
28 SPARK PLUGS PORT 6868.8 55.9 194.1
29 SPARK PLUGS N/A STRB 6874.8 49.9 200.1
30 RUD KEY CABLE N/A PORT 7511.1 1163.6 836.4
31 RUD KEV CABLE N/A STRB 7511.1 1163.6 836.4
32 ELEV KEV CABLE N/A PORT 7511.1 1163.1 836.4
33 ELEV KEV CABLE N/A STRB 7511.1 1163.6 836.4
34 VECT CORT RELAY N/A 7408.9 765.8 734.2
35 NOSE CONE LACING N/A AUG 20, 1995 5195.5 N/A
36 NOSE BATT LACING N/A AUG 20, 1995 5195.5 N/A
37 TAILFIN ROOT CORD N/A AUG 20, 1995 5195.5 N/A
38 BRAC CABLE VERS CORD N/A APR 18, 1995 2622.1 N/A
39 EXTERN BE RIP CORD N/A OCT 2, 1995 1863.6 N/A
40 MAN LINE 934258 OCT 1, 1995 329.8 N/A
41 FIRE MINING CARTRIGE N/A NOV 10, 1995 5195.5 N/A
42 CHECK B N/A 6707.5 42.2 32.8
43 150 HR OUT OF PHASE N/A 6750.5 74.3 75.7
44 300 HR OUT OF PHASE N/A 6790.9 223.8 76.2
45 CHECK 1 N/A FEB 22, 1995 516.0 N/A
46 CHECK 2 N/A MAR 24 1995 1163.6 N/A
47 CHECK 3 N/A APR 18, 1995 2622.1 N/A
48 CHECK 4 N/A AUG 20, 1995 5195.3 N/A
49 FUEL PUMP; CLK ERS ELRA 543 AUX PORT 800 666.0 134
50 FUEL PUMP; CLK ERS ELRA 602 AUX STRB 800 666.0 134
51 BAL FAN; CLK ERS 1013 PORT 3275.4 332.0 357.8
52 BAL FAN; CLK ERS 892 STRB 3387.5 280.1 469.9
</TABLE>
<PAGE>
<PAGE>
FULL WARRANTY BILL OF SALE
THIS FULL WARRANTY BILL OF SALE is given by AIRSHIP INTERNATIONAL LTD.
(herein the "Seller") to TRANS CONTINENTAL LEASING, INC. (herein the "Buyers").
WITNESSETH:
THAT FOR TEN DOLLAR.5 ($10.00) AND OTHER GOOD AND VALUABLE CONSIDERATION,
the receipt and sufficiency of which is hereby acknowledged, Seller does hereby
bargain, sell, assign, transfer and set over to Buyer, its successors and
assigns, the items of equipment listed on the schedule attached hereto (being
referred to herein as the "Equipment").
TO HAVE AND TO HOLD said Equipment, unto Buyer, its successors and assigns,
forever.
Seller covenants that it has good and marketable title to said Equipment
conveyed hereunder and does hereby transfer good and valid title thereto free
and clear of any and all mortgages, pledges, claims, dispositions of title,
leases, security interests, encumbrances, liens, charges or defects. Seller
further represents and warrants that the Equipment sold hereunder is
transferable by Seller by its sole act and deed and that all corporate action
required to authorize, approve and validate such transfer has been duly and
lawfully taken.
AND Seller covenants that it will from time to time on demand execute any
and all such further instruments which Buyer, its successors and assigns, may
deem necessary, desirable or proper to effect the complete transfer of the
Equipment or any interest therein unto Buyer, its successors and assigns, or
better to evidence the right, title and interest of Buyer, its successors and
assigns.
AND Seller further covenants that it will warrant and defend such title
forever against all claims and demands whatsoever.
AND Seller does hereby hake, constitute and appoint Buyer, its successors
and assigns, its true and lawful attorneys, irrevocably in its name or
otherwise, to have, use and take all lawful ways and means for the recovery of
any of said property or right or interest therein herein assigned to Buyer which
Seller may have or could take if this Bill of Sale had not been made.
This Full Warranty Bill of Sale has been delivered in, and each of Seller
and Buyer hereby agrees that the rights and obligations of Seller and Buyer
hereunder shall in all respects be governed by, and construed in accordance
with, the internal laws of the State of New York (without regard to the conflict
of laws
<PAGE>
<PAGE>
principles of such state), including all matters of construction, validity and
performance, regardless of the location of the Equipment (which has been
delivered in the State of Florida).
IN WITNESS WHEREOF, Seller has caused this Full Warranty Bill of Sale to be
duly executed as of the day of May, 1995.
AIRSHIP INTERNATIONAL LTD.
By: /s/ Alan Siegel
-----------------------------------
Name: Alan Siegel
---------------------------------
Title: Secretary
--------------------------------
2
<PAGE>
<PAGE>
CREDIT AGREEMENT
BETWEEN
AIRSHIP INTERNATIONAL LTD., Borrower
AND
SENSTAR CAPITAL CORPORATION, Lender
Dated November 30, 1995
<PAGE>
<PAGE>
CREDIT AGREEMENT
THIS AGREEMENT, dated November 30, 1995, by and between Airship
International LTD., a New York corporation (the "Borrower"), and Senstar Capital
Corporation, a Delaware corporation (the "Lender").
WITNESSETH THAT:
WHEREAS, the Borrower has requested that the Lender extend a term
loan to the Borrower in an amount equal to $3,500,000; and
WHEREAS, the Lender is willing to make such loan, subject to and
upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, in consideration of their
mutual covenants and agreements herein contained and intending to be legally
bound hereby, covenant and agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 Certain Definitions. In addition to words and terms defined
elsewhere in this Agreement, the following words and terms shall have the
following meanings, respectively,
Agreement shall mean this Credit Agreement as the same may be
supplemented or amended from time to time.
Anheuser-Busch shall mean Anheuser-Busch Companies, Inc., a
Delaware corporation.
Aircraft Mortgage shall mean the Aircraft Mortgage in the form of
Exhibit "A" hereto to be executed and delivered by Borrower in favor of Senstar
and pursuant to which Lender shall receive a first priority lien on and security
interest in the Skyship, as now or hereafter amended.
Assignment of Contract shall mean the Assignment of Contract in the
form of Exhibit "D" hereto to be executed and delivered by Borrower in favor of
Senstar and pursuant to which Lender shall be granted a first priority security
interest in the Bud I Contract.
1
<PAGE>
<PAGE>
Benefit Arrangement shall mean at any time an "employee benefit
plan", within the meaning of Section 3(3) of ERISA, which is neither a Plan nor
a Multiemployer Plan and which is maintained, sponsored or otherwise contributed
to, by any member of the ERISA Group. Thus, a Benefit Arrangement includes,
e.g., an "employee welfare benefit plan" within the meaning of Section 3(1) of
ERISA, a money purchase pension plan, a funded deferred profit sharing plan, and
an employee stock ownership plan.
Bud I Contract shall mean that certain Amended and Restated Airship
Advertising Agreement, dated as of July 8, 1994, between Borrower and
Anheuser-Busch as now or hereafter amended in accordance with the provisions of
the Loan Documents.
Business Day shall mean, as to notices to or matters affecting the
Lender, a day other than a Saturday or Sunday or a public holiday under the laws
of the Commonwealth of Pennsylvania or other day on which lending institutions
are authorized or obligated to close in a municipality where the principal
office of the Lender is situated.
Capitalized Lease shall mean any lease under which the obligations
of the lessee therein would, in accordance with generally accepted accounting
principles, be included in determining total liabilities of the lessee as shown
on the liability side of its balance sheet.
Closing Date shall mean the date of this Agreement.
COBRA Violation shall mean a failure by the Borrower to comply with
group health plan continuation coverage requirements of Sections 601 et seq. of
ERISA.
Controlled Group shall mean (a) the controlled group of
corporations as defined in Section 1563 of the Internal Revenue Code and (b) the
group of trades or businesses under common control as defined in Section 414(c)
of the Internal Revenue Code, in either case of which the Borrower is a part or
may become a part.
Environmental Condition shall mean any condition affecting any
natural resource, including without limitation the air, soil, surface and
groundwater which must be reported to a Governmental Authority or which must be
remedied under any of the Environmental Laws.
Environmental Laws shall mean all federal, state, local and foreign
laws, rules and regulations pertaining to human health, the environment and
worker safety.
ERISA shall mean the Employee Retirement Income Security Act of
1974, as the same may be amended or supplemented from time to time, and the
rules and regulations, as from time to time in effect, promulgated thereunder.
2
<PAGE>
<PAGE>
ERISA Group shall mean, at any time, the Borrower and all members
of a controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control and all other entities which, together
with the Borrower, are treated as a single employer under Section 414 of the
Internal Revenue Code.
Event of Default shall mean any of the Events of Default described
in Section 7.01 of the Agreement.
Governmental Authority shall mean any federal, state, local or
foreign government and any agency, commission or other entity thereof authorized
to enforce any of the Environmental Laws.
Guaranty shall mean the Agreement of Guaranty and Suretyship to be
executed and delivered contemporaneously herewith by Trans Air in favor of
Senstar in substantially the form of Exhibit "B" hereto.
Indebtedness shall mean, as to any Person, all items of
indebtedness, obligation or liability, whether matured or unmatured, liquidated
or unliquidated, direct, indirect or contingent, joint or several, including,
but without limitation:
(a) all indebtedness guaranteed, directly or indirectly, in any
manner, or endorsed (other than for collection or deposit in the ordinary course
of business) or discounted with recourse;
(b) all indebtedness in effect guaranteed, directly or indirectly,
through agreements, contingent or otherwise: (i) to purchase such indebtedness;
(ii) to purchase, sell or lease (as lessee or lessor) property, products,
materials or supplies or to purchase or sell services, in any case primarily for
the purpose of enabling the debtor to make payment of such indebtedness or to
assure the owner of the indebtedness against loss; or (iii) to supply funds to
or in any other manner invest in the debtor;
(c) all indebtedness secured by (or for which the holder of such
indebtedness has a right, contingent or otherwise, to be secured by) any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance upon property owned or acquired subject thereto, whether or not the
liabilities secured thereby have been assumed; and
(d) all indebtedness incurred as the lessee of real or personal
property or services under any Capitalized Lease.
Internal Revenue Code shall mean the Internal Revenue Code of 1986,
as amended from time to time.
3
<PAGE>
<PAGE>
Loan Documents shall mean the Agreement, the Term Note, the
Aircraft Mortgage, the Guaranty, the Assignment of Contract and any other
instruments, certificates or documents delivered or contemplated to be delivered
hereunder or in connection herewith.
Material Adverse Change shall mean any set of circumstances or
events which (a) has or could reasonably be expected to have any material
adverse effect whatsoever upon the validity or enforceability of this Agreement
or any other Loan Document, (b) is or could reasonably be expected to be
material and adverse to the business, properties, assets, financial condition,
results of operations or prospects of the Borrower, (c) impairs materially or
could reasonably be expected to impair materially the ability of the Borrower to
duly and punctually pay or perform its Indebtedness, or (d) impairs materially
or could reasonably be expected to impair materially the ability of the Lender,
to the extent permitted, to enforce its legal remedies pursuant to this
Agreement or any other Loan Document delivered thereunder.
Multiemployer Plan shall mean any employee benefit plan which is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which the Borrower or any member of the ERISA Group is then making or accruing
an obligation to make contributions or, within the preceding five plan years,
has made or had an obligation to make such contributions.
Multiple Employer Plan shall mean a Plan which has two or more
contributing sponsors (including the Borrower or any member of the ERISA Group)
at least two of whom are not under common control, as such a plan is described
in Sections 4063 and 4064 of ERISA.
PBGC shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA or any successor.
Person shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, joint
venture, government or political subdivision or agency thereof.
Plan shall mean at any time an employee pension benefit plan
(including a Multiple Employer Plan but not a Multiemployer Plan) which is
covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Code and either (i) is maintained by any member of the
ERISA Group for employees of any member of the ERISA Group or (ii) has at any
time within the preceding five years been maintained by any entity which was at
such time a member of the ERISA Group for employees of any entity which was at
such time a member of the ERISA Group.
4
<PAGE>
<PAGE>
Prohibited Transaction shall mean any prohibited transaction as
defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA for
which neither an individual nor a class exemption has been issued by the United
States Department of Labor.
Regulated Substances shall mean any substance the manufacture,
storage, use, generation, treatment, disposal, transportation or other
management of which is regulated by any of the Environmental Laws.
Skyship shall mean that certain Skyship 500-HL Aircraft,
Registration No. N501LP and all equipment described on Schedule 1.01 hereto and
all replacements, substitutions, and alterations thereof and additions,
attachments, accessories and accessions thereto, whether now owned or hereafter
acquired.
Term Loan shall mean the loan to be made by Senstar to Borrower
pursuant to Section 2.01 hereof
Term Note shall mean the promissory note of the Borrower referred
to in Section 2.02 hereof and any amendment or allonge thereto and any
replacement or substitution therefor.
Trans Air means Trans Continental Airlines, Inc., a Florida
corporation.
Trans Leasing means Trans Continental Leasing, Inc., a New York
corporation.
ARTICLE II
TERM LOAN
2.01 Term Loan. Subject to the terms and conditions hereof and
relying upon the representations and warranties herein set forth, and provided
no Event of Default exists or will exist with the mere passage of time, notice
or both, the Lender will make a $3,500,000 term loan to the Borrower on Closing
Date (the "Term Loan").
2.02 Term Note. The Term Loan made by the Lender under Section 2.01
shall be evidenced by a term note in substantially the form attached hereto as
Exhibit "C", with the blanks appropriately completed, delivered by the Borrower
to the Lender on or before the Closing Date (the "Term Note"). The Term Note
shall be payable in installments and shall bear interest from the date thereof
on the unpaid balance, all as provided in the Term Note.
<PAGE>
<PAGE>
ARTICLE III
PAYMENTS AND PREPAYMENTS
3.01 Payments and Prepayments. All payments of the principal of and
interest on the Term Note shall be made to the Lender at its office designated
therein in lawful money of the United States of America and in immediately
available funds.
The Borrower shall have the right, at its option, to prepay on any
Business Day, the Term Note in whole or in part; provided, however, each
prepayment shall be accompanied by a premium, based upon the amount of the
prepayment, equal to 3% if prior to the first anniversary of the Closing Date,
2-1/4% if between the first and second anniversary of the Closing Date, 1-1/2%
if between the second and third anniversary of the Closing Date, 1% if between
the third and fourth anniversary, and 1/2% if subsequent to the fourth
anniversary. Each partial prepayment with respect to the Term Note shall be
applied to the unpaid installments of the principal amount thereof in the
inverse order of their scheduled maturities. The Borrower shall give the Lender
not less than three Business Days' prior written or telegraphic notice of each
prepayment, specifying the principal amount of the Term Note to be prepaid and
the prepayment date. Notice of prepayment having been given by the Borrower as
aforesaid, the principal amount of the Term Note specified in such notice,
together with interest accrued and unpaid thereon to the date of prepayment,
shall become due and payable on such prepayment date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01 Representations and Warranties. The Borrower represents and
warrants to the Lender that:
(a) Organization and Qualification. The Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New York; the Borrower has the lawful power to own or lease its
properties and to engage in the business it presently conducts and contemplates
conducting; and the Borrower is duly licensed or qualified and in good standing
as a foreign corporation in each jurisdiction where the failure to be qualified
and in good standing could have a Material Adverse Change.
(b) Power and Authority. The Borrower has the power to make
and carry out the Loan Documents, to execute and deliver the Loan Documents, and
to make the borrowings contemplated hereby and to perform its obligations under
the Loan Documents and all such actions have been duly authorized by all
necessary corporate proceedings.
6
<PAGE>
<PAGE>
(c) Validity and Binding Effect. The Agreement has been duly
and validly executed and delivered by the Borrower. The Agreement constitutes
and the Term Note and any other Loan Documents when duly executed and delivered
by the Borrower and any other parties hereto or thereto pursuant to the
provisions hereof will constitute legal, valid and binding obligations of the
Borrower enforceable in accordance with the respective terms of the Agreement,
the Term Note and any such other Loan Documents, except to the extent that
enforceability of the foregoing Loan Documents may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforceability of creditors' rights generally or by laws or judicial decisions
limiting the right of specific performance. No authorization, approval,
exemption or consent by any governmental or public body or authority is required
in connection with the authorization, execution, delivery and carrying out of
the terms of the Loan Documents by the Borrower.
(d) No Conflict. Neither the execution and delivery of the
Loan Documents nor the consummation of the transactions herein or therein
contemplated or compliance with the terms and provisions hereof or thereof will
conflict with or result in any breach of the terms and conditions of the
articles of incorporation or bylaws of the Borrower or of any law or regulation
or any order, writ, injunction or decree of any court or governmental
instrumentality or of any agreement or instrument to which the Borrower is a
party or by which the Borrower is bound or to which it is subject, will
constitute a default thereunder or will result in the creation or enforcement of
any lien, charge or encumbrance whatsoever upon any property (now or hereafter
acquired) of the Borrower. All material contracts and agreements of the Borrower
which require the consent of any party to the transactions contemplated herein
are set forth on Schedule 4.01(d).
(e) Litigatio. Except as set forth on Schedule 4.01(e)
hereto, there are no actions, suits, proceedings or investigations pending or,
to the knowledge of the Borrower or its officers, against it at law or equity
before any court or before any federal, state, municipal or any governmental
department, commission, board, agency or instrumentality whether or not covered
by insurance which individually or in the aggregate may result in any materially
adverse effect on the business, properties or assets or the condition, financial
or otherwise, of the Borrower or in any impairment in the Borrower's ability to
perform its obligations under the Agreement, the Term Note or any of the other
Loan Documents. Neither the Borrower nor any of its officers has knowledge of
any default with respect to any order, writ, injunction or any decree of any
court or any federal, state, municipal or other governmental department,
commission or bureau, agency or instrumentality which may result in any such
materially adverse effect or impairment.
(f) Audited Financial Condition. The Borrower has heretofore
delivered to the Lender copies of the balance sheet of the Borrower as of
December 31, 1993 and
7
<PAGE>
<PAGE>
the statements of income, retained earnings and changes in financial position of
the Borrower for the fiscal year ended on such date, which have been certified
by Grant Thornton, independent certified public accountants. Such financial
statements (including the related notes) are correct and complete and fairly
present the financial condition of the Borrower as of December 31, 1993 and the
results of its operations for the fiscal year then ended and have been prepared
in accordance with generally accepted accounting principles consistently applied
by the Borrower; there were no material liabilities as of December 31, 1993,
contingent or otherwise, of the Borrower not reflected in said balance sheet
(including the related notes) as of said date.
(g) Title to Skyship. Contemporaneously herewith, the
Borrower is acquiring and will, subsequent to the Closing Date, possess good and
marketable title to the Skyship, free and clear of all liens, security
interests, encumbrances and claims of others, except for the lien granted by
Borrower to Lender pursuant to the Aircraft Mortgage.
(h) Tax Returns and Taxes. The Borrower has filed all
federal, state and local tax returns and other reports it was required by law to
file prior to the date hereof and which were material to the conduct its
respective businesses, has paid or caused to be paid all taxes, assessments and
other governmental charges that were due and payable prior to the date hereof,
and has made adequate provision in its financial statements for the payment of
such taxes, assessments and other charges accruing but not yet payable; the
Borrower has no knowledge of any deficiency or additional assessment in a
materially important amount in connection with any taxes, assessments or charges
which is not provided for on its books.
(i) Compliance with Laws. The Borrower has complied with all
applicable laws such that it has not been subject to any fines, penalties,
injunctive relief or similar criminal liabilities which in the aggregate have
materially affected the business operations or financial condition of the
Borrower or the ability of the Borrower to perform its obligations under the
Agreement or the Term Note.
(j) Plans and Benefit Arrangements.
(i) The Borrower and each member of the ERISA Group
are in compliance in all material respects with any applicable provisions of
ERISA with respect to all Benefit Arrangements, Plans and Multiemployer Plans.
There have been no COBRA Violations by the Borrower which could result in any
material liability to the Borrower. There has been no Prohibited Transaction
with respect to any Benefit Arrangement or any Plan or, to the best knowledge of
the Borrower, with respect to any Multiemployer Plan or Multiple Employer Plan,
which could result in any material liability to the Borrower or any other member
of the ERISA Group. The Borrower and all members of the ERISA Group have made
when due any and all payments required to be made under any agreement relating
to a Multiemployer Plan or a
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Multiple Employer Plan or any law pertaining thereto. With respect to each Plan,
Multiemployer Plan, and Benefit Arrangement that is a defined contribution plan,
the Borrower and each member of the ERISA Group (A) have fulfilled in all
material respects their obligations under the minimum funding standards of
ERISA, if applicable, or contractual obligations to contribute to such plans,
(B) have not incurred any liability to the PBGC and (C) have not had asserted
against them any penalty for failure to fulfill the minimum funding requirements
of ERISA.
(ii) To the best of the Borrower's knowledge, each
Multiemployer Plan and Multiple Employer Plan is able to pay benefits thereunder
when due.
(iii) Neither the Borrower nor any other member of the
ERISA Group has instituted or intends to institute proceedings to terminate any
Plan.
(iv) No event requiring notice to the PBGC under
Section 302(f)(4)(A) of ERISA has occurred or is reasonably expected to occur
with respect to any Plan, and no amendment with respect to which security is
required under Section 307 of ERISA has been made or is reasonably expected to
be made to any Plan.
(v) The aggregate actuarial present value of all
benefit liabilities (whether or not vested) under each Plan, determined on a
plan termination basis, as disclosed in, and as of the date of, the most recent
actuarial report for such Plan, does not exceed the aggregate fair market value
of the assets of such Plan.
(vi) Neither the Borrower nor any other member of the
ERISA Group has incurred or reasonably expects to incur any material withdrawal
liability under ERISA to any Multiemployer Plan or Multiple Employer Plan.
Neither the Borrower nor any other member of the ERISA Group has been notified
by any Multiemployer Plan or Multiple Employer Plan that such Multiemployer Plan
or Multiple Employer Plan has been terminated within the meaning of Title IV of
ERISA and, to the best knowledge of the Borrower, no Multiemployer Plan or
Multiple Employer Plan is reasonably expected to be reorganized or terminated,
within the meaning of Title IV of ERISA.
(vii) To the extent that any Benefit Arrangement is
insured, the Borrower and all members of the ERISA Group have paid when due all
premiums required to be paid for all periods through and including the Closing
Date. To the extent that any Benefit Arrangement is funded other than with
insurance, the Borrower and all members of the ERISA Group have made when due
all contributions required to be paid for all periods through and including the
Closing Date.
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(k) Environmental Matters.
(i) The operations of the Borrower comply in all
material respects with all of the Environmental Laws;
(ii) To the best of Borrower's knowledge there have
been no Regulated Substances disposed of on any of the properties owned or
leased by the Borrower;
(iii) To the best of Borrower's knowledge there are no
Environmental Conditions present on any of the properties owned or leased by the
Borrower;
(iv) The Borrower has received no notice from a
Governmental Authority that it is, or is considered potentially, liable for any
Environmental Conditions;
(v) To the best of Borrower's knowledge there are no
underground storage tanks, asbestos or equipment containing polychlorinated
biphenyls on the property owned or leased by the Borrower other than those
present and utilized in compliance with all of the Environmental Laws; and
(vi) The Borrower does not manufacture, store, use,
generate, treat, dispose or manage any Regulated Substances except in material
compliance with all of the Environmental Laws.
(l) General Validity. No representation or warranty by the
Borrower contained herein or in any other Loan Document contains or will contain
any untrue statement of material fact or omits or will omit to state a material
fact necessary to make such representation or warranty not misleading in light
of the circumstances under which it was made.
(m) Principal Place of Business. The address of the
Borrower's chief executive office and principal place of business is set forth
on Schedule 4.01(n) hereto; and Borrower does not have any other place of
business or conduct its business under a trade, assumed or fictitious name.
(n) Storage Locations of Skyship. The base of operations for
the Skyship is as set forth on Schedule 4.01(o) and will for the foreseeable
future be in the Orlando, Florida area.
(o) Bud I Contract. The Bud I Contract (i) is in full force
and effect, (ii) to the best of Borrower's knowledge, constitutes the legal,
valid and binding obligation of Anheuser-Busch, enforceable in accordance with
its terms, (iii) to the best of Borrower's
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knowledge, is not in default or subject to an event which with the passage of
time or the giving of notice, or both, would constitute a default, (iv) has not
been prepaid in any respect by Anheuser-Busch and (v) is not subject to any
liens, security interests, or encumbrances other than in favor of Lender.
(p) Solvency. After giving effect to the transactions
described herein and in the other Loan Documents, Borrower is not insolvent as
such term is defined in any applicable state or federal statute including
without limitation the Bankruptcy Reform Act of 1978, as amended. Borrower is
not engaged or about to engage in any business or transaction for which the
assets retained by it shall be unreasonably small capital, taking into
consideration the obligations and liabilities to the Lender incurred pursuant
hereto. Borrower does not intend to, nor believes that it will, incur debts
beyond its ability to pay them as they mature. Borrower agrees that it is paying
fair and reasonable consideration in connection with the acquisition by the
Borrower of the Skyship.
ARTICLE V
CONDITIONS OF LENDING
The obligation of the Lender to make Term Loan hereunder is subject to
the performance by the Borrower of its obligations to be performed hereunder at
or prior to the making of the Term Loan and to the satisfaction of the following
further conditions:
5.01 At the time of the making of the Term Loan:
(a) The representations and warranties of the Borrower
contained in Article IV hereof shall be true and accurate on and as of such
date; no Event of Default and no condition, event or action which, with the
giving of notice or the lapse of time or both, would constitute an Event of
Default shall have occurred and be continuing or shall exist.
(b) The following corporate information shall be delivered by
the Borrower, which shall be acceptable to Lender in its sole discretion:
(i) copies of the articles of incorporation of the Borrower
certified by the Secretary of State of the State of New York as of a date
reasonably near the Closing Date and accompanied by a certificate from an
appropriate officer of Borrower stating that the copy is complete and that the
articles of incorporation have not been amended, annulled, rescinded or revoked
since the date of the certificate of the Secretary of State;
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(ii) a copy of the bylaws of Borrower in effect on the
Closing Date, accompanied by a certificate from an appropriate officer of
Borrower stating that the copy is true and complete and that the bylaws have not
been amended, annulled, rescinded or revoked since the date of the bylaws or the
last amendment reflected in the copy, if any;
(iii) a copy of resolutions of the Board of Directors of
Borrower authorizing the execution, delivery and performance of the Loan
Documents to which Borrower is a party and specifying the officer of Borrower
authorized to execute the Loan Documents, accompanied by a certificate from an
appropriate officer of Borrower stating that the resolutions are true and
complete, were duly adopted at a properly called meeting at which a quorum was
present and acting throughout, or were duly adopted by appropriate written
action, and have not been amended, annulled, rescinded or revoked in any respect
and remain in full force and effect on the date of the certificate;
(iv) an incumbency certificate containing the names, titles
and genuine signatures of all duly elected officers of Borrower who are
authorized to execute any of the Loan Documents or any other documents or
instruments to be executed and delivered to the Lender in connection herewith,
accompanied by a certificate from an appropriate officer of Borrower stating
that the information is true and complete;
(c) The following corporate information shall be delivered by
Trans Air, which shall be acceptable to Lender in its sole discretion:
(i) copies of the articles of incorporation of Trans Air
certified by the Secretary of State of the State of Florida as of a date
reasonably near the Closing Date and accompanied by a certificate from an
appropriate officer of Trans Air stating that the copy is complete and that the
articles of incorporation have not been amended, annulled, rescinded or revoked
since the date of the certificate of the Secretary of State;
(ii) a copy of the bylaws of Trans Air in effect on the
Closing Date, accompanied by a certificate from an appropriate officer of Trans
Air stating that the copy is true and complete and that the bylaws have not been
amended, annulled, rescinded or revoked since the date of the bylaws or the last
amendment reflected in the copy, if any;
(iii) a copy of resolutions of the Board of Directors of
Trans Air authorizing the execution, delivery and performance of the Loan
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Documents to which Trans Air is a party and specifying the officer or officers
Trans Air authorized to execute the Guaranty, accompanied by a certificate from
an appropriate officer of Trans Air stating that the resolutions are true and
complete, were duly adopted at a properly called meeting at which a quorum was
present and acting throughout, or were duly adopted by appropriate written
action, and have not been amended, annulled, rescinded or revoked in any respect
and remain in full force and effect on the date of the certificate;
(iv) an incumbency certificate containing the names, titles
and genuine signatures of all duly elected officers of Trans Air who are
authorized to execute any of the Loan Documents or any other documents or
instruments to be executed and delivered to the Lender in connection herewith,
accompanied by a certificate from an appropriate officer of Trans Air stating
that the information is true and complete;
(d) The Borrower shall have executed and delivered to Lender the
Term Note, Assignment of Contract, Aircraft Mortgage and such financing
statements and other documents and instruments as may be requested by Lender;
(e) Trans Air shall execute and deliver the Guaranty to Lender;
(f) Borrower shall have acquired title (satisfactory to Lender)
to the Skyship from Trans Leasing pursuant to a bill of sale and/or purchase
agreement in form and substance (including, purchase price) acceptable to Lender
in its sole discretion;
(g) Lender shall have received an opinion of Trans Air's
independent public accountants in form and substance and related to such matters
as Lender may request;
(h) Borrower shall have delivered copies of insurance policies,
confirming compliance with the insurance provisions required under this
Agreement, accompanied by an endorsement naming Lender as additional insured and
loss payee thereunder;
(i) Lender shall have received satisfactory lien/judgment
reports confirming that Lender will upon the making of the Term Loan and the
filing of the financing statements, and Aircraft Mortgage have a first priority
perfected security interest in and lien on the Skyship and the Bud I Contract;
(j) The lease of the Skyship between Trans Leasing and the
Borrower shall be terminated on terms and conditions acceptable to Lender;
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(k) Anheuser-Busch shall have executed a Notice and
Acknowledgment of Assignment and Reassignment acceptable to the Lender;
(1) There shall be delivered to the Lender a written opinion of
Messrs. Baer Marks & Upham, counsel for the Borrower, dated as of the Closing
Date and in form and substance satisfactory to Buchanan Ingersoll Professional
Corporation, special counsel for the Lender.
(m) There shall be delivered to the Lender a written opinion of
Mr. William Pringle, Esquire, counsel for the Trans Air and Trans Leasing, dated
as of the Closing Date and in form and substance satisfactory to Buchanan
Ingersoll Professional Corporation, special counsel for the Lender.
(n) All legal details and proceedings in connection with the
transactions contemplated by the Agreement and all Loan Documents delivered to
the Lender pursuant to this Section 5.01 shall be in form and substance
reasonably satisfactory to the Lender and to Buchanan Ingersoll Professional
Corporation, counsel for the Lender, and the Lender shall have received all such
other counterpart originals or certified or other copies of such documents and
proceedings in connection with such transactions, in form and substance
satisfactory to Me Lender and said counsel, as the Lender or said counsel may
reasonably request.
ARTICLE VI
COVENANTS
6.01 Affirmative Covenants Other Than Reporting Requirements.
The Borrower covenants that, until payment in full of the Term Note and interest
thereon, it will, unless otherwise consented to in writing by the Lender:
(a) Preservation of Corporate Existence, etc. Maintain its
corporate existence and its license or qualification and good standing in each
jurisdiction in which the failure to qualify would have a Material Adverse
Change and maintain and keep all its property in good repair, working order and
condition, ordinary wear and tear alone excepted, and make or cause to be made
all necessary or appropriate repairs, renewals, replacements, substitutions,
additions, betterments and improvements thereto so that the efficiency and
suitability for their use or intended uses within the business of all such
properties shall at all times be properly preserved and maintained;
(b) Payment of Liabilities, Including Taxes, etc. Duly pay
and discharge all Indebtedness to which it is subject or which is asserted
against it, promptly as and when the same shall become due and payable,
including all taxes, assessments and governmental
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charges upon it or any of its properties, assets, income or profits, prior to
the date on which penalties attach thereto, except to the extent that such
Indebtedness, including taxes, assessments or charges, is being contested in
good faith and by appropriate proceedings diligently conducted and for which
such reserve or other appropriate provisions, if any, as shall be required by
generally accepted accounting principles shall have been made, but only to the
extent that failure to discharge any such Indebtedness would not result in any
liability which would adversely affect to a material extent the financial
condition of the Borrower;
(c) Maintenance of Insurance. Maintain insurance, at its own
expense, with insurers and reinsurers of recognized reputation and
responsibility satisfactory to Lender: (A) all-risk ground and flight aircraft
hull insurance covering the Skyship; (B) all-risk coverage with respect to all
engines, equipment and parts while removed from the aircraft; and (C) war risk
and hijacking (including political/non-political hijacking and acts
of terrorism). All such insurance shall be in full force and effect throughout
any geographical areas at any time traversed by the Skyship, shall be payable in
United States of America dollars and shall be in the amount of not less than the
casualty value determined by Lender (which shall be $3,500,000 as of the Closing
Date) and with liability coverage of not less than $50,000,000. Any policies
carried under this section: (1 ) shall be primary without right of contribution
from any other insurance; (2) be subject to a deductible no greater than
$500,000; (3) shall provide that if such insurance is canceled or materially
changed for any reason whatsoever, or the same is allowed to lapse for
non-payment of premium, such cancellation, change or lapse shall not be
effective as to Lender for thirty (30) days after receipt by Lender of written
notice from such insurers of such cancellation or lapse or material change in
policy terms and conditions; (4) shall provide that partial losses of less than
$25,000 shall be adjusted by and payable to Borrower (so long as no Event of
Default exists hereunder), but that in the event of a greater loss the entire
insurance shall be adjusted by Borrower and Lender and payable to Lender alone;
(5) shall provide that in respect of the interest of Borrower in such policies,
the insurance shall insure Borrower regardless of any breach or violation of any
warranties, declarations or conditions contained in such policies by Borrower or
any other Person; (6) shall waive any rights of set off, counterclaim or
deduction, whether by attachment or otherwise, and all rights of subrogation
against Lender and its successors, assignors, agents, officers, employees and
servants; (7) shall name Lender as additional insured and loss payee on all
insurance policies maintained by Borrower with respect to the Skyship, including
those policies generally described above; (8) shall provide that Lender shall
have no liability for any premiums, commission or calls in connection with such
insurance; and (9) to the extent of reinsurance, include a cut-through provision
permitting Lender to file claims and to obtain payment directly form the
reinsurers under the reinsurance policies;
(d) Visitation Rights. Permit any of the officers or
authorized employees or representatives of the Lender to visit and inspect any
of its properties and to examine and make excerpts from its books and records
and discuss its affairs, finances and accounts with its officers, all at such
reasonable times and as often as the Lender may reasonably
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request; provided, however, so long as no Event of Default exists or will exist
with the mere passage of time, notice or both, all of the foregoing shall be on
reasonable prior notice (i.e., no longer than seven (7) calendar days), during
usual business hours and shall be conducted in a manner reasonably calculated to
not materially interfere with Borrower's daily operations;
(e) Keeping of Records and Books of Account. Maintain and
keep proper books of record and account in accordance with generally accepted
accounting practices applied on a consistent basis and in which full, true and
correct entries shall be made of all its dealings and business and financial
affairs;
(f) Maintenance of Patents, Trademarks, etc. Maintain in full
force and effect all patents, trademarks, trade names, copyrights, licenses,
franchises, permits and other authorizations necessary for the ownership and
operation of its properties and business if the failure so to maintain the same
would substantially interfere with the normal operations of the Borrower or
adversely affect to a material extent the financial condition, business or
operations of the Borrower;
(g) Plans and Benefit Arrangements. Comply, and cause each
member of the ERISA Group to comply, with ERISA, the Internal Revenue Code and
other applicable laws applicable to Plans and Benefit Arrangements except where
such failure, alone or in conjunction with any other failure, would not result
in a Material Adverse Change. Without limiting the generality of the foregoing,
the Borrower shall cause all of its Plans and all Plans maintained by any member
of the ERISA Group to be funded in accordance with the minimum funding
requirements of ERISA and shall make, and cause each member of the ERISA Group
to make, in a timely manner, all contributions due to Plans, Benefit
Arrangements and Multiemployer Plans;
(h) Environmental Indemnification. Indemnify and hold the
Lender harmless from and against all liability, directly or indirectly arising
out of any Environmental Condition on or associated with or emanating from any
property of the Borrower or out of the use, generation, storage or disposal of
Regulated Substances, including, without limitation, the cost of any required or
necessary repair, clean-up or detoxification and the preparation of any closure
or other required plans, whether such action is required or necessary prior to
or following transfer to the Lender of title or operation of the property, to
the full extent that such action is attributable, directly or indirectly, to any
such Environmental Condition or to the use, generation, storage or disposal of
Hazardous Materials on any property of the Borrower. Notwithstanding the
provisions of Section 8.09, this indemnification shall survive the full
repayment of the Term Note;
(i) Compliance with Laws. Comply with all applicable laws in
all respects provided that the Borrower shall not be deemed to be in violation
of this subsection (i)
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of Section 8.01 hereof as the result of any failure to comply which would not
result in fines, penalties, injunctive relief or other similar criminal
liabilities which in the aggregate materially affect the business operations or
financial condition of the Borrower or the ability of the Borrower to perform
its obligations under the Agreement or the Term Note;
(j) Application of Proceeds. Apply a portion of the proceeds
of the Term Loan to acquire the Skyship from Trans Continental Leasing and the
remaining proceeds in connection with Borrower's business;
(k) Change of Base for Skyship. Prior to making any change of
the Skyship's base of operations and in the event that the Skyship is to be
temporarily based outside of Florida for more than thirty (30) consecutive days
at any one particular location, notify Lender of the new base of operations or
temporary base, as the case may be, and execute such additional financing
statements and other documents and instruments as Lender may request to continue
its perfected security interest in and lien on the Skyship;
(l) Guaranty. Cause Trans Air to unconditionally guarantee
and become surety for all Indebtedness of Borrower to Lender pursuant to the
Guaranty and comply with all terms and conditions of the Guaranty;
(m) Aircraft Mortgage. Grant Lender a first priority
perfected lien on and security interest in the Skyship as security for all
Indebtedness of Borrower to Lender pursuant to the Aircraft Mortgage and comply
with all terms and conditions set forth therein; and
(n) Bud I Contract. Grant Lender a first priority perfected
security interest in the Bud I Contract as security for all Indebtedness of
Borrower to Lender pursuant to the Assignment of Contract and comply with all
terms and conditions set forth therein.
6.02 Negative Covenants. The Borrower covenants until payment in
full of the Term Note and interest thereon, it will not, unless otherwise
consented to in writing by the Lender:
(a) Liens on Skyship and Bud I Contract. Create, incur,
assume or suffer to exist any mortgage, security interest, lien or encumbrance
whatsoever on the Skyship or the Bud I Contract;
(b) Liquidation, Merger, etc. (i) Liquidate, merge or
consolidate with or into any other Person or take any action in furtherance of
any thereof; (ii) permit any other Person to consolidate with or merge into it,
or (iii) sale, assign or dispose of substantially all of its assets in one or a
series transactions; and
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(c) Sale of Skyship or Bud I Contract. Sell, convey, assign
or otherwise transfer or dispose of (i) Skyship or any portion thereof except
for ordinary repairs and replacements of components of the Skyship or (ii) the
Bud I Contract.
6.03 Reporting Requirements. The Borrower covenants that, until
payment in full of the Term Note and interest thereon, it will furnish to the
Lender:
(a) Quarter-Fiscal Year Financial Statements. Within 60 days
after the close of each of the first three quarter-fiscal year periods of each
fiscal year of the Borrower, unaudited statements of income, retained earnings
and changes in financial position of the Borrower for such quarter-fiscal year
period, and an unaudited balance sheet of the Borrower as of the close of such
quarter-fiscal year period, all in reasonable detail and certified by the chief
accounting officer of the Borrower, subject to year-end audit adjustments, as
having been prepared in accordance with generally accepted accounting principles
consistent with those applied in the preparation of the annual financial
statements last furnished under Section 4.01(f) hereof or subsection (b) below.
(b) Annual Financial Statements. Within 120 days after the
close of each fiscal year of the Borrower, statements of income, retained
earnings and changes in financial position of the Borrower for such fiscal year
and a balance sheet of the Borrower as of the close of such fiscal year, all in
reasonable detail, such financial statements to be certified by independent
certified public accountants of recognized standing selected by the Borrower and
satisfactory to the Lender, whose certificate or opinion accompanying such
financial statements shall not contain any material qualification or exception
not satisfactory to the Lender.
(c) Shareholder Reports and SEC Filings. Promptly upon their
filing or distribution (i) any reports distributed by the Borrower to its
shareholders on a date no later than the date supplied to the shareholders, and
(ii) periodic reports filed by the Borrower with the Securities and Exchange
Commission, including Borrower's 10Q and 10K filings.
(d) Notice of Default. As soon as possible and in any event
within five days after the occurrence of each Event of Default (other than a
payment default arising under Section 7.01(a)) or each event which, with the
giving of notice or lapse of time or both, would constitute an Event of Default,
a certificate signed by its President, a Vice President or its chief financial
officer and setting forth the details of such Event of Default and the action
which the Borrower proposes to take with respect thereto.
(e) Notices of Litigation. Promptly after the commencement
thereof, notice of all actions, suits and proceedings before any court or
governmental or administrative
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body or agency, domestic or foreign, of the type described in Section 4.01(e)
hereof affecting the Borrower.
(f) Other Information. Such other information respecting the
business, properties or condition of operations, financial or otherwise, of the
Borrower as the Lender may from time to time reasonably request.
ARTICLE VII
DEFAULT
7.01 Events of Default. An Event of Default with respect to the Term
Loan shall mean the occurrence of any one or more of the following described
events:
(a) The Borrower shall fail to make any payment when under
the Term Note, whether such payment be (i) the payment of any installment (other
than the final installment) of principal and interest on the Term Note as
specified therein; provided, however, the Borrower shall have the right, which
may be exercised up to two (2) times each twelve (12) month period, to cure any
failure to make a payment when due on the Term Note within five (5) calendar
days of the due date prior to such failure constituting an Event of Default
under this subparagraph (a)(i), or (ii) any payment due at the maturity of the
Term Note as specified therein;
(b) The Borrower shall default in any payment of principal
of or interest on any other Indebtedness for money borrowed beyond any period of
grace provided with respect thereto or in the performance of any other
agreement, or any term or condition contained in any agreement or instrument,
under or by which any such Indebtedness is created, evidenced or secured, if the
effect of such default is to cause, or permit the holder or holders of such
Indebtedness or a trustee on behalf of such holder or holders to cause, such
Indebtedness to become due prior to its stated maturity unless such default is
waived by the holders thereof;
(c) Any representation or warranty made by the Borrower
herein or by any party in any of the Loan Documents, or in any certificate,
other instrument or statement furnished pursuant to the provisions hereof, shall
prove to have been false or misleading in any material respect as of the time
made or furnished;
(d) The Borrower shall default in the observance or
performance of any covenant contained in Section 6.01(c) or Section 6.02 hereof;
(e) An "Event of Default" shall occur under any other Loan
Document;
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(f) Trans Air shall default in the observance or performance
of any covenant contained in Section 9(i) of the Guaranty;
(g) The Borrower or, Trans Air or any other party thereto
shall default in the observance or performance of any other covenant, condition
or provision hereof or any other Loan Document delivered in connection herewith
and such default shall continue unremedied for a period of thirty (30) calendar
days after written notice thereof shall have been given to the Borrower or Trans
Air, as the case may be;
(h) A default or event which, with the passage of time or
giving of notice, or both, would constitute a default exists under the Bud I
Contract or Anheuser-Busch shall cancel or terminate the Bud I Contract or
assert that the Bud I Contract is not a legal, valid or binding obligation of
Anheuser-Busch;
(i) Borrower or Trans Air shall have final judgments
aggregating an excess of $100,000 or $250,000, respectively, rendered against it
which shall remain outstanding and undischarged for thirty (30) calendar days or
have rendered against it any levy, seizure, garnishment or attachment which has
or may have a material adverse affect on Borrower's or Trans Air's financial
condition;
(j) A proceeding shall have been instituted in a court
having jurisdiction in the premises seeking a decree or order for relief in
respect of the Borrower, Trans Air or any other Person who shall have guaranteed
the payment of the Term Note (the "Guarantor") in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or for the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Borrower, Trans Air or any
Guarantor or for any substantial part of its, his or her property, or for the
winding-up or liquidation of its, his or her affairs, and such proceeding shall
remain undismissed or unstayed and in effect for a period of 30 consecutive days
or such court shall enter a decree or order granting any of the relief sought in
such proceeding;
(k) The Borrower, Trans Air or any Guarantor shall commence
a voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case under any such law, or shall consent to the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Borrower, Trans Air or any
Guarantor or for any substantial part of its, his or her property, or shall make
a general assignment for the benefit of creditors, or shall fail generally to
pay its, his or her debts as they become due, or shall take any action in
furtherance of any of the foregoing.
20
<PAGE>
<PAGE>
7.02 Consequences of Event of Default.
(a) If an Event of Default specified under subsections (a)(i)
or (b) through (i) of Section 7.01 hereof shall occur, the Lender may by
written notice to the Borrower declare the unpaid balance of the principal of
the Term Note then outstanding and all interest accrued thereon and all other
Indebtedness of the Borrower to the Lender to be forthwith due and payable, and
the same shall thereupon become and be immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived.
(b) If an Event of Default specified under subsections
(a)(ii), (j) or (k) of Section 7.01 hereof shall occur, the unpaid principal
balance of the Term Note then outstanding and all interest accrued thereon and
all other Indebtedness of the Borrower to the Lender shall be immediately due
and payable, without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived.
ARTICLE VIII
MISCELLANEOUS
8.01 No Implied Waiver; Cumulative Remedies; Writing Required. No
delay or failure of the Lender in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise thereof or any abandonment or discontinuance of steps to enforce such a
right, power or remedy preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. The rights and remedies provided
hereunder are cumulative and not exclusive of any rights or remedies (including,
without limitation, the right of specific performance) which the Lender would
otherwise have. Any waiver, permit, consent or approval of any kind or character
on the part of the Lender of any breach or default under the Agreement, Term
Note or any other Loan Documents or any such waiver of any provision or
condition hereof or thereof must be in writing and shall be effective only to
the extent in such writing specifically set forth. The Borrower acknowledges
that with respect to this Agreement and its terms the Borrower is neither
authorized nor entitled to rely on any representations, modifications or
assurances in any form or as to any subject from any officer of the Lender
unless and until such representation, modification or assurance is set forth in
writing and signed by such officer of the Lender.
8.02 Taxes. The Borrower agrees to pay or cause to be paid any and
all stamp, document, transfer or recording taxes, and similar impositions
payable or hereafter determined to be payable in connection with the Loan
Documents, and agrees to save the Lender harmless from and against any and all
present or future claims or liabilities with respect to, or resulting from, any
delay in paying, or omission to pay, any such taxes or similar impositions.
21
<PAGE>
<PAGE>
8.03 Holidays. Whenever any payment or action to be made or taken
hereunder or under the Term Note shall be stated to be due on a day which is not
a Business Day, such payment or action shall be made or taken on the next
succeeding Business Day and such extension of time shall be included in
computing interest or fees, if any, in connection with such payment or action.
8.04 Notices. All notices and other communications given to or made
upon any party hereto in connection with the Agreement, the Term Note, or any
other Loan Documents shall, except as herein or therein otherwise expressly
provided, be in writing and delivered by personal delivery, overnight courier,
express mail or certified mail return receipt requested, telefaxed or telexed
with confirmation in writing mailed first class, telefaxed, telegraphed or
delivered, in all cases with charges prepaid, (i) if to the Borrower, at the
address set forth below the signature of the Borrower or at such other single
address as shall be designated in the latest written notice signed by the
President of the Borrower and mailed or delivered in accordance with the
provisions of this Section 8.04 with a copy to Baer Marks & Upham, 805 Third
Avenue, New York, NY 10022, Attn: Samuel F. Ottensoser, Esquire, and (ii) if to
the Lender, at the address set forth below its signature hereto or at such other
address as shall be designated in the latest written notice given by such party
in accordance with the provisions of this Section 8.04 with a copy to Buchanan
Ingersoll Professional Corporation, 301 Grant Street, 20th Floor, One Oxford
Centre, Pittsburgh, PA 15219, Attn: Donald E. Malecki, Esquire. All such
properly given notices or other communications shall be effective when received.
8.05 Reimbursement for Certain Expenses. The Borrower agrees to pay
or cause to be paid and save the Lender harmless against liability for the
payment of all reasonable out-of-pocket expenses, including legal fees and
costs, incurred by the Lender (i) arising in connection with the development,
preparation, execution and performance of the Agreement, the Term Note, any
other Loan Documents and the related transactions, (ii) relating to any
requested amendments, waivers or consents pursuant to the provisions hereof, and
(iii) arising out of or in connection with any action or proceeding (including
any action or proceeding arising in or related to any insolvency, bankruptcy or
reorganization involving or affecting the Borrower) taken to protect, enforce,
determine or assert any right or remedy under this Agreement, the Term Note or
any of the other Loan Documents or any collateral securing the same. Any legal
fees to which Lender shall be entitled pursuant to the immediately preceding
sentence shall be offset to the extent of the amount of legal fees which the
Lender shall collect pursuant to the "Confession of Judgment" clause included in
the Term Note.
8.06 Severability. The provisions of the Agreement are severable,
and if any clause or provision of the Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such clause or
provision shall, as to such jurisdiction, be ineffective to the extent of such
invalidity or unenforceability without in any manner affecting the validity or
22
<PAGE>
<PAGE>
enforceability of such clause or provision in any other jurisdiction or the
remaining provisions hereof in any jurisdiction.
8.07 Governing Law. The Agreement, the Term Note and any other Loan
Documents and the rights and obligations of the parties hereto and thereto shall
be governed by and construed and enforced in accordance with the substantive law
of the Commonwealth of Pennsylvania without giving effect to the principles of
conflict of laws.
8.08 Prior Understandings. The Agreement supersedes all prior
understandings and agreements, whether written or oral, between the parties
hereto and thereto relating to the transactions provided for herein and therein.
8.09 Survival. All representations, warranties, covenants and
agreements of the Borrower contained in the Agreement, the Term Note or any
other Loan Documents shall survive the execution and delivery hereof and
thereof, the making of Term Loan hereunder and the issuance of the Term.
8.10 Section Headings. The underlined section headings herein are
for convenience of reference only and shall not in any way affect the
interpretation or construction hereof or thereof.
8.11 Successors and Assigns. The Agreement shall be binding upon and
inure to the benefit of the Lender, the Borrower, and their respective
successors and assigns, except that the Borrower may not assign or transfer its
rights hereunder or any interest herein.
8.12 Attorney-in-Fact. Borrower hereby irrevocably appoints Lender
as Borrower's attorney-in-fact (which power shall be deemed coupled with an
interest) to execute, endorse and deliver any deed, conveyance, assignment or
other instrument in writing as may be required to vest in Lender any right,
title or power which by the terms hereof are expressed to be conveyed to or
conferred upon Lender, including, without limitation, filings to be made at the
Federal Aviation Administration, Uniform Commercial Code financing statements
(including continuation statements), real property waivers, and documents and
checks or drafts relating to or received in payment for any loss or damage under
the policies of insurance required by the provisions of Section 6.01(c) hereof,
but only to the extent that the same relates to the Skyship.
8.13 Jurisdiction. The parties agree that any action or proceeding
arising out of or relating to this Agreement may be commenced in any state or
Federal court of competent jurisdiction in the Commonwealth of Pennsylvania and
each party submits to the jurisdiction of such court and agrees that a summons
and compliant commencing an action or proceeding in any such court shall be
properly served and shall confer personal jurisdiction if served personally or
23
<PAGE>
<PAGE>
by certified mail to it at its address designated pursuant hereto, or as
otherwise provided under the laws of the Commonwealth of Pennsylvania.
8.14 Counterparts. The Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto, by their officers hereunto
duly authorized, have executed the Agreement as of the day and year first above
written.
[CORPORATE SEAL]
WITNESS: AIRSHIP INTERNATIONAL LTD.
/s/ Alan Siegel NAME /s/ LOUIS J. PEARLMAN
- ----------------------------------- -------------------------
Title: President
------------------------
Address: 7380 Sand Lake Road
Suite 350
Orlando, FL 32819
WITNESS: SENSTAR CAPITAL CORPORATION
/s/ Illegible NAME /s/ Illegible
- ----------------------------------- -------------------------
Title: Credit Manager
------------------------
Address: One Oxford Centre
Pittsburgh, PA 15219
24
<PAGE>
<PAGE>
Aircraft Description: One (l) 1991 Airship Industries Series 500HL Skyship
Registration Number N501LP, Manufacturer's Serial Number 1214-04
AIRSHIP INTERNATIONAL LTD.
Airship International Skyship Statistics
Dimensions:
Length 194 feet
Height 67 feet
Width 63 feet
Volume 235,400 cubic feet
Lifting Gas Helium (non-flammable)
Maximum Passenger Capacity: Six, plus captain and co-pilot
Perfortmance:
Cruising Speed 35 mph
Maximum Speed 62 mph
Two Porsche 930 Engines 225 hp each
Cruising Altitude 1,000 to 3,000 feet
Maximum Altitude 10,000 feet
Range 300 miles
Gondola Dimensions:
Length 38.3 feet
Width 8.4 feet
Headroom 6.3 feet
Envelope Fabric: Polyurethane-coated Polyester Synthetic
NightSign'tm':
Height of Sign 29 feet
Length of Sign 118 feet
Readability 1 mile
Colors Blue, Green, Red, Yellow
AIRSHIP INTERNATIONAL LTD. 7360 Sand Lake Road . Suite 200 . Orlando,
Florida 32819, Telephone: (407) 351-0011 . Telefax (407) 345-0888
SCHEDULE 1.01 TO CREDIT AGREEMENT
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
N 501 LP AT 8276.7 HOURS DATE 11/27/95
COMPONENT NAME S\N POSITION REMOVE HRS RUN REMAIN
<C> <C> <C> <C> <C> <C>
1 ENGINE 09D1033 PORT 8569.1 957.6 292.4
2 ENGINE 09D1031 STRB 8632.8 893.9 356.1
3 PROP PITCH ACTVATOR 01R PORT 8915.8 360.9 639.1
4 PROP PITCH ACTUATOR 176 STRB 9253.9 22.8 977.2
5 GENERATOR H098906.0 PORT 8940.2 86.5 663.5
6 GENERATOR A3088.12 STRB 8399.3 516.4 122.6
7 FUEL PUMP 134 M\PORT 8493.3 583.4 216.6
8 FUEL PUMP RAV012 H\STRB 8900.2 176.5 623.5
9 FUEL PUMP ELRA402 AUX PORT 8560.3 516.4 283.6
10 FUEL PUMP ELRA543 AUX STRB 8560.3 516.4 283.6
11 PROPELLER V-173 PORT 9193.3 583.4 916.6
12 PROPELLER V-201 STRB 9193.3 583.4 916.6
13 G\BOX AAN0636 PORT 9193.3 583.4 916.6
14 G\BOX ABP7068 STRB 9193.3 583.4 916.6
15 VECT G\BOX BAT0001/R PORT 9078.5 1198.2 801.8
16 VECT G\BOX 0029/R STRB 9078.5 1198.2 801.8
17 VECT MOTOR 101530 PORT 8296.9 979.8 20.2
18 VECT MOTOR 103201 STRB 8382.8 893.9 106.1
19 LIQUID SPRING JES/ACC/16/57 8965.3 311.4 688.6
20 IGN BOX 1032 PORT 8486.3 790.4 209.6
21 IGH BOX 1060 STRB 8572.7 704.0 296
22 BAL FAN RELAY N\A PORT MAY 2,1997 5760.9 N\A
23 BAL FAN RELAY STRB MAY 2,1997 576O.9 N\A
24 NOSE PROBE KA3 MAR 15, 97 1198.2 N\A
25 ENG FIRE EXTINGUISH 11974A1 PORT JULY 24,00 311.4 N\A
26 ENG FIRE EXTINGUISH 09973A1 STRB AUG 19, 96 6797.5 N\A
27 LIFEJACKETS N\A NOV 12, 96 22.8 N\A
28 CABIN FIRE EXTINGUISH N\A MAR 20, 96 311.4 N\A
29 BATT CAP CHECK G01530172 FEB 11, 96 22.8 N\A
30 SPARK PLUGS PORT 8421.1 105.6 144.4
31 SPARK PLUGS N\A STRB 8421.1 105.6 144.4
32 RUD KEV CABLE N\A PORT 9078.5 1198.2 801.8
33 RUD KEV CABLE N\A STRB 9078.5 1198.2 601.8
34 ELEV KEV CABLE N\A PORT 9078.5 1198.2 801.8
35 ELEV KEV CABLE N\A STRB 9078.5 119B.2 801.8
36 VECT CONT RELAY N\A 8882.8 893.9 606.1
37 NOSE CONE LACING N\A MAR 15, 99 1l98.2 N\A
38 NOSE BATT LACING N\A MAR 15, 99 1198.2 N\A
39 TAILFIN ROOT CORD N\A MAR 15, 99 1198.2 N\A
40 BRAC CABLE TENS CORD N\A MAR 15, 97 1198.2 N\A
41 EXTERN HE RIP CORD N\A SEPT 19,97 311.4 N\A
42 MAN LINE 947010 SEPT 25,96 284.3 N\A
43 FIRE EXTING CARTRIGE N\A NOV 10,95 6797.5 N\A
44 CHECK B N\A 8351.7 0.0 75
45 150 HR OCT OF PHASE N\A 8416.3 10.4 139.6
46 300 HR OUT OF PHASE N\A 8566.3 10.4 289.6
47 CHECK 1 N\A MAR 21, 96 311.4 N\A
48 CHECK 2 N\A MAR 15, 96 1198.2 N\A
49 CHECK 3 N\A MAR 15, 97 1198.2 N\A
50 CHECK 4 N\A MAR 15, 99 1198.2 N\A
51 BAL FAN; CLK HRS 1048 PORT 3824 80.0 670
52 BAL FAN; CLK HRS 992 STRB 3387.5 516.5 233.5
</TABLE>
<PAGE>
<PAGE>
Consents required with respect to the Credit Agreement
None, assuming the contemporaneous termination of the existing
lease between the Borrower and Trans Air, the purchase of the Skyship by the
Borrower from Trans Air and the payout of obligations owed to Phoenixcor, Inc.,
as well as obtaining contemporaneously the consent of Anheuser-Busch to the
assignment of the Bud I Contract.
SCHEDULE 4.01(d) TO CREDIT AGREEMENT
<PAGE>
<PAGE>
Litigations, Suits and Proceedings
None
SCHEDULE 4.01(e) TO CREDIT AGREEMENT
<PAGE>
<PAGE>
Borrower's Chief Executive Office and Principal Place of Business
7380 Sand Lake Road
Suite 350
Orlando, Florida 32819
SCHEDULE 4.01(n) TO CREDIT AGREEMENT
<PAGE>
<PAGE>
Base of Operations for the Skyship:
Executive or Kissimmee Airports in Orlando, Florida
SCHEDULE 4.01(o) TO CREDIT AGREEMENT
<PAGE>
<PAGE>
TERM NOTE
$3,500,000.00 Pittsburgh, Pennsylvania
November 30
_________________ , 1995
FOR VALUE RECEIVED, the undersigned, Airship International LTD
("Maker"), a New York corporation, having its principal office at 7380 Sand
Lake Road, Suite 350, Orlando, Florida 32819, promises to pay to the order of
Senstar Capital Corporation ("Lender") in lawful money of the United States of
America in immediately available funds at the Pittsburgh, Pennsylvania office
of Lender at 36th Floor One Oxford Centre, Pittsburgh, Pennsylvania 15219, or
at such other location as the holder hereof may designate from time to time,
the principal sum of Three Million Five Hundred Thousand Dollars
($3,500,000.00), together with interest from the date hereof on the unpaid
principal balance at a rate of nine and one-quarter percent (9.25%) per annum.
This Note shall be payable as follows: Sixty Three Thousand Three Hundred
Seventy One Dollars and 06/100 ($63,371.06), on November 30, 1995, and a like
and equal sum on the thirtieth (30th) day of each succeeding calendar month (in
the event any month has less than 30 days, then on the last day of such month)
thereafter to and including October 30, 2000 and the entire outstanding balance
of principal and accrued and unpaid interest on this Note on November 30, 2000.
If the Maker fails (i) to make any payment hereunder or under any other
document executed in connection with this Note, or (ii) fails to pay this Note
at maturity, whether by acceleration, demand or otherwise, then in either such
event, each such payment or accelerated balance shall bear interest at the
lower of 18% or the highest rate permitted by law. The aforesaid interest rates
shall continue to apply whether or not judgment shall be entered on this Note.
If any payment of principal or interest on this Note shall
become due on a Saturday, Sunday or on any other day on which Lender is not
open for business, such payment shall be made on the next succeeding business
day and such extension of time shall in such case be included in computing
interest in connection with such payment.
Notwithstanding any provision of this Note to the contrary, it
is the intent of Maker and Lender that Lender shall not at any time be entitled
to receive, collect or apply, and Maker and Lender shall not be deemed to have
contracted for, as interest on the principal indebtedness evidenced hereby, any
amount in excess of the maximum rate of interest permitted to be charged by
applicable law, and in the event Lender ever receives, collects or applies as
interest any such excess, such excess shall be deemed partial payment of the
principal indebtedness evidenced hereby, and if such principal shall be paid in
full, any such excess shall
EXHIBIT "C" TO CREDIT AGREEMENT
NOT FOR EXECUTION
<PAGE>
<PAGE>
forthwith be paid to Maker. In the event that, but for this paragraph, the rate
of interest applicable to this Note would at any time exceed the maximum lawful
rate, then this Note and all interest hereon shall thereupon be immediately due
and payable.
This Note is the Term Note referred to in and issued pursuant to
the Credit Agreement, dated of even date herewith, between Maker and Lender
("Credit Agreement"). The Credit Agreement contains provisions, among other
things, for the acceleration of the stated maturity of this Note upon the
happening of certain stated events recited therein and also for prepayments on
account of the principal hereof prior to maturity as provided therein.
Maker hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
This Note shall bind Maker and the successors and assigns of
Maker, and the benefits hereof shall inure to the benefit of Lender and its
successors and assigns. All references herein to "Maker" shall be deemed to
apply to Maker and to the successors and assigns of Maker, and all references
herein to "Lender" shall be deemed to apply to Lender and its successors and
assigns. This Note shall be governed by and enforced in accordance with the
laws of the Commonwealth of Pennsylvania without giving effect to conflict of
laws principles. Maker hereby consents that jurisdiction and venue for action,
suit or other legal proceeding arising under this Note shall lie in the
appropriate courts of competent jurisdiction in Allegheny County, Pennsylvania.
MAKER DOES HEREBY EMPOWER THE PROTHONOTARY OR ANY ATTORNEY OF
ANY COURT OF RECORD WITHIN THE COMMONWEALTH OF PENNSYLVANIA TO APPEAR FOR MAKER
AND, WITH OR WITHOUT ONE OR MORE COMPLAINTS FILED, CONFESS JUDGMENT OR
JUDGMENTS AGAINST MAKER IN ANY COURT OF RECORD WITHIN THE COMMONWEALTH OF
PENNSYLVANIA AT ANY TIME AFTER THE DATE OF THIS NOTE AND, WHETHER OR NOT THIS
NOTE IS THEN DUE OR IN DEFAULT, IN FAVOR OF LENDER, ITS SUCCESSORS AND ASSIGNS,
FOR THE UNPAID PRINCIPAL BALANCE OF THIS NOTE AND ALL INTEREST ACCRUED HEREON,
TOGETHER WITH COSTS OF SUIT AND AN ATTORNEY'S COMMISSION OF TWENTY PERCENT
(20%) FOR COLLECTION OF SUCH SUMS, AND MAKER HEREBY FOREVER WAIVES AND RELEASES
ANY AND ALL ERRORS IN SAID PROCEEDINGS AND WAIVES STAY OF EXECUTION AND STAY,
CONTINUANCE OR ADJOURNMENT OF SALE ON EXECUTION. THE AUTHORITY AND POWER TO
APPEAR FOR AND ENTER JUDGMENT AGAINST MAKER SHALL NOT BE EXHAUSTED BY ONE OR
MORE EXERCISES THEREOF, AND MAY BE EXERCISED FROM TIME TO TIME AND AS OFTEN AS
LENDER OR ITS SUCCESSORS AND ASSIGNS SHALL DEEM NECESSARY OR DESIRABLE.
2
<PAGE>
<PAGE>
IN WITNESS WHEREOF, Maker, intending to be legally bound, has
executed this Note on the day and year first above written with the intention
that this Note shall constitute a sealed instrument.
<PAGE>
<PAGE>
ATTEST: AIRSHIP INTERNATIONAL LTD.
_______________________ By: /s/ LOUIS J. PEARLMAN
______________________
Name:
______________________
[SEALl Title: President
______________________
3
<PAGE>
<PAGE>
This Aircraft Mortgage and Security Agreement
encumbers the following aircraft:
Make: Skyship
Model/Serial No.: 500HL
Registration No.: N501LP
AIRCRAFT MORTGAGE AND SECURITY AGREEMENT
THIS AIRCRAFT MORTGAGE AND SECURITY AGREEMENT (hereinafter called the
"Mortgage") dated November 30, 1995, from Airship International Ltd., a New
York corporation, (hereinafter called the "Borrower"), as the Mortgagor, to
Senstar Capital Corporation, a Delaware corporation, having its principal
office at One Oxford Centre, 31st Floor, 301 Grant Street, Pittsburgh,
Pennsylvania 15219 (hereinafter called the "Mortgagee" or the "Lender"),
as the Mortgagee.
WHEREAS, the Borrower has entered into a Credit Agreement of even date
herewith with the Mortgagee, (as now or hereafter amended hereinafter called
the "Credit Agreement"), pursuant to which the Mortgagee has agreed, subject to
the terms and conditions set forth in the Credit Agreement, to make a
$3,500,000 loan to the Borrower, which is evidenced by a $3,500,000 Term Note,
dated of even date herewith, from Borrower in favor of Lender (as now or
hereafter amended or replaced the "Term Note");
WHEREAS, the Borrower desires to execute and to deliver this Mortgage
for the purpose, among other things, of securing payment of the Term Note and
the payment when due of any and all Indebtedness and liability of every kind,
nature and character (including all renewals, extensions and modifications
thereof) from the Borrower to the Mortgagee, including but not limited to
indebtedness created, or arising, or evidenced or acquired under the Credit
Agreement (hereinafter collectively called the "Obligations"), and for the
purpose of subjecting the Mortgaged Property (as hereinafter defined)
including, without limitation, the aircraft, aircraft engines, propellers and
flight equipment, as hereinbelow described, to the lien of this Mortgage;
WHEREAS, the Borrower is the legal and beneficial owner, free and clear
of all security interests, mortgages, liens, charges and encumbrances of the
Mortgaged Property;
EXHIBIT "A" TO CREDIT AGREEMENT
NOT FOR EXECUTION
<PAGE>
<PAGE>
NOW, THEREFORE, THIS INSTRUMENT WITNESSETH that, to secure the
Obligations, the Borrower, intending to be legally bound hereby, does bargain,
sell, transfer, convey, hypothecate and mortgage unto the Mortgagee, its
successors and assigns, and grants to the Mortgagee a security interest in and
to the following described property (hereinafter called the "Mortgaged
Property"), to wit:
(i) All the property described in the Supplement attached to
this Mortgage;
(ii) All proceeds from the sale or other disposition of the
Mortgaged Property and all proceeds of insurance on and all proceeds of any
condemnation (being any condemnation, confiscation, expropriation or seizure
of, or requisition of title to or use of, the Mortgaged Property by any
government or instrumentality or agency thereof) with respect to the Mortgaged
Property;
(iii) All additions, accessories, attachments, replacements and
renewals of all property subjected or required to be subjected to the lien
hereof and all property which shall hereafter become physically attached to or
incorporated in all property subjected or required to be subjected to the lien
hereof, in each case whether the same are now or are hereafter subjected to the
lien hereof; and
(iv) All rents, issues, profits, revenues and other income of
the property subjected or required to be subjected to the lien hereof, and all
the estate, right, title and interest of every nature whatsoever of the
Borrower, at law or in equity, in and to such property and every part and
parcel thereof.
Title to or a lien upon all property mortgaged hereby, or intended to be
hereafter acquired by the Borrower or to which it may at any time hereafter be,
in any manner, entitled at law or in equity, and required to be subjected
hereto or intended so to be, shall vest in the Mortgagee, under the terms and
conditions of this Mortgage, forthwith on acquisition thereof by the Borrower,
and such property shall be as fully embraced within the provisions of this
Mortgage and subject to the lien hereof as if such property were now owned by
the Borrower and were specifically described herein and mortgaged hereby. All
property which is hereinafter subjected to the lien of this Mortgage shall
thereupon become Mortgaged Property.
TO HAVE AND TO HOLD all and singular said property unto the Mortgagee,
its successors and assigns, as security as aforesaid.
ON CONDITION that, until the happening of an "Event of Default" (as
defined herein), the Borrower shall have the right to possess the Mortgaged
Property and to collect and enjoy the rents, issues, profits, revenues and
income thereof.
2
<PAGE>
<PAGE>
All collateral described or referred to in the foregoing granting
clauses and included in the Mortgaged Property, whenever acquired by the
Borrower, shall secure the Obligations.
IT IS HEREBY COVENANTED AND DECLARED by and between the parties hereto
and their respective successors and assigns that the terms on which the
Mortgaged Property shall be held, used and operated are as follows:
ARTICLE I
DEFINITIONS
Section 1.1 For all purposes of this instrument, unless the context
otherwise requires:
A. "Aircraft," "aircraft engines" and "spare parts" shall have the
respective meanings given to these terms in the Federal Aviation Act as in
effect on the date of this Mortgage and shall mean the aircraft, aircraft
engines, and spare parts included in the Mortgaged Property.
B. "Event of Default" shall mean the occurrence of any one or more of the
events described in Section 3.1 hereof which shall not be remedied in the grace
period, if any, provided therein.
C. "Federal Aviation Act" shall mean the Federal Aviation Act of 1958, as
amended, as in effect on the date of this Mortgage, or any successor or
substituted legislation at the time in effect and applicable.
D. "Federal Aviation Administration" shall mean the Federal Aviation
Administration provided for in the Federal Aviation Act as in effect on the
date of this Mortgage, or any successor or substituted governmental authority
at the time having jurisdiction.
ARTICLE II
PARTICULAR COVENANTS OF THE COMPANY
The Borrower covenants, agrees and warrants as hereinafter in this Article set
forth:
Section 2.1 Warranty of Title. The Borrower warrants that it is the
legal and beneficial owner of the Mortgaged Property free and clear of all
security interests, mortgages, liens, charges and encumbrances whatsoever
(excepting only the lien of the Mortgagee), and has full power and authority to
grant, bargain, sell, transfer, convey, hypothecate and mortgage, and give a
security interest in, said Mortgaged Property. The Borrower hereby does and
shall forever warrant and
3
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<PAGE>
defend the title to and possession of the Mortgaged Property against the claims
and demands of all persons whomsoever.
Section 2.2 Recording. The Borrower shall bear the expense of and be
responsible for recording and re-recording, registering and re-registering, and
filing and refiling this Mortgage and each amendment hereto with respect to the
Mortgaged Property and such other instruments from time to time as reasonably
may be requested by the Mortgagee in all such jurisdictions and offices as the
Mortgagee shall from time to time require in order that the lien granted herein
is a first lien on all of the Mortgaged Property, senior to all liens.
Section 2.3 Priority of Lien: Payment of Taxes. Until the Obligations
have been paid in full, this Mortgage always shall be kept a first lien upon
the Mortgaged Property as from time to time constituted, and senior to all
liens, and the Borrower will not create or suffer to be created any lien or
charge of any kind or nature whatsoever upon the Mortgaged Property or any part
thereof or upon the income or proceeds therefrom. The Borrower shall from time
to time pay or cause to be paid as they become due and payable all taxes, fees,
assessments and governmental charges lawfully levied, assessed or imposed upon
the Mortgaged Property or any part thereof or upon any income or proceeds
therefrom and all taxes, fees, assessments and governmental charges lawfully
levied or assessed or imposed upon the security interest of the Mortgagee in
the Mortgaged Property, so that the lien of and security interest created by
this Mortgage shall, until the Obligations have been paid in full, be wholly
preserved at the cost of the Borrower and without expense to the Mortgagee. The
Borrower shall not suffer any other matter or thing whatsoever whereby the lien
of or security interest created by this Mortgage might be impaired; provided,
however, that nothing in this Section shall require the Borrower to discharge
any lien for taxes, assessments or governmental charges that are not delinquent
or that in good faith are being contested or litigated by appropriate
proceedings, and pending such contest, the Borrower may defer the payment
thereof, so long as such deferment in payment shall not, in the reasonable
opinion of the Mortgagee, subject the property or any part thereof to
forfeiture or loss and the Borrower shall have on its books reserves deemed by
the Mortgagee adequate with respect thereto or the Borrower shall otherwise
post adequate security.
Section 2.4 Indemnification. The Borrower shall indemnify and protect
the Mortgagee against all claims arising out of or connected with the ownership
or use of any of the Mortgaged Property including, without limitation, any and
all claims arising out of the use of any patented inventions employed in or in
connection with the Mortgaged Property.
Section 2.5 Maintenance of Mortgaged Property. The Borrower shall at all
times cause all of the Mortgaged Property as from time to time constituted and
every part thereof to be maintained in good order and repair and fit for use at
no cost to the Mortgagee. The Borrower shall from time to time make all needed
and proper repairs, so that at all times the efficiency and the fitness for use
of the Mortgaged Property will be fully maintained.
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The Borrower shall at all times cause the Mortgaged Property to be
maintained and repaired in accordance with the higher of the requirements of
Section 2.6 or as suggested by the manufacturer of the Aircraft or any
insurance policy in effect with respect to the Mortgaged Property.
In addition to any and all other causes and conditions rendering the
Aircraft unfit for use within the meaning of this Section, the withdrawal of
the airworthiness certificate issued under the Federal Aviation Act with
respect to the Aircraft, or the existence, with respect to the Aircraft or with
respect to any aircraft engine included in the Mortgaged Property, of any
order, rule or regulation of the Federal Aviation Administration which
prohibits the use of such Aircraft or aircraft engine in normal Aircraft or
aircraft engine operations shall be deemed to render the same unfit for use.
The Borrower shall promptly notify the Mortgagee in writing of any such
withdrawal, order, rule or regulation.
The Borrower shall promptly notify the Mortgagee of any aircraft engine
included in the Mortgaged Property becoming condemned, worn out, lost,
destroyed or rendered unfit for use. The Borrower shall promptly replace all
parts which may from time to time be incorporated or installed in or attached
to the Aircraft or aircraft engines and which may from time to time become worn
out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use for any reason whatsoever.
The Borrower will at all times comply in all material respects with all
orders, rules and regulations of governmental authorities having jurisdiction
with respect to any part of the Mortgaged Property, unless the same are being
contested in good faith by the Borrower. At all times, the Aircraft shall be
operated subject to this Mortgage and only in accordance and compliance in all
material respects with the laws, rules and regulations of the United States of
America, or any state or municipality thereof, or any other sovereign
jurisdiction with respect to any aspect of such operation.
The Borrower hereby irrevocably assigns, transfers and sets over the
Mortgagee all rights of the Borrower to any award or payment on account of any
confiscation of any part of the Mortgaged Property and irrevocably authorizes
and empowers the Mortgagee, in the name of the Borrower or otherwise, to file
and prosecute what would otherwise be the Borrower's claim for any such award
or payment and to collect, receipt for and retain the same. The Borrower will
pay all costs, fees and expenses incurred by the Mortgagee in connection with
any expropriation or confiscation and seeking and obtaining any reward or
payment on account thereof
Section 2.6 Service and Repair. So long as any of the Obligations are
outstanding (the "Term") the Borrower, at its sole cost and expense, shall
maintain, service, repair, overhaul, test, alter, modify and add equipment (the
"Borrower-Furnished Equipment") to the Aircraft and any
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spare engine(s) used with the Aircraft (the "Spare Engine") (i) so as to keep
them in as good operating condition as they were in as of the date of the
Mortgage, ordinary wear and tear excepted, and (ii) as required to meet all
applicable service, maintenance, repair and overhaul regulations, directions,
and instructions of the Civil Aeronautics Board, Federal Aviation
Administration and/or the Administration of the Federal Aviation Administration
or any person, governmental department, bureau, commission or agency succeeding
to the functions of the foregoing (the "Aeronautics Authority") regardless of
on whom such requirements are by their terms imposed, as well as any other
appropriate governmental agency having jurisdiction over the Borrower's
operation and maintenance of the Aircraft. During the Term, the Borrower, at
its sole cost and expense, shall maintain, service, repair, overhaul, test,
alter, modify and add to the Borrower-Furnished Equipment so as to keep them in
good operating condition.
During the Term, the Borrower, at its sole cost and expense, shall
promptly replace all parts, including Borrower- Furnished Equipment, which may
from time to time be incorporated or installed in or attached to the Airframe
and Engines or any item thereof and which may from time to time become worn
out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use for any reason whatsoever. In addition, the
Borrower may, at its sole cost and expense, remove in the ordinary course of
maintenance, service, repair, overhaul or testing, any parts, whether or not
worn out, destroyed, damaged beyond repair or permanently rendered unfit for
use; provided, however, that the Borrower will, at its sole cost and expense,
replace such parts, including Borrower-Furnished Equipment, as promptly as
possible. All such replacement parts shall be free and clear of all Liens
(except those in favor of the Lender) and shall be in as good operating
condition as, and shall have a value and utility at least equal to, the parts
replaced assuming such replaced parts were in the condition and repair required
to be maintained by the terms hereof. All parts, including the
Borrower-Furnished Equipment, at any time removed from the airframe and engines
as herein provided shall remain part of the Collateral of the Lender, no matter
where located, until such time as such parts shall be replaced by parts which
have been incorporated or installed in or attached to the airframe or any
engine as above provided, without further act and (i) title to such replacement
part thereupon must vest in the Borrower, free and clear of all Liens (except
those in favor of the Lender), (ii) such replacement part shall become subject
to the Credit Agreement and this Agreement and be deemed a part of the airframe
or engine for all purposes hereof to the same extent as parts originally
incorporated or installed in or attached to the airframe or engine and (iii)
title to the replaced part shall thereafter vest in the Borrower free and clear
of all rights of the Lender and all Liens created or incurred by the Lender,
and shall no longer be deemed a part hereunder.
During the Term, the Borrower, without expense to the Lender, may from
time to time make alterations and modifications in and additions to the
Aircraft and any spare engine as the Borrower may deem desirable in the proper
conduct of its business; provided that the Borrower shall not, without the
Lender's prior written consent, make any such alteration, modification or
addition which (i) diminishes the value and utility of the Aircraft, airframe
or any engine below
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the value and utility thereof immediately prior to such change or alternation,
assuming the Aircraft, or airframe was at such time in the condition and repair
as required by the terms hereof, or (ii) materially and adversely affects the
costs of performing airframe or engine maintenance. The Lender shall bear no
liability whatsoever for the alteration or modification of or addition to the
Aircraft, whether in the event of grounding, suspension of certification or for
any other cause whatsoever. Title to all Parts, including Borrower-Furnished
Equipment, incorporated or installed in or attached to or added to the Aircraft
and any spare engine as the result of such alternation, modification or
addition shall, without further act, vest in the Borrower, free and clear of
all Liens (except those in favor of the Lender).
During the Term, the Borrower shall operate the Mortgaged Property in
the continental United States of America and shall comply in all material
respects with all laws of the jurisdiction in which the Aircraft may be
operated and with all laws, rules, regulations, orders (including, without
limitation, paying when due all taxes, assessments and governmental charges
imposed on it or upon its property) and airworthiness directives of the Federal
Aviation Administration and any other legislative, executive, administrative or
judicial body exercising any power or jurisdiction over the Borrower's
operation and maintenance of the Aircraft, and will maintain the Aircraft in
proper condition for operation under such laws, rules and airworthiness
directives; provided, however, that the Borrower may in good faith contest the
validity and application of any such law, rule, regulation, order or
airworthiness directive in any reasonable manner which does not affect the
Aircraft or rights of the Lender hereunder or the duties and obligations of the
Borrower hereunder (except as provided in this Subsection 2.6) and if the
Borrower shall have obtained in writing from the appropriate authorities
permissions, extensions, variances or continuances to perform any acts required
of the Borrower hereunder, provided the Borrower shall perform or cause to be
performed on the Aircraft prior to the end of the Term any and all requirements
or conditions set forth in such permissions, extensions, variances or
continuances. The Borrower shall at all times during the Term hereof hold such
form of certificate, if any, as may be necessary to permit the Borrower's title
to the Aircraft to be recorded, and to be entitled to the benefits of
recordation, under the Act or under similar provisions of any statute enacted
in lieu thereof and the pertinent regulations of the Federal Aviation
Administration relating to recordation.
Section 2.7 Record Keeping. The Borrower shall maintain all records,
logs, and other materials required by the Federal Aviation Administration to be
maintained in respect of the Aircraft, regardless of whether such requirements
are by their terms imposed on the Borrower or the Lender, and in the event that
the Aircraft or any item thereof is repossessed by the Lender, the Borrower
shall forthwith deliver to the Lender all such records, logs and other
materials relating to the Aircraft so repossessed.
Section 2.8 Annual Reports. Upon Lender's request, the Borrower shall
furnish the Lender with annual reports reasonably detailing the hours of usage
of the Aircraft and major
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maintenance, service repair and overhaul performed on the Aircraft in
accordance with the requirements of this Section 2.
Section 2.9 Insurance. The Borrower shall at its expense at all times
maintain with financially sound and reputable insurers, satisfactory to the
Mortgagee, insurance as required under the terms of the Credit Agreement and as
follows:
A. Delivery of Policies: Insurance Certificates. The Borrower will
deliver to the Mortgagee, as soon as possible upon request, the copies
of all insurance policies, or certificate thereof, with respect to the
Mortgaged Property which the Borrower is required to maintain pursuant
to the Credit Agreement, together with evidence as to the payment of all
premiums then due thereon. Each certificate shall be signed by an
independent insurance broker satisfactory to the Lender stating that the
insurance in force covering risks relating to the Mortgaged Property is
carried and maintained with financially sound and reputable insurers and
otherwise complies with the provisions of this Credit Agreement is in
such amounts and covers such risks so that the protection afforded is
not less than that which would be customarily maintained for properties
of a similar character for entities engaged in a similar business,
Mortgagee shall be named as a loss payee and additional insured with
respect to all insurance policies.
B. Borrower Not to Cancel, etc., Insurance. The Borrower will not,
without the written consent of the Mortgagee, cancel, amend or alter any
insurance required by Section 2.9 above and will not mortgage, pledge,
hypothecate, sell, assign or transfer its interest in any such insurance
or in any rights to cancel such insurance or to obtain the return of the
unearned premiums therefor.
C. Uninsured Aircraft to be Grounded. At any time when all insurance
required by any provision of Section 2.9 above shall not be in effect
with respect to the Aircraft, the Borrower will promptly ground the
Aircraft and will not permit the same to be flown until such insurance
is again in effect.
Section 2.10 Inspection by Mortgagee; Information. The Borrower will at
any and all times, on reasonable notice and request of the Mortgagee during
usual business hours, permit the Mortgagee by its representatives to inspect
the Mortgaged Property and the records, reports and other papers of the
Borrower relating thereto and to take copies and extracts therefrom and will
afford and procure a reasonable opportunity to make any such inspection and
will furnish the Mortgagee any and all such other information as the Mortgagee
may reasonably request with respect to the Mortgaged Property, provided the
foregoing is reasonably calculated not to materially interfere with the
operation of the Mortgaged Property or Borrower's daily operations.
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Section 2.11 Advances by Mortgagee. If the Borrower shall fail to
perform any of its covenants in this Mortgage, the Mortgagee may, in its sole
discretion, at any time and from time to time make advances to effect
performance of such covenant on behalf of the Borrower, and all moneys so
advanced by the Mortgagee, together with interest at the highest default rate
provided for in the Note shall be repaid by the Borrower on demand, but no such
advance shall relieve the Borrower from any Event of Default.
Section 2.12 Location of Mortgaged Property; Registration. The Mortgaged
Property will at all times be based at the location specified in the Supplement
attached hereto. If the Borrower proposes at any time to base the Mortgaged
Property at any locations other than the location specified in said Supplement,
the Borrower will obtain the prior written consent of the Mortgagee to such
proposed change. The Borrower shall cause the Aircraft to remain duly
registered in the name of the Borrower pursuant to the Federal Aviation Act.
The Borrower will at all times maintain its eligibility so to register the
Aircraft in its name.
Section 2.13 Insignia. At the Mortgagee's option, the Borrower shall
plainly, distinctly and conspicuously place and leave in the cockpit of the
Aircraft and on each aircraft engine included in the Mortgaged Property and
upon such other place as may reasonably be designated by the Mortgagee from
time to time, a plate, insignia or other identification bearing the following
words in letters of a size reasonable under the circumstances and acceptable to
the Mortgagee:
Airship International Ltd., Owner
Senstar Capital Corporation, Mortgagee
Section 2.14 Operation of Mortgaged Property. The Borrower will not fly
the Aircraft or suffer the Aircraft to be flown in violation of any provision
of any insurance policy in effect with respect to the Mortgaged Property. The
Borrower will not operate the Aircraft or suffer the Aircraft to be operated
except by pilots currently certified by the Federal Aviation Administration for
the operation of the Aircraft and meeting the requirements of any insurance
policy in effect with respect to such Aircraft.
Section 2.15 No Claims Against Mortgagee. Nothing contained in this
Mortgage shall constitute any consent or request by the Mortgagee, express or
implied, for the performance of any labor or services or the furnishing of any
materials or other property in respect of the Mortgaged Property or any part
thereof, nor as giving the Borrower any right, power or authority to contract
for or permit the performance of any labor or services or the furnishing of any
materials or other property in such fashion as would permit the making of any
claim against the Mortgagee in respect thereof. Borrower shall promptly pay and
discharge any claim for labor or services or the furnishing of any materials or
other property which may give rise to a claim or lien prior to the lien of this
Mortgage.
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Section 2.16 Use of Mortgaged Property; Assignment of Interest. Except
as the Mortgagee may permit by prior written consent in accordance with the
terms of this Mortgage, use of the Mortgaged Property will be limited to the
air transportation as permitted by Borrower's insurance policy. Borrower shall
not, by operation of law or otherwise, assign, transfer, dispose of or convey
any interest in the Mortgaged Property.
ARTICLE III
EVENTS OF DEFAULT AND ACCELERATION
Section 3.1 Events of Default. Each of the following events shall
constitute an "Event of Default" under this Mortgage:
A. An Event of Default, as defined in the Credit Agreement, shall
occur; or
B. The Borrower shall default in the performance of or compliance:
(1) with any term, condition or commitment contained in this
Mortgage; or
(2) any of the other terms, conditions or commitments contained
in any of the Obligations; or
C. Any representation or warranty made by the Borrower in this Mortgage
or any statement made in any certificate, statement or report of the Borrower
furnished to the Mortgagee in accordance with the provisions of this Mortgage
shall prove to have been false or breached in any material respect; or
D. All or a substantial portion of the Mortgaged Property shall be
declared unfit for use or condemned, seized or otherwise expropriated, or the
possession, control, use or management of such Mortgaged Property shall be
assumed, by any government or any officer or instrumentality thereof, and shall
be retained for any period of thirty (30) consecutive days, unless within such
period the Mortgagee shall receive assurances, reasonably satisfactory to the
Mortgagee, that the Borrower will be compensated therefor in amount, time and
manner satisfactory to the Mortgagee, in its sole discretion; or
E. An administrator, custodian, or other representative shall take
possession, control, use or management of the Mortgaged Property.
Section 3.2 Acceleration. If any Event of Default exists, the Mortgagee
shall have the right to exercise all its rights and remedies under the Credit
Agreement, the Assignment of Contract, and in addition to all other remedies
available to it hereunder or by law, may, by written
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notice declare the Note and any other of the Obligations and all fees, premiums
or other amounts required to be paid to the Mortgagee to be forthwith due and
payable, whereupon the Note, Obligations, accrued interest, fees, premiums and
other amounts shall forthwith become due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived, anything herein or in any note or any security agreement to the
contrary notwithstanding.
ARTICLE IV
REMEDIES
Section 4.1 Repossession. The Borrower agrees, to the full extent that
it lawfully may, that, in case one or more of the Events of Default shall have
occurred and shall not have been remedied or waived, then, and in every such
case, (i) the Mortgagee shall have the rights and remedies with respect to the
Mortgaged Property of a secured party under the Uniform Commercial Code in
effect in the Commonwealth of Pennsylvania (whether or not the Uniform
Commercial Code is in effect in the jurisdiction where the rights and remedies
are asserted); and in accordance therewith and subject to the provisions
thereof, the Mortgagee shall have the rights and powers provided for in this
Mortgage, and (ii) the Mortgagee, by agent or representative, shall have the
right and power to take possession of all or any part of the Mortgaged
Property, with or without legal proceedings and with or without notice, and to
exclude the Borrower and, all persons claiming under the Borrower, wholly or
partly therefrom and thereafter to hold, store and/or use, operate, manage and
control the same.
At the request of the Mortgagee, the Borrower shall promptly deliver or
cause to be delivered to the Mortgagee or to an agent or representative
designated by the Mortgagee all of the Mortgaged Property to whose possession
the Mortgagee shall at the time be entitled hereunder, and the Mortgagee, its
agents and representatives, shall have the right to enter upon any or all of
the Borrower's premises and promptly to exercise the Mortgagee's rights
hereunder or to compel the Borrower to retake possession of the Aircraft from
whomsoever shall have possession thereof so that the Mortgagee can promptly
exercise its rights hereunder.
On taking possession of the Mortgaged Property, the Mortgagee, from time
to time, at the expense of the Borrower, may but shall not be required to make
all such repairs, replacements, alterations, additions and improvements to and
of the Mortgaged Property as to the Mortgagee may seem proper and shall have
the right to manage and control the Mortgaged Property and to carry on the
business and to exercise all rights and powers of the Borrower in respect to
the Mortgaged Property as the Mortgagee shall deem best, including the right to
enter into any and all such agreements with respect to the leasing and/or
operation of the Mortgaged Property or any part thereof as the Mortgagee may
see fit (the Mortgagee being entitled to collect and receive all rents,
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issues, profits, revenues and other income of the same and every part thereof);
provided, however, Borrower shall have no liability for expenses incurred for
repairs, replacements, alterations, additions and improvements to and of the
Mortgaged Property which are incurred subsequent to Mortgagee (i) selling the
Mortgaged Property, or (ii) leasing the Mortgaged Property for more than ninety
(90) calendar days except to the extent of any rents, issues, profits,
revenues, proceeds and other income received from the leasing operation and/or
disposition of the Mortgaged Property. Any rents, issues, profits, revenues and
other income collected and received by or on behalf of the Mortgagee shall be
applied to pay the expenses of holding and operating the Mortgaged Property, of
conducting such business and of all maintenance, repairs, replacements,
alterations, additions and improvements of or to the Mortgaged Property and to
make all payments which the Mortgagee may be required or may elect to make, if
any, for taxes, assessments, insurance and other proper charges upon the
Mortgaged Property or any part thereof, and all other payments which the
Mortgagee may be required or authorized to make under any provision of this
Mortgage. The remainder of the rents, issues, profits, revenues and other
income shall be applied only in accordance with Section 4.5. The Mortgagee may,
in its sole and absolute discretion, lease the Mortgaged Property and thereby
receive all profits, rents, revenues and other income associated with such
rental, including without limitation, renting the Mortgaged Property to any
party agreeing to perform under the Bud I Contract (as defined in the Credit
Agreement).
Section 4.2 Power of Sale and Suits for Enforcement. In case one or more
of the Events of Default shall have occurred and shall not have been remedied
or waived, the Mortgagee, personally or by agents, with or without possession
of the Mortgaged Property:
A. may, to the extent permitted by law, sell at one or more sales, as an
entirety or in components hereinafter provided, all or any part of the
Mortgaged Property; such sale or sales to be made at public auction or private
sale at such place or places, and at such time or times and on such terms as
the Mortgagee may fix and briefly specify in the notice of sale to be given as
herein provided or as may be required by law; or
B. may proceed to protect and enforce the rights of the Mortgagee under
this Mortgage by suit, whether for specific performance of any covenant herein
contained, in aid of the execution of any power herein granted, for the
foreclosure of this Mortgage and the sale of the Mortgaged Property under the
judgment or decree of a court of competent jurisdiction, or for the enforcement
of any other right, as the Mortgagee shall determine; and the Mortgagee shall
be entitled, as a matter of right, to the appointment of a receiver of all or
any part of the Mortgaged Property.
Section 4.3 Notice of Sale. Notice of sale under this Article shall
state the time when and the place where the same is to be made, shall contain a
brief description of the property to be sold, and shall be sufficiently given
if sent to the Borrower in accordance with the notice provisions hereof and as
may be required by applicable law. For the aforesaid purposes, all notice of
sale, advertisement and other notice or demand, any right or equity of
redemption and any
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obligation of a prospective purchaser to inquire as to the power and authority
of the Mortgagee to sell or the application by the Mortgagee of the proceeds of
sale or otherwise, which would otherwise be required by, or available to the
Borrower under, applicable law are hereby expressly waived by the Borrower to
the fullest extent permitted by such law.
Section 4.4 Delivery to Purchaser. On the completion of any sale under
this Article, the Borrower shall use its best efforts to deliver all of the
property sold to the purchaser or purchasers at such sale on the date of sale,
or within a reasonable time thereafter if it shall be impractical to make
immediate delivery, but in any event full title and right of possession to such
property shall pass to such purchaser or purchasers forthwith on the completion
of such sale. Nevertheless, if so requested by the Mortgagee or by any
purchaser, the Borrower shall confirm any such sale or transfer by executing
and delivering to such purchaser all proper instruments of conveyance and
transfer and releases as may be designated in any such request. Every sale
shall operate to divest all right, title, interest, claim and demand whatsoever
of the Borrower of, in and to the property so sold, and shall be a perpetual
bar, both at law and in equity, against the Borrower, all persons claiming the
property sold or any part thereof through the Borrower and its successors or
assigns.
Section 4.5 Application of Proceeds. The proceeds of any sale, lease or
other disposition of the Mortgaged Property, or any part thereof, received by
the Mortgagee under this Mortgage, together with any other sums then held by
the Mortgagee, as part of the Mortgaged Property, shall be applied as follows:
A. First. To the payment of the costs and expenses expended or incurred
by the Mortgagee in the location, protection, taking possession of, repair,
rehabilitation, storage, transportation to the Mortgagee or place of sale and
sale of the Mortgaged Property (including reasonable compensation to the
Mortgagee's agents, attorneys and counsel and all charges, expenses,
liabilities and advances incurred or made by the Mortgagee, and all other sums
payable by the Borrower under this Mortgage) and to the payment of all taxes,
assessments or liens, if any, prior to the lien of this Mortgage, except any
taxes, assessments or liens subject to which such sale shall have been made;
B. Second. To the payment of the Obligations, in such order as Mortgagee
elects in its sole discretion;
C. Third. The surplus, if any, shall be paid to the Borrower, its
successors or assigns, or to whomever may be lawfully entitled to receive the
same or as a court of competent jurisdiction may direct.
Section 4.6 Mortgagee May Purchase. At any sale under this Article, the
Mortgagee may bid for and purchase the property offered for sale and, on
compliance with the terms of sale, may hold, retain and dispose of such
property without further accountability therefor.
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Section 4.7 Right to Possession. In accordance with the provisions of
Section 1110 of Title 11 of the United States Code, the right of the Mortgagee
to take possession of and to sell or cause the sale of the Mortgaged Property
in compliance with the provisions of the terms of this Mortgage shall not be
affected by the provisions of Section 362 and 363 of Title 11 of the United
States Code as amended from time to time, except as provided for in Section
1110.
Section 4.8 No Waiver. No failure or delay by the Mortgagee to insist on
the strict performance of any term hereof or to exercise any right, remedy,
power or privilege consequent on an Event of Default and no acceptance of any
payment of the principal of or interest on the Term Note payable to the
Mortgagee during the continuance of any such Event of Default shall constitute
a waiver of any such term or default or of any such right, remedy, power or
privilege, nor shall any single or partial exercise of any such right, remedy,
power or privilege preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. No waiver of any Event
of Default hereunder or under the Credit Agreement shall affect or alter this
Mortgage, which shall continue in full force and effect, or the rights of the
Mortgagee with respect to any other then existing or subsequent Event of
Default.
Section 4.9 Remedies Cumulative. Each right, power and remedy of the
Mortgagee provided for in this Mortgage or now or hereafter existing at law, in
equity, by statute or otherwise shall be cumulative and concurrent and shall be
in addition to every other right, power or remedy provided for in this Mortgage
or now or hereafter existing at law, in equity, by statute or otherwise, and
the exercise or beginning of the exercise by the Mortgagee of any one or more
of such rights, powers or remedies shall not preclude the simultaneous or later
exercise of any or all such other rights, powers or remedies.
Section 4.10 Waiver of Appraisement, etc., Laws. The Borrower agrees, to
the full extent that it may lawfully so agree, that neither it nor anyone
claiming through or under it, will set up, claim or seek to take advantage of
any appraisement, valuation, stay, extension or redemption law now or hereafter
in force in any locality where any property subject to the lien hereof may be
situated, in order to prevent, hinder or delay the enforcement or foreclosure
of this Mortgage, the absolute sale of the Mortgaged Property or any part
thereof, or the final and absolute putting into possession thereof, immediately
after such sale, of the purchasers thereat; and the Borrower, for itself and
all who may at any time claim through or under it, hereby waives, to the full
extent that it may be lawful so to do, the benefit of all such laws and any and
all right to have any of the properties or assets comprising the Mortgaged
Property marshalled on any such sale and agrees that the Mortgagee or any court
having jurisdiction to foreclose the lien hereof may sell the Mortgaged
Property as an entirety or in such components as the Mortgagee may determine.
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ARTICLE V
MISCELLANEOUS PROVISIONS
Section 5.1 Payment of Indebtedness; Satisfaction. On the payment in
full and discharge of the Tern Note and the satisfaction of all other
Obligations, this Mortgage and the lien, rights and interests hereby granted
shall cease and become null and void, and the Mortgagee, on the written request
of the Borrower and at the Borrower's expense, shall execute and deliver to the
Borrower all instruments of satisfaction as may be necessary to satisfy and
discharge this Mortgage.
Section 5.2 Notices. Any request, order, direction, approval, consent,
notice or other document provided or permitted by this Mortgage to be made,
given or furnished shall be sufficiently served or given for all purposes when
sent in accordance with the notice provisions of the Credit Agreement.
Section 5.3 Construction. This Mortgage shall be construed in accordance
with the internal law, and not the law of conflicts, of the Commonwealth of
Pennsylvania and the rights and remedies of the parties hereunder shall be
determined in accordance with such laws, except to the extent that the law of
some other jurisdiction may be mandatorily applicable to proceedings taken for
the enforcement of the rights of the Mortgagee hereunder. Borrower hereby
consents to the jurisdiction and venue of any court residing in the
Commonwealth of Pennsylvania.
Section 5.4 Counterparts. This Mortgage may be executed in any number of
counterparts, and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same Mortgage.
IN WITNESS WHEREOF, the Borrower and the Mortgagee have caused this
instrument to be duly executed as of the day and year first above written.
ATTEST AIRSHIP INTERNATIONAL LTD.
By /s/ LOUIS J. PEARLMAN
___________________________ -----------------------
Name:
-----------------------
Title: President
-----------------------
[SEAL]
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WITNESS: SENSTAR CAPITAL CORPORATION
/s/ Illegible By: /s/ Illegible
___________________________ -----------------------
Name:
_______________________
Title: Credit Manager
_______________________
STATE OF______________ )
)
COUNTY OF_____________ )
On this day of , 199_, before me, a notary public, personally appeared
_________________________, who acknowledged himself to be
the______________________ of AIRSHIP INTERNATIONAL LTD, a New York corporation,
and that he, as such officer, being authorized to do so, executed the foregoing
instrument for the purposes therein contained by signing the name of the
corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
_________________________
Notary Public
My commission expires:
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COMMONWEALTH OF PENNSYLVANIA )
)
COUNTY OF ALLEGHENY )
On this________ day of__________________, 199_, before me, a notary
public, personally appeared______________________, who acknowledged himself to
be the ________________________________ of SENSTAR CAPITAL CORPORATION, a
Delaware corporation, and that he, as such officer, authorized to do so,
executed the foregoing instrument for the purposes therein contained by signing
the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
________________________
Notary Public
My commission expires:
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ASSIGNMENT OF CONTRACT RIGHTS
THIS ASSIGNMENT is made and entered into the 30th day of
November, 1995, by AIRSHIP INTERNATIONAL LTD., a New York corporation
("Assignor"), in favor of SENSTAR CAPITAL CORPORATION, a Delaware corporation
("Assignee").
WITNESSETH:
WHEREAS, pursuant to that certain Credit Agreement (as it may
hereafter from time to time be restated, amended, modified or supplemented, the
"Credit Agreement") of even date herewith between Assignor and Assignee,
Assignee has agreed to provide a certain term loan to the Assignor; and
WHEREAS, in order to provide additional security for the
repayment of such loan, the parties hereto desire that Assignee be granted an
assignment and security interest in all rights of Assignor under that certain
Amended and Restated Airship Advertising Agreement (the "Assigned Contract")
between Assignor and Anheuser-Busch Companies, Inc., dated July 8, 1994.
NOW, THEREFORE, in consideration of the promises and covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are acknowledged by Assignor, and intending to be legally
bound, Assignor assigns to Assignee all of its right, title and interest in and
to the Assigned Contract to the extent assignable and to the fullest extent
permitted by Law.
1. Except as otherwise expressly provided herein, capitalized
terms used in this Assignment shall have the respective meanings given to them
in the Credit Agreement.
2. As collateral security for all Indebtedness, now outstanding
or hereafter arising, of Assignor to Assignee, Assignor has granted, bargained,
sold, assigned, transferred and set over and by these presents does hereby
grant, bargain, sell, assign, transfer and set over unto Assignee, its
respective successors and assigns, all the rights, interests and privileges
which the Assignor has or may have in or under the Assigned Contract, including
without limiting the generality of the foregoing, the present and continuing
right with full power and authority, in its own name, or in the name of the
Assignor, or otherwise, but subject to the provisions and limitations of
Section 3 hereof, (i) to make claim for, enforce, perform, collect and receive
any and all rights under the Assigned Contract, (ii) to do any and all things
which Assignor is or may become entitled to do under the Assigned Contract, and
(iii) to make all waivers and agreements, give all notices, consents and
releases and other instruments and to do any and all other things whatsoever
which Assignor is or may become entitled to do under the Assigned Contract.
3. The acceptance of this Assignment and the payment or
performance under the Assigned Contract shall not constitute a waiver of any
rights of Assignee under the terms of the Term Note, the Credit Agreement or
any other Loan Documents, it being understood that, until the occurrence of an
Event of Default, and the exercise of Assignee's rights under Section 4 hereof,
Assignor shall have all rights to the Assigned Contract and to retain, use and
enjoy the same.
4. Assignor, upon the occurrence of an Event of Default, hereby
authorizes Assignee, at Assignee's option, to do all acts required or permitted
under the Assigned Contract as Assignee in its sole discretion may deem proper.
Assignor does hereby irrevocably constitute
EXHIBIT "D" TO CREDIT AGREEMENT
NOT FOR EXECUTION
<PAGE>
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and appoint Assignee, while this Assignment remains in force and effect and, in
each instance, to the full extent permitted by applicable Law, its true and
lawful attorney in fact, coupled with an interest and with full power of
substitution and revocation, for Assignor and in its name, place and stead, to
demand and enforce compliance with all the terms and conditions of the Assigned
Contract and all benefits accrued thereunder, whether at law, in equity or
otherwise; Provided, however, that Assignee shall not exercise any such power
unless and until an Event of Default shall have occurred.
5. Assignee shall not be obligated to perform or discharge any
obligation or duty to be performed or discharged by Assignor under the Assigned
Contract, and Assignor hereby agrees to indemnify Assignee for, and to save
Assignee harmless from, any and all liability arising under the Assigned
Contract, other than arising or resulting from Assignee's (or its agents,
employees or contractors) gross negligence or willful misconduct.
6. Assignor agrees that this Assignment and the designation and
directions herein set forth are irrevocable.
7. Neither this Assignment nor any action or inaction on the
part of Assignee shall constitute an assumption on the part of Assignee of any
obligations or duties under the Assigned Contract.
8. Assignor covenants and warrants that:
(a) it has the power and authority to assign the Assigned
Contract and there have been no prior assignments of the Assigned Contract;
(b) the Assigned Contract is and shall be a legal, valid
and binding contract on the Assignor and, to the best of Assignor's knowledge,
on Anehuser-Busch Companies, Inc., and that there are and shall be, to the
extent ascertainable by Assignor, no defaults on the part of any of the parties
thereto;
(c) the Assigned Contract is not subject to any pledge,
security interest, lien or encumbrance (except for Phoenixcor, Inc.'s interest,
which is contemporaneously herewith being released) and Assignor will not
assign, pledge or otherwise encumber the Assigned Contract without the prior
written consent of Assignee at Assignee's sole discretion;
(d) it will not cancel, terminate or accept any surrender
of the Assigned Contract, or amend or modify the same directly or indirectly in
any respect whatsoever, without having obtained the prior written consent of
Assignee thereto at Assignee's sole discretion;
(e) it will not waive or give any consent with respect to
any default or material variation in the performance under the Assigned
Contract, it will at all times take proper steps to enforce all of the
provisions and conditions thereof, and it will forthwith notify Assignee of any
material default under the Assigned Contract;
(f) it will perform and observe, or cause to be performed
and observed, all of the terms, covenants and conditions on its part to be
performed and observed with respect to the Assigned Contract; and
(g) it will execute from time to time any and all
additional assignments or instruments of further assurance to Assignee, as
Assignee may at any time reasonably request.
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9. At such time as the Term Loan is indefeasibly paid in full,
this Assignment and all of Assignee's right, title and interest hereunder with
respect to the Assigned Contract shall terminate without regard to its
conflicts of law principles.
10. This Assignment shall inure to the benefit of Assignee, its
respective successors and assigns, and shall be binding upon Assignor, its
successors, successors in title and assigns.
11. This Agreement shall be governed by and construed in
accordance with the internal laws of the Commonwealth of Pennsylvania without
regard to its conflicts of law principles.
IN WITNESS WHEREOF, the parties have executed this instrument
under seal as of the day and year first above written.
ATTEST: AIRSHIP INTERNATIONAL LTD.
By: By: /s/ LOUIS J. PEARLMAN
----------------------------- -------------------------
Title: Title: President
-------------------------- ----------------------
[SEAL]
WITNESS: SENSTAR CAPITAL CORPORATION
By: /s/ Illegible
- --------------------------------- -------------------------
Title: Credit Manager
----------------------
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AGREEMENT OF GUARANTY AND SURETYSHIP
(PAYMENT)
MADE as of the 30th day of November, 1995, by TRANS CONTINENTAL
AIRLINES, INC., a ___________________________ corporation, ("Guarantor"), to
and for the benefit SENSTAR CAPITAL CORPORATION, a Delaware corporation
("Lender").
WITNESSETH:
WHEREAS, as more fully provided in that certain Credit Agreement (the
"Credit Agreement") of even date herewith between Lender and Airship
International, LTD. (the "Borrower"), Lender has agreed to make a term loan in
the original principal amount of $3,500,000 (the "Term Loan");
WHEREAS, the proceeds of the Term Loan are being advanced to the
Borrower to enable the Borrower to, among other things, acquire a certain
Series 500HP Skyship, Registration No. N501LP ("Skyship") from Trans
Continental Leasing, Inc., a wholly owned subsidiary of Guarantor ("Trans
Continental Leasing");
WHEREAS, Guarantor will benefit from Lender making the Term Loan and
Borrower purchasing the Skyship from Trans Continental Leasing.
NOW, THEREFORE, to induce Lender to make the Term Loan and for other
good and valuable consideration, receipt of which is hereby acknowledged, and
intending to be legally bound, Guarantor hereby covenants and agrees as
follows:
1. Defined Terms. Capitalized terms used, but not defined, herein shall
have the meaning ascribed to such terms under the Credit Agreement.
2. Guaranteed Obligations. Guarantor unconditionally guarantees and
becomes surety for the full and timely payment, whether by declaration,
acceleration or otherwise, by Borrower of all the following (hereinafter
collectively referred to as the "Obligations"):
(i) all obligations, now outstanding or hereafter
arising, of Borrower to Lender, including without limitation, those obligations
evidenced by the Term Note and those arising under the Credit Agreement, as the
same may be amended, supplemented, renewed or replaced from time, and
(ii) all sums now or hereafter to be paid by Borrower
under all other agreements, instruments and documents given to Lender to
evidence, secure or otherwise support the Borrower's obligations under the
Credit Agreement (all such agreements, instruments and documents, including the
Credit Agreement, as the same may be amended, supplemented, renewed or replaced
from time to time being hereinafter referred to as the "Loan Documents").
EXHIBIT "B" TO CREDIT AGREEMENT
NOT FOR EXECUTION
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<PAGE>
3. Unconditional Guaranty and Suretyship. Guarantor agrees to pay the
Obligations immediately when due, irrespective of whether or not any one or
more of the following events have occurred: (i) Lender has made any demand on
Borrower; (ii) Lender has taken any action of any nature against Borrower;
(iii) Lender has pursued any rights which Lender has against any other person
who may be liable for any of the Obligations; (iv) Lender holds or has resorted
to any security for any of the Obligations; or (v) Lender has invoked any other
remedies or rights Lender has available with respect to any of the Obligations.
The liability of Guarantor as surety and Guarantor is unconditional. Guarantor
therefore agrees to pay the Obligations even if any of the Loan Documents, or
any part thereof, are for any reason invalid or unenforceable. Guarantor
further agrees to make full payment to Lender even if circumstances exist which
otherwise constitute a legal or equitable discharge of Guarantor as surety or
guarantor.
4. Subrogation; Marshalling; Subordination. Guarantor waives and agrees
not to enforce any of the rights of Guarantor against Borrower unless and until
Borrower is no longer liable in any respect to Lender, including, but not
limited to: (i) any right of Guarantor to be subrogated in whole or in part to
any right or claim with respect to any of the Obligations or any portion
thereof to Lender which might otherwise arise from partial payment or
performance by Guarantor to Lender on account of the Obligations or any portion
thereof; and (ii) any right of Guarantor to require the marshalling of assets
of Borrower which might otherwise arise from partial payment or performance by
Guarantor to Lender on account of the Obligations or any portion thereof
Guarantor agrees that (i) all of the obligations of Borrower to Guarantor,
whether now existing or hereafter arising, are subordinated to the prior
payment in full of all of the Obligations and (ii) it will not, without the
prior written consent of Lender, enforce any right or remedy it may have to
collect any of the obligations of Borrower to Guarantor.
5. Waiver of Notice. Guarantor waives any and all notice with respect
to: (i) acceptance by Lender of this Agreement or any of the Loan Documents;
and (ii) the provisions of any of the Loan Documents or any other instrument or
agreement relating to the Obligations; and (iii) any default in connection with
the Obligations.
6. Waiver of Presentment, etc. Guarantor waives any presentment, demand,
notice of dishonor or nonpayment, protest, notice of protest and notice of
non-payment in connection with the Obligations.
7. Waiver of Guarantor Defenses. Guarantor agrees that Lender may do any
of the following without notice to Guarantor and without adversely affecting
the validity or enforceability of this Agreement or any other agreement,
document or instrument given by Guarantor to Lender in connection with this
Agreement or the Obligations: (i) release, surrender, exchange, compromise or
settle the Obligations, or any part thereof; (ii) change, renew or waive the
terms of the Obligations, or any part thereof; (iii) change, renew or waive the
terms of any of the Loan Documents or any other note, instrument or agreement
relating to the Obligations, such rights in Lender to include without
limitation the right to change the rate of interest charged to Borrower (in
which event the Obligations shall be deemed also to include all interest at
such changed rate);
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(iv) grant any extension or indulgence with respect to the payment or
performance of the Obligations or any part thereof; (v) enter into any
agreement of forbearance with respect to the Obligations, or any part thereof;
(vi) release, surrender, exchange or compromise any security held by Lender for
any of the Obligations; (vii) release any person who is a Guarantor or surety
or who has agreed to purchase the Obligations or any part thereof; and (viii)
release, surrender, exchange or compromise any security or lien held by Lender
for the liabilities of any person who is guarantor or surety for the
Obligations or any part thereof agrees that Lender may do any of the above as
Lender deems necessary or advisable, in Lender's sole discretion, without
giving any notice to Guarantor, and that Guarantor will remain liable for full
payment and performance of the Obligations. If at any time all or any part of
any payment theretofore applied by Lender to any of the liabilities is or must
be rescinded or returned by Lender for any reason whatsoever (including,
without limitation, the insolvency, bankruptcy or reorganization of Borrower),
such liability shall, for the purposes of this Agreement, to the extent that
such payment is or must be rescinded or returned, be deemed to have continued
in existence, notwithstanding such application by Lender, and this Agreement
shall continue to be effective or be reinstated, as the case may be, as to such
liabilities, all as though such application by Lender had not been made.
8. Representations and Warranties. The Guarantor represents and warrants
to the Lender that (which representations and warranties shall continue to be
true and correct until the Obligations are paid in full, except for
representations which expressly relate to an earlier date in time):
(a) Organization and Qualification. The Guarantor is a
corporation duly organized, validly existing and in good standing under the
laws of the State of ______________; has the lawful power to own or lease its
properties and to engage in the business it presently conducts and contemplates
conducting; and is duly licensed or qualified and in good standing as a foreign
corporation in each jurisdiction wherein the property owned or leased by it or
the nature of the business transacted by it or both makes such licensing or
qualification necessary.
(b) Power and Authority. The Guarantor has the power to make and
carry out this Guaranty, to execute and deliver this Guaranty, and to perform
its obligations under this Guaranty and all such actions have been duly
authorized by all necessary corporate proceedings.
(c) Validity and Binding Effect. This Guaranty has been duly and
validly executed and delivered by the Guarantor. This Guaranty constitutes a
legal, valid and binding obligation of the Guarantor, enforceable in accordance
with its respective terms, except to the extent that enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforceability of creditors' rights generally or by laws or
judicial decisions limiting the right of specific performance. No
authorization, approval, exemption or consent by any governmental or public
body or authority is required in connection with the authorization, execution,
delivery and carrying out of the terms of this Guaranty by the Guarantor.
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(d) No Conflict. Neither the execution and delivery of this
Guaranty nor the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result in
any breach of the terms and conditions of the articles of incorporation or
bylaws of the Guarantor or of any law or regulation or any order, writ,
injunction or decree of any court or governmental instrumentality or of any
agreement or instrument to which the Guarantor is a party or by which the
Guarantor is bound or to which it is subject, will constitute a default
thereunder or will result in the creation or enforcement of any lien, charge or
encumbrance whatsoever upon any property (now or hereafter acquired) of the
Guarantor.
(e) Litigation. There are no actions, suits, proceedings or
investigations pending or, to the knowledge of the Guarantor or its officers,
against it at law or equity before any court or before any federal, state,
municipal or any governmental department, commission, board, agency or
instrumentality whether or not covered by insurance which individually or in
the aggregate may result in any materially adverse effect on the business,
properties or assets or the condition, financial or otherwise, of the Guarantor
or in any impairment in the Guarantor's ability to perform its obligations
under this Guaranty. Neither the Guarantor nor any of its officers has
knowledge of any default with respect to any order, writ, injunction or any
decree of any court or any federal, state, municipal or other governmental
department, commission or bureau, agency or instrumentality which may result in
any such materially adverse effect or impairment.
(f) Audited Financial Condition. The Guarantor has heretofore
delivered to the Lender copies of the balance sheet of the Guarantor as of
April 30, 1995 and the statements of income, retained earnings and changes in
financial position of the Guarantor for the fiscal year ended on such date,
which have been certified by Cohen & Siegel, independent certified public
accountants. Such financial statements (including the related notes) are
correct and complete and fairly present the financial condition of the
Guarantor as of April 30, 1995 and the results of its operations for the fiscal
year then ended and have been prepared in accordance with generally accepted
accounting principles consistently applied by the Guarantor; there were no
material liabilities as of April 30, 1995, contingent or otherwise, of the
Guarantor not reflected in said balance sheet (including the related notes) as
of said date.
(g) Changes in Financial Condition. Since April 30, 1995, the
date of the last audited balance sheet of the Guarantor delivered to the
Lender, there has been no Material Adverse Change in the business, assets,
liabilities, contingent or otherwise, or financial condition of the Guarantor
from those set forth in said balance sheet (including the related notes) as of
that date.
(h) Tax Returns and Taxes. The Guarantor has filed all federal,
state and local tax returns and other reports it was required by law to file
prior to the date hereof and which were material to the conduct its respective
businesses, has paid or caused to be paid all taxes, assessments and other
governmental charges that were due and payable prior to the date hereof, and
has made adequate provision in its financial statements for the payment of such
taxes,
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assessments and other charges accruing but not yet payable; the Guarantor has
no knowledge of any deficiency or additional assessment in a materially
important amount in connection with any taxes, assessments or charges which is
not provided for on its books.
(i) Compliance with Laws. The Guarantor has complied with all
applicable laws such that it has not been subject to any fines, penalties,
injunctive relief or similar criminal liabilities which in the aggregate have
materially affected the business operations or financial condition of the
Guarantor or the ability of the Guarantor to perform its obligations under this
Guaranty.
(j) Plans and Benefit Arrangements.
(i) The Guarantor and each member of the ERISA Group are
in compliance in all material respects with any applicable provisions of ERISA
with respect to all Benefit Arrangements, Plans and Multiemployer Plans. There
have been no COBRA Violations by the Guarantor which could result in any
material liability to the Guarantor. There has been no Prohibited Transaction
with respect to any Benefit Arrangement or any Plan or, to the best knowledge
of the Guarantor, with respect to any Multiemployer Plan or Multiple Employer
Plan, which could result in any material liability to the Guarantor or any
other member of the ERISA Group. The Guarantor and all members of the ERISA
Group have made when due any and all payments required to be made under any
agreement relating to a Multiemployer Plan or a Multiple Employer Plan or any
law pertaining thereto. With respect to each Plan, Multiemployer Plan, and
Benefit Arrangement that is a defined contribution plan, the Guarantor and each
member of the ERISA Group (A) have fulfilled in all material respects their
obligations under the minimum funding standards of ERISA, if applicable, or
contractual obligations to contribute to such plans, (B) have not incurred any
liability to the PBGC and (C) have not had asserted against them any penalty
for failure to fulfill the minimum funding requirements of ERISA.
(k) Environmental Matters.
(i) The operations of the Guarantor comply with all of
the Environmental Laws;
(ii) There have been no Regulated Substances disposed of
on any of the properties owned or leased by the Guarantor;
(iii) There are no Environmental Conditions present on
any of the properties owned or leased by the Guarantor;
(iv) The Guarantor has received no notice from a
Governmental Authority that it is, or is considered potentially, liable for
any Environmental Conditions;
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(v) There are no underground storage tanks, asbestos or
equipment containing polychlorinated biphenyls on the property owned or leased
by the Guarantor other than those present and utilized in compliance with all
of the Environmental Laws; and
(vi) The Guarantor does not manufacture, store, use,
generate, treat, dispose or manage any Regulated Substances except in
compliance with all of the Environmental Laws.
(l) Ownership of Guarantor. All of the issued and outstanding
capital stock of the Guarantor is owned as follows: ________________________.
(m) Participations as General Partner. The Guarantor is
currently the general partner of _________ limited partnerships and all
borrowings under each limited partnership are non-recourse to the assets of
Guarantor; and none of Guarantor's rights under any limited partnership, in
which it is the general partner, has been pledged, assigned or encumbered in
any fashion.
(n) Line of Credit. The Guarantor has an available credit line
of $10,000,000 and no borrowings are outstanding under such line of credit at
this time.
(o) Accounting Matters. All of Guarantor's financial books and
records reflect (i) assets, liabilities, revenues and expenses associated with
its interests in limited partnerships in an amount corresponding to the
Guarantor's proportional interest in each limited partnership and (ii) the net
asset value maintained by Guarantor for each limited partnership interest is
restated (i.e. reduced) from time to time to the extent that any annual
appraisal of the equipment owned by such partnership reflects a net asset value
of such equipment 15% or more below the net asset value that such equipment is
maintained on the books and records of the limited partnership.
(p) General Validity. No representation or warranty by the
Guarantor contained herein or in any other Loan Document contains or will
contain any untrue statement of material fact or omits or will omit to state a
material fact necessary to make such representation or warranty not misleading
in light of the circumstances under which it was made.
9. Affirmation Covenants. The Guarantor covenants that, until payment in
full of the Obligations, it will, unless otherwise consented to in writing by
the Lender:
(a) Preservation of Corporate Existence, etc. Maintain its
corporate existence and its license or qualification and good standing in each
jurisdiction in which its ownership or lease of property or the nature of its
business makes such license or qualification necessary, and maintain and keep
all its property in good repair, working order and condition, ordinary wear
and tear alone excepted, and make or cause to be made all necessary or
appropriate repairs, renewals, replacements, substitutions, additions,
betterments and improvements thereto so that the efficiency and suitability
for their use or intended uses within the business of all such properties
shall at all times be properly preserved and maintained;
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(b) Payment of Liabilities, Including Taxes, etc. Duly pay and
discharge all Indebtedness to which it is subject or which is asserted against
it, promptly as and when the same shall become due and payable, including all
taxes, assessments and governmental charges upon it or any of its properties,
assets, income or profits, prior to the date on which penalties attach thereto,
except to the extent that such Indebtedness, including taxes, assessments or
charges, is being contested in good faith and by appropriate proceedings
diligently conducted and for which such reserve or other appropriate
provisions, if any, as shall be required by generally accepted accounting
principles shall have been made, but only to the extent that failure to
discharge any such Indebtedness would not result in any liability which would
adversely affect to a material extent the financial condition of the Guarantor;
(c) Maintenance of Insurance. Maintain, at its own expense,
insurance in an amount and of a type standard in the industry with insurers and
reinsurers of recognized reputation and responsibility, all of which shall be
satisfactory to Lender;
(d) Visitation Rights. Permit any of the officers or authorized
employees or representatives of the Lender to visit and inspect any of its
properties and to examine and make excerpts from its books and records and
discuss its affairs, finances and accounts with its officers, all at such
reasonable times and as often as the Lender may reasonably request;
(e) Keeping of Records and Books of Account. Maintain and keep
proper books of record and account in accordance with generally accepted
accounting practices applied on a consistent basis and in which full, true and
correct entries shall be made of all its dealings and business and financial
affairs;
(f) Maintenance of Limited Partnership Interests, Trademarks,
etc. Maintain in full force and effect all limited partnership interests held
by Guarantor and all patents, trademarks, trade names, copyrights, licenses,
franchises, permits and other authorizations necessary for the ownership and
operation of its properties and business if the failure so to maintain the same
would substantially interfere with the normal operations of the Guarantor or
adversely affect to a material extent the financial condition, business or
operations of the Guarantor;
(g) Plans and Benefit Arrangements. Comply, and cause each
member of the ERISA Group to comply, with ERISA, the Internal Revenue Code and
other applicable laws applicable to Plans and Benefit Arrangements except where
such failure, alone or in conjunction with any other failure, would not result
in a Material Adverse Change;
(h) Compliance with Laws. Comply with all applicable laws in all
respects provided that the Guarantor shall not be deemed to be in violation of
this subsection (i) as the result of any failure to comply which would not
result in fines, penalties, injunctive relief or other similar criminal
liabilities which in the aggregate materially affect the business operations or
financial condition of the Guarantor or the ability of the Guarantor to perform
its obligations under this Guaranty; and
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(i) Liquidation, Merger, etc. Neither (i) Liquidate, merge or
consolidate with or into any other person or take any action in furtherance of
any thereof; (ii) permit any other person to consolidate with or merge into it,
nor (iii) sale, assign or dispose of substantially all of its assets in one or
a series transactions.
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10. Financial Reporting Covenants. The Guarantor covenants that, until
payment in full of the Obligations, it will furnish to the Lender:
(a) Quarter-Fiscal Year Financial Statements. Within 60 days
after the close of each of the first three quarter-fiscal year periods of each
fiscal year of the Guarantor, unaudited statements of income, retained earnings
and changes in financial position of the Guarantor for such quarter-fiscal year
period, and an unaudited balance sheet of the Guarantor as of the close of such
quarter-fiscal year period, all in reasonable detail and certified by the chief
accounting officer the Guarantor, subject to year-end audit adjustments, as
having been prepared in accordance with generally accepted accounting
principles consistent with those applied in the preparation of the annual
financial statements last furnished under Lender.
(b) Annual Financial Statements. Within 120 days after the close
of each fiscal year of the Guarantor, statements of income, retained earnings
and changes in financial position of the Guarantor for such fiscal year and a
balance sheet of the Guarantor as of the close of such fiscal year, all in
reasonable detail, such financial statements to be certified by independent
certified public accountants of recognized standing selected by the Guarantor
and satisfactory to the Lender, whose certificate or opinion accompanying such
financial statements shall not contain any material qualification or exception
not satisfactory to the Lender.
(c) Other Information. Such other information respecting the
business, properties or condition of operations, financial or otherwise, of the
Guarantor as the Lender may from time to time reasonably request.[qp]
11. Set-Off. Guarantor, as security for the Obligations and for the
obligations of the Guarantor hereunder, pledges to Lender, and grants to Lender
a security interest in and a right of act-off against, all moneys, deposits and
other property of any kind owned by Guarantor or in which Guarantor has an
interest and which are or shall be in the possession or control of Lender at
any time for any reason whatsoever.
12. Waivers by Lender. Guarantor agrees that no failure on the part of
Lender to exercise any of its rights under this Agreement shall be a waiver of
such rights or a waiver of any default by Guarantor. Guarantor further agrees
that no waiver or modification of any rights of Lender under this Agreement
shall be effective unless in writing and signed by an authorized officer of
Lender. Guarantor further agrees that each written waiver shall extend only to
the specific instance actually recited in such written waiver and shall not
impair the rights of Lender in any other respect.
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13. Costs and Expenses. Guarantor agrees to pay all costs and expenses,
including reasonable attorney's fees, incurred by Lender in enforcing this
Agreement against Guarantor. Guarantor further agrees to pay all costs and
expenses, including attorney's fees, incurred by Lender in collecting or
enforcing or attempting to collect or enforce the Obligations.
14. Successors and Assigns. Guarantor agrees that this Agreement shall
be binding upon Guarantor, and Guarantor's respective successors or assigns.
Guarantor further agrees that this Agreement shall inure to the benefit of
Lender, its successors and assigns.
15. Governing Law. Guarantor agrees that this Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania, without regard to its principles of conflict of laws.
16. Sealed Instrument. Guarantor recognizes that this Agreement when
executed constitutes a sealed instrument and as a result the instrument will be
enforceable as such without regard to any statute of limitations which might
otherwise be applicable and without any consideration.
17. Counterpart. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which together
shall constitute but one and the same instrument.
18. Jurisdiction. The Guarantor agrees that any action or proceeding
arising out of or relating to this Guaranty may be commenced in-any state or
Federal court of competent jurisdiction in the Commonwealth of Pennsylvania and
the Guarantor submits to the personal jurisdiction of such court and agrees
that a confession of judgment, summons or complaint commencing in action or
proceeding in any such court shall be properly served and shall confer personal
jurisdiction if personally served or by certified mail to it at its address
designated beneath its signature hereto, or as otherwise provided under the
laws of the Commonwealth of Pennsylvania.
19. Section Headings. The underlined section headings are for
convenience of reference only and shall not in any way affect the
interpretation or construction hereof.
20. Confession of Judgment. GUARANTOR HEREBY EMPOWERS ANY ATTORNEY OF
ANY COURT OF RECORD WITHIN THE COMMONWEALTH OF PENNSYLVANIA, TO APPEAR FOR
GUARANTOR AND, WITH OR WITHOUT A COMPLAINT OR DECLARATION FILED, CONFESS A
JUDGMENT OR JUDGMENTS AGAINST GUARANTOR IN ANY COURT OF RECORD WITHIN THE
COMMONWEALTH OF PENNSYLVANIA, AT ANY TIME AFTER THE OCCURRENCE OF AN EVENT OF
DEFAULT UNDER THE REIMBURSEMENT DOCUMENTS, IN FAVOR OF LENDER OR ITS SUCCESSORS
OR ASSIGNS FOR THE UNPAID PRINCIPAL BALANCE OF THE OBLIGATIONS, AND ALL
INTEREST THEREON, TOGETHER WITH COSTS OF SUIT AND AN ATTORNEY'S COMMISSION OF
20% FOR COLLECTION. THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER JUDGMENT
AGAINST GUARANTOR
9
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SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES THEREOF, AND MAY BE EXERCISED
FROM TIME TO TIME AND AS OFTEN AS LENDER OR ITS SUCCESSORS OR ASSIGNS SHALL
DEEM NECESSARY OR DESIRABLE. THE VALIDITY OF ANY JUDGMENT ENTERED UNDER THE
AUTHORITY OF THIS WARRANT SHALL NOT BE ADVERSELY AFFECTED BY THE OCCURRENCE
OF ANY OF THE EVENTS DESCRIBED IN PARAGRAPH 7 OF THIS AGREEMENT AND ANY SUCH
JUDGMENT SHALL BE FULLY ENFORCEABLE UP TO THE AMOUNT OF THE OBLIGATIONS AT THE
TIME ENFORCEMENT OF THE JUDGMENT IS SOUGHT, PLUS AN ATTORNEY'S COMMISSION OF
20% FOR COLLECTION, EVEN THOUGH ANY OF THE EVENTS DESCRIBED IN PARAGRAPH 7 HAVE
OCCURRED. GUARANTOR HEREBY FOREVER WAIVES AND RELEASES ANY AND ALL ERRORS IN
SAID PROCEEDINGS, WAIVES STAY OF EXECUTION, STAY, CONTINUANCE OR ADJOURNMENT OF
SALE ON EXECUTION, THE RIGHT TO PETITION TO SET ASIDE OR ORDER A RESALE, THE
RIGHT TO EXCEPT TO THE SHERIFF'S SCHEDULE OF PROPOSED DISTRIBUTION, THE RIGHT
OF INQUISITION AND EXTENSION OF TIME OF PAYMENT, AND AGREES TO CONDEMNATION OF
ANY PROPERTY LEVIED UPON BY VIRTUE OF ANY EXECUTION ISSUED ON ANY SUCH
JUDGMENT, AND GUARANTOR SPECIFICALLY WAIVES ALL EXEMPTIONS FROM LEVY AND SALE
OF ANY PROPERTY THAT NOW IS OR MAY HEREAFTER BE EXEMPT UNDER ANY EXISTING OR
FUTURE LAWS OF THE UNITED STATES OF AMERICA OR THE COMMONWEALTH OF PENNSYLVANIA
OR OF ANY OTHER JURISDICTION.
21. Severability. In the event that any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
22. Waiver of Jury Trial. GUARANTOR WAIVES THE RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING BASED UPON OR RELATED TO THE SUBJECT MATTER OF THIS
AGREEMENT OR ANY OF THE OTHER REIMBURSEMENT DOCUMENTS OR ANY OF THE
TRANSACTIONS RELATED TO ANY OF THE REIMBURSEMENT DOCUMENTS. THIS WAIVER IS
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY GUARANTOR AND GUARANTOR
ACKNOWLEDGES THAT NEITHER LENDER NOR ANY PERSON ACTING ON BEHALF OF LENDER HAS
OR HAVE MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY
OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. GUARANTOR FURTHER ACKNOWLEDGES
THAT GUARANTOR HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE
REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER
BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT GUARANTOR
HAVE HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
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IN WITNESS WHEREOF, Guarantor, intending to be legally bound, has
executed this Agreement as of the 30th day of November, 1995.
ATTEST: TRANS CONTINENTAL AIRLINES, INC.
___________________ By: /s/ LOUIS J. PEARLMAN
___________________ ______________________
[SEAL] Title: President
______________________
Address: 7380 Sand Lake Road, Suite 200
Orlando, Florida 32819
11
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RELEASE AND SETTLEMENT AGREEMENT
THIS RELEASE AND SETTLEMENT AGREEMENT (the "Agreement") is made and
entered on this 20th day of September, 1993 by and between SEQUEL CAPITAL
CORPORATION (hereinafter sometimes referred to as "Plaintiff"), and AIRSHIP
INTERNATIONAL LTD. ("A.I.L.") and LOUIS J. PEARLMAN ("PEARLMAN") (hereinafter
sometimes referred to collectively as "Defendants").
W I T N E S S E T H:
WHEREAS, there is now pending in the United States District Court for
the Northern District of Illinois, Eastern Division, a lawsuit entitled Sequel
Capital Corporation v. Airship International Ltd. and Louis J. Pearlman, Case
No. 92 C 7794 (hereinafter referred to as the "Lawsuit");
WHEREAS, Plaintiff claims in the Lawsuit that Defendants A.I.L. and
Pearlman breached an alleged Leaseback Agreement, Loan Agreement and Aircraft
Mortgage with Plaintiff;
WHEREAS, Plaintiff initially also brought this action against
Anheuser-Busch Companies, Inc. ("Anheuser-Busch"), claiming that certain
payments due under an agreement between A.I.L. and Anheuser-Busch should have
been paid to Plaintiff;
WHEREAS, Defendants deny the allegations asserted against each of them
in the Lawsuit;
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WHEREAS, the Plaintiff and each Defendant have agreed to fully settle
and compromise all claims and issues that have been asserted or which can be
asserted by the Plaintiff in the Lawsuit;
NOW THEREFORE, in consideration of the premises and of the mutual
promises contained herein and of other good and valuable consideration, the
sufficiency of which is admitted, the parties agree as follows:
1. Defendants shall pay to Plaintiff the sum of Three Hundred
Eighty-Six Thousand Dollars and No/100 ($386,000.00) by wire transfer no later
than Monday, September 20, 1993.
2. Plaintiff acknowledges that all principal, interest, attorneys, fees
and other costs due under the Loan Agreement and Promissory Note, dated October
14, 1992, have been paid in full and that it has released the Guaranty dated
October 14, 1992 previously given by Louis J. Pearlman.
3. For and in consideration of the payments described immediately above,
and specifically conditioned on the making of said payment on or before October
20, 1993, and other good and valuable consideration, Plaintiff Sequel Capital
Corporation releases and forever discharges Defendant, Airship International
Ltd. and Anheuser-Busch Companies, Inc. (previously dismissed as a defendant in
this action), their respective officers, directors, employees, attorneys,
assigns and agents, parents, subsidiaries and affiliated entities, and Louis J.
Pearlman, his heirs, devisees, agents, attorneys, successors and assigns, from
any and all claims, debts, damages, dues, obligations, demands, actions or
causes of action of every kind and nature, at law or in equity, whether known
or unknown to Plaintiff at the present time,
Page 2 of 6
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which Plaintiff has or claims to have or which may hereinafter accrue against
Airship International Ltd. and/or Anheuser-Busch Companies, Inc., and each of
their respective officers, directors, employees, attorneys, assigns and
agents, parents, subsidiaries and affiliated entities, and Louis J. Pearlman,
his heirs, devisees, agents, attorneys, successors and assigns, arising from or
growing out of any incident or event or by reason of any act done or omitted
to be done by A.I.L., Anheuser-Busch and/or Pearlman prior to the date of this
Agreement, including but without limiting the generality of the foregoing, all
claims, demands, debts, dues, actions or causes of action and obligations, of
every kind or nature for all known or unknown injuries, damages or losses
arising from or growing out of the transactions alleged in the Lawsuit,
including the alleged Lease Agreement, the Loan Agreement and Promissory Note
dated October 14, 1992, and the Guaranty by Louis J. Pearlman, dated October
14, 1992.
4. For and in consideration of the promises herein, and other good and
valuation consideration, Defendants Airship International Ltd. and Louis J.
Pearlman release and forever discharge Plaintiff Sequel Capital Corporation, its
respective officers, directors, employees, attorneys, assigns and agents,
parents, subsidiaries and affiliated entities, from any and all claims, debts,
damages, dues, obligations, demands, actions or causes of action of every kind
and nature, at law or in equity, whether known or unknown to Defendants at the
present time, which Defendants have or claim to have or which may hereinafter
accrue against Sequel Capital Corporation and each of its respective officers,
directors, employees, attorneys, assigns and agents, parents, subsidiaries and
affiliated entities, arising from or growing out of any incident or event or by
reason of any act done or omitted to be done by Sequel prior to the date of this
Agreement, including but without limiting the generality of the foregoing, all
claims, demands,
Page 3 of 6
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debts, dues, actions or causes of action and obligations, of every kind or
nature for all known or unknown injuries, damages or losses arising from or
growing out of the transactions alleged in the Lawsuit, including the alleged
Lease Agreement, the Loan Agreement and Promissory Note dated October 14, 1992,
and the Guaranty by Louis J. Pearlman, dated October 14, 1992.
5. The making of this Agreement is not an admission of any liability or
wrongdoing on the part of Defendants and, in fact, Defendants expressly deny
any liability or wrongdoing in any manner contrary to statutory or common law.
Plaintiff agrees that the fact of this Settlement and its terms will be kept
confidential and will not be disclosed in any manner or to any person without
the written consent of each of the Defendants, except as may be required by
law.
6. Plaintiff shall join with Defendants in filing a joint motion to
vacate the judgment entered against the Defendants on July 27, 1993 on the
grounds that all matters have been settled and compromised, prior to resolution
of post-trial motions and appeal. Plaintiff shall indicate its support of this
motion to the Court, but shall not be obligated to prepare any pleadings or
take other actions in addition thereto, except as may reasonably be requested
by Defendants. All out-of-pocket costs reasonably sustained by Plaintiff in
compliance with this paragraph shall be reimbursed by Defendants promptly upon
request.
Page 4 of 6
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7. Plaintiff shall cause the pending Lawsuit to be dismissed against
Defendants with prejudice, apart from the $6,375.35 claimed in Plaintiff Is
Bill of Costs which Defendants have agreed to pay by wire transfer within 48
hours, each party to bear its own costs and attorneys' fees.
8. Plaintiff Sequel Capital Corporation will cause to be done, executed,
acknowledged and delivered all and every such further releases, acts,
conveyances and assurances as any Defendant shall reasonably require for
accomplishing the purposes of this Release and Settlement Agreement, and that
certain Receipt and Release of Indebtedness previously executed and delivered
by Plaintiff to Airship International Ltd. and Louis J. Pearlman in April, 1993
with respect to the Promissory Note and Loan Agreement, each dated October 14,
1992. All out-of-pocket costs reasonably sustained by Plaintiff in compliance
with this Paragraph shall be reimbursed by Defendants promptly upon request.
9. This Agreement and the performance hereunder shall be governed by the
laws of the State of Illinois.
10. This Agreement and each of its provisions shall bind and inure to
the benefit of the parties hereto and their respective officers, directors,
agents, employees, heirs, successors transferees and assigns.
Page 5 of 6
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11. This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties, hereby execute this Agreement on the
day and year indicated below.
SEQUEL CAPITAL CORPORATION AIRSHIP INTERNATIONAL LTD.,
By: /s/ HARVEY KINZELBERG By: /s/ LOUIS J. PEARLMAN
________________________________ _______________________________
Harvey Kinzelberg Title: President
President _______________________________
Date: September 20, 1993 Date: September 20, 1993
________________________________ _______________________________
APPROVED: /s/ LOUIS J. PEARLMAN
_______________________________
Louis J. Pearlman
/s/ HOWARD C. EMMERMAN Date: September 20, 1993
__________________________________ -------------------------------
Howard C. Emmerman
Its Attorney APPROVED:
/s/ TAMI J. REDING-BRUBAKER
______________________________________
Tami J. Reding-Brubaker
Their Attorney
Page 6 of 6
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PROMISSORY NOTE
$30,400.00 ORLANDO, FLORIDA
WHEN PAYABLE: See below October 1994
For the value received, I or we, promise to pay to the order of AIRSHIP
AIRWAYS, INC. ("AAI") the sum of Thirty Thousand Four Hundred Dollars and
.00/100 Cents ($30,400.00), and said principal shall be due and payable as
follows:
Nineteen (19) payments at $1,600.00 per month with no interest payable
to AAI as monies are paid to Sand Lake IV Limited Partnership by All
Star Cafe, Inc.
It is agreed that time is of the essence of this contract and that in
the event of default in the making of any payment as herein provided, the
holder of this note may, at his option, declare all the remainder of said debt
due and collectible, and any failure to exercise the said option shall not
constitute a waiver of the right to exercise the same at any other time. In the
event of default in the making of any payments herein provided and in the event
the whole of said debt is declared to be due. If any amount payable hereunder
is not paid when due or declared due, this note may-be placed in the hands of
an attorney at law for collection and,-in that event the undersigned agree to
pay all attorney fees and costs. Such attorney's fees and costs shall include,
but not be limited to, fees and costs incurred in all matters of collection and
enforcement, before, during and after trial proceedings and appeals, as well as
appearances in and connected with any bankruptcy proceedings, creditors'
reorganization proceedings, and probate proceedings.
I, or we, each of us whether maker, surety, guarantor, endorser, or
other party hereto agree to be jointly and severally bound. I, or we, each
further waive presentment for payment, demand, protest, and notice of demand,
protest and nonpayment, and assent to each and every extension or postponement
of the time of payment or other indulgence, or to any substitution, addition,
exchange or release of the security held by holder. As used herein the word
"holder" shall include the payee and any subsequent holder hereof, and the word
"note" shall include this note and any extension or renewal thereof - The word
"undersigned" whenever used shall be deemed to include any and all makers,
endorsers and guarantors. The Undersigned hereby acknowledge that they have
received a completed copy of this note, and agree to all of the terms contained
herein.
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IN WITNESS WHEREOF, the Undersigned have executed this promissory note
on the date above written.
Witnesses: AIRSHIP INTERNATIONAL, LTD.
________________________________ By: /s/ LOUIS J. PEARLMAN
_________________________
________________________________ Louis Pearlman, Pres.
2
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PROMISSORY NOTE
$25,000.00 ORLANDO, FLORIDA
WHEN PAYABLE: See below October 26, 1994
For the value received, I or we, promise to pay to the order of AIRSHIP
AIRWAYS, INC. the sum of Twenty Five Thousand Dollars and .00/100 Cents
($25,000.00), and said principal shall be due and payable as follows:
One balloon payment of $25,000.00 shall be due and payable to AAI on or
before February 23, 1995 with no pre-payment penalty.
It is agreed that time is of the essence of this contract and that in
the event of default in the making of any payment as herein provided, the
holder of this note may, at his option, declare all the remainder of said debt
due and collectible, and any failure to exercise the said option shall not
constitute a waiver of the right to exercise the same at any other time. In the
event of default in the making of any payments herein provided and in the event
the whole of said debt is declared to be due. If any amount payable hereunder
is not paid when due or declared due, this note may be placed in the hands of
an attorney at law for collection and, in that event the undersigned agree to
pay all attorney fees and costs. Such attorney's fees and costs shall include,
but not be limited to, fees and costs incurred in all matters of collection and
enforcement, before, during and after trial proceedings and appeals, as well as
appearances in and connected with any bankruptcy proceedings, creditors'
reorganization proceedings, and probate proceedings.
I, or we, each of us whether maker, surety, guarantor, endorser, or
other party hereto agree to be jointly and severally bound. I, or we, each
further waive presentment for payment, demand, protest, and notice of demand,
protest and nonpayment, and assent to each and every extension or postponement
of the time of payment or other indulgence, or to any substitution, addition,
exchange or release of the security held by holder. As used herein the word
"holder" shall include the payee and any subsequent holder hereof, and the word
"note" shall include this note and any extension or renewal thereof. The word
"undersigned" whenever used shall be deemed to include any and all makers,
endorsers and guarantors. The Undersigned hereby acknowledge that they have
received a completed copy of this note, and agree to all of the terms contained
herein.
1
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PROMISSORY NOTE
$30,400.OO ORLANDO,FLORIDA
WHEN PAYABLE: See below October 26, 1994
For the value received, I or we, promise to pay to the order of AIRSHIP
AIRWAYS, INC. ("AAI") the sum of Thirty Thousand Four Hundred Dollars and
.00/100 Cents ($30,400.00), and said principal shall be due and payable as
follows:
Nineteen (19) payments at $1,600.00 per month with no interest payable
to AAI as monies are paid to Sand Lake IV Limited Partnership by All
Star Cafe, Inc.
It is agreed that time is of the essence of this contract and that in
the event of default in the making of any payment as herein provided, the
holder of this note may, at his option, declare all the remainder of said debt
due and collectible, and any failure to exercise the said option shall not
constitute a waiver of the right to exercise the same at any other time. In the
event of default in the making of any payments herein provided and in the event
the whole of said debt is declared to be due. If any amount payable hereunder
is not paid when due or declared due, this note may be placed in the hands of
an attorney at law for collection and, in that event the undersigned agree to
pay all attorney fees and costs. Such attorney's fees and costs shall include,
but not be limited to, fees and costs incurred in all matters of collection and
enforcement, before, during and after trial proceedings and appeals, as well as
appearances in and connected with any bankruptcy proceedings, creditors'
reorganization proceedings, and probate proceedings.
I, or we, each of us whether maker, surety, guarantor, endorser, or
other party hereto agree to be jointly and severally bound. I, or we, each
further waive presentment for payment, demand, protest, and notice of demand,
protest and nonpayment, and assent to each and every extension or postponement
of the time of payment or other indulgence, or to any substitution, addition,
exchange or release of the security held by holder. As used herein the word
"holder" shall include the payee and any subsequent holder hereof, and the
word "note" shall include this note and any extension or renewal thereof. The
word "undersigned" whenever used shall be deemed to include any and all makers,
endorsers and guarantors. The Undersigned hereby acknowledge that they have
received a completed copy of this note, and agree to all of the terms contained
herein.
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IN WITNESS WHEREOF, the Undersigned have executed this promissory note
on the date above written.
Witnesses:
AIRSHIP INTERNATIONAL, LTD.
/s/ LOUIS J. PEARLMAN
______________________________ By:___________________________
LOUIS J. PEARLMAN, Pres.
______________________________
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FORM OF
SHARE SUBSCRIPTION AGREEMENT
AGREEMENT dated as of March _, 1994 by and between AIRSHIP
INTERNATIONAL LTD., a New York corporation (the "Company"), and
____________________________ having an address at _______________________ (the
"Purchaser").
WITNESSETH
WHEREAS, the Company is in the business of operating lighter-than-air
crafts, also known as airships, blimps or dirigibles;
WHEREAS, the Purchaser desires to subscribe for and purchase, and the
Company desires to sell and issue to the Purchaser, the number of shares of the
Company's common stock, par value $.01 per share, set forth below.
NOW, THEREFORE, in consideration of the premises and the respective
mutual agreements, covenants, representations and warranties herein contained,
and for other good and valuable consideration, the receipt and sufficiency of
which hereby are acknowledged, the parties agree as follows:
1. Purchase and Sale of Shares. Subject to all of the terms and
conditions of this Agreement, the Purchaser hereby subscribes for and shall
purchase, and the Company shall sell to the Purchaser, ___________ common shares
(the "Shares") of its capital stock for a total purchase price of $_____________
(the "Purchase Price").
2. Closing.
(a) Time and Place. The closing (the "Closing") of the
transaction contemplated by this Agreement shall be held at the offices of
Airship International Ltd., 7380 Sand Lake Road, Suite 200, Orlando, Florida,
32819, at 4:00 p.m. Local time on the date hereof or at such other place and
time as may be agreed upon by the parties (the time and date upon which the
Closing occurs herein called the "Closing Date").
(b) Delivery by Company. At the Closing, against payment by
Purchaser of the Purchase Price, the Company shall deliver to the Purchaser a
share certificate registered in the purchaser's name and representing the
Shares, which certificate shall bear the legend set forth in Section 3 (e)
hereof.
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(c) Payment of the Purchase Price the Purchaser. At the Closing,
the Purchaser shall pay the Purchase Price by means of a bank wire transfer to
an account designated by the Company or by such other means as the parties may
mutually agree upon.
3. Purchaser's Representations, Warranties and Covenants. Purchaser
represents and warrants to, and covenants with, the Company as follows:
(a) Investment Intention. Purchaser is acquiring the Shares for
Purchaser's own account and not with a present intention to make any sale,
disposition, distribution or other transfer of the Shares in a manner that will
be in violation of any applicable securities laws.
(b) Access to Information. Purchaser has the financial
sophistication necessary to enable him to make an informed decision relating to
his investment in the Company and he has been given adequate opportunity (i) to
obtain information and documents relating to the Purchaser's investment in the
Shares and (ii) to ask questions and receive answers about such documents and
Company, its business and future prospects; and that these opportunities have
provided the Purchaser with the information necessary or desirable to make an
evaluation of the merits and risks relating to Purchaser's investment.
(c) Status of and Accredited Investor. Purchaser is an
"accredited investor" (as that term is defined in Rule 501 of Regulation D
promulgated under the Securities Act of 1933, as amended (the "Securities Act"),
a copy of which definition is annexed hereto as Exhibit A.
(d) Restrictions on Transferability. Purchaser understands that
the Shares have not been registered under the Securities Act or under the
securities law of any state, and, except as provided in Section 6, that the
Company will be under no obligation to register any of the Shares. Purchaser
agrees that he will not sell, transfer, encumber or otherwise dispose
(collectively, "transfer") his Shares or any interest therein except in
accordance with applicable securities laws.
(e) Legend. To give effect to the restrictions on transfer set
forth in Section 3 (d) hereof, Purchaser understands that the certificate
representing the Shares shall bear a legend in substantially the following form,
and Purchaser shall not transfer any or all of the Shares or any interest
therein, except in accordance with the terms of such legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"1933 Act"), and no transfer of such securities may be made in
violation of the of the 1933 Act and the rules and regulation
promulgated thereunder. Such securities were issued pursuant to a
Share Subscription Agreement (the "Agreement") between the
registered owner hereof and the issuing corporation which, among
other things, restricts the sale, transfer or other disposition
of such securities. No sale, transfer or other disposition of
such securities or any rights attaching or attendant thereto
shall be valid unless made in accordance with the terms, and
subject to the conditions, of the Agreement. A copy of Agreement
is on file at the office of the issuing corporation."
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4. Representations, Warranties and Covenants of the CompanY. The
Company represents and warrants to, and covenants with the Purchaser as
follows:
(a) Authorization. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized and approved by all necessary corporate actions of the
Company.
(b) SEC Reports. The Company has previously furnished Purchaser
with true and complete copies of its (i) annual reports on Form 10-K for the
years ended December 31, 1992 and December 31, 1991, respectively, as filed
with the Securities and Exchange Commission (the "SEC"),(ii) proxy statements
relating to all meetings of its shareholders during fiscal year 1993 and (iii)
all other reports or registration statements filed by the Company with the SEC
since December 31, 1993 (collectively, the "SEC Reports"). As of their
respective dates, the SEC Reports did not contain any untrue statements of a
material fact or omit to state any material fact required to be stated
misleading.
(c) Capitalization. As of the date of this Agreement, the
authorized capital stock of the Company consists of (i) 10,000,000 shares of
preferred stock, par values $.01 per share of which 2,875,000 shares are
outstanding and (ii) 80,000,000 shares of common stock, par value $.01 per
share, of which 27,448,000 shares are issued and outstanding. Except for the
outstanding options and warrants to purchase shares of the Company's common
stock, which are disclosed in Footnote 8 to the Company's audited financial
statements included in the 1992 10-K, there are no outstanding or authorized
options, warrants or rights to purchase or acquire any capital stock of the
Company or any securities convertible into or evidencing the right to subscribe
for any shares of its capital stock.
(d) Validity of Shares. The Shares, when issued, delivered and
paid for in accordance with the terms hereof, will be duly delivered and paid
for in accordance with the terms hereof, will be duly and validly issued, fully
paid and non-assessable and shall be free and clear of all liens, claims and
encumbrances.
5. Mutual Representations. Each party hereto represents and warrants to
the other that:
(a) The execution and delivery of this Agreement and fulfillment
of the terms hereof (i) will not constitute a default under or conflict with
any agreement or other instrument to which such party is a party or by which
such party is bound and (ii) do not require the consent of any person or
entity; and
(b) This Agreement constitutes the valid and binding obligation
of such party enforceable against such party in accordance with its terms,
except as may be limited by (i) applicable bankruptcy, insolvency, moratorium
and similar laws affecting creditors rights generally, and (ii) general
principles governing the availability of equitable remedies.
3
<PAGE>
<PAGE>
6. Registration Rights.
(a) Piggyback and Demand Registration Rights.
The Company agrees that prior to June 30, 1994, the Board
of Directors of the Company shall authorize the filing of a registration
statement under the Securities Act registering shares of its stock of any class
on a form other than Form S-4, or Form S-8, it will give notice to Purchaser at
least 30 days prior to the date of filing of the proposed registration
statement. Upon request by Purchaser with 15 days after receipt of such notice,
the Company will use reasonable efforts to include the securities to be
registered by such registration statement all of the Shares of the Purchaser.
(b) Limitations. With respect to any registration statement in
which Purchaser's Shares may be included pursuant to the provisions of this
Section 6, the Company agrees to use its best efforts to register Purchaser's
Shares for Sale, and maintain such registration in effect for a period of two
years, subject to the following limitations:
(i) In no event shall the Company be obligated to qualify to
do business in any jurisdiction where it is not so qualified or to take any
action that would subject it to tax or to service of process (other than
service of process under state securities laws) in any jurisdiction where it is
not subject thereto.
(ii) The Company will not be obligated to furnish any
audited financial statements other than the audited financial statements
customarily prepared at the end of the fiscal year or to furnish any unaudited
financial information with respect to any period other than interim quarterly
periods, unless Purchaser undertakes to pay the additional cost to the Company
for such financial statements or financial information.
(iii) The Company will pay the expenses of such registration,
except that the Purchaser shall pay all underwriting discounts and commissions
applicable to his Shares and all legal fees and expenses of his own counsel, if
any.
(iv) The right of the Purchaser to have his Shares included
in any registration statement may not be exercised more than once.
(c) Indemnification. (i) In connection with any registration of
securities pursuant to this Agreement, to the extent permitted by law, the
Company shall indemnify the Purchaser and the Purchaser shall indemnify the
Company in the manner provided in the Section 6(c).
(ii) The Company will indemnify and hold harmless the
Purchaser and each underwriter of the Shares being so registered, and each
other person, if any, who controls the Purchaser or such underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act of 1934, as the case may be, against any losses,
4
<PAGE>
<PAGE>
claims, damages or liabilities, joint or several, to which the Purchaser or
such underwriter or controlling person may become subject under the Securities
Act, insofar as such losses, claims, damages or liabilities (or action in
respect thereof) arise out of or are based upon any untrue statement of any
material fact contained, on the effective date thereof, in any registration
statement under which such securities were registered under the Securities Act,
any preliminary prospectus of final prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Purchaser or such underwriter and each such controlling person
for any legal or any other expenses reasonable incurred by the Purchaser or
such underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, said preliminary prospectus or said prospectus or
said amendment or supplement in reliance upon written information furnished to
the Company by the Purchaser or such underwriter specifically for use in the
preparation thereof, and provided, further however, that the foregoing
indemnity agreement with respect to any preliminary prospectus shall not inure
to the benefit of the Purchaser or any such underwriter and each such
controlling person of such underwriter from whom the person asserting any such
losses, claims, damages or liabilities purchased the Shares, if a copy of the
final prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given to such
person by or on behalf of the Purchaser or any such underwriter if required by
law so to have been delivered, at or prior to written confirmation of the sale
of the Shares to such person, and if the final prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage or liability.
(iii) The Purchaser will indemnify and hold harmless the
Company, each officer and director and representative of the company and each
person who controls the Company to the same extent that the Company agrees to
indemnify it but only with respect to the written information relating to the
Purchaser specifically for use in the registration statement concerned.
(iv) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought hereunder, such person (hereinafter called the
indemnified party) shall promptly notify the person against whom such indemnity
may be sought (hereinafter called the indemnifying party) in writing of the
commencement thereof and the indemnifying party shall have the defense thereof
with counsel reasonably satisfactory to the parties. The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be final
judgement for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment
5
<PAGE>
<PAGE>
(v) If for any reason the indemnification provided for in
the preceding clauses of this Section 6 is unavailable to any indemnified party
or insufficient to hold it harmless as contemplated by the preceding clauses of
this Section 6, then the indemnifying party shall contribute to the amount paid
or payable by the indemnified party as a result of the relative benefits
received by the indemnified party and the indemnifying party, as well as any
other relevant equitable considerations, provided, no person guilty of
fraudulent misrepresentation (within the meaning of Section ll(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
7. Miscellaneous.
(a) Cooperation. Subject to the terms and conditions herein
provided, each of the parties hereto shall use its best efforts to take, or
cause to be taken, such action, to execute and deliver, or cause to be executed
and delivered, such additional documents and the provisions of this Agreement
and under applicable law to consummate and make effective the transactions
contemplated hereby.
(b) Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by mail, postage
prepaid. Any such notice shall be deemed given when so delivered personally,
telegraphed, telexed or sent by facsimile transmission or, if mailed by
certified or registered mail, five days after the date of deposit in the mails,
as follows:
if to the Company, one copy to: with a copy to:
Airship International Ltd. Baer, Marks & Upham
7380 Sand Lake Road, Suite 200 805 Third Avenue, 20th Floor
Orlando, Florida, 32819 New York, New York, 10022
Attention: Louis J. Pearlman Attention: David Mathus
Telecopier: (407) 345-0888 Telecopier: (212) 702-5797
If to the Purchaser, one copy to:
(See front page.)
Any party, by notice given in accordance with this Section to the other
party, may designate another address or person for receipt of notices
hereunder. Notices by a party may be given by counsel to such party.
6
<PAGE>
<PAGE>
(c) Entire Agreement. This Agreement contains the entire
agreement among the parties with respect to the subject matter hereof and
superseded all prior agreements or undertakings, written or oral, of any nature
whatsoever,
(d) Amendments. This Agreement may not be amended nor shall any
waiver, change modification, consent or discharge be effected except by an
instrument in writing executed by or on behalf of the party seeding or against
whom enforcement of any amendment, waiver, change, modification, consent or
discharge is sought.
(e) No Waiver. Any failure or delay on the party of a party in
exercising any power or right hereunder shall not operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power preclude
any other or further exercise thereof or the exercise of any other right or
power hereunder or otherwise available in law or in equity.
(f) Severability. If any provisions of this Agreement for any
reason shall be held to be illegal, invalid, or unenforceable, such illegality
shall not effect any other provision of this Agreement, but this Agreement
shall be construed as if such illegal, invalid or unenforceable provision had
never been herein.
(g) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State.
(h) Binding Effect. This Agreement and all of its provisions,
rights and obligations shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. This Agreement may not be
assigned by either party without the express written consent of the other and
any purported assignment, unless so consented to, shall be void and without
effect. Nothing herein express or implied is intended or shall be construed to
confer upon or to give anyone other than the parties hereto and their
respective representatives and successors any rights or benefits under or by
reason of this Agreement. Accordingly, no party that has not executed this
Agreement shall have any right to enforce any of the provisions of this
Agreement.
(i) Counterparts. The Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding
when one or more counterparts hereof, individually or taken together, shall
bear the signatures of all of the parties reflected hereon as the signatories.
(j) Captions. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
7
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
AIRSHIP INTERNATIONAL, LTD.
By: /s/ LOUIS J. PEARLMAN
_______________________________
Name: Louis J. Pearlman
Title: President
By: /s/
_______________________________
Name: Allen & Shelley Glushakow
(Purchaser)
8
<PAGE>
<TABLE>
<CAPTION>
List of Purchasers
------------------
REGISTRATION LIST 1:
Shares Investment
Investor Agreement (@ $.20 ea.) Total
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Abatti, James A. Yes 175,000 $35,000
2 Alexander, Joseph C. Yes 61,500 $12,300
3 Bloom, Benjamin Yes 18,000 $3,600
4 Christensen, Robert F. Yes 1,500,000 $300,000
5 Desai, Parimel Yes 15,000 $3,000
6 Holub, Wayne Yes 15,000 $3,000
7 Hudson, Willie J. Yes 75,000 $15,000
8 Jackson, Dr. Rodney W. Yes 15,000 $3,000
9 Jeff Lang TTEE FBO Gales
Creek Ins. Yes 50,000 $10,000
10 Lalumia, J. Yes 33,625 $6,725
11 Laursen, Henrik Yes 19,800 $3,960
12 Merrity, John L. Yes 500,000 $100,000
13 Nesheim, Mark & Noel Yes 50,000 $10,000
14 Rangi, Sreekanth Yes 7,500 $1,500
15 Rosenberg, Mark Yes 30,000 $6,000
16 Ryk, Joe Yes 7,500 $1,500
17 Shackelford, Roy Yes 15,000 $3,000
18 Sikkema, Ralph P. Yes 100,000 $20,000
19 Spitzer, Henry Yes 112,500 $22,500
--------- ---------
Totals 2,800,425 $560,085
========= =========
</TABLE>
<PAGE>
<PAGE>
REGISTRATION LIST 2:
<TABLE>
<CAPTION>
SHARES INVESTMENT
INVESTOR AGREEMENT (@ $.20 EA.) TOTAL
- ------------------------------------------------------------ --------- -------------
<S> <C> <C> <C>
1 Andrews, Robert F. Yes 15,000 $ 3,000
2 Barrington, Cynthia A. Yes 11,000 $ 2,200
3 Carr, Robert J. Yes 45,000 $ 9,000
4 Connor, Mary Yes 22,500 $ 4,500
5 Elvin L. Booth Revocable Trust Yes 30,000 $ 6,000
6 Emerson, Marie B. Yes 25,000 $ 5,000
7 Esch, David E. Yes 60,000 $ 12,000
8 Fox, Stella Yes 27,500 $ 5,500
9 Gagliolo, Bruce F. Yes 125,000 $ 25,000
10 Garrett, W. Jay & Judy B. Yes 13,750 $ 2,750
11 Heckrodt, Margaret Yes 15,000 $ 3,000
12 Hogan, William E. Yes 45,000 $ 9,000
13 Hogan, William J. Yes 65,000 $ 13,000
14 Huff, Tom C. Yes 7,500 $ 1,500
15 Hultgren, Paul J. Yes 125,000 $ 25,000
16 Johnson, Neil Yes 9,000 $ 1,800
17 Kriskovich, Robert Yes 25,000 $ 5,000
18 Kris, Steven Yes 200,000 $ 40,000
19 Mathis, David Yes 200,000 $ 40,000
20 Millar, James S. Yes 30,000 $ 6,000
21 Milne, Ronald R. Yes 30,000 $ 6,000
22 Mitchell, Mary Lou Yes 34,995 $ 6,999
23 Nelson, Curtis Yes 139,500 $ 27,900
24 Nemeth, Peter P. Yes 243,910 $ 48,782
25 Roos, W. Rodger Yes 15,000 $ 3,000
26 Schaffner, Edwin K. Yes 60,000 $ 12,000
27 Shaffer, Betty J. Yes 55,500 $ 11,100
28 Shemaria, Barry Yes 200,000 $ 40,000
29 Simmons, Dennis & Margaret Yes 10,000 $ 2,000
30 Solberg, Richard L. Yes 7,500 $ 1,500
31 Suazo, Treve Yes 3,000 $ 600
32 Sullivan, James W. Yes 15,000 $ 3,000
33 Teune, Garret Yes 5,000 $ 1,000
34 Weinstein, Paul Yes 50,000 $ 10,000
35 White, William B. Yes 18,750 $ 3,750
36 Wieburg, Jack L. Yes 20,000 $ 4,000
37 Willis, Bill & Michelle Yes 10,500 $ 2100
38 Woods, Stan Yes 7,500 $ 1,500
39 Young, Michael Aaron Yes 45,000 $ 9,000
40 Henderson, Thomas A. Yes 33,333 $ 5,000
41 Prober, Elaine Yes 66,667 $ 10,000
42 Serafini Jr., John R. Yes 266,667 $ 40,000
43 Serafini, Serafini & Darling Yes 66,667 $ 10,000
------------- ----------
Total 2,500,739 $ 478,481
===========================
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT REFUNDS
<S> <C>
1 Alexander, Joseph C. $ 12,000
2 Andrews, Robert F. $ 3,000
3 Belodoff, Ellis $ 40,000
4 Bloom, Ben $ 3,600
5 Booth, Elvin L. & Jacque M. $ 6,000
6 Christensen, Robert F. $300,000
7 Connor, Mary and Lark, Carol $ 4,500
8 Carr, Robert J. $ 9,000
9 Esch, David E. $ 12,000
10 Gagliolo, G. Suzanne & Bruce F. $ 25,000
11 Garrett, W. Jay and Judy B. $ 2,750
12 Heckrodt, Margaret and Stanly $ 3,000
13 Hogan, William E. $ 9,000
14 Hogan, William J. & Florence M. $ 13,000
15 Hudson, Willie J. & Linda S. $ 15,000
16 Hultgren, Paul J. $ 25,000
17 Jackson, Dr. Rodney W. $ 3,000
18 Huff, Tom C. & Eleanor $ 1,500
19 Kriskovich, Robert $ 5,000
20 Laursen, Henrick $ 3,960
21 Lazenby & Merrity $100,000
22 Mathis, David D. $ 40,000
23 Millar, James S. $ 6,000
24 Roos, W. Rodger & Patricia J. $ 3,000
25 Rosenberg, Mark S. $ 6,000
26 Schaffner, Edwin K. $ 12,000
27 Shackelford, Roy & Betty $ 3,000
28 Simmons, Dennis & Margaret $ 2,000
29 Sullivan, James W. and Carol R. $ 3,000
30 White, William B. $ 3,750
31 Wieburg, Jack L. & Vonda E. $ 4,000
32 Willis, Bill & Michelle $ 2,100
33 Woods, Stan $ 1,500
34 Young, Michael Aaron $ 9,000
35 Polese, Marcia A. $ 10,000
36 Serafini, Paul M. $ 1,000
37 Abatti, Jim $ 35,000
38 Barrington, Cynthia Allison $ 2,200
39 Desai, Parimal $ 3,000
40 Dorough, Thomas G. (Trust) $ 15,000
41 Fox, Stella $ 5,500
42 Holub, Wayne $ 3,000
43 Johnson, Neil and Andy $ 1,800
44 Kramer, George $ 10,000
45 Lalumia Jr., Joseph A. $ 6,725
46 Lang Jeff TTEE F/B/O $ 10,000
47 Nemeth, Peter P. $ 48,782
48 Nesheim, Mark & Noel $ 10,000
49 Ryk, Joe $ 1,500
50 Sikkema, Dr. Ralph P. $ 20,000
51 Solberg Richard and Barbara $ 1,500
52 Suazo, Treve $ 600
53 Teune, Garrett $ 1,000
54 Emerson, Marie B. $ 5,000
--------
TOTAL $883,567
========
</TABLE>
<PAGE>
<PAGE>
SECURED NOTE
$137,500.00 October 26, 1994
FOR VALUE RECEIVED, AIRSHIP AIRWAYS, INC. (f/k/a Federal Airlines,
Inc.) a Florida corporation (the "Maker"), having an office at 7380 Sand Lake
Road, Suite 200, Orlando, Florida 32819 hereby promises to pay to the order of
AIRSHIP INTERNATIONAL LTD, (the "Payee") at its office at 7380 Sand Lake Road,
Suite 350, Orlando, Florida 32819 or at such other place as Payee may, from
time to time, designate, the principal sum of One Hundred Thirty Seven Thousand
Five Hundred Dollars ($137,500.00) in lawful money of the United STATES due and
payable as set forth below.
1. Interest. Maker further promises to pay interest on unpaid principal
balance hereof of 8% per annum from the date hereof. Such interest shall be due
and payable together with principal as provided below. Interest shall be
calculated on the basis of a 360 day year (12 equal 30 day periods). In no
event shall the interest charged hereunder exceed the maximum permitted under
the laws of the State of Florida.
2. Principal. The entire unpaid principal balance hereof, and all
accrued and unpaid interest shall be due and payable on or before February 23,
1995, or such later date to which the Payee may agree in writing, unless
accelerated as a result of a default as set forth below.
3. Covenants. Maker agrees to use the proceeds of the loan evidenced
hereby as deposit monies paid in connection with aircraft acquisition and to
defray the costs of Maker's FAA certification.
a) Maker shall not, without the prior written consent of the Payee,
create, incur, assume or suffer to exist any mortgage, pledge,
security interest, assignment, lien (statutory or other) or
claims in or upon the assets described in Exhibit "A".
4. Representations and Warranties. The Maker hereby represents and
warrants as follows, which representations and warranties shall continue to be
true while any obligations pursuant to this Note remain outstanding:
a) it is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation and has the
corporate power and authority to carry on its business as it is
now being conducted and to own, operate and lease its properties
and assets and is duly qualified or licensed to do business as a
foreign corporation and is in good standing in all the
jurisdictions in which the ownership or leasing of its property
or conduct of its business requires such qualifications or
licensing.
<PAGE>
<PAGE>
b) it has full power, authority and legal right to execute and
deliver this Note, the Collateral and Security Agreement dated
the date hereof between Maker and Payee (the "Security
Agreement"), the foregoing have been duly authorized by all
necessary corporate action on its part and each of this Notice
and the Security Agreement is the legal, valid and binding
obligation of Maker enforceable against is in accordance with the
terms hereof and thereof.
c) it is not in default under any material indenture, mortgage, deed
of trust, agreement or other instrument to which it is a party or
by which it or any of its assets may be bound. The execution and
delivery of this Note and the Security Agreement and compliance
with provisions hereof shall not violate any United States or
foreign law, regulation or any order or decree of any United
States or foreign court or governmental instrumentality in any
material respect, nor shall the same violate its charter or
by-laws or result in the breach of, constitute any material
default under,or conflict with any indenture, mortgage, material
agreement or other instrument to which it is party or by which it
or any of its assets may be bound or result in the creation or
imposition of any lien, security interest or claim upon any of
its assets.
d) except for filings required to perfect the security interest
granted in the Security Agreement, no action of or filing with or
consent of any United States or foreign governmental or public
body or authority and no approval or consent of any other party
is required to authorize or is otherwise required in connection
with the execution, delivery or performance of this Note or the
Security Agreement.
e) notwithstanding issues raised in the pending litigation styled
V-3 Travel, Inc. v. Federal Airlines, Inc. and Louis J. Pearlman,
Case No.: 93-1034-CIV-ORL-18, there is no suits, proceedings or
investigations pending or, to its knowledge, threatened against
it which, individually or in the aggregate, if determined
adversely, would have a material adverse effect on it, its
business, operation or assets.
5. Default. Notwithstanding the fact that this Note is payable on the
due date set forth above, the entire unpaid principal balance of this Note and
interest accrued with respect thereto as well as any other costs, fees and
expenses incurred in connection herewith shall be immediately due and payable,
without notice or demand, upon the occurrence of any of the following:
a) the Maker becoming insolvent (however defined or evidenced),
committing an act of bankruptcy, making an assignment for the
benefit of creditors or making or sending a notice of intended
bulk transfer, or if a
<PAGE>
<PAGE>
meeting of creditors is convened or a committee of creditors is
appointed for, or any petition or proceeding for any relief under
any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, receivership, liquidation or dissolution
law or statute now or hereinafter in effect (whether at law or in
equity) is filed or commenced by or against Maker or any of its
properties or the appointment of a receiver or trustee for Maker
or any of its properties;
b) any merger, consolidation or other business combination involving
the Maker (other then a merger of consolidation between Maker and
Payee) or the sale of all or substantially all of the assets of
Maker;
c) the filing of a lien, the issuance of a levy or execution, or the
seizure, attachment or garnishment, or the entry of judgment on
or against Maker or any of its properties which, individually or
in the aggregate, exceeds $50,000.00 and which shall not be
released, satisfied of record or bonded within thirty (30) days
thereafter;
d) the occurrence of a default of any kind or the breach of any
covenant under this Note, the Security Agreement or any present
or future document, instrument or agreement between the Maker and
Payee, which remains uncured for the length of the grace period
specified therein, if any; or
e) should any representation or warranty made by Maker in this Note,
the Security Agreement or any present or future document,
instrument or agreement between Maker and Payee prove to be
untrue or inaccurate in any material respect as of the date on
which such representation or warranty is made.
6. Remedies. All rights and remedies available to the Payee pursuant to
the provisions of this Note, the Security Agreement, applicable law and
otherwise are cumulative, not exclusive, and enforceable alternatively,
successively and/or concurrently after default by Maker.
7. Waivers. maker waives demand, presentment, protest and notice of any
kind and consents to the extension of time of payments, the release, surrender
or substitution of any and all security or guarantees for the obligations
evidenced hereby or other indulgence with respect to this Note, all without
notice. In the event of any litigation with respect to the obligations
evidenced by this Note, or with respect to the Security Agreement, the MAKER
WAIVES THE RIGHT TO A TRIAL BY JURY.
8. Modification. This Note may not be changed, modified or terminated
orally, but only by an agreement in writing, signed by the party to be charged.
The Maker hereby
<PAGE>
<PAGE>
authorizes the Payee to complete the blanks, if any, in this Note or the
Security Agreement and any particulars relating thereto according to the terms
of the indebtedness evidenced hereby.
9. Governing Law; Venue. The laws of the State of Florida shall govern
the validity, enforcement and interpretation of this Note, and any lawsuit
hereunder shall be venued in the Circuit Court of Orange County, Florida.
10. Invalidity Assignment. If any term or provision of this Note shall
be held invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby. This Note shall be
binding upon the successors and assigns of the Maker and enure to the benefit
of the Payee, its successors, endorsers and assigns.
11. Set Off. Maker reserves the right and ability to offset monies owed
in connection with other Promissory Notes between Maker and Payee in the event
Payee defaults on said Notes.
IN WITNESS WHEREOF, the Maker has executed this Secured Note as of the
date set forth above.
AIRSHIP AIRWAYS, INC.
By: /s/ PETER GARRAMBONE
____________________________________________
Peter Garrambone, Chief Executive Officer
<PAGE>
<PAGE>
OPTION AGREEMENT
Option Agreement, dated as of August 11, 1994, between Airship
International, Ltd., a corporation organized under the laws of the State of New
York (the "Company") and Louis J. Pearlman (the "Optionee").
--------------------
NOW, THEREFORE, the parties, intending to be legally bound agree as
follows:
1. Grant of Option. In consideration of the agreement of the Optionee
to cancel certain warrants owing from the Company to the Optionee and the
guaranty of certain obligations of the Company by the Optionee the Company
hereby grants the Optionee an option to purchase 5,000,000 shares of the common
stock, par value $.01 per share (the "Common Stock") of the Company (the
"Option Shares").
2. Exercise Price. The exercise price for the purchase of Option Shares
under this Option is $.125 per share.
3. Exercise of Option. The Option may be exercised by Optionee any time
prior to its termination in whole or in parts, which cumulatively shall not
exceed the whole, by giving the Company written notice of the number of Option
Shares to be purchased on each exercise of the Option.
4. Termination. The Option will terminate at 5:00 P.M., New York time,
on August 10, 1999.
5. Adjustments. In case the Company shall (i) pay a dividend in Common
Stock or make a distribution in Common Stock, (ii) subdivide the shares of the
Common Stock, (iii) combine the outstanding shares of the Common Stock into a
<PAGE>
<PAGE>
smaller number of shares, (iv) issue any securities by reclassification of
shares of the Common Stock, or (v) distribute to all holders of the Common
Stock, other securities, evidences of indebtedness or assets (excluding cash
dividends or distributions out of retained earnings), then the number of Option
Shares purchasable by Optionee upon exercise of the Option immediately prior to
such event shall be adjusted so that Optionee shall be entitled to receive the
kind and number of Option Shares, other securities, evidences of indebtedness
or assets which he would have owned and have been entitled to receive after the
happening of any such event had the Option been exercised immediately prior to
the happening of such event or any record date with respect thereto, whichever
is earlier. Any such adjustment shall be made without changing the aggregate
exercise price applicable to the then unexercised portion of the Option Shares.
6. Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties with respect to its subject matter. This Agreement
supersedes all prior agreements and understandings between the parties, both
written and oral, and all contemporaneous oral agreements and understandings,
with respect to its subject matter.
7. Governing Law. This Agreement and the Option shall be governed by,
and construed in accordance with, the laws of the State of New York, without
regard to conflict of laws principles applied in the State of New York.
-2-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
AIRSHIP INTERNATIONAL LTD.
By: /s/ Alan Siegel
_____________________
Alan Siegel
/s/ LOUIS J. PEARLMAN
_____________________
Louis J. Pearlman
-3-
<PAGE>
<PAGE>
AMENDMENT NO. 1 TO OPTION AGREEMENT
WHEREAS, Airship International Ltd. (the "Company") and Louis J.
Pearlman ("Optionee") have entered into an Option Agreement dated as of
December 11, 1994 (the "Agreement"); and
WHEREAS, the parties now desire to amend the Agreement;
NOW WHEREFORE, in consideration of the Optionee's guaranty of certain
obligations of the Company existing pursuant to an Aerial Advertising Agreement
between the Company and Mastellone Hnos, S.A., the parties hereby amend the
Agreement as follows:
Capitalized terms used and not otherwise defined herein shall have the
meanings set forth in the Agreement.
Paragraph 2 of the Agreement is hereby amended by deleting therefrom the
exercise price of $.125 per Option Share referred to therein and replacing it
with an exercise price of $.02 per Option Share.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the 15th day of December, 1994.
AIRSHIP INTERNATIONAL LTD.
By: /s Alan Siegel
_____________________
Alan Siegel
/s/ LOUIS J. PEARLMAN
______________________
Louis J. Pearlman
<PAGE>
<PAGE>
STATEMENT RE: COMPUTATION OF
PER SHARE EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
--------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Average shares outstanding 30,161,000 27,073,000 22,070,000
Average common and common equivalent shares outstanding 30,161,000 27,073,000 22,070,000
Net income $(20,645,000) $(5,406,000) $ 1,165,000
Preferred stock dividend $ (1,683,000) $(1,166,000) 0
Computation of Earnings Per Share = Net Income/Average common
equivalent shares $(22,328,000) $(6,572,000) $ 1,165,000
30,161,000 27,073,000 22,070,000
Earnings Per Share $(0.74) $(0.24) $0.05
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 21.1
AIRSHIP INTERNATIONAL LTD.
SUBSIDIARIES OF THE REGISTRANT
Name of Subsidiary Jurisdiction of Incorporation
- ------------------ -----------------------------
Airship Operations, Inc.(1) Florida
Airship International (USA), Inc. Delaware
- --------
(1) The registrant sold all of the outstanding stock of Airship Operations, Inc.
to Mr. Julian Benscher on May 24, 1995.
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT
As independent public accountants, I hereby consent to the incorporation of my
reports on the financial statements and schedules of Airship International Ltd,
dated August 22, 1997, to be included in this annual report on Form 10-K, which
includes an explanatory paragraph describing matters giving rise to substantial
doubt as to the Company's ability to continue as a going concern.
Charlie M. Meeks, C.P.A., P.A.
Charlie M. Meeks, C.P.A., P.A.
Maitland, Florida
August 22, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 543,000
<SECURITIES> 0
<RECEIVABLES> 1,809,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 964,000
<PP&E> 7,985,000
<DEPRECIATION> (1,492,000)
<TOTAL-ASSETS> 9,809,000
<CURRENT-LIABILITIES> 13,070,000
<BONDS> 0
<COMMON> 314,000
0
29,000
<OTHER-SE> (3,604,000)
<TOTAL-LIABILITY-AND-EQUITY> 9,809,000
<SALES> 3,980,000
<TOTAL-REVENUES> 3,980,000
<CGS> 17,452,000
<TOTAL-COSTS> 19,860,000
<OTHER-EXPENSES> 3,960,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 805,000
<INCOME-PRETAX> (20,645,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (20,645,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20,645,000)
<EPS-PRIMARY> (0.74)
<EPS-DILUTED> 0
</TABLE>
