U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended June 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from _____________________ to
______________________________
Commission file number 1-10310
SETECH, INC.
(Name of small business issuer in its charter)
DELAWARE 11-2809189
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
905 INDUSTRIAL DRIVE, MURFREESBORO, TENNESSEE 37129
(Address of principal executive offices) (Zip Code)
Issuer's telephone number:(615) 890-1700
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Title of Class
Common Stock, $.01 par value
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirement for the past
90 days. Yes X No ____
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-KSB or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for the most recent fiscal year
$20,987,442.00
State the aggregate market value of the voting stock held by non-
affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date
within the past 60 days. (See definition of affiliate in Rule 12b-2 of the
Exchange Act). $338,744.00
State the number of shares outstanding of each of the issuer's classes
of common equity as of the latest practicable date: 5,202,991
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB into which the
document is incorporated: (1) any annual report to security holders; (2)
any proxy or information statement; and (3) any prospectus filed pursuant
to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act").
The list documents should be clearly described for identification purposes.
None
Transitional Small Business Disclosure Format (check one):
Yes ____ No X
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
SETECH, INC., formerly named Aviation Education Systems, Inc., is a
Delaware corporation (the "Company") formed in 1987. The Company is engaged
in the businesses of providing "integrated supply"/inventory management
services, job shop machining, engineering products and services, and
aviation equipment and services to a variety of industries including
automotive, aviation, and medical through its four subsidiary corporations:
Titan Services, Inc. ("Titan").
Southeastern Technology, Inc. ("Southeastern")
BARTON ATC International, Inc. ("BARTON Intn'l")
BARTON ATC, Inc. ("BARTON")
In August 1996, the Company changed its name from "Aviation Education
Systems, Inc." to "SETECH, INC." to better reflect its diversified business
operations.
The Company acquired BARTON in 1990. It formed BARTON Intn'l in 1994.
The Company acquired Titan and Southeastern in September 1993 upon the
acquisition of their parent corporation, SEtech, Incorporated. The Company
caused SEtech, Incorporated to be merged into the Company, resulting in
Titan and Southeastern becoming direct and separate subsidiaries of the
Company. Titan, Southeastern and BARTON Intn'l are Tennessee corporations;
BARTON is incorporated under Delaware law.
The Company, for certain organizational purposes, regards its four
subsidiaries as being divided into two groups: (1) an Industrial Support
Group comprised of Titan and Southeastern and (2) a Government Services
Group comprised of BARTON and BARTON Intn'l.
TITAN
TITAN'S OPERATIONS
Titan operates in an emerging business segment offering "integrated
supply" services to the manufacturing industry. Presently, Titan delivers
its services primarily to the automotive industry through facilities
located in Tennessee and Michigan. Titan provides procurement, engineering
and maintenance/repair services for machined spare parts, original
equipment manufacturer ("OEM") spare parts and inventory management
services. These types of services are increasingly being utilized by major
manufacturers to supplement and enhance in-house capabilities and control
costs.
COMPETITION
Titan operates in the relatively new segment of industry known as
"integrated supply." Titan has encountered competing firms, but none of
these competitors apparently presently offers the range of services offered
by Titan. Titan may in the future encounter presently unforseen
competition.
MAJOR CUSTOMERS
Titan operates under two contracts as a source supplier of purchasing
and inventory control functions for a major automobile manufacturer at two
automotive plants, one in Tennessee and one in Michigan. Titan is
negotiating to provide similar services to the same customer at a third
location. Titan has received several major awards in recognition of its
high level of performance from the customer. Contracts with this single
customer account for virtually all of Titan's revenues.
PRINCIPAL SUPPLIERS
Titan acquires machining services and parts from a wide variety of
machine shops, most of which are located in the southeastern United States.
OEM spare parts are purchased from the original manufacturer. Titan
purchases approximately 3% of its parts from its co-subsidiary
Southeastern.
SOUTHEASTERN
SOUTHEASTERN'S OPERATIONS
Southeastern is a job shop machining and engineering organization,
serving a variety of industries including aerospace, automotive and
medical. Southeastern continues its expansion in the manufacturing and
sale of medical and surgical devices for major medical manufacturers, to
their specifications. Management believes, based upon recent growth in this
area, that the medical field will continue to become a more significant
source of machine work in the future.
COMPETITION
Southeastern operates in a highly competitive environment and
confronts competition from both generalized and specialized job shop
machining and engineering businesses. Southeastern is equipped with
sophisticated computer aided design and manufacturing equipment.
Southeastern engineers utilize state-of-the-art equipment and systems which
are designed to enable them to meet stringent customer requirements and
generate innovative solutions to consistently emerging manufacturing
impediments resulting from cost containment programs.
MAJOR CUSTOMERS
Five customers account for 80% of Southeastern's revenues, little of
which is based on long-term contracts. Southeastern's business is
concentrated in approximately equal numbers among the aerospace, automotive
and medical industries.
SUPPLIERS
Historically, the availability of raw materials has not been of
concern to Southeastern whose management foresees no significant material
related impediment to production or production scheduling. Principal
suppliers to Southeastern include: Fry Steel; Tennessee Die Supply;
Jorgensen Steel; Wyman Gordon; and Loftis Metals.
BARTON
BARTON'S OPERATIONS
BARTON is engaged in the manufacture and sale of both fixed and mobile
airport traffic control towers and in the operation of private and
government-owned air traffic control towers and meteorological
observatories located throughout the United States. BARTON also provides
weather station consultation, electronics maintenance and airport lighting
systems.
BARTON currently operates five Airport Traffic Control Towers and four
Weather Observing and Forecasting Facilities under contracts of varying
length. While the operation of airport traffic control towers and
meteorological facilities has always been the core of BARTON's business,
significant increases have been made in the sale and installation of
control tower communications equipment.
COMPETITION
Because BARTON's clients are essentially all governmental in nature,
most projects are a result of competitive proposals prepared in response to
a government issued solicitation. As a result of a solicitation for bids
for contract operation of FAA Level I Airport Traffic Control Towers,
released by the US FAA in mid 1993, the number of companies competing for
business in contract air traffic control services has increased.
Opportunities remain for the operation of Level I airport traffic
control towers throughout the United States, under contracts let by
municipal governments, counties, states and industry. BARTON will continue
to compete for this business. A number of firms compete for business in the
equipment sales and maintenance areas; however, this segment of BARTON's
business continues to increase.
MAJOR CUSTOMERS
One contract, under which BARTON operates four weather stations,
accounted for approximately 60% of the gross sales generated by BARTON for
its fiscal year ended June 30, 1996. The contract expires September 30,
1996. BARTON will not operate three of the weather stations after September
30, 1996. BARTON will continue to operate the largest of the four stations
until October 30, 1996. The contract for that location is in the rebid
process and results will be unknown for some time. Management of the
Company anticipates, but cannot guarantee, that BARTON will be able
to substantially replace revenues lost from the non-renewal of weather
station management contract with revenues from equipment sales.
GOVERNMENT REGULATION
The operation and maintenance of air traffic control towers and
weather stations are governed by complex directives promulgated by the U.S.
government. The federal government also has certain standards applicable
to the operation of non-federal activities. While BARTON has not
experienced difficulty in complying with government regulations and does
not anticipate future problems, there is no assurance that regulations will
not be imposed which could impair BARTON's ability to operate and maintain
these facilities.
GOVERNMENT CONTRACTS
Approximately 70% of BARTON's revenues are derived from its contracts
with the United States Air Force and the Air National Guard for the
management of air traffic control towers and meteorological facilities.
Some of BARTON's activities are subject to U. S. Government security
industrial regulations. In November 1994, the Company entered into a
Special Security Agreement with the U. S. Department of Defense and major
foreign investors of the Company which precludes foreign control or
influence of any contract subject to industrial security regulations.
BARTON INTN'L
BARTON INTN'L'S OPERATIONS
BARTON Intn'l is engaged in the provision of Air Traffic Control and
weather Reporting Services at numerous airports, in primarily the Western
United States, under contract to the U.S. Federal Aviation Administration.
BARTON Intn'l presently operates 31 control towers under the FAA's FCT
Program, 23 of which commenced operation after July 1, 1995.
COMPETITION
BARTON Intn'l competes in a new marketplace, one created in 1994 by
the formulation of a plan by the FAA for the contracting out of government
operated air traffic control facilities commencing with Level I Control
Towers. This Program, known as the Federal Contract Tower Program, stirred
intense interest and competition in the service sector of industry when it
was announced. Although several companies entered intense competition for
business under this new Program, only three companies; BARTON Intn'l and
two competing firms, were successful in obtaining contracts under this new
Program.
MAJOR CUSTOMERS
BARTON Intn'l has only one customer -- the U.S. Federal Aviation
Administration (FAA). The FAA FCT contract held by BARTON Intn'l has a
gross revenue potential of $40,000,000 over a contract life expiring
September 30, 1998. The actual gross contract revenue realized under this
contract will be a function of implementation timing.
GOVERNMENT REGULATION
As a provider of air traffic control services, the operations of
BARTON Intn'l are controlled, in virtually every aspect, by government
regulation. These regulations change on a regular, periodic, basis and are
tracked by the management of BARTON Intn'l to ensure compliance in both
operating location and headquarters operations.
GOVERNMENT CONTRACTS
All of BARTON Intn'l's current business base is contained within a
single contract with the U. S. Federal Aviation Administration. While
efforts are ongoing to expand this business base, excellence in the
performance of its existing contract is primary. As this new business
matures, increasing emphasis will be placed on the sales and marketing
effort.
<PAGE>
EMPLOYEES OF COMPANY AND SUBSIDIARIES
As of June 30, 1996, the Company and its four subsidiaries had 243
full time employees, including five executive personnel. The employees are
apportioned among the businesses as follows: SETECH (3, including 2
executives); Titan (27, including 1 executive); Southeastern (39, including
1 executive); BARTON (54, including 1 executive); BARTON Intn'l (120).
ITEM 2. PROPERTIES.
Neither the Company nor any of its four subsidiaries owns any real
property.
Titan conducts its operations from three rented facilities, one each
located: (1) in Murfreesboro, Tennessee; (2) near its automotive
manufacturing customer in Tennessee; and (3) adjacent to its automotive
manufacturing customer in Michigan. None of the three lease terms expires
after 1998.
Southeastern conducts its operations from facilities located at 905
Industrial Drive Murfreesboro, Tennessee that are leased under a non-
cancelable, operating lease expiring July 31, 1998.
BARTON currently leases approximately 5,000 square feet of office
space in Murfreesboro, Tennessee. The lease expires December 31, 2006.
BARTON is further obligated to pay insurance and maintenance costs on the
premises.
BARTON Intn'l subleases a portion, on a cancelable per square foot
basis, of BARTON's facility in Murfreesboro.
ITEM 3. LEGAL PROCEEDINGS.
The Company filed a complaint in the United States District Court for
the Middle District of Tennessee, Nashville Division, on October 20, 1992
against its former officials, James E. Turner, the Company's former
President, Chief Executive Officer, Treasurer, Chairman and a member of the
Board of Directors; Donna M. Turner, the Company's former Secretary and a
Director; and Paul F. Caviglia, Jr., the former Chief Financial Officer.
The complaint seeks damages or restitution for corporate monies converted
by James E. Turner and Donna M. Turner during the period July 1, 1990
through June 30, 1992; damages related to the breach of fiduciary duties by
each of the defendants; and damages, both compensatory and punitive,
related to the intentional acts of fraud by each of the defendants in the
amount of $8,000,000. BARTON joined in the lawsuit because certain damages
and payments which the companies seek to recover were incurred or paid
directly by BARTON. Subsequent to the filing of the complaint, the Company
and BARTON amended the complaint to add as defendants the Company's prior
attorneys, Blau, Kramer, Wactler, Lieberman and Satin, P. C., David
Lieberman and Richard Satin. The Company's claim against the law firm is
scheduled for a "settlement conference" on October 21, 1996. The Company's
claim against the Turners has not been set for trial as of September 1,
1996.
On May 15, 1995, an employee of BARTON ATC, Inc. filed a complaint
alleging violation of Title VII of the Civil Rights Act of 1964, by reason
of gender based discrimination. Management believes this charge to be
entirely without merit and has so responded to the Equal Employment
Opportunity Commission. Management therefore believes, but can give no
assurance, that these changes will have no adverse impact upon the BARTON
subsidiary.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) Marketing Information - There is only a limited and sporadic
trading market for the Company's common stock, currently trading over the
counter, which has historically been thinly traded with limited market
maker participation.
The following table, prepared from information supplied by the
National Quotation Bureau, sets forth the range of high and low bid prices
for the Company's common stock for the fiscal periods indicated (which
reflects inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions):
<PAGE>
COMMON STOCK
High Low
1995 (Fiscal)
First Quarter 5/16 .01
Second Quarter 3/16 .01
Third Quarter .08 .02
Fourth Quarter .08 .02
1996 (Fiscal)
First Quarter .095 .02
Second Quarter .10 .02
Third Quarter .11 .10
Fourth Quarter .11 .06
(b) Holders - There were approximately 171 holders of record of the
Company's common stock as of June 30, 1996, inclusive of those brokerage
firms and/or clearing houses holding the Company's securities for their
clientele (with each such brokerage house and/or clearing house being
considered as one holder).
(c) Dividends - The Company has not paid or declared any dividends
upon its common stock since its inception and, by reason of its present
financial status and its contemplated financial requirements, does not
contemplate or anticipate paying any dividends upon its common stock in the
foreseeable future.
Effective as of June 30, 1996 the Company effectuated a twenty-to-one
reverse stock split which reduced the number of shares of the Company's
single class of common stock to 5,127,991. As a result of the twenty-to-one
reverse stock split, the price per share of the Company's common stock
increased by a multiple of 20.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
PLAN OF OPERATION
The Company believes that a strategic opportunity exists during the
short and near-term to expand Titan's "integrated supply" business with its
existing automotive manufacturing customer. The Company's Titan subsidiary
will also seek to market its services to other manufacturing businesses.
Company management constantly considers the most advantageous utilization
of its financial, personnel and tangible resources, including appropriate
acquisitions and dispositions.
RESULTS OF OPERATIONS
For the fiscal year ended June 30, 1996, the Company posted net
revenues of $20,987,442, compared to $14,559,663 for the previous fiscal
year. This increase is attributable to nearly a 300% increase in sales by
BARTON Intn'l to approximately $5,362,600, and a 30% and 35% increase in
revenues for Southeastern and Titan, respectively, to approximately
$9,357,000 and $3,368,000.
The Company realized a net income before income taxes for the year
ended June 30, 1996 of $819,595 compared to $368,342 for the year ended
June 30, 1995, an increase of 122%. The Company's financial statements for
the fiscal year ended June 30, 1996 reflect the actual and expected
realization of certain tax benefits attributed to net operating losses
generated in prior years. In accordance with FASB Statement 109, the
Company's statement of operations for the fiscal year ended June 30, 1996
reflects an income tax benefit of $579,644 notwithstanding the Company's
profitable operations. See Notes 1 and 13 of the June 30, 1996 financial
statements included in this Form 10-KSB.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company's current assets exceeded its current
liabilities by approximately $4,124,457.
Titan, Southeastern and BARTON Intn'l each maintains a secured
revolving line of credit with a banking institution, which as of June 30,
1996, were in the following maximum amounts:
Titan $8,000,000
Southeastern 600,000
BARTON Intn'l 200,000
See Note 6 of the June 30, 1996 financial statements included in this
Form 10-KSB for a description of the terms and maturities of these loans.
All these indebtedness obligations of the subsidiaries of the Company are
guaranteed by the Company.
See Item 12, "Certain Relationships and Related Transactions," of this
Annual Report on Form 10-KSB for a description of the sale (and use of
proceeds thereof) of certain securities of the Company during the fiscal
year ended June 30, 1996.
These infusions of debt and equity capital result in sufficient
capital to support the Company's existing operations. The Company may seek
to increase its bank revolving lines of credit to finance any expansion of
its existing lines of business.
LOSS CONTINGENCIES
On May 15, 1995, an employee of BARTON ATC, Inc. filed a complaint
alleging violation of Title VII of the Civil Rights Act of 1964, by reason
of gender based discrimination. Management believes this charge to be
entirely without merit and has so responded to the Equal Employment
Opportunity Commission. Management therefore believes, but can give no
assurance, that these charges will have no adverse impact upon the BARTON
subsidiary.
[THIS SPACE LEFT BLANK INTENTIONALLY]
<PAGE>
ITEM 7. FINANCIAL STATEMENTS.
SETECH, INC. and Subsidiaries:
Report of Independent Certified Public Accountants.
Consolidated Balance Sheets as of June 30, 1996 and June 30, 1995.
Consolidated Statements of Operations for the Years ended June 30,
1996 and June 30, 1995.
Consolidated Statements of Changes in Stockholders' Equity for the
Years ended June 30, 1996 and June 30, 1995.
Consolidated Statements of Cash Flows for the Years ended June 30,
1996 and June 30, 1995.
Notes to Consolidated Financial Statements.
<PAGE>
Aviation Education Systems, Inc.
and Subsidiaries
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITOR'S REPORT
June 30, 1996 and 1995
<PAGE>
C O N T E N T S
PAGE
INDEPENDENT AUDITOR'S REPORT 16
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 17 - 18
CONSOLIDATED STATEMENTS OF OPERATIONS 19
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY 20
CONSOLIDATED STATEMENTS OF CASH FLOWS 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 22 - 33
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Aviation Education Systems, Inc.
Murfreesboro, Tennessee
We have audited the accompanying consolidated balance sheets of Aviation
Education Systems, Inc. and Subsidiaries as of June 30, 1996 and 1995, and
the related consolidated statements of operations, stockholders' equity,
and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Aviation Education Systems, Inc. and Subsidiaries as of June 30, 1996 and
1995 and the results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
DEMPSEY, WILSON & CO., P.C.
Murfreesboro, Tennessee
August 19, 1996
<PAGE>
AVIATION EDUCATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND 1995
1996 1995
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,704,654 $ 1,951,004
Accounts receivable, less allowance for
doubtful accounts of $1,665 in 1996
and $7,500 in 1995 6,063,128 2,391,227
Inventory 9,523,621 6,490,173
Prepaid expenses 40,158 58,854
Stock subscriptions receivable 661,500 -
Other current assets 37,266 4,065
Deferred tax benefit 306,000 42,500
Total current assets 18,336,327 10,937,823
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $2,737,729 in 1996 and
$2,423,268 in 1995 1,128,007 1,057,601
DEFERRED INCOME TAX BENEFIT 629,680 377,906
COST IN EXCESS OF NET ASSETS ACQUIRED, net of
accumulated amortization of $1,120,073 in 1996
and $854,643 in 1995 and allowance for future
realization of $240,000 in 1996 and 1995 2,024,628 2,290,058
OTHER ASSETS 24,372 39,281
$22,143,014 $14,702,669
See accompanying notes.
<PAGE>
AVIATION EDUCATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
JUNE 30, 1996 AND 1995
1996 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable-financial institutions $ 7,969,044 $ 4,784,031
Current portion of long-term debt 566,943 527,979
Current portion of capital lease obligations 58,189 69,247
Accounts payable 3,453,987 1,265,246
Accrued expenses 2,116,071 1,686,455
Income taxes - current 47,636 165,756
Total current liabilities 14,211,870 8,498,714
NONCURRENT LIABILITIES, less current portion
Long-term debt 1,177,181 665,456
Capital lease obligations 154,725 -
1,331,906 665,456
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 400,000,000
shares authorized, 5,413,901 issued 54,139 54,139
Additional paid-in capital 11,512,038 11,495,681
Accumulated deficit (4,612,082) (6,011,321)
6,954,095 5,538,499
Less treasury stock, $1.24 cost, 285,910
shares 354,857 -
6,599,238 5,538,499
$22,143,014 $14,702,669
See accompanying notes.
<PAGE>
AVIATION EDUCATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1996 AND 1995
1996 1995
REVENUES
Industrial support group $12,725,117 $ 9,502,058
Government services 7,992,043 4,317,009
Equipment sales 270,282 740,596
20,987,442 14,559,663
COST OF REVENUES
Industrial support group 9,696,617 7,163,729
Government services group 7,145,826 3,582,598
Equipment sales 172,436 438,244
17,014,879 11,184,571
Gross profit 3,972,563 3,375,092
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 2,683,202 2,634,246
Operating income 1,289,361 740,846
OTHER INCOME (EXPENSE):
Interest income 86,343 74,720
Interest expense (578,767) (500,063)
Miscellaneous income 2,765 52,839
Gain on sale of equipment 19,893 -
(469,766) (372,504)
INCOME BEFORE INCOME TAXES 819,595 368,342
INCOME TAX PROVISION (BENEFIT) (579,644) 95,755
NET EARNINGS $ 1,399,239 $ 272,587
EARNINGS PER COMMON SHARE:
Primary earnings $ .27 $ .05
Fully diluted earnings $ .24 $ .05
See accompanying notes.
<PAGE>
AVIATION EDUCATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS AND CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Per Common Stock Additional
Share TREASURY STOCK $.01 PAR VALUE Paid-In Accumulated
AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
<S> <C> <C> <C> <C> <C> <C> <C>
Balance (deficit) at July 1, 1994 - $ - 5,413,901 $ 54,139 $11,495,681 $(6,283,908)
Net earnings - - - - - - 272,587
Balance (deficit) at June 30, 1995 5,413,901 54,139 11,495,681 (6,011,321)
Redemption of shares 1.24 1,018,410 1,264,000 - - - -
Reissuance of shares 1.20 (500,000) (600,000) - - - -
Reissuance of shares 1.40 (232,500) (309,143) - - 16,357 -
Net earnings - - - - - 1,399,239
Balance (deficit) at June 30, 1996 285,910 $ 354,857 5,413,901 $ 54,139 $11,512,038 $(4,612,082)
</TABLE>
See accompanying notes.
<PAGE>
AVIATION EDUCATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1996 AND 1995
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,399,239 $ 272,587
Adjustments to reconcile net earnings
to net cash provided by continuing
operations:
Depreciation and amortization 591,130 652,016
Bad debt (5,835) -
Deferred income tax benefit (515,274) (80,406)
Gain on disposal of equipment (19,893) -
Changes in operating assets and
liabilities:
Increase in accounts receivable (3,666,066) (377,317)
Increase in inventory (3,093,598) (639,831)
(Increase) decrease in other assets (3,284) 249
Increase (decrease) in accounts
payable 2,188,741 (152,237)
Increase in accrued expenses 429,616 751,371
(Decrease) increase in income
taxes - current (118,120) 151,810
Net cash provided by (used by) operations (2,813,344) 578,242
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment 19,893 -
Purchases of equipment (80,645) (134,954)
Net cash used in investing activities (60,752) (134,954)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments on) short-term debt 3,185,013 (263,681)
Proceeds from long-term debt 1,000,000 833,276
Payments on long-term debt (557,267) (298,496)
Proceeds from issuance of treasury stock, less
related receivable 264,000 -
Purchase of treasury stock (1,264,000) -
Net cash provided by financing activities 2,627,746 271,099
(Decrease) increase in cash and cash equivalents (246,350) 714,387
Cash and cash equivalents at beginning of period 1,951,004 1,236,617
Cash and cash equivalents at end of period $ 1,704,654 $1,951,004
SUPPLEMENTARY INFORMATION:
Cash paid during the year for:
Interest expense $ 593,122 $ 491,532
Income taxes 60,251 10,405
Non-cash transactions
Long-term capital leases 251,623 -
Conversion of inventory to equipment 60,150 -
See accompanying notes.
<PAGE>
AVIATION EDUCATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
1. THE COMPANY'S BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
BUSINESS OPERATIONS AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Aviation
Education Systems, Inc., and its wholly-owned subsidiaries, BARTON ATC, Inc.
(Barton), BARTON ATC International, Inc. (Barton Int'l), Southeastern
Technology, Inc. (Southeastern), and Titan Services, Inc. (Titan). All
significant intercompany accounts and transactions have been eliminated.
The Company changed its name from Aviation Education Systems, Inc. to SETECH,
Inc., effective August 6, 1996.
Barton (acquired in 1990) and Barton Int'l (organized in 1995) provide air
traffic control and weather observation and forecasting services under
contracts with the FAA and other federal, state and local governments and
agencies, which expire periodically through February, 2001 and are subject to
cancellation under certain conditions as defined in the individual contracts.
Barton also designs, constructs and sells certain air traffic control
equipment.
Southeastern and Titan (both acquired in 1993) provide highly sophisticated
industrial "integrated supply", including proprietary spare parts, procurement
and inventory management and machining services.
Industry segment information is summarized as follows:
IN THOUSANDS
INDUSTRIAL SUPPORT GOVERNMENT SERVICES
1996 1995 1996 1995
Operating revenue:
Single customers (revenues in
excess of 10% of sales):
Federal government
and agencies $ - $ - $ 7,429 $ 4,317
Automotive 4,425 4,482 - -
Aircraft 2,688 1,351 - -
Medical instruments 1,993 2,014 - -
Total operating
revenues 12,725 9,502 8,262 5,057
Earnings from operations 1,224 284 143 129
Total assets 15,546 9,739 2,706 2,161
Depreciation and amortization 349 368 247 299
Capital expenditures 301 103 27 24
The Company is currently negotiating the possible sale of its government
services operations.
<PAGE>
The award of certain long-term government service contracts and the continuing
expansion of the Company's industrial support business base have resulted in
substantial current and future incremental taxable income. The Company's net
operating loss (NOL) deductions are available to reduce such income. Very
substantial tax benefits have been recognized in the financial statements,
under the provisions of FASB Statement 109 since the realization of the tax
benefits of these NOL deductions is now expected and the related allowance for
valuation of the benefits has been reduced accordingly (Note 13).
Pro forma operating information, assuming these benefits had been recognized as
the related NOL's occurred (prior to 1994), follows:
YEAR ENDED JUNE 30
1996 1995 1994
Income (loss) before income taxes $819,595 $368,342 $(317,431)
Income tax provision (excluding
change in allowance for
valuation of deferred tax
benefits) 489,704 210,262 48,619
Pro-forma net earnings $329,891 $158,080 $(366,050)
The adjusted income tax provisions noted above are high in relation to income
due to nondeductible amortization and other permanent timing differences
associated with the Company's operations (Note 13).
INVENTORIES
Inventories are generally stated at the lower of cost (first-in, first-out) or
market.
DEPRECIATION AND AMORTIZATION
Additions to property, plant and equipment are recorded at cost when placed in
service. Maintenance and repairs are charged to expense as incurred.
Depreciation, recognized over the estimated useful lives (five to fifteen
years) of the related assets, is calculated using primarily the straight-line
method for financial reporting purposes and prescribed methods for income tax
purposes.
Cost of businesses acquired, in excess of the estimated fair value of the
related tangible assets, is being amortized over the estimated benefit periods
(five to ten years).
<PAGE>
REVENUE AND EXPENSE RECOGNITION
Government service contract revenues are recognized in accordance with the
terms of the fixed price contracts in place at each facility. Customers are
billed monthly pursuant to the respective underlying contracts. Such billings
are reflective of the incurrence of cost related to each contract.
Revenue from fixed price purchase orders for specialized tools and machinery
is recognized as the job progress, measured by the percentage of direct and
indirect cost incurred to date to estimated total costs. Recognized profits on
uncompleted contracts are not material in relation to the Company's
consolidated operations.
Revenues from procurement and inventory management services are recognized as
fixed fees and incentives are earned. Reimbursements are recognized as related
expenses are incurred. Customers' parts, subject to indemnification based upon
approved specifications and prices ($21,813,205 in 1996 and $13,059,750 in
1995) are excluded from revenues and related costs.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers cash on hand and in
demand deposits, and those investments which are a part of its short-term (less
than three months) cash management activities to be cash equivalents.
FINANCIAL INSTRUMENTS
Carrying values of the Company's financial instruments (cash and cash
equivalents, accounts and notes receivable, notes payable and accounts payable
and accrued expenses) approximate fair value due to their market-based interest
rates and/or relatively short maturities.
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of demand cash deposits and trade accounts
receivable. Cash deposits exceeded federal deposit insurance coverage by
approximately $2,376,000 at June 30, 1996.
Trade accounts receivable include amounts due from nine major customers of
$5,653,000. Such trade accounts include concentrations in the aviation,
automobile and medical instrument industries and the federal government.
<PAGE>
INCOME TAXES
In 1994, the Company adopted FASB Statement No. 109, Accounting for Income
Taxes, which requires an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between the financial statement and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in
deferred tax assets and liabilities.
EARNINGS PER SHARE
Earnings per share have been computed based on the weighted average number of
common shares. Conversion shares (convertible subordinated bonds) are included
in the computation of fully diluted earnings per share. 1995 earnings per
share has been adjusted to reflect the reverse stock split effective June 30,
1996 (Note 2).
RECLASSIFICATION OF FINANCIAL STATEMENT PRESENTATION
Certain reclassifications have been made to the 1995 financial statements to
conform with the 1996 presentation.
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.
2. STOCKHOLDERS' EQUITY TRANSACTIONS
On February 28, 1996, the Company repurchased the 20,368,200 shares held by a
former executive for $1,264,000. The Company subsequently reissued 14,650,000
of these treasury shares to certain officers, affiliates and existing
shareholders for $925,500. Stock subscriptions receivable represent payments
in transit on June 30, 1996 for the reissuance of shares. Subsequent to year
end, a director acquired 75,000 (after reverse stock split) shares for
$105,000.
Effective June 30, 1996, the Company declared a reverse stock split converting
each 20 then existing shares into one share. The financial statements have
been restated for the effects of such reverse stock split.
<PAGE>
Management, based on opinion of legal counsel, believes that 26,500 (after
reverse stock split) shares of the Company's common stock were improperly
issued to a past officer. The Company is currently considering the
cancellation of these shares.
3. INVENTORY
Inventory consists of the following:
1996 1995
Finished goods, primarily parts
purchased under procurement contracts $7,530,264 $4,878,681
Contracts in process 1,559,523 1,377,612
Raw materials 433,834 233,880
$9,523,621 $6,490,173
4. PROPERTY AND EQUIPMENT
Property and equipment, at cost, consist of the following:
1996 1995
Machinery and equipment $3,081,458 $2,714,138
Furniture and fixtures 486,106 485,274
Vehicles 102,407 102,407
Leasehold improvements 195,765 179,050
3,865,736 3,480,869
Less accumulated depreciation and
amortization 2,737,729 2,423,268
$1,128,007 $1,057,601
Depreciation expense totaled $322,012 in 1996 and $343,386 in 1995.
Certain property and equipment is pledged as collateral (Notes 6 and 8).
<PAGE>
5. ACCRUED EXPENSES
Accrued expenses consist of the following:
1996 1995
Employees' compensation and benefits $1,474,224 $1,005,871
Customer deposits 357,944 488,352
Miscellaneous 283,903 192,232
$2,116,071 $1,686,455
6. NOTES PAYABLE - FINANCIAL INSTITUTIONS
The Company maintains an $8,000,000 revolving line of credit from a local
financial institution for the purpose of financing parts purchased under
customers' procurement contracts. Interest (LIBOR rate plus 2.50%) (8.25% at
June 30, 1996) is payable monthly. The note matures on January 31, 1997. The
balance at June 30, 1996 is $7,479,044.
The Company also maintains revolving lines of credit totalling $800,000 at
local financial institutions. Interest (published base rate plus 1%) is
payable monthly. The lines mature annually. Balances due on these notes at
June 30, 1996 total $490,000.
The Company has a standby letter of credit associated with a contract bid for
$45,000 which expires November 1, 1996.
Inventories, receivables, property and equipment, and life insurance pledged as
collateral at June 30, 1996 totaled $9,302,796, $5,555,469, $571,265 and
$16,225 respectively.
The revolving credit lines contain covenants regarding certain financial
statement amounts, ratios and activities of the Company and its subsidiaries.
At June 30, 1996, the Company was in compliance with such covenants.
<PAGE>
7. LONG-TERM DEBT
Long-term debt as of June 30, 1996, consists of the following balances:
Note payable to bank, due in monthly
installments of principal and interest
of $3,850. Interest at the bank's prime
rate plus 1% (9.25% as of June 30, 1996)
not to exceed 10.5%. Note is due
October 1,1998, and is collateralized
by net assets approximating $1,242,000. $ 178,833
Convertible ($1.00 to $1.06 per share)
subordinated debentures - principal and
8% interest due in installments
totalling $161,024 per year. 565,291
Convertible ($1.20 per share) subordinated
debentures - principal due in three equal
annual installments of $333,334 and 8%
interest due annually. 1,000,000
1,744,124
Less current portion 566,943
$1,177,181
The Company's debentures are subordinated to other indebtedness. Outstanding
principal and accrued interest is convertible to the Company's common stock
only in case of default.
Annual maturities of long-term debt are summarized as follows:
YEAR ENDING JUNE 30,
1997 $ 566,943
1998 500,764
1999 591,582
2000 48,280
2001 36,555
$1,744,124
<PAGE>
8. CAPITAL LEASE OBLIGATIONS
The Company leases certain manufacturing equipment under capital leases.
Related cost and accumulated depreciation total $251,624 and $22,328,
respectively as of June 30, 1996. Monthly installments, including interest
(9.1% to 9.5%), total $6,281 and extend through August, 1999 and March, 2000.
The future minimum lease payments required under the capital leases at June 30,
1996 are summarized as follows:
1997 $ 75,374
1998 75,374
1999 75,374
2000 21,642
247,764
Less amount representing interest 34,850
212,914
Less current portion 58,189
$154,725
9. EARNING PER SHARE
Earnings per share were computed as follows:
1996 1995
Primary earnings per share:
Net earnings $1,399,239 $ 272,587
Weighted average common shares
outstanding 5,158,850 5,413,901
$ .27 $ .05
Fully-diluted earnings per share:
Net earnings $1,399,239 $ 272,587
Interest charged to operations-
convertible subordinated
debentures (Note 7), less
related income taxes 47,207 41,260
1,446,446 313,847
Weighted average common shares
outstanding 5,158,850 5,413,901
Incremental common shares
assuming conversion of
subordinated debentures 947,025 994,627
6,105,875 6,408,528
$ .24 $ .05
Common shares have been restated for the effects of the twenty-to-one reverse
stock split (Note 2).
<PAGE>
10. COMMITMENTS
The Company rents certain facilities under an operating lease which expires
December 31, 2006. Related rentals totaled $26,159 in 1996 and $24,913 in
1995.
The Company rents procurement and warehousing facilities under short-term
leases at current annual costs approximating $118,000. Related rentals totaled
$92,084 in 1996 and $61,783 in 1995.
The Company rents certain inventory warehouse facilities under a three year
lease expiring in March 1998. This lease requires monthly payments of $4,515.
Related rentals totaled $54,182 in 1996 and $13,545 in 1995.
The Company rents certain machining facilities under a ten year noncancelable
operating lease expiring July 31, 1998. The current annual lease payments are
$87,319. The lease agreement calls for adjustments based upon the consumer
price index. Rentals paid under this lease totaled $87,319 in 1996 and $81,318
in 1995.
The Company rents certain warehouse equipment under 60 month operating leases.
The leases currently require monthly installments totaling $661.
Minimum future lease payments are estimated as follows:
YEAR ENDING JUNE 30,
1997 $260,349
1998 192,724
1999 51,511
2000 36,932
2001 36,310
Thereafter 215,524
$793,350
11. WAGE DEFERRAL PLAN
The Company established a qualified 401(k) wage deferral plan on March 15,
1994, whereby eligible employees may defer certain compensation. Discretionary
employer contributions totaled $21,547 in 1996 and $19,821 in 1995.
<PAGE>
12. STOCK OPTION PLANS
In August, 1994, the Company approved stock option plans for officers, key
executives and directors, which provide for non-qualified and qualified stock
options. A Compensation Committee has been established by the Board of
Directors to oversee the stock option plans. The committee will determine
option prices (which will not be less than the par value of the common stock).
Options will vest over a period of four years and expire either three months
after termination of employment, or ten years after date of grant. The Company
registered up to 5,000,000 shares of its common stock for future issuance under
these plans. There are currently no options outstanding.
13. INCOME TAXES
Deferred income taxes as of June 30, 1996 and 1995, are summarized as follows:
1996 1995
Deferred tax assets:
Accrued costs and expenses
subject to "economic performance"
income tax limitations $ 250,598 $ 85,290
Inventory costs 12,217 13,631
Net operating loss deductions 831,483 1,597,577
1,094,298 1,696,498
Less valuation allowance for future
realization 6,707 1,076,055
1,087,591 620,443
Deferred tax liability - depreciation (151,911) (200,037)
Net deferred tax asset $ 935,680 $ 420,406
The Company's income tax benefits (provisions) for the years ended June 30,
1996 and 1995, are summarized as follows:
1996 1995
Federal and state income taxes
currently payable $ 64,370 $(176,161)
Deferred income taxes:
Current timing differences (554,074) (34,101)
Adjustment to beginning
valuation allowance 1,069,348 114,507
515,274 80,406
$ 579,644 $ (95,755)
<PAGE>
Management anticipates, based upon the Company's established long-term
government service contracts and expanded industrial support business, that
future incremental earnings will exceed available net operating loss
deductions. (This determination represents an estimate critical to the
Company's reported operations.) Related adjustments have been made to the
valuation allowance (as of July 1, 1993) for realization of these tax benefits.
A reconciliation of the Company's statutory federal and effective income tax
rates follows:
1996 1995
Income taxes at statutory federal
income tax rate of 34% - net benefit $ 278,662 $ 125,236
State income taxes, net of federal
tax deduction 32,456 11,583
Amortization of cost in excess of
net assets acquired 90,246 90,246
Change in valuation allowance (1,069,348) (153,431)
Miscellaneous 88,340 22,121
Net income tax (benefit) $ (579,644) $ 95,755
Net operating loss deductions, available to reduce taxable income of future
years, are summarized as follows:
Year Federal State
of Income Income
EXPIRATION TAXES TAXES
2003 $ 821,941 $ -
2004 536,306 -
2005 990,399 -
2006 1,384,338 -
2007 786,021 34,190
2008 197,147 -
$4,716,152 $34,190
These net operating loss deductions are subject to certain limitations with
respect to separate company operations and ownership continuity. Management
believes, based upon opinion of legal counsel, that the company has complied
with these requirements and the realization of the deductions is probable.
<PAGE>
14. LOSS CONTINGENCY
On May 15, 1995, an employee of BARTON ATC, Inc. filed a complaint alleging
violation of Title VII of the Civil Rights Act of 1964, by reason of gender
based discrimination. Management believes these charges to be entirely without
merit and has so responded to the Equal Employment Opportunity Commission.
Management believes this claim will have no material adverse impact on the
Company's operations.
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Company's directors and executive officers are as follows:
NAME, AGE AND POSITION
BIOGRAPHICAL DATA
Mr. Thomas N. Eisenman (46)
President and CEO
Director
Mr. Eisenman was elected President and CEO of the Company in February
1996. He is also the Chief Executive Officer of both Southeastern and
Titan, positions he has held since June, 1995. He is a Director of the
Company and all of its subsidiaries except BARTON. He is the President of
BARTON Intn'l. He serves as a member of the Executive Committee of the
Company's Board of Directors. Mr. Eisenman founded and served as President
of Southeastern. He has also held the position of President of Titan
Services, Inc. and served on the Board of Directors of SEtech, Inc. prior
to the Company's acquisition in 1993 of SEtech. He worked with Kennametal,
Inc. in the area of Technical Representation, Technical Sales, and
Manufacturing Management. He also served as a manufacturing engineer for
Teledyne Firth Sterling. Mr. Eisenman holds a Bachelor of Arts degree in
Natural Sciences from Slippery Rock University.
Cindy L. Rollins (32)
Secretary, Treasurer, Director
Vice President and CFO
Ms. Rollins is Vice President, Chief Financial Officer and a Director of
the Company and of each of its four subsidiaries. Ms. Rollins became
Secretary and Treasurer of the Company in July 1992. She became Chief
Financial Officer of the Company on September 1, 1993. Ms. Rollins was
employed, in June 1986, by BARTON, where she had various finance and
accounting positions. Ms. Rollins has served continuously as a member of
the Board of Directors of the Company since August 13, 1992. She is a
member of the Executive Committee of the Company's Board of Directors. Ms.
Rollins holds a BBA in Accounting from Middle Tennessee State University.
Mr. William J Ballard (54)
Director
Mr. Ballard was elected as a member of the Board of Directors of the
Company on April 25, 1996 by a vote of the Board to fill the vacancy
created by the resignation of Robert W. Lynch, Jr. Mr. Ballard is the
Chairman and Chief Executive Officer (since March 1993) of Children's
Comprehensive Services, Inc., a public company engaged in the business of
juvenile education and treatment. Previously, he served as President of
Paladin Capital and President of Major Safe Company, Inc. Mr. Ballard
holds a B.S. from Middle Tennessee State University and an M.B.A. from the
University of Chicago.
Mr. Hans R. Buser (48)
Director
Mr. Buser is a lawyer and certified accountant with degrees in Law (1972)
from the University of Basel, Switzerland; and in Accounting (1982) from
the Audit School of Basel, Switzerland. Mr. Buser has held positions in
the Swiss financial community and in the government of Switzerland. He is
presently serving as a Vice President in the Audit Division of ATAG Ernst
& Young of Basel, Switzerland. Mr. Buser currently serves as a member of
the Environmental Committee of the City of Wallbach, Switzerland.
Mr. Peter Joss (53)
Director
Mr. Joss holds a Bachelor of Business Administration and a Masters Degree
in Economics from the St-Gall School of Economics, Switzerland. From 1969
to 1971 Mr. Joss worked at the Institute of Tourism and Transport at the
St-Gall School of Economics and from 1971 to 1973 was responsible for
transport and tourism matters in the cantonal government of St-Gall. Mr.
Joss held, from 1973 until 1980, a post with the Federal Transit
Authority, in Bern, where he was responsible for public finance of the
Swiss railroad system. Following that assignment, from 1980 until 1988,
he served as the Vice President, Finance, of the Swiss Federal Transit
Authority. Since 1988, Mr. Joss has served as the Chief Executive Officer
of Mittelthurgaubahn, a Swiss railroad, and as the Chairman of the Board
of Directors of both Reiseburo Mittelthurgau and Hotel Thurgauerhof,
Weinfelden. He is currently a member of the Board of Directors of several
Swiss and French companies.
Mr. Martin Oester (39)
Director
Mr. Oester is an economist with degrees in Economics from the University
of Neuchatel and in Education from the Teachers Training College in Spiez,
Switzerland. Mr. Oester has taught, both at the secondary and post
secondary levels; served the Swiss Railway Union as an advisor in economic
affairs and transportation policy and, since 1989, has been Investment
Manager for, and Vice President of, Pensionskasse der ASCOOP, a Swiss
pension fund. Pensionskasse der ASCOOP is the largest single holder of the
Company's capital stock.
The Board of Directors is authorized to have up to seven members; the board
currently consists of six Directors. The directors are annually elected for a
one year term by the stockholders. The Board of Directors is authorized to fill
any interim vacancy.
Messrs. Buser, Oester and Joss comprise the three members of the Compensation
Committee of the Board of Directors of the Company.
Anthony Morriello serves as President of Southeastern. Richard Hulbert is
the President of Titan. Travis L. Pierson is President of BARTON. Mr. Pierson,
Jerry L. Allen, Jerry C. Mitchell and Edgar B. McClung comprise the four member
Defense Security Committee of BARTON. The members of BARTON's Compensation
Committee are Messrs. Allen, Mitchell and McClung.
The management of the Company is presently ascertaining the obligations and
status thereof of the stock ownership reports under Section 16(a) of its
officers, directors and holders of 10% or more of any class of its capital
stock and will promptly take action to remediate any delinquencies.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth the cash compensation paid for services
rendered in all capacities to the Company during its fiscal year ended June 30,
1996, to each executive officer of the Company whose cash compensation exceeded
$100,000 in such fiscal year.
Annual Compensation
(in $)
Name and Capacity in which
Remuneration was Received Year Salary Bonus Other
Thomas N. Eisenman 1996 94,846 27,900 -0-
President and CEO 1995 67,308 -0- -0-
1994 100,000 -0- -0-
Robert W. Lynch, Jr.(1) 1996 87,500 -0- -0-
1995 150,000 -0- -0-
1994 150,000 -0- -0-
(1) Mr. Lynch resigned as Chief Executive Officer and a Director of the
Company and all other offices with the Company and its four subsidiaries on
January 31, 1996. Compensation includes amounts received from July 1, 1995
through the date of his resignation.
Messrs. Hulbert, Morriello and Pierson and Ms. Rollins have employment
agreements with the Company or one of its four subsidiaries. The term of the
employment agreements for Rollins, Pierson, and Hulbert expires August 31,
1998. Mr. Morriello's contract expires January 29, 1997.
Each member of the Board of Directors of the Company who are not employees of
the Company or any of its subsidiaries receives a quarterly director's fee of
$400.
See Item 12 (below), "Certain Relationships and Related Transactions," of
this Annual Report on Form 10-KSB for a description of the purchases of Company
common stock by Mr. Eisenman, Mr. Hulbert and certain members of the Board of
Directors during the fiscal year ended June 30, 1996.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
PRINCIPAL STOCKHOLDERS
The table below sets forth information regarding the beneficial ownership of
the Common Stock, as of the date hereof and giving effect to the June 30, 1996
reverse stock split, by (i) each person known to the Company to be the
beneficial owner of more than 5% of the outstanding shares of Common Stock,
(ii) each director and executive officer of the Company and (iii) all directors
and executive officers of the Company as a group. Unless otherwise indicated,
each of the stockholders listed below has sole voting and investment power with
respect to the shares beneficially owned.
Name and Address Amount and
Class Of Beneficial Owner Nature of Beneficial Owner Percent of Class
Common William J Ballard 75,000 1.5%
805 South Church
Murfreesboro, Tennessee 37130
Common Hans R. Buser 100,000 2.0%
Aeschengraben 9
Postfach 2149
CH-40002, Basel, Switzerland
Common Thomas N. Eisenman 324,016 6.2%
905 Industrial Drive
Murfreesboro, Tennessee 37130
Common Peter Joss 75,000 1.5%
Schutzenstrasse 15
CH-8570, Weinfelden, Switzerland
Common Martin Oester 2,500 0.05%
Beundenfeldstrasse 5
Postfach 694, 3000 Bern, Switzerland
Common Cindy L. Rollins -0- 0.0%
905 Industrial Drive
Murfreesboro, Tennessee 37130
Common Pensionskasse der ASCOOP 2,655,045 51.0%
Beundenfeldstrasse 5
Postfach 694, 3000 Bern, Switzerland
Common Spida-Ausgleichskassen 1,279,205 24.6%
Bergstrasse 21
8044 Z<u">rich, Switzerland
Common All officers and directors
as a group (6 persons)(1) 576,516 11.1%
(1) Excludes shares owned by Pensionskasse der ASCOOP, the employer of
Mr. Oester, a Director of the Company, and with whom Mr. Joss has an
affiliation; and excludes shares owned by Spida-Ausgleichskassen with whom
Mr. Buser, a Director, has an affiliation.
See Item 12 (below), "Certain Relationships and Related Transactions," of
this Annual Report on Form 10-KSB for a description of the purchase by the
Company of all the Company's shares owned by its former chief executive
officer, Robert W. Lynch, Jr., in February 1996 and the sale (and use of
proceeds thereof) of certain securities of the Company during the fiscal year
ended June 30, 1996 to certain members of its Board of Directors.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On July 11, 1994, the Company issued $430,000 in convertible subordinated
debentures (convertible, in the event of default, at the lesser of five ($0.05)
cents or the most recent market price per share of common stock) to three major
stockholders, including Robert W. Lynch, Jr., then the Chief Executive Officer
and President of the Company. The debentures are to be repaid, from cash flow,
in five equal annual installments of $107,696 including interest at 8%. The
proceeds of the debentures were used to fund current operations and various
expansion projects.
On September 14, 1994, the Company issued $100,000 in convertible (in the
event of default) subordinated debentures to a major stockholder. These
debentures are to be repaid on September 13, 1995, with interest payable
monthly at a rate of 6%. The proceeds of these debentures were used to fund
the BARTON Mobile Air Traffic Control Tower project and, as a subsequent event,
were repaid on September 1, 1995, from funds generated from the sale of the
Mobile Tower.
On October 5, 1994, the Company issued $200,000 in convertible (in the event
of default) subordinated debentures to a major stockholder. These debentures
are to be repaid on October 4, 1995, with interest payable monthly at a rate of
6%. The proceeds of these debentures were used to finance the initial
operations of JBI (subsequently BARTON Intn'l). On September 1, 1995 the
Company caused these debentures to be repaid and replaced with a more
conventional working capital line of credit.
Effective January 31, 1996, Robert W. Lynch, Jr., resigned as the President
and Chief Executive Officer of the Company, and from all other offices and
positions with the Company and its subsidiaries. Pursuant to an agreement
between Mr. Lynch and the Company, the Company purchased all of Mr. Lynch's
stock ownership in the Company, aggregating 20,368,200 shares, for a
purchase price of $1,264,000.
In February 1996 the Company offered 10,000,000 shares of such stock at a
price of $.06 per share to key members of management. On February 28, 1996,
pursuant to the Company's offer, Mr. Eisenman acquired 2,200,000 shares for
$132,000 ($0.06 per share) and Richard Hulbert, the President of Titan, also
acquired 2,200,000 shares for $132,000. The Company utilized the $264,000 to
repurchase a portion of the shares held by Lynch and funded the balance of the
purchase of shares held by Lynch by the issuance to Pensionskasse der ASCOOP
and Spida-Ausgleichskassen, the Company's largest two shareholders, of $500,000
each in convertible subordinated debentures (convertible in the event of
default at $.06 per share of common stock) maturing in three years.
The Company in May 1996 registered up to 5,000,000 shares of its common stock
with the Securities and Exchange Commission for future issuance in accordance
with the terms and conditions of two Employee Stock Option Plans (an incentive
stock option plan and a non-qualified stock option plan) disclosed in Note 12
of the June 30, 1996 financial statements included in this Form 10-KSB. As of
September 16, 1996, no options had been granted under the Plans. Copies of
these Plans are included in two Form S-8 registration statements filed by the
Company with the Commission in May 1996.
On June 28, 1996 (prior to the June 30, 1996 effectuation of the 20 - 1
reverse stock split) Directors Buser and Joss each purchased 1,500,000 shares
of the Company common stock at a price of $0.07 per share. Director Oester
purchased 50,000 shares at $0.07 per share. Peter Schuler, an affilate of
Spida-Ausgleichskassen, and Jean-Claude Duby, an affiliate of Pensionskasse der
ASCOOP (the largest shareholder of the Company) also purchased 1,500,000 and
100,000 shares, respectively, of the Company common stock on June 28, 1996 at
the same price per share. On the same date Mr. Eisenman and Mr. Hulbert each
acquired 2,800,000 shares of the Company common stock at a price of $0.06 per
share. The aggregate price of these seven stock purchases equalled $661,500.
The Company will apply the proceeds of these stock sales to pay some of the
indebtedness incurred when it purchased in February 1996 all the shares of
Company common stock owned by Mr. Lynch.
In August 1996 (after effectuation of the reverse stock split) Director
William J Ballard purchased 75,000 shares of Company common stock at a price of
$1.40 per share (an aggregate purchase price of $105,000). The Company will
apply the proceeds to pay Company indebtedness. The Company and Mr. Eisenman
are in negotiations regarding the terms and conditions of an award of 30,000
shares (after effectuation of the reverse stock split) preliminarily granted to
Mr. Eisenman by the Company as additional compensation.
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits
Exhibit Number Description
EX-3.(i) Articles of Incorporation, SETECH, INC.
EX-3.(ii) Amended and Restated By-Laws, SETECH, INC.
EX-4.1 Loan Agreement among Titan Services, Inc., Southeastern
Technology, Inc., Aviation Education Systems, Inc. and
NationsBank of Tennessee
EX-4.2 Guaranty of Aviation Education Systems of subsidiary
indebtedness obligations to NationsBank of Tennessee
EX-10.1 Employment Agreement of Cindy L. Rollins
EX-10.2 Employment Agreement of Richard R. Hulbert
EX-10.3 Employment Agreement of Anthony Morriello
EX-10.4 Employment Agreement of Travis L. Pierson
EX-10.5 Agreement between Company and Robert W. Lynch, Jr.
EX-10.6 Incentive Stock Option Plan (Incorporated by Reference to Form
S-8 Registration Statement filed May 21, 1996, effective June 9,
1996, Commission file number 333-04143)
EX-10.7 Nonqualified Stock Option Plan (Incorporated by Reference to
Form S-8 Registration Statement filed May 21, 1996, effective
June 9, 1996, Commission file number 333-04147)
EX-10.8 Agreement between BARTON ATC International, Inc. and the U.S.
Federal Aviation Administration
EX-21 Subsidiaries of SETECH, INC.
EX-27 Financial Data Schedule
b) The Registrant filed no Current Reports on Form 8-K during the last
quarter of the fiscal year ended June 30, 1996.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
(Registrant) SETECH, INC.
By: (Signature and Title) /s/THOMAS N. EISENMAN
Thomas N. Eisenman, President and CEO
Principal Executive Officer
Date: September 26, 1996
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By: (Signature and Title) /s/THOMAS N. EISENMAN
Thomas N. Eisenman, President, CEO and Director
Date: September 26, 1996
By: (Signature and Title) /s/CINDY L. ROLLINS
Cindy L. Rollins, Secretary, Vice President,
CFO and Director; Chief Financial Officer
and Chief Accounting Officer
Date: September 26, 1996
By: (Signature and Title) /s/WILLIAM J BALLARD
William J Ballard, Director
Date: September 26, 1996
By: (Signature and Title) /s/HANS R. BUSER
Hans R. Buser, Director
Date: September 26, 1996
By: (Signature and Title) /s/PETER M. JOSS
Peter M. Joss, Director
Date: September 26, 1996
By: (Signature and Title) /s/MARTIN A. OESTER
Martin A. Oester, Director
Date: September 26, 1996
<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH
REPORTS FILED PURSUANT TO SECTION 15(D) OF THE
EXCHANGE ACT BY NON-REPORTING ISSUERS
No annual report with respect to the registrant's last fiscal year nor any
proxy material with respect to any annual or other meeting of security-holders
has been sent to security-holders.
<PAGE>
EXHIBIT 3.(i)
CERTIFICATE OF INCORPORATION
OF
HIGH POINT VENTURES, INC.
The undersigned, being of legal age, in order to form a corporation
under and pursuant to the laws of the State of Delaware, does hereby set
forth as follows:
FIRST: The name of the corporation is
HIGH POINT VENTURES, INC.
SECOND: The address of the initial registered office and registered
agent in this state is c/o United Corporate Services, Inc., 410 South State
Street, in the City of Dover, County of Kent, State of Delaware 19901 and
the name of the registered agent at said address is United Corporate
Services, Inc.
THIRD: The purpose of the corporation is to engage in any lawful
act or activity for which corporations may be organized under the
corporation laws of the State of Delaware.
FOURTH: The corporation shall be authorized to issue the following
shares:
CLASS NUMBER OF SHARES PAR VALUE
COMMON 15,000,000 $.01
FIFTH: The name and address of the incorporator are as follows:
NAME ADDRESS
Ray A. Barr 9 East 40th Street
New York, New York 10016
SIXTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the corporation, and for
further definition, limitation and regulation of the powers of the
corporation and its directors and stockholders:
(1) The number of directors of the corporation shall be such as
from time to time shall be fixed by, or in the manner provided in the
By-Laws. Election of directors need not be by ballot unless the By-
Laws so provide.
(2) The Board of Directors shall have power without the assent to
vote of the stockholders:
(a) To make, alter, amend, change, add to or repeal the By-
Laws of the corporation; to fix and vary the amount to be
reserved for any proper purpose; to authorize and cause to be
executed mortgages and liens upon all or any part of the property
of the corporation; to determine the use and disposition of any
surplus or net profits; and to fix the times for the declaration
and payment of dividends.
(b) To determine from time to time whether, and to what
times and places, and under what conditions the accounts and
books of the corporation (other than the stockledger) or any of
them, shall be open to the inspection of the stockholders.
(3) The directors in their discretion may submit any contract or
act for approval or ratification at any annual meeting of the
stockholders or at any meeting of the stockholders called for the
purpose of considering any such act or contract, and any contract or
act that shall be approved or be ratified by the vote of the holders
of a majority of the stock of the corporation which is represented in
person or by proxy at such meeting and entitled to vote thereat
(provided that a lawful quorum of stockholders be there represented in
person or by proxy) shall be as valid and as binding upon the
corporation and upon all the stockholders as though it had been
approved or ratified by every stockholder of the corporation, whether
or not the contract or act would otherwise be open to legal attack
because of directors' interest, or for any other reason.
(4) In addition to the powers and authorities hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the corporation; subject, nevertheless,
to the provisions of the statutes of Delaware, of this certificate,
and to any By-Laws from time to time made by the stockholders;
provided, however, that no By-Laws so made shall invalidate any prior
act of the directors which would have been valid if such By-Law had
not been made.
SEVENTH: No director shall be liable to the corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a
director, except with respect to (1) a breach of the director's duty of
loyalty to the corporation or its stockholders, (2) acts or omissions not
in good faith or which involve intentional misconduct or a knowing
violation of law, (3) liability under Section 174 of the Delaware General
Corporation Law or (4) a transaction from which the director derived an
improper personal benefit, it being the intention of the foregoing
provision to eliminate the liability of the corporation's directors to the
corporation or its stockholders to the fullest extent permitted by Section
102(b)(7) of the Delaware General Corporation Law, as amended from time to
time. The corporation shall indemnify to the fullest extent permitted by
Sections 102(b)(7) and 145 of the Delaware General Corporation Law, as
amended from time to time, each person that such Sections grant the
corporation the power to indemnify.
EIGHTH: Wherever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware, may, on the
application in a summary way of this corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers
appointed for this corporation under the provisions of Section 291 of Title
8 of the Delaware Code or on the application of trustees in dissolution or
of any receiver or receivers appointed for this corporation under the
provisions of Section 279 Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number representing
three-fourths (3/4) in value of the creditors or class of creditors, and/or
of the stockholders or class of stockholders of this corporation, as the
case may be, agree to any compromise or arrangement and to any
reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been
made, be binding on all the creditors or class of creditors, and/or on all
the stockholders or class of stockholders of this corporation, as the case
may be, and also on this corporation.
NINTH: The corporation reserves the right to amend, alter, change or
refusal any provision contained in this certificate of Incorporation in the
manner now or hereafter prescribed by law, and all rights and powers
conferred herein on stockholders, directors and officers are subject to
this reserved power.
IN WITNESS WHEREOF, the undersigned hereby executes this document and
affirms that the facts set forth herein are true under the penalties of
perjury this day of , 1987.
Ray A. Barr, Incorporator
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
HIGH POINT VENTURES, INC.
Under Section 242 of the
CORPORATION LAW OF THE STATE OF DELAWARE
HIGH POINT VENTURES, INC. (the "Corporation"), a corporation organized
and existing under and by virtue of the General Corporation Law of the
State of Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by written
unanimous consent filed with the minutes of the board, adopted the
following resolution proposing and declaring advisable the following
amendment to the Certificate of Incorporation of said corporation:
"1. That Article FIRST of the Certificate of Incorporation be amended
and, as amended, read as follows:
'FIRST: The name of the corporation is AVIATION EDUCATION SYSTEMS,
INC.'
SECOND: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of section 242 of the General Corporation Law of
the State of Delaware.
THIRD: Prompt notice of the taking of this corporate action is being given
to all stockholders who did not consent in writing, in"accordance with
Section 228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the corporation has caused this certificate to be
signed by Philip Wayne Elkins, its President, and attested by Louis Kelem,
its Secretary, this 21st day of August, 1987.
HIGH POINT VENTURES, INC.
By:
Philip Wayne Elkins, President
ATTEST:
By:
Louis Kelem, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF INCORPORATION OF
AVIATION EDUCATION SYSTEMS, INC.
Aviation Education Systems, Inc., a corporation organized and existing
under the laws of the State of Delaware, pursuant to Title 8. Section 242
of the General Corporation Law of be State of Delaware does hereby certify:
FIRST: That the board of directors of the corporation by written
consent filed with the minutes of the board adopted the following
resolution proposing and declaring advisable the following amendment to the
Certificate of Incorporation of the corporation;
1. That article FOURTH of the Certificate of Incorporation be
amended and, as amended, read as follows:
FOURTH: The corporation shall be authorized to issue
the following shares:
CLASS NUMBER OF SHARES PAR VALUE
COMMON 30,000,000 $.01
SECOND: That the aforesaid amendment was duly adopted by the directors
and shareholders in accordance with the applicable provisions of Section
242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Robert W. Lynch, Jr., its President, and attested by Cindy L.
Rollins, its Secretary, this 25th lay of November, 1992.
AVIATION EDUCATION SYSTEMS, INC.
By:
Robert W. Lynch, Jr., President
ATTEST:
By:
Cindy L. Rollins, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF INCORPORATION OF
AVIATION EDUCATION SYSTEMS, INC.
Aviation Education Systems, Inc., a corporation organized and existing
under the laws of the State of Delaware, pursuant to Title 8, Section 242
of the General Corporation Law of the State of Delaware, does hereby
certify:
FIRST: That the board or directors of the corporation, by written
consent filed with the minutes of the board adopted the following
resolution proposing and declaring advisable the following amendment to the
Certificate of Incorporation of the corporation:
1. That article FOURTH of the Certificate of Incorporation be
amended and, as amended, read as follows:
FOURTH: The corporation shall be authorized to issue
the following shares:
CLASS NUMBER OF SHARES PAR VALUE
COMMON 400,000,000 $.01
SECOND: That the aforesaid amendment was duly adopted by the directors
and shareholders in accordance with the applicable provisions of Section
242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Robert W. Lynch, Jr., its President, and attested by Cindy L.
Rollins, its Secretary, this 24th day of June, 1993.
AVIATION EDUCATION SYSTEMS, INC.
By:
Robert W. Lynch, Jr., President
ATTEST:
By:
Cindy L. Rollins, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF INCORPORATION
OF AVIATION EDUCATION SYSTEMS, INC.
Under Section 242 of the Corporation
LAW OF THE STATE OF DELAWARE
AVIATION EDUCATION SYSTEMS, INC. (the "Corporation") a corporation
organized and existing under and by virtue of the General corporation Law
of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, by written
unanimous consent filed with the minutes of the board, adopted the
following resolution proposing and declaring advisable the following
amendment to the Certificate of Incorporation of said corporation:
1. That Article FIRST of the Certificate of Incorporation, as
previously amended, be further amended to read as follows:
"FIRST: The name of the corporation is SETECH, INC."
SECOND: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Section 242 of the General corporation Law of
the State of Delaware.
THIRD: Prompt notice of the taking of this corporate action is being
given to all stockholders who did not consent in writing, in accordance
with Section 228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Thomas N. Eisenman, its President, and attested by Cindy L.
Rollins, its Secretary, this 9th day of August, 1996.
AVIATION EDUCATION SYSTEMS, INC.
By:
Thomas N. Eisenman, President
ATTEST:
By:
Cindy L. Rollins, Secretary
<PAGE>
EXHIBIT 3(ii)
AMENDED AND RESTATED BY-LAWS
OF
HIGH POINT VENTURES, INC.
(NOW NAMED SETECH, INC.)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office shall be
established and maintained at c/o United Corporate Services, Inc., 410
South State Street, Dover, Delaware 19901 and United Corporate Services,
Inc. shall be the registered agent of this corporation in charge thereof.
SECTION 2. OTHER OFFICES. The corporation may have other offices,
either within or without the State of Delaware, at such place or places as
the Board of Directors may from time to time appoint or the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. Annual meetings of stockholders for the
election of directors and for such other business as may be stated in the
notice of the meeting, shall be held at such place, either within or
without the State of Delaware, and at such time and date as the Board of
Directors, by resolution, shall determine and as set forth in the notice of
meeting. In the event the Board of Directors fails to so determine the
time, date and place of meeting, the annual meeting of stockholders shall
be held at the registered office of the corporation in Delaware.
If the date of the annual meting shall fall upon a legal holiday, the
meeting shall be held on the next succeeding business day. At each annual
meeting, the stockholders entitled to vote shall elect a Board of Directors
and they may transact such other corporate business as shall be stated in
the notice of the meeting.
SECTION 2. OTHER MEETINGS. Meetings of stockholders for any purpose
other than the election of directors may be held at such time and place,
within or without the State of Delaware, as shall be stated in the notice
of the meeting.
SECTION 3. VOTING. Each stockholder entitled to vote in accordance
with the terms of the Certificate of Incorporation and in accordance with
the provisions of these By-Laws shall be entitled to one vote, in person or
by proxy, for each share of stock entitled to vote held by such
stockholder, but no proxy shall be voted after three years from its date
unless such proxy provides for a longer period. Upon the demand of any
stockholder, the vote for directors and the vote upon any question before
the meeting, shall be by ballot. All elections for directors shall be
decided by plurality vote; all other questions shall be decided by majority
vote except as otherwise provided by the Certificate of Incorporation or
the laws of the State of Delaware.
A complete list of the stockholders entitled to vote at the ensuing
election, arrange in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
SECTION 4. QUORUM. Except as otherwise required by law, by the
Certificate of Incorporation or by these By-Laws, the presence, in person
or by proxy, of stockholders holding a majority of the stock of the
stockholders. In case a quorum shall not be present at any meeting, a
majority in interest of the stockholders entitled to vote thereat, present
in person or by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until the
requisite amount of stock entitled to vote shall be present. At any such
adjourned meeting at which the requisite amount of stock entitled to vote
shall be represented, any business may be transacted which might have been
transacted at the meeting as originally noticed; but only those
stockholders entitled to vote at the meeting as originally noticed shall be
entitled to vote at any adjournment or adjournments thereof.
SECTION 5. SPECIAL MEETINGS. Special meetings of the stockholders for
any purpose or purposes may be called by the President or Secretary, or by
resolution of the directors.
SECTION 6. NOTICE OF MEETINGS. Written notice, stating the place, date
and time of the meeting, and the general nature of the business to be
considered, shall be given to each stockholder entitled to vote thereat at
his address as it appears on the records of the corporation, not less than
ten nor more than fifty days before the date of the meeting. No business
other than that stated in the notice shall be transacted at any meeting
without the unanimous consent of all the stockholders entitled to vote
thereat.
Except as otherwise provided by the Certificate of Incorporation, any
action required to be taken at any annual or special meeting of
stockholders or any action which may be taken at any annual or special
meeting, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at
a meeting at which all shares entitled to vote thereon were present and
voted. prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM. The number of directors shall be
*__________. The directors shall be elected at the annual meeting of the
shareholders or, if a vacancy shall occur (by resignation, removal or
creation of additional directorship) by a majority of the Board of
Directors (even though less than a quorum remains).
*shall be not less than one nor more than seven directors.
SECTION 2. RESIGNATIONS. Any director, member of a committee or other
officer may resign at any time. Such registration shall be made in
writing, and shall take effect at the time specified therein, and if no
time be specified, at the time of its receipt by the President or
Secretary. The acceptance of a resignation shall not be necessary to make
it effective.
SECTION 3. VACANCIES. If the office of any director, member of a
committee or other officer becomes vacant, the remaining directors in
office, though less than a quorum by a majority vote, may appoint any
qualified person to fill such vacancy, who shall hold office for the
unexpired term and until his successor shall be duly chosen.
SECTION 4. REMOVAL. Any director or directors may be removed either
for or without cause at any time by the affirmative vote of the holders of
a majority of all the shares of stock outstanding and entitled to vote, at
a special meeting of the stockholders called for the purpose and the
vacancies thus created may be filled, at the meeting held for the purpose
of removal, by the affirmative vote of a majority in interest of the
stockholders entitled to vote.
SECTION 5. INCREASE OF NUMBER. The number of directors may be
increased by amended of those By-Laws by the affirmative vote of a majority
of the directors, though less than a quorum, or, by the affirmative vote of
a majority in interest of the stockholders, at the annual meeting or at a
special meeting called for that purpose, and by like vote the additional
directors may be chosen at such meeting to hold office until the next
annual election and until their successors are elected and qualify.
SECTION 6. POWERS. The Board of Directors shall exercise all of the
powers of the corporation except such as are by law, or by the Certificate
of Incorporation of the corporation or by these By-Laws conferred upon or
reserved to the stockholders.
SECTION 7. COMMITTEES. The Board of Directors may, by resolution or
resolutions passed by a majority of the whole board, designate one or more
committees, each committee to consist of two or more of the directors of
the corporation. The board may designate one or more directors as
alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of any member or such committee or committees, the member
or members thereof present at any such meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in
the place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, or in these By-Laws, shall ahve and may exercise all
the powers and authority of the Board of Directors in the management of the
business and affairs of the corporation, and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power of authority in reference to amending the
Cerificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange
of all or substantially allof the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the By-Laws of the corporation;
and unless the resolution, these By-Laws, or the Certificate of
Incorporation expressly so provide, no such committee shall have the power
or authority to declare a dividend or to authorize the issuance of stock.
SECTION 8. MEETINGS. The newly elected Board of Directors may hold
their first meeting for the purpose of organization and the transaction of
business, if a quorum be present, immediately after the annual meeting of
the stockholders; or the time and place of such meeting may be fixed by
consent, in writing, of all the directors.
Unless restricted by the incorporation document or elsewhere in these
By-laws, members of the Board of Directors or any committee designated by
such Board may participate in a meeting of such Board or committee by means
of conference telephone or similar communications equipment allowing all
persons participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at such
meeting.
Regular meetings of the Board of Directors may be scheduled by a
resolution adopted by the Board. The Chairman of the Board or the
President or Secretary may call, and if requested by any two directors,
must call special meeting of the Board and give five days' notice by mail,
or two days' notice personally or by telegraph or cable to each director.
The Board of Directors may hold an annual meeting, without notice,
immediately after the annual meeting of shareholders.
SECTION 9. QUORUM. A majority of the directors shall constitute a
quorum for the transaction of business. If at any meeting of the board
there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum is obtained, and no
further notice thereof need be given other than by announcement at the
meeting which shall be so adjourned.
SECTION 10. COMPENSATION. Directors shall not receive any stated
salary for their services as directors or as members of committees, but by
resolution of the board a fixed fee and expenses of attendance may be
allowed for attendance at each meeting. Nothing herein contained shall be
construed to preclude any director from serving the corporation in any
other capacity as an officer, agent or otherwise, and receiving
compensation therefor.
SECTION 11. ACTION WITHOUT MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting, if prior to such action
a written consent thereto is signed by all members of the board, or of such
committee as the case may be, and such written consent is filled with the
minutes of proceedings of the board or committee.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall be a
President, a Treasurer, and a Secretary, all of whom shall be elected by
the Board of Directors and who shall hold office until their successors are
elected and qualified. In addition, the Board of Directors may elect a
Chairman, one or more Vice-Presidents and such Assistance Secretaries and
Assistant Treasurers as they may deem proper. None of the officers of the
corporation need be directors. The officers shall be elected at the first
meeting of the Board of Directors after each annual meeting. More than two
offices may be held by the same person.
SECTION 2. OTHER OFFICERS AND AGENTS. The Board of Directors may
appoint such other officers and agents as it may deem advisable, who shall
hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board
of Directors.
SECTION 3. CHAIRMAN. The Chairman of the Board of Directors, if
one be elected, shall preside at all meetings of the Board of Directors and
he shall have and perform such other duties as from time to time be
assigned to him by the Board of Directors.
SECTION 4. PRESIDENT. The President shall be the chief executive
officer of the corporation and shall have the general powers and duties of
supervision and management usually vested in the office of President of a
corporation. He shall preside at all meetings of the stockholders if
present thereat, and in the absence or non-election of the Chairman of the
Board of Directors, at all meetings of the Board of Directors, and shall
have general supervision, direction and control of the business of the
corporation. Except as the Board of Directors shall authorize the
execution thereof in some other manner, he shall execute bonds, mortgages
and other contracts in behalf of the corporation, and shall cause the seal
to be affixed to any instrument requiring it and when so affixed the seal
shall be attested by the signature of the Secretary or the Treasurer or
Assistant Secretary or an Assistant Treasurer.
SECTION 5. VICE-PRESIDENT. Each Vice-President shall have such powers
and shall perform such duties as shall be assigned to him by the directors.
SECTION 6. TREASURER. The Treasurer shall have the custody of the
corporation funds and securities and shall keep full and accurate account
of receipts and disbursements in books belonging to the corporation. He
shall deposit all moneys and other valuables in the name and to the credit
of the corporation in such depositories as may be designated by the Board
of Directors.
The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors, or the President, taking proper vouchers
for such disbursements. He shall render to the President and Board of
Directors at the regular meetings of the Board of Directors, or whenever
they may request it, an account of all his transactions as Treasurer and of
the financial condition of the corporation. If required by the Board of
Directors, he shall give the corporation a bond for the faithful discharge
of his duties in such amount and with such surety as the board shall
prescribe.
SECTION 7. SECRETARY. The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and directors, and all other
notices required by the law or by these By-Laws, and in case of his absence
or refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the President, or by the directors, or stockholders,
upon whose requisition the meeting is called as provided in these By-Laws.
He shall record all the proceedings of the meetings of the corporation and
of the directors in a book to be kept for that purpose, and shall perform
such other duties as may be assigned to him by the directors or the
President. He shall have the custody of the seal of the corporation and
shall affix the same to all instruments requiring it, when authorized by
the directors or the President, and attest the same.
SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall
have such powers and shall perform such duties as shall be assigned to
them, respectively, by the directors.
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK. A certificate of stock, signed by
the Chairman or Vice-Chairman of the Board of Directors, if they be
elected, President or Vice-President, and the Treasurer or an Assistant
Treasurer, or Secretary or Assistant Secretary, shall be issued to each
stockholder certifying the number of shares owned by him in the
corporation. When such certificates are countersigned (1) by a transfer
agent other than the corporation or its employee, or, (2) by a registrar
other than the corporation or its employee, the signatures of such offices
may be facsimile.
SECTION 2. LOST CERTIFICATES. A new certificate of stock may be issued
in the place of any certificate theretofore issued by the corporation,
alleged to have been lost or destroyed, and the directors may, in their
discretion, require the owner of the lost or destroyed certificate, or his
legal representatives, to give the corporation against any claim that may
be made against it on account of the alleged loss of any such certificate,,
or the issuance of any such new certificate.
SECTION 3. TRANSFER OF SHARES. The shares of stock of the corporation
shall be transferrable only upon its books by the holders thereof in person
or by their duly authorized attorneys or legal representatives, and upon
such transfer the old certificate shall be surrendered to the corporation
by the delivery thereof to the person in charge of the stock and transfer
books and ledgers, or to such other person as the directors may designate,
by whom they shall be cancelled, and new certificates shall thereupon be
issued. A record shall be made of each transfer and whenever a transfer
shall be made for collateral security, and not absolutely, it shall be so
expressed in the entry of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE. In order that the corporation
may determine the stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, or to express consent
to corporate action in writing without a meeting, or entitled to receive
payment of any dividend or other distribution or allotment of any rights,
or entitled to exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any date, which shall not be more
than sixty no less than ten days before the date of such meeting, nor more
than sixty days prior to any other action. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders
shall apply to any adjournment of the meeting; provided, however, that the
Board of Directors may fix a new record date for the adjournment meeting.
SECTION 5. DIVIDENDS. Subject to the provisions of the Certificate
of Incorporation, the Board of Directors may, out of funds legally
available therefor at any regular or special meeting, declare dividends
upon the capital stock of the corporation as and when they deem expedient.
Before declaring any dividend there may be set apart out of any funds of
the corporation available for dividends, such sum or sums as the directors
from time to time in their discretion deem proper for working capital or as
a reserve fund to meeting contingencies or for equalizing dividends or for
such other purposes as the directors shall deem conducive to the interests
of the corporation.
SECTION 6. SEAL. The corporate seal shall be circular in form and
shall contain the name of the corporation, the year of its creation and the
words "Corporate Seal, Delaware, 1986". Said seal may be used by causing
it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
SECTION 7. FISCAL YEAR. The fiscal year of the corporation shall be
determined by resolution of the Board of Directors.
SECTION 8. CHECKS. All checks, drafts or other orders for the payment
of money, notes or other evidences of indebtedness issued in the name of
the corporation shall be signed by such officer or officers, agent or
agents of the corporation, and in such manner as shall be determined from
time to time by resolution of the Board of Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE. Whenever any notice is
required by these By-Laws to be given, personal notice is not meant unless
expressly so stated, and any notice so required shall be deemed to be
sufficient if given by depositing the same in the United States mail,
posted, prepaid, addressed to the person entitled thereto at his address as
it appears on the records of the corporation, and such notice shall be
deemed to have been given on the day of such mailing. Stockholders not
entitled to vote shall not be entitled to receive notice of any meetings
except as otherwise provided by Statute.
Whenever any notice is required to be given under the provisions of
any law, or under the provisions of the Certificate of Incorporation of the
corporation of these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE VI
AMENDMENTS
These By-Laws may be altered or repealed and By-Laws may be made at
any annual meeting of the stockholders or at any special meeting thereof if
notice of the proposed alteration or repeal of By-Law or By-Laws to be made
be contained in the notice of such special meeting, by the affirmative vote
of a majority of the stock issued and outstanding and entitled to vote
thereat, or by the affirmative vote of a majority of the Board of
Directors, at any regular meeting of the Board of Directors, or at any
special meeting of the Board of Directors, if notice of the proposed
alteration or repeal of By-Law or By-Laws to be made, be contained in the
notice of such special meeting.
<PAGE>
EXHIBIT 4.1
AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT
THIS AGREEMENT, made and entered into as of the 1st day of May, 1996,
between NationsBank of Tennessee, N.A., a national banking association,
with its principal place of business at One NationsBank Plaza, 414 Union
Street, Nashville, Tennessee, hereinafter referred to as "Bank", and Titan
Services, Inc., a Tennessee corporation, hereinafter referred to as
"Titan," Southeastern Technology, Inc., a Tennessee corporation,
hereinafter referred to as "SET" (Titan and SET are sometimes hereinafter
referred to individually as a "Borrower Party" and collectively, as the
"Borrower Parties"), and Aviation Education Systems, Inc., a Delaware
corporation, hereinafter referred to as "AES,"
W I T N E S S E T H:
WHEREAS, pursuant to the terms of a Sixth Amendment to Loan Documents
dated as of January 31, 1996, Bank agreed to make available to the Borrower
Parties certain loan facilities; and
WHEREAS, at the request of Borrower, Bank has agreed to consolidate,
renew and extend the loan facilities described in the Sixth Amendment, as
more particularly set forth herein; and
WHEREAS, Bank, the Borrower Parties, and AES have agreed to amend and
restate the Loan Agreements, as defined in the Sixth Amendment,
NOW, THEREFORE, in consideration of the foregoing premises, and other
good and valuable consideration, the receipt and legal sufficiency of which
is hereby acknowledged, the parties hereby agree to amend and restate the
Loan Agreements, as follows:
1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have
the following meanings:
1.1 "[ABC] [means one of the the Automotive Corporations purchasing
parts and services from SETECH subsidiaries.]
1.2 "[ABC] Borrowing Base" means the lesser of $3,000,000.00, or the
sum of 100% of the Qualified [ABC] Accounts Receivable plus the Qualified
[ABC] Inventory.
1.3 "[ABC] PO" means the agreements between Titan and [ABC] attached
hereto as EXHIBIT A, as the same may be amended or supplemented from time
to time.
1.4 "Qualified [ABC] Accounts Receivable" means those accounts of
Titan that meet the following criteria:
a. the account arises from a bona fide, outright sale of goods
by Titan, or for services performed under the [ABC] PO, and such goods have
been shipped to [ABC] or the sale has otherwise been consummated, or the
services have been performed for [ABC] in accordance with the [ABC] PO;
b. the title of Titan to the account, and, except as to the
account debtor, to any goods, is absolute and is not subject to any prior
assignment, claim, lien or security interest;
c. the amount shown on the books of Titan and on any invoice or
statement delivered to Bank is owing to Titan, and no partial payment has
been made thereon by anyone;
d. the account is not subject to any claim of reduction,
counterclaim, setoff, recoupment, or any claim for credits, allowances or
adjustments by the account debtor because of returned, inferior or damaged
goods or unsatisfactory services, or for any other reason, except for
customary discounts allowed for prompt payment;
e. the account is not an account that the Bank, in its
reasonable discretion, has determined to be ineligible in whole or in part
and has notified Titan thereof;
f. [ABC] has not returned or refused to retain any of the goods
from the sale of which the account arose;
g. the account is due and payable in accordance with the 25th
prox system utilized by [ABC] for payment of invoices;
h. the account is not more than ninety (90) days old, dating
from the original invoice dates (not due dates) as set forth in the terms
of the respective invoices;
i. no account arises out of a contract with, or order from, an
account debtor that, by its terms, forbids or makes the assignment of that
account to the Bank void or unenforceable;
j. Titan has not received any note, trade acceptance, draft or
other instrument with respect to or in payment of the account, or any
chattel paper with respect to the goods giving rise to the account, and if
any such instrument or chattel paper is received, Titan will immediately
notify Bank and, at the latter's request, endorse or assign and deliver the
same to Bank;
k. neither Titan nor Bank has received any notice of the
dissolution, termination of existence, insolvency, business failure,
appointment of a receiver for any part of the property of, assignment for
the benefit of creditors by, or the filing of a petition in bankruptcy or
the commencement of any proceeding under any bankruptcy or insolvency laws
by or against [ABC];
1.5 "Qualified [ABC] Inventory" means the inventory of Titan
consisting of spare parts purchased for the [ABC] facility located in
Romulus, Michigan, pursuant to the [ABC] PO.
1.6 "[XYZ]" [means one of the Automotive Corporations purchasing
parts and services from SETECH subsidiaries], a wholly owned subsidiary of
[ABC].
1.7 "[XYZ] Borrowing Base" means the lesser of $5,000,000.00, or the
sum of 100% of the Qualified [XYZ] Accounts Receivable plus the Qualified
[XYZ] Inventory.
1.8 "[XYZ] PO" means the agreements between Titan and [XYZ] attached
hereto as EXHIBIT A, as the same may be amended or supplemented from time
to time.
1.9 "Qualified [XYZ] Accounts Receivable" means those accounts of
Titan that meet the following criteria:
a. the account arises from a bona fide, outright sale of goods
by Titan, or for services performed under the [XYZ] PO, and such goods have
been shipped to [XYZ] or the sale has otherwise been consummated, or the
services have been performed for [XYZ] in accordance with the [XYZ] PO;
b. the title of Titan to the account, and, except as to the
account debtor, to any goods, is absolute and is not subject to any prior
assignment, claim, lien or security interest;
c. the amount shown on the books of Titan and on any invoice or
statement delivered to Bank is owing to Titan, and no partial payment has
been made thereon by anyone;
d. the account is not subject to any claim of reduction,
counterclaim, setoff, recoupment, or any claim for credits, allowances or
adjustments by the account debtor because of returned, inferior or damaged
goods or unsatisfactory services, or for any other reason, except for
customary discounts allowed for prompt payment;
e. the account is not an account that the Bank, in its
reasonable discretion, has determined to be ineligible in whole or in part
and has notified Titan thereof;
f. [XYZ] has not returned or refused to retain any of the goods
from the sale of which the account arose;
g. the account is due and payable not more than thirty (30)
days from the date of the invoice therefor;
h. the account is not more than ninety (90) days old, dating
from the original invoice dates (not due dates) as set forth in the terms
of the respective invoices;
i. no account arises out of a contract with, or order from, an
account debtor that, by its terms, forbids or makes the assignment of that
account to the Bank void or unenforceable;
j. Titan has not received any note, trade acceptance, draft or
other instrument with respect to or in payment of the account, or any
chattel paper with respect to the goods giving rise to the account, and if
any such instrument or chattel paper is received, Titan will immediately
notify Bank and, at the latter's request, endorse or assign and deliver the
same to Bank;
k. neither Titan nor Bank has received any notice of the
dissolution, termination of existence, insolvency, business failure,
appointment of a receiver for any part of the property of, assignment for
the benefit of creditors by, or the filing of a petition in bankruptcy or
the commencement of any proceeding under any bankruptcy or insolvency laws
by or against [XYZ];
1.10 "Qualified [XYZ] Inventory" means the inventory of Titan
consisting of spare parts purchased for the [XYZ] facility located in [...]
Tennessee, pursuant to the [XYZ] PO.
1.11 "SET Borrowing Base" means the lesser of $600,000, or 80% of the
Qualified SET Accounts Receivable.
1.12 "Qualified SET Accounts Receivable" means
a. the account arises from a bona fide, outright sale of goods
by SET or for services performed by SET, and such goods have been shipped
or the sale has otherwise been consummated, or
b. the title of SET to the account, and, except as to the
account debtor, to any goods, is absolute and is not subject to any prior
assignment, claim, lien or security interest;
c. the amount shown on the books of SET and on any invoice or
statement delivered to Bank is owing to SET, and no partial payment has
been made thereon by anyone;
d. the account is not subject to any claim of reduction,
counterclaim, setoff, recoupment, or any claim for credits, allowances or
adjustments by the account debtor because of returned, inferior or damaged
goods or unsatisfactory services, or for any other reason, except for
customary discounts allowed for prompt payment;
e. the account is not an account that the Bank, in its
reasonable discretion, has determined to be ineligible in whole or in part
and has notified SET thereof;
f. the account debtor has not returned or refused to retain any
of the goods from the sale of which the account arose;
g. the account is due and payable not more than thirty (30)
days from the date of the invoice therefor;
h. the account is not more than ninety (90) days old, dating
from the original invoice dates (not due dates) as set forth in the terms
of the respective invoices;
i. no account arises out of a contract with, or order from, an
account debtor that, by its terms, forbids or makes the assignment of that
account to the Bank void or unenforceable;
j. SET has not received any note, trade acceptance, draft or
other instrument with respect to or in payment of the account, or any
chattel paper with respect to the goods giving rise to the account, and if
any such instrument or chattel paper is received, SET will immediately
notify Bank and, at the latter's request, endorse or assign and deliver the
same to Bank;
k. neither SET nor Bank has received any notice of the
dissolution, termination of existence, insolvency, business failure,
appointment of a receiver for any part of the property of, assignment for
the benefit of creditors by, or the filing of a petition in bankruptcy or
the commencement of any proceeding under any bankruptcy or insolvency laws
by or against the account debtor.
2. CREDIT FACILITY
2.1 Subject to the terms and conditions of this Agreement, Bank will
make available the following facilities (collectively, the "Credit
Facility"):
a. A revolving line of credit in the principal amount of
$5,000,000, pursuant to which, so long as no Event of Default exists
hereunder, Titan may borrow, repay and reborrow through the Maturity Date,
amounts not exceeding the lesser of (i) $5,000,000, or (ii) the [XYZ]
Borrowing Base (the "[XYZ] Line of Credit").
b. A revolving line of credit in the principal amount of
$3,000,000, pursuant to which, so long as no Event of Default exists
hereunder, Titan may borrow, repay and reborrow through the Maturity Date,
amounts not exceeding the lesser of (i) $3,000,000, or (ii) the [ABC]
Borrowing Base (the "[ABC] Line of Credit").
c. A revolving line of credit in the principal amount of
$600,000, pursuant to which, so long as no Event of Default exists
hereunder, SET may borrow, repay and reborrow through the Maturity Date,
amounts not exceeding $600,000 (the "SET Line of Credit").
2.2 The Credit Facilities shall be evidenced by notes in form
satisfactory to Bank, bearing interest at the rates agreed upon by the
parties. The Credit Facility shall be secured by a first priority security
interest in the accounts, inventory, equipment, machinery, general
intangibles, trademarks, and other personal property assets of the Borrower
Parties, and by a Guaranty and Suretyship Agreement of even date herewith
executed by AES (the "AES Guaranty").
2.3 The Borrower Parties shall pay Bank a fee equal to one-half of
one percent (.50%) of the average daily unused portion of the SET Line of
Credit, such fee to be due and payable quarterly, in arrears, on the 25th
day of each April, July, October and January during the term of this
Agreement, beginning July 25, 1996.
2.4 The [XYZ] Line of Credit shall be used to finance the purchase of
parts inventory for [XYZ] pursuant to the [XYZ] PO. The [ABC] Line of
Credit shall be used to finance the purchase of parts inventory for the
[ABC] Romulus, Michigan facility pursuant to the [ABC] PO. Advances under
the [XYZ] Line of Credit and the [ABC] Line of Credit shall be based upon
Borrowing Base Certificates submitted by Titan in form and substance
acceptable to Bank. Advances under the SET Line of Credit shall be used to
finance working capital needs of SET, and shall be based upon Borrowing
Base Certificates submitted by SET, in form and substance acceptable to
Bank. In no event shall advances under the Credit Facility be used for any
purpose except as set forth in this paragraph 2.4.
3. SECURITY INTEREST
3.1 As security for the payment of all advances under the Credit
Facilities now or in the future made hereunder and all other indebtedness
and obligations of the Borrower Parties to Bank, created under this
Agreement or otherwise, now existing or hereafter incurred, matured or
unmatured, direct or contingent, including all modifications, extensions
and renewals thereof, hereinafter sometimes collectively referred to as the
"Indebtedness", the Borrower Parties hereby collaterally assign to Bank and
grant to Bank a security interest in the following:
a. All of the Borrower Parties accounts, whether now existing
or hereafter arising;
b. All of the Borrower Parties' chattel paper and instruments,
whether now existing or hereafter acquired, evidencing any obligation to
the Borrower Parties for payment for goods sold or leased or services
rendered;
c. All of the Borrower Parties' existing inventory and all
inventory acquired (in connection with the [ABC] PO or the [XYZ] PO) by the
Borrower Parties during the term of this Agreement;
d. All of the Borrower Parties' existing equipment and
machinery (excluding leased equipment) and all equipment and machinery
acquired by the Borrower Parties during the term of this Agreement;
e. All of Borrower Parties' trademarks and general intangibles,
whether now existing or hereafter arising or acquired, and all of Borrower
Parties' files, records (including without limitation computer programs,
tapes and related electronic data processing software) and writings of the
Borrower Parties or in which a Borrower Party has an interest in any way
relating to Borrower Parties' general intangibles, accounts, inventory and
equipment;
f. All proceeds of policies of insurance on any of the
foregoing;
g. All of the proceeds therefrom.
All of which hereinafter sometimes is referred to collectively as the
"Collateral".
4. CONDUCT OF BUSINESS AND LOCKBOX OF RECEIVABLES
4.1 So long as no Event of Default occurs hereunder, the Borrower
Parties shall have the right, in the regular course of business, to process
and sell each party's inventory. Bank's security interest hereunder shall
attach to all proceeds of all sales or other dispositions of Borrower
Parties' inventory.
4.2 Titan shall pay all amounts due the Bank under the terms of the
notes evidencing the [XYZ] Line of Credit directly to Bank from management
fee payments received from [XYZ]. Following the occurrence of an Event of
Default, at Bank's request, Titan shall cause [XYZ] to deposit with Bank
via electronic funds transfer (or other direct deposit mechanism acceptable
to Bank) the management fee payable to Titan under the [XYZ] PO, together
with all payments of inventory sold or in payment of or on account of
Titan's accounts, such funds to be deposited with Bank in a special account
maintained by Bank on behalf of Titan. To the extent [XYZ] pays Titan
directly for inventory sold or other payments due under the [XYZ] PO, Titan
shall immediately deposit such funds with Bank. Pending such deposit, Titan
agrees that it will not commingle any such checks, drafts, cash and other
remittances with any of Titan's funds or property, but will hold them
separate and apart therefrom, and upon an express trust for Bank until
deposit thereof is made in the special account. The funds in the special
account shall be security for all loans and obligations of Titan to Bank
and all other Indebtedness secured by the terms of this Agreement. So long
as Titan is not in default hereunder, Bank agrees that the funds in the
special account shall be applied first to pay interest due under the [XYZ]
Line of Credit, with the balance to be paid to Titan. Following an Event of
Default (subject to notice and cure provisions set forth in this
Agreement), Bank may apply the whole or any part, as Bank deems
appropriate, of the collected funds on deposit in the special account
against the principal and/or interest due under the Indebtedness secured by
this Agreement, the order and method of such application to be in the
discretion of Bank. Any portion of the funds on deposit in the special
accounts that are not applied by Bank to the Indebtedness shall be paid to
Titan.
4.3 Titan shall pay all amounts due the Bank under the terms of the
notes evidencing the [ABC] Line of Credit directly to Bank from management
fee payments received from [ABC]. Following the occurrence of an Event of
Default, at Bank's request, Titan shall cause [ABC] to deposit with Bank
via electronic funds transfer the management fee payable to Titan under the
[ABC] PO, together with all payments of inventory sold or in payment of or
on account of Titan's accounts, such funds to be deposited with Bank in a
special account maintained by Bank on behalf of Titan. To the extent [ABC]
pays Titan directly for inventory sold or other payments due under the
[ABC] PO, Titan shall immediately deposit such funds with Bank. Pending
such deposit, Titan agrees that it will not commingle any such checks,
drafts, cash and other remittances with any of Titan's funds or property,
but will hold them separate and apart therefrom, and upon an express trust
for Bank until deposit thereof is made in the special account. The funds in
the special account shall be security for all loans and obligations of
Titan to Bank and all other Indebtedness secured by the terms of this
Agreement. So long as Titan is not in default hereunder, Bank agrees that
the funds in the special account shall be applied first to pay interest due
under the [ABC] Line of Credit, with the balance to be paid to Titan.
Following an Event of Default (subject to notice and cure provisions set
forth in this Agreement), Bank may apply the whole or any part, as Bank
deems appropriate, of the collected funds on deposit in the special account
against the principal and/or interest due under the Indebtedness secured by
this Agreement, the order and method of such application to be in the
discretion of Bank. Any portion of the funds on deposit in the special
accounts that are not applied by Bank to the Indebtedness shall be paid to
Titan.
4.4 Following an Event of Default, Bank shall have the absolute and
unconditional right to notify and direct the account debtors obligated on
any or all of Borrower Parties' accounts to make payments thereof directly
to Bank and to take control of all proceeds of any such accounts which
rights Bank may exercise at any time, whether or not Borrower Parties are
then in default hereunder or theretofore were making collections thereon.
The costs of such collection and enforcement, including attorneys' fees and
expenses, shall be borne solely by Borrower Parties, whether incurred by
Bank or Borrower Parties.
4.5 Whether or not an Event of Default shall have occurred, through
independent auditors designated by the Borrower Parties, Bank shall have
the right from time to time to contact the account debtors obligated on any
or all of Borrower Parties' accounts for the purposes of confirming the
validity and amount of the accounts, such contact to be made by such
independent auditors, as approved by Bank. Copies of all responses from
account debtors shall be provided to Bank.
4.6 The Bank shall not, under any circumstances, be liable for any
error or omission or delay of any kind occurring in the settlement,
collection or payment of any accounts or any instrument received in payment
thereof or for any damage resulting therefrom, except for fraud or gross
negligence on the part of the Bank.
5. COVENANTS AND WARRANTIES OF THE BORROWER PARTIES
5.1 Each of the Borrower Parties hereby covenants and warrants to
Bank:
a. The principal place of business and chief executive office
of each Borrower Party is set forth in SCHEDULE 5.1(A). The Borrower
Parties will notify Bank promptly in writing of any change in the location
of the principal place of business or any other place of business or the
establishment of any new place of business.
b. All equipment and machinery that is a part of the Collateral
under this Agreement is used primarily for business use and is located at
the locations set forth in SCHEDULE 5.1(B). The Borrower Parties will not
sell or offer to sell or otherwise transfer or dispose of any portion of
the said equipment or machinery, or any interest therein, without the prior
written consent of Bank. All inventory of the Borrower Parties will be
stored at the locations set forth in SCHEDULE 5.1(B). Borrower Parties will
not store inventory in any other location without the prior written consent
of Bank.
c. The Borrower Parties are the owners of the Collateral free
from any adverse lien, security interest, or encumbrance. The Borrower
Parties will defend the Collateral against all claims and demands of all
persons at any time claiming the same or any interest therein.
d. The Borrower Parties at all times will keep accurate and
complete records of the Borrower Parties' accounts. Bank, or any of its
agents, shall have the right to call at Borrower Parties' place or places
of business, at intervals to be determined by Bank and, without hindrance
or delay, to inspect at Borrower Parties' cost all of Borrower Parties'
inventory and to inspect, audit, check, and make extracts from the books,
records, journals, orders, receipts, correspondence, and other data
relating to Borrower Parties' accounts or to any other transactions between
the parties hereto. Without limiting the foregoing, Borrower Parties
acknowledge and agree that Bank or its agents shall inspect Borrower
Parties' books, records and inventory by field audits (to be conducted not
less often than annually), with the costs of said field audits to be paid
by Borrower Parties.
e. If any of Borrower Parties' accounts should be evidenced by
promissory notes, trade acceptances, or other instruments for the payment
of money, Borrower Parties immediately will deliver same to Bank,
appropriately endorsed to Bank's order. Regardless of the form of such
endorsement, Borrower Parties hereby waive presentment, demand, notice of
dishonor, protest and notice of protest, and all other notices with respect
thereto.
f. No financing statement covering any of the Collateral or any
proceeds therefrom is on file in any public office, except for filings in
favor of the Bank. At the request of Bank, Borrower Parties will join with
Bank in executing one or more financing statements pursuant to the Uniform
Commercial Code, in form satisfactory to Bank, and will pay the cost of
filing or recording the same or this Agreement in all public offices
wherever filing or recording is deemed by Bank to be necessary or
desirable. A copy of this Security Agreement or copies of any financing
statements executed herewith may be filed in lieu of originals in any
public office.
g. Titan and SET are and shall remain corporations duly
organized, existing and in good standing under the laws of the State of
Tennessee, authorized to transact in Tennessee (and Michigan in the case of
Titan) all business that each entity is now transacting therein and are and
shall remain duly qualified to do business in each state which
qualification is necessary. Neither the execution, the delivery nor the
performance of this Agreement and all related documents by Borrower Parties
will constitute a default under or conflict with its respective charter or
bylaws or any agreement, contract, document, or instrument to which a
Borrower now are a party. The execution of all necessary resolutions and
other prerequisites of corporate actions have been duly performed so that
the individuals executing this Agreement and related documents on behalf of
each Borrower is duly authorized to bind such entity by his signature.
h. There is no litigation or proceeding pending against the
Borrower Parties or, to the knowledge of Borrower Parties, threatened that,
if decided adversely to a Borrower Party, would have a material effect upon
its financial condition. Borrower Parties are not subject to any
outstanding court or administrative order. Each Borrower Party covenants to
give Bank prompt written notice of any litigation, arbitration,
administrative proceeding or investigation that may hereafter be instituted
or threatened against a Borrower Party, whether or not liability under such
proceeding would be covered by insurance.
i. The statements of condition of Titan dated March 31, 1996,
and SET dated March 31, 1996, fairly and accurately reflects the financial
condition and capital structure of each entity as of said date. Since said
date, no material adverse change in either has occurred or, to the
knowledge of Borrower Parties, is threatened. All financial statements
delivered to Bank have been prepared in accordance with generally accepted
accounting principles, consistently applied, and are true, accurate and
complete in every respect. Without limiting the foregoing, Borrower Parties
warrant that such financial statements disclose all known contingent
liabilities as well as direct liabilities. Borrower Parties acknowledge
that Bank has advanced (or committed to advance) the Indebtedness in
reliance upon such financial statements, and each Borrower Party warrants
that no material adverse change has occurred in the financial condition of
any person or entity as set forth in such financial statements. Borrower
Parties warrant that each has good and absolute title to the assets
disclosed on Borrower Parties' balance sheet disclosed to Bank, subject
only to liens, security interests and other encumbrances noted thereon.
j. Borrower Parties are not presently delinquent in the payment
of any taxes imposed by any governmental authority or in the filing of any
tax return and a Borrower is not involved in a dispute with any taxing
authority over tax amounts due. Borrower Parties covenant that all future
taxes assessed against Borrower Parties shall be timely paid and that all
tax returns required of Borrower Parties shall be timely filed.
k. Borrower Parties will keep the Collateral free from any
lien, security interest, or encumbrance other than that granted to Bank
herein and in good order and repair and will not waste or destroy the
Collateral or any part thereof. Borrower Parties will not use the
Collateral in violation of any statute or ordinance. Borrower Parties'
business activities are conducted in accordance with all applicable laws
and regulations, and Borrower Parties covenant that such activities shall
continue to be so conducted. Bank may examine and inspect the Collateral at
any time, wherever located.
l. Borrower Parties will maintain insurance, in form, amounts,
and with companies in all respects satisfactory to Bank, insuring Borrower
Parties', inventory, fixtures, equipment, and machinery against loss from
fire, theft, and other risks determined by Bank. Bank shall be designated
as an additional insured under the terms of the policies evidencing such
insurance. Upon request by Bank, Borrower Parties will execute such
additional instruments as Bank deems necessary to perfect in Bank a lien on
Borrower Parties' rights under such policies.
m. Each Borrower Party shall provide Bank with the following:
(i) to the extent Titan has customers other than [XYZ] or
[ABC] with inventory to be financed under the Credit
Facility, then, within one hundred twenty (120) days of
fiscal year end, complete audited financial statements
prepared in accordance with generally accepted
accounting principles, consistently applied, including
balance sheet, income statement, sources and uses
statement, and reconciliation of net worth and
pertinent footnotes, prepared by a certified public
accountant reasonably acceptable to Bank with such
accountant giving an unqualified opinion as to all
statements, including, copy of the management letter
delivered by the certified public accountant completing
the audit,
(ii) within thirty (30) days after the end of each month,
monthly interim financial and operating statements for
the preceding month, in form satisfactory to Bank,
which shall be certified by a responsible officer and
shall reflect accurately the financial condition of the
Borrower Party;
(iii)within five (5) days after the end of each month, a
report of all accounts receivable, the account party
and respective agings;
(iv) a completed borrowing base certificate, which shall be
in form and substance acceptable to Bank, and which
shall be due (a) in the case of Titan, within five days
after each month end, and at the time of any draw under
the [XYZ] or [ABC] Lines of Credit, and (b) in the case
of SET, on a bi-weekly basis, and at the time of any
draw under the SET Line of Credit.
(v) a compliance certificate in form and substance
acceptable to Bank, which shall include a calculation
of the financial covenants set forth in this Agreement,
which certificate shall be delivered to Bank
simultaneously with the delivery of the monthly interim
financial statements required in (ii) above.
All financial statements, certificates and other information required
to be submitted to Bank shall be in form satisfactory to Bank and shall be
executed by an officer of the entity submitting such information,
satisfactory to Bank.
n. Borrower Parties will give Bank prompt written notice within
five (5) days of (i) the creation or discovery of any material additional
contingent liability or the occurrence of any other material adverse change
in the financial condition of Borrower Parties or of any guarantor or other
person or entity presently or hereafter liable for payment of all or part
of the Indebtedness, and (ii) the occurrence of any event, or presence of
any condition, which constitutes a default hereunder or which within the
giving of notice, the passage of time, or both, would constitute a default.
o. Borrower Parties will comply with all statutes and
government regulations applicable to Borrower Parties' operations and pay
promptly all taxes, assessments, claims for labor, supplies, rent, and
other obligations that, if unpaid, might become a lien against Borrower
Parties' property. In the event any such liability or obligation is
contested by Borrower Parties in good faith, Borrower Parties, at the
request of Bank, shall establish reserves in amounts satisfactory to Bank
to meet such obligation.
p. Upon demand, Borrower Parties will advance to Bank, or, at
Bank's option, reimburse Bank, for the following expenses:
(1) All taxes that Bank may be required to pay because of
the Indebtedness or because of Bank's interest in any Collateral securing
the payment of the Indebtedness;
(2) All expenses that Bank may incur in connection with the
preparation, execution, audit and administration, or enforcement of this
Agreement or of any other document pertaining to the Indebtedness;
(3) All costs of preserving, insuring, preparing for sale
(whether by improvement, repair or otherwise) or selling any Collateral
securing the Indebtedness;
(4) All court costs and other costs of collecting any debt,
overdraft or other obligation included in the Indebtedness, including
compensation for time spent by employees of Bank;
(5) All reasonable costs arising from any litigation
proceeding (whether or not Bank is a party thereto) that Bank may incur as
a result of the Indebtedness or as a result of Bank's association with
Borrower Parties, including, but not limited to, expenses incurred by Bank
in connection with a case or proceeding involving Borrower Parties under
any chapter of the Bankruptcy Code or any successor statute thereto;
(6) Reasonable attorney's fees incurred in connection with
any of the foregoing.
If Bank pays any of the foregoing expenses, they shall become a part of the
Indebtedness and shall bear interest at the highest lawful rate.
q. Following an Event of Default, Bank shall have the right to
obtain and use the services of a collateral control firm at its option. All
expenses for such services shall be borne by Borrower Parties.
r. Except as set forth in SCHEDULE 5.1(V), Borrower Parties
presently have no subsidiaries or interests in any partnership or other
business entity, and Borrower Parties covenant that the Borrower Parties
will not hereafter acquire stock of any other corporation or acquire an
equity interest in any other business entity without the prior written
approval of Bank.
s. Each Borrower Party will maintain current corporate minute
books and stock ledgers and agrees to allow Bank to inspect the same at any
time.
t. The Borrower Parties do not maintain any plan qualified
under the Employee Retirement Income Security Act of 1974 and covenant that
they will not establish such a plan without Bank's prior written consent.
Bank acknowledges that Guarantor currently maintains a plan which may
benefit employees of the Borrower Parties.
u. Neither Borrower Party has been known under or done business
under any name other than the name used by Borrower Parties in executing
this Agreement. Borrower Parties agree to give Bank at least fifteen (15)
days prior written notice before a Borrower Party begins using any name
other than that used in executing this Agreement.
v. In order to further secure the payment of the Indebtedness,
Borrower Parties hereby grant a security interest and right to setoff
against all presently owned or hereafter acquired monies, items, credits,
deposits and instruments (including certificates of deposit) presently or
hereafter in the possession of Bank. By maintaining any such accounts or
other property with Bank, Borrower Parties voluntarily subject the property
to Bank's rights hereunder. Bank may exercise its rights under this
Paragraph without prior notice following an Event of Default. Borrower
Parties agree that Bank shall not be liable for the dishonor of any
instrument resulting from the exercise of rights under this Paragraph.
w. Borrower Parties will execute such other assignments,
security agreements, financing statements, and other documents that Bank
may deem necessary to further evidence the obligations provided for herein
or to perfect, extend, or clarify Bank's rights in any property securing or
intended to secure the Indebtedness. Any Vice President of Bank is hereby
appointed as Borrower Parties' attorney-in-fact with full power of
substitution for the signing of financing statements and other similar
filings with government offices for perfecting security interests granted
hereby to the extent the Borrower Parties fail to execute or deliver such
documents following a written request by Bank. Borrower Parties acknowledge
that this power of attorney is coupled with an interest and is irrevocable.
x. Borrower Parties are not a party to any contract or
agreement and is not subject to any contingent liability that does or may
impair Borrower Parties' ability to perform under the terms of this
Agreement. The execution and performance of this Agreement will not cause a
default under any other contract or agreement to which Borrower Parties or
any property of Borrower Parties are subject, and will not result in the
imposition of any charge, penalty, lien or other encumbrance against any of
Borrower Parties' property except in favor of Bank.
y. Borrower Parties' execution and performance of this
Agreement do not require the consent of or the giving of notice to any
third party including, but not limited to, any account debtor, other
lender, governmental body or regulatory authority.
5.2 So long as any indebtedness secured hereby is outstanding,
Borrower Parties covenant and warrant that, without the prior written
consent of Bank, the Borrower Parties will not:
a. Change its name, enter into any merger, consolidation,
reorganization, or recapitalization, or reclassify its capital stock.
b. Sell, lease, convey, or otherwise dispose of any of its
property or assets, except in the ordinary course of business.
c. Become liable, directly or indirectly, for any obligation of
any other person, by guaranty, endorsement, or otherwise, except by
endorsement of negotiable instruments payable at sight for deposit or
collection.
d. Become liable, directly or indirectly, with respect to any
obligation for money borrowed, or the equivalent, except the Indebtedness,
except for equipment leases entered into by Borrower Parties in the
ordinary course of business.
e. Suffer or permit, in whole or in part, dissolution,
liquidation, or the retirement or redemption of any shares of its own stock
or the stock of any subsidiary.
f. Declare, set aside, or pay any dividend or make any other
distribution, whether in cash, in kind, or otherwise, on account of or with
respect to its stock, or take any action whatsoever that would reduce
Borrower Parties' capital surplus or earned surplus.
g. Make any loans other than employee loans not exceeding an
aggregate amount of Five Thousand Dollars ($5,000.00) and deposits required
by government agencies or public utilities.
h. Make any investments except for investments in direct
obligations of the United States Government maturing within one (1) year
and certificates of deposit issued by Bank.
i. Suffer or permit the Collateral to become subject to any
security interest, lien, or other encumbrance, except for the following:
(1) Any lien created by virtue of this Agreement, or any
other lien in favor of Bank;
(2) A pledge or deposit in connection with or to secure
workman's compensation, unemployment insurance, pensions, or other employee
benefits accruing under the provisions of law or under agreements now in
force and disclosed to Bank.
(3) Tax liens which result from obligations being contested
by Borrower in good faith and for which Borrower has established adequate
reserves in the event of an adverse ruling.
j. Take any action or suffer or permit any action to be taken,
that would violate any of the warranties and covenants contained in Section
4.1 hereof or cause any of said warranties and covenants to be or become
untrue.
k. Submit to Bank any certificate or other document that
contains any untrue statement of material fact or omits to state a material
fact necessary to make it not misleading.
l. Fail to comply with the following financial covenants:
TITAN:
(i) INTEREST COVERAGE RATIO. The ratio of EBITDA divided by
interest expense shall not be less than 1 to 1,
measured monthly on a rolling twelve (12) month basis.
(ii) CURRENT RATIO. Current assets divided by current
liabilities shall not be less than 1 to 1 at all times,
measured on a monthly basis.
(iii)TANGIBLE NET WORTH. Net worth as reflected on the
financial statements less intangibles and intercompany
receivables/loans shall not be less than $1,075,000 as
of June 30, 1996, and not less than $1,185,000 as of
December 31, 1996.
(iv) MANAGEMENT FEES. Management fees paid shall not exceed
(a) the lesser of $260,000, or forty-five percent (45%)
of EBITDA plus management fees expensed, as of June 30,
1996, and (b) the lesser of $215,000, or forty-five
percent (45%) of EBITDA plus management fees expensed,
as of January 31, 1997.
(v) LEVERAGE RATIO. The ratio of total liabilities divided
by tangible net worth shall not exceed 7.75 to 1 at all
times, measured on a monthly basis.
SET:
(i) INTEREST COVERAGE RATIO. The ratio of EBITDA divided by
interest expense shall not be less than 2 to 1,
measured monthly on a rolling twelve (12) month basis.
(ii) CURRENT RATIO. Current assets divided by current
liabilities shall not be less than 1 to 1 at all times,
measured on a monthly basis.
(iii)TANGIBLE NET WORTH. Net worth is reflected on the
financial statements less intangibles and intercompany
receivables/loans to be not less than $1,200,000 as of
June 30, 1996, and not less than $1,300,000 as of
December 31, 1996.
(iv) MANAGEMENT FEES. Management fees paid shall not exceed
(a) the lesser of $150,000, or twenty-five percent
(25%) of EBITDA Plus management fees expensed, as of
June 30, 1996, and (b) the lesser of $140,000, or
twenty-five percent (25%) of EBITDA plus management
fees expensed, as of January 31, 1997.
(v) LEVERAGE RATIO. The ratio of total liabilities divided
by tangible net worth shall not exceed 1.5 to one at
all times, measured on a monthly basis.
m. Suffer or permit (i) the amount outstanding under the [XYZ]
Line of Credit to exceed the [XYZ] Borrowing Base, (ii) the amount
outstanding under the [ABC] Line of Credit to exceed the [ABC] Borrowing
Base, or (iii) the amount outstanding under the SET Line of Credit to
exceed the SET Borrowing Base.
6. COVENANTS AND WARRANTIES OF AES
6.1 AES hereby covenants and warrants to Bank:
a. AES is and shall remain a corporation duly organized and
existing and in good standing under the laws of the State of Delaware,
authorized to transact in each state in which qualification is necessary.
Neither the execution, the delivery nor the performance of this Agreement
and all related documents by AES will constitute a default under or
conflict with its respective charter or bylaws or any agreement, contract,
document, or instrument to which AES now is a party. The execution of all
necessary resolutions and other prerequisites of corporate actions have
been duly performed so that the individuals executing this Agreement and
related documents on behalf of AES is duly authorized to bind AES by his
signature.
b. There is no litigation or proceeding pending against AES or,
to the knowledge of AES, threatened that, if decided adversely to AES,
would have a material effect upon its financial condition. AES is not
subject to any outstanding court or administrative order. AES covenants to
give Bank prompt written notice of any litigation, arbitration,
administrative proceeding or investigation that may hereafter be instituted
or threatened against AES, whether or not liability under such proceeding
would be covered by insurance.
c. The statement of condition of AES dated December 31, 1995,
fairly and accurately reflects the financial condition and capital
structure of each entity as of said date. Since said date, no material
adverse change in either has occurred or, to the knowledge of AES, is
threatened. All financial statements delivered to Bank have been prepared
in accordance with generally accepted accounting principles, consistently
applied, and are true, accurate and complete in every respect. Without
limiting the foregoing, AES warrants that such financial statements
disclose all known contingent liabilities as well as direct liabilities.
AES acknowledges that Bank has advanced (or committed to advance) the
Indebtedness in reliance upon such financial statements, and AES warrants
that no material adverse change has occurred in the financial condition of
any person or entity as set forth in such financial statements. AES
warrants that it has good and absolute title to the assets disclosed on
AES' balance sheet disclosed to Bank, subject only to liens, security
interests and other encumbrances noted thereon.
d. AES is not presently delinquent in the payment of any taxes
imposed by any governmental authority or in the filing of any tax return
and AES is not involved in a dispute with any taxing authority over tax
amounts due. AES covenants that all future taxes assessed against AES shall
be timely paid and that all tax returns required of AES shall be timely
filed.
e. AES shall provide Bank with the following:
(i) within one hundred twenty (120) days of fiscal year
end, complete audited financial statements prepared in
accordance with generally accepted accounting
principles, consistently applied, including
consolidating audited statements and auditor's report
on consolidating information, prepared by a certified
public accountant acceptable to Bank with such
accountant giving an unqualified opinion as to all
statements, including a copy of the management letter
delivered by the certified public accountant;
(ii) within thirty (30) days of the end of each month, a
compliance certificate in the form and substance
acceptable to Bank, which shall include a calculation
of the financial covenants set forth in the agreement.
All financial statements, certificates and other information required
to be submitted to Bank, shall be in form and content satisfactory to Bank
and shall be executed by an officer of AES, satisfactory to Bank.
f. AES will give Bank prompt written notice within five (5)
days of (i) the creation of discovery of any material additional contingent
liability or the occurrence of any other material adverse change in the
financial condition of AES, and (ii) the occurrence of any event, or
presence of any condition, which constitutes a default hereunder or which
within the giving of notice, the passage of time, or both, would constitute
a default.
g. AES will comply with all statutes and government regulations
applicable to AES' operations and pay promptly all taxes, assessments,
claims for labor, supplies, rent, and other obligations that, if unpaid,
might become a lien against AES' property. In the event any such liability
or obligation is contested by AES in good faith, AES, at the request of
Bank, shall establish reserves in amounts satisfactory to Bank to meet such
obligation.
h. Upon demand, AES will advance to Bank, or, at Bank's option,
reimburse Bank, for the following expenses:
(1) All taxes that Bank may be required to pay because of
the Indebtedness or because of Bank's interest in any Collateral securing
the payment of the Indebtedness;
(2) All expenses that Bank may incur in connection with the
preparation, execution, audit and administration, or enforcement of this
Agreement or of any other document pertaining to the Indebtedness,
(3) All costs of preserving, insuring, preparing for sale
(whether by improvement, repair or otherwise) or selling any Collateral
securing the Indebtedness;
(4) All court costs and other costs of collecting any debt,
overdraft or other obligation included in the Indebtedness, including
compensation for time spent by employees of Bank;
(5) All reasonable costs arising from any litigation
(whether or not Bank is a party thereto) that Bank may incur as a result of
the Indebtedness or as a result of Bank's association with AES, including,
but not limited to, expenses incurred by Bank in connection with a case or
proceeding involving AES under any chapter of the Bankruptcy Code or any
successor statute thereto;
(6) Reasonable attorney's fees incurred in connection with
any of the foregoing.
If Bank pays any of the foregoing expenses, they shall become a part of the
Indebtedness and shall bear interest at the highest lawful rate.
i. Except for Titan, SET and the entities set forth in SCHEDULE
6.1(I), AES presently has no subsidiaries or interests in any partnership
or other business entity.
j. AES is not a party to any contract or agreement and is not
subject to any contingent liability that does or may impair AES' ability to
perform under the terms of this Agreement or the Guaranty Agreement
executed by AES. The execution and performance of this Agreement will not
cause a default under any other contract or agreement to which AES or any
property of AES is subject, and will not result in the imposition of any
charge, penalty, lien or other encumbrance against any of AES' property
except in favor of Bank.
k. AES' execution and performance of this Agreement and the
Guaranty Agreement do not require the consent of or the giving of notice to
any third party including, but not limited to, any account debtor, other
lender, governmental body or regulatory authority.
6.2 So long as any Indebtedness secured hereby is outstanding, AES
covenants and warrants that, without the prior written consent of Bank, AES
will not:
a. Change its name, enter into any merger (except a merger for
which AES is the surviving entity), consolidation, reorganization, or
recapitalization, or reclassify its capital stock.
b. Sell, lease, convey, or otherwise dispose of any of its
Property or assets, except in the ordinary course of business.
c. Suffer or permit, in whole or in part, dissolution,
liquidation, or the retirement or redemption of any shares of the stock of
any subsidiary of AES.
d. Take any action, or suffer or permit any action to be taken,
that would violate any of the warranties and covenants contained in Section
6.2 hereof or cause any of said covenants contained in Section 6.2 hereof
or cause any of said warranties and covenants to be or become untrue.
e. Submit to Bank any certificate or other document that
contains any untrue statement of material fact or omits to state a material
fact necessary to make it not misleading.
f. Suffer or permit its net worth as reflected on its financial
statements, less intangibles and intercompany receivables to be less than
$2,750,000, as measured on a monthly basis.
7. CONDITIONS PRECEDENT
7.1 As conditions precedent to Bank's making or continuing any loans
hereunder, Borrower Parties and AES shall furnish to Bank, in form
satisfactory to Bank:
a. Appropriate corporate resolutions authorizing Titan, SET and
AES to enter into this Amendment, together with authorizations for officers
of Titan, SET and AES to execute any and all documents necessary to
effectuate the transactions contemplated by this Agreement. In addition,
SET, Titan and AES shall Provide to Bank copies of all corporate
organizational documents, together with current Certificates of Good
Standing/Existence.
b. An executed copy of the final [XYZ] and [ABC] POs, which
shall be in form and substance acceptable to Bank.
c. Delivery to Bank of letters executed by [XYZ] and [ABC]
confirming Bank's lien in the Collateral and confirming Bank's rights under
the [XYZ] and [ABC] POs, such letter to be in form and substance acceptable
to Bank.
d. Delivery to Bank of current updated certificates of
insurance evidencing comprehensive liability, hazard loss, and such other
insurance insuring Titan and SET's inventory and facilities, which shall be
in an amount, and issued by companies acceptable to Bank. Bank shall be
named as an additional insured on all liability insurance, and as a
mortgagee/loss payee on all hazard insurance.
e. A Current Landlord Lien Waiver, executed by the landlord for
Titan's warehouse facility located in Romulus, Michigan, confirming that
any lien in favor of the landlord is subordinate to the Bank's lien in the
Collateral, such Landlord Lien Waiver to be in form and substance
acceptable to Bank.
f. A Guaranty and Suretyship Agreement executed by AES
guaranteeing repayment of the Credit Facility, in form and substance
acceptable to Bank.
8. PROTECTIVE ACTION
8.1 At its Option, Bank may discharge taxes, liens, security
interests, or other encumbrances at any time levied or placed on the
Collateral and may pay for insurance on the Collateral. Borrower Parties
agree to reimburse Bank on demand for any payment made, or any expense
incurred, by Bank pursuant to the foregoing authorization, together with
interest thereon from date of payment at the highest rate permitted by
applicable law. Until the occurrence of an Event of Default Borrower
Parties may have possession of the Collateral and use it in any lawful
manner not inconsistent with any policy of insurance thereon and not
inconsistent with this Agreement.
9. DEFAULT
9.1 Regardless of the terms of any promissory note or notes issued in
connection herewith, the occurrence of any of the events specified
hereinbelow (sometimes hereinafter referred to as an "Event of Default")
shall immediately terminate any obligations on the part of Bank to make or
continue to fund, advance or readvance any sums to Borrower Parties and, at
the option of Bank, shall make all sums of interest and principal remaining
on the Indebtedness immediately due and payable, without notice of default,
presentment or demand for payment, protest or notice of nonpayment or
dishonor, or other notices or demands of any kind or character, except as
hereinafter specified:
a. Default in the punctual payment when due of any Indebtedness
or default in performance of any of the covenants, warranties, terms, or
provisions contained or referred to in this Agreement or in any note
evidencing any of the Indebtedness;
b. Any covenant, warranty, representation, or statement made or
furnished to Bank by or on behalf of Borrower Parties or in connection with
this Agreement proving to have been false in any material respect when made
or furnished;
c. Loss, theft, substantial damage, destruction, sale, or
encumbrance to or of the Collateral, except for the sale of inventory
specifically provided for in Section 4.1 hereof, or the making of any levy,
seizure, or attachment thereof or thereon;
d. Dissolution, liquidation, cessation of business, termination
of existence, insolvency, failure to pay debts as they mature, business
failure, or appointment of a receiver of any part of the property of,
assignment for the benefit of creditors by, or the commencement of any
proceeding under any bankruptcy or insolvency law by or against Borrower
Parties or any guarantor or surety for Borrower Parties.
e. The filing of any tax lien whatsoever with respect to any of
the Collateral pledged hereby, except for a tax lien that is being
contested in good faith and for which Borrower Parties provides additional
security satisfactory in all respects to Bank;
f. The issuance of an attachment against property of Borrower
Parties unless removed, by bond or otherwise, within thirty (30) days;
g. The entry of a final judgment against Borrower Parties that
remains unsatisfied for five (5) days after execution may first issue;
h. The occurrence of an event of default under any other
agreement between Borrower Parties and Bank or under any agreement between
Borrower Parties and any lessor of real or personal property or any bank,
savings and loan, insurance company, commercial credit company or other
lender, including without limitation any lenders who are subordinated to
the Indebtedness secured hereunder;
i. Termination of the [XYZ] or [ABC] POs; or
j. Modification of the [XYZ] or [ABC] POs, without Bank's prior
consent.
10. REMEDIES
10.1 Upon the occurrence of an Event of Default and at any time
thereafter, Bank shall have all the rights and remedies of a secured party
under the Uniform Commercial Code and any other right Bank may have at law
or equity. Bank may require Borrower Parties to assemble the Collateral and
make it available to Bank at a place or places, to be designated by Bank,
reasonably convenient to both parties. Unless the Collateral is perishable,
threatens to decline speedily in value, or is of a type customarily sold on
a recognized market, Bank will give Borrower Parties reasonable notice of
the time and place of any public sale thereof or of the time after which
any private sale or any other intended disposition thereof is to be made.
The requirements of reasonable notice shall be met if such notice is
mailed, postage prepaid, to the address of Borrower Parties shown at the
end of this Agreement at least ten (10) days before the time of the sale or
disposition. Borrower Parties agree to pay all expenses of retaking,
holding, preparing for sale, and selling the Collateral, together with any
court costs and Bank's reasonable attorney's fees; all such expenses, costs
and fees shall be deemed part of the Indebtedness. Bank may exercise its
lien upon and right of setoff against any monies, credits, deposits or
instruments that Bank may have in its possession and which belong to
Borrower Parties or to any other person or entity liable for the payment of
any or all of the Indebtedness. The remedies provided Bank in this
Agreement are not exclusive of any other remedies that may be available to
Bank under any other document or at law or equity.
10.2 No delay or omission on the part of Bank in exercising any right
hereunder or in demanding strict compliance with the terms of this
Agreement shall operate as a waiver of such right or of any other right
under this Agreement or of demanding strict compliance with the terms of
this Agreement. No waiver by Bank of any default shall operate as a waiver
of any other default or of the same default on a future occasion.
11. MISCELLANEOUS DEFINITIONS
11.1 Unless otherwise set forth herein, all financial ratios and
reports shall be calculated and prepared in accordance with generally
acceptable accounting principles consistently applied.
11.2 The captions contained in this Agreement are inserted only as a
matter of convenience and shall not be construed as defining, limiting,
extending, or describing the scope of this Agreement, any section hereof,
or the intent of any provision hereof.
11.3 All rights of Bank hereunder shall inure to the benefit of its
successors and assigns, and all obligations of Borrower Parties shall bind
Borrower Parties' successors and assigns.
11.4 This Agreement shall become effective when it is signed by
Borrower Parties.
11.5 Time is of the essence with regard to each and every provision of
this Agreement.
11.6 Nothing in this Agreement shall be deemed a waiver or prohibition
of Bank's right of banker's lien or setoff.
11.7 This Agreement, and the documents executed and delivered pursuant
hereto, constitute the entire agreement between the parties, and may be
amended only by a writing signed by all parties.
11.8 If any provision of this Agreement shall be held invalid under
any applicable law, such invalidity shall not affect any other provision of
this Agreement that can be given effect without the invalid provision, and,
to this end, the provisions hereof are severable.
11.9 Any controversy or claim between or among the parties hereto,
including but not limited to those arising out of or relating to this
Agreement or any related agreements or instruments, including any claim
based on or arising from an alleged tort, shall be determined by binding
arbitration in accordance with the Federal Arbitration Act (or if not
applicable, the applicable state law), the Rules of Practice and Procedure
for the Arbitration of Commercial Disputes or Judicial Arbitration and
Mediation Services, Inc. ("J.A.M.S.") and the "Special Rules" set forth
below. In the event of any inconsistency, the Special Rules shall control.
Judgment upon any arbitration award may be entered in any court having
jurisdiction. Any party to the Agreement may bring an action, including a
summary or expedited proceeding, to compel arbitration of any controversy
or claim to which this Agreement applies in any court having jurisdiction
over such action.
(A) Special Rules. The arbitration shall be conducted in the city of
Borrower's domicile at the time of the Agreement's execution and
administered by J.A.M.S. who will appoint an arbitrator. If J.A.M.S. is
unable or legally precluded from administering the arbitration, then the
American Arbitration Association will serve. All arbitration hearings will
be commenced within ninety (90) days of the demand for arbitration;
further, the arbitrator shall only, upon a showing of cause, be permitted
to extend the commencement of such hearing for an additional sixty (60)
days.
(B) Reservation of Rights. Nothing in this Agreement shall be deemed
to (i) limit the applicability of any otherwise applicable statutes of
limitation or repose and any waivers contained in this Agreement; or (ii)
be a waiver by the Bank of the protection afforded to it by 12 U.S.C.
<section> 91 or any substantially equivalent state law; or (iii) limit the
right of the Bank hereof (a) to exercise self help remedies such as (but
not limited to) setoff, or (b) to foreclosure against any real or personal
property collateral, or (c) to obtain from a court provisional or ancillary
remedies such as (but not limited to) injunctive relief, writ or possession
of the appointment of a receiver. The Bank may exercise such self help
rights, foreclosure upon such property, or obtain such provisional or
ancillary remedies before, during or after the pendency of any arbitration
proceeding brought pursuant to this Agreement. Neither the exercise of self
help remedies nor the institution or maintenance of an action for
foreclosure or provisional or ancillary remedies shall constitute a waiver
of the right of any party, including the claimant in such action, to
arbitrate the merits of the controversy or claim occasioning resort to such
remedies.
11.10 Nothing contained herein or in any related document shall be
deemed to render Bank a partner of Borrower Parties for any purpose. This
Agreement has been executed for the sole benefit of Bank, and no third
party is authorized to rely upon Bank's rights hereunder or to rely upon an
assumption that Bank has or will exercise its rights under this Agreement
or under any document referred to herein.
11.11 Bank may proceed against collateral securing the Indebtedness
and against parties liable therefor in such order as it may elect, and
neither Borrower Parties nor any surety or guarantor for Borrower Parties
shall be entitled to require Bank to marshall assets. The benefit of any
rule of law or equity to the contrary is hereby expressly waived.
11.12 Bank may, in its sole discretion, release any collateral
securing the Indebtedness or release any party liable therefor. The
defenses of impairment of recourse and any requirement of diligence on
Bank's part in collecting the Indebtedness are hereby waived.
11.13 If any payment date under the Indebtedness falls on a day that
is not a business day of Bank, or if the last day of any notice period
falls on such a day, the payment shall be due and the notice period shall
end on Bank's next following business day.
11.14 The validity, construction and enforcement of this Agreement and
all other documents executed with respect to the Indebtedness shall be
determined to the maximum extent permissible according to the laws of
Tennessee, in which state this Agreement has been executed and delivered.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered on their behalf by their duly authorized
officers, on the date first set out above.
NATIONSBANK OF TENNESSEE, N.A. TITAN SERVICES, INC.
BY: BY:
TITLE: TITLE:
One NationsBank Plaza Chief Executive Officer
414 Union Street 815 USA Today Way
Nashville, TN 37219 Murfreesboro, TN 37129
"BANK"
SOUTHEASTERN TECHNOLOGY, INC.
BY:
TITLE:
Chief Executive Officer
905 Industrial Drive
Murfreesboro, TN 37129
AVIATION EDUCATION SYSTEMS, INC.
BY:
TITLE:
Chief Executive Officer
633 E. Vine Street
Murfreesboro, TN 37129
<PAGE>
EXHIBIT 4.2
GUARANTY AND SURETYSHIP AGREEMENT
FOR VALUE RECEIVED and intending to be legally bound, in consideration
of credit given, or to be given, advances made or to be made, or other
financial accommodations from time to time afforded or to be afforded to
Borrowers (as hereinafter defined), the undersigned ("Guarantor') does
hereby unconditionally and irrevocably guarantee and become surety to
NationsBank of Tennessee, N.A. its successors and assigns ("Bank"), having
an office at 414 Union Street, NationsBank Plaza, Nashville, TN 37239, for
the due and punctual payment and performance of the Obligations (as
hereinafter defined), as and when such payment or performance shall
respectively become due, payable, and/or performed in accordance with the
terms of the Obligations, whether at maturity or by declaration,
acceleration, or otherwise.
I. DEFINITIONS
As used herein, the following terms shall have the indicated meanings:
"Agreement" means this Guaranty and Suretyship Agreement and all
modifications, renewals, extensions, and amendments hereto.
"Borrowers" means collectively, Titan Services, Inc., a Tennessee
corporation ("Titan") and Southeastern Technology, Inc., a Tennessee
corporation ("SET").
"Collateral" means the collateral securing, or which may in the future
secure the Obligations.
"Loan Agreement" means that certain Amended and Restated Credit and
Security Agreement of even date herewith between the Borrowers, Bank, and
the Guarantor, as amended from time to time.
"Loan Document" or "Loan Documents" means any or all, respectively, of
the Loan Agreement, the Notes, and all other documents or instruments
evidencing or securing the indebtedness evidenced by the Notes.
"Notes" means collectively, (i) the Renewal and Modification Revolving
Line of Credit Note in the original principal amount of $5,000,000, dated
as of May 1, 1996, executed by Titan and payable to Bank, as the same has
been or may be renewed, amended or modified from time to time, (ii) the
Renewal and Modification Revolving Line of Credit Note in the original
principal amount of $3,000,000, dated as of May 1, 1996, executed by Titan
and payable to Bank, and (iii) the Renewal and Modification Revolving Line
of Credit Note in the original principal amount of $600,000, dated as of
May 1, 1996, executed by the Borrowers and payable to Bank, as the same has
been or may be renewed, amended or modified from time to time.
"Obligations" means and includes (i) all indebtedness of Borrowers to
Bank heretofore or hereafter created under the Loan Agreement and under the
Notes, direct or indirect, absolute or contingent, joint or several,
together with any and all indebtedness created or incurred under any
extension, renewal, refinancing, or refunding of such indebtedness in whole
or in part, whether on account of principal, interest, or otherwise
(including, without limitation, any interest which accrues after the
commencement of any case, proceeding, or other action relating to the
bankruptcy, insolvency, or reorganization of Borrowers), (ii) payment,
performance, and discharge of all Obligations of Borrowers under the Loan
Agreement and under the other Loan Documents, (iii) all costs and expenses,
including without limitation reasonable attorneys' fees, incurred by Bank
in the collection or attempted collection of any indebtedness included in
the Obligations, and in the administration of the Obligations, and (iv) all
future advances made by Bank for the maintenance, preservation, protection,
or enforcement of, or realization upon, the property subjected and intended
to be subjected to the lien and security interest in the Collateral (as
defined in the Loan Agreement), or any portion thereof, including without
limitation advances for storage, transportation charges, taxes, insurance,
repairs, and the like; provided however, that Guarantor shall be liable
under this Agreement for the maximum amount of such liability that can be
incurred hereby without rendering this Agreement, as it relates to
Guarantor, voidable under applicable law relating to fraudulent conveyance
or fraudulent transfer, and not for any greater amount.
Any capitalized term not otherwise defined herein shall have the same
meaning given that term in the Loan Agreement.
II. COVENANTS
2.1 The obligations of Guarantor under this Agreement shall be
continuing, absolute, and unconditional and shall remain in full force and
effect without regard to, and shall not be released, discharged, or in any
way affected by: (i) any amendment, extension, modification of, or
supplement to the Notes or an, of the other Loan Documents, including
without limitation an increase in the principal indebtedness evidenced by
the Notes; (2) any exercise or nonexercise of or delay in exercising any
right, remedy, power, or privilege under or in respect of this Agreement,
the Loan Agreement, the Notes, or any of the other Loan Documents (even if
any such right, remedy, power, or privilege shall be lost thereby), or any
waiver, consent, indulgence, or other action or inaction in respect
thereof; (3) any lack of diligence, failure, neglect, or omission on the
part of Bank to make any demand or protest or to give any notice of
dishonor or default; (4) any failure or omission of Bank to realize upon or
protect any of the Collateral, to exercise or enforce any lien upon the
Collateral, or to exercise any right of set-off; (5) any bankruptcy,
insolvency, arrangement, composition, assignment for the benefit of
creditors, or similar proceeding commenced by or against Borrowers or
Guarantor; (6) any failure to perfect or continue perfection of, or any
release or waiver of, any rights given to Bank with respect to any property
as security for the performance of any of Borrowers's obligations under the
Loan Agreement, the Notes, or any other Loan Document; (7) any extension of
time for payment of the Notes or performance of any of the Obligations; (8)
dissolution (voluntarily or involuntarily) of Guarantor; (9) the
genuineness, validity, or enforceability of the Loan Documents; (10) any
limitation of liability of Borrowers or Guarantor contained in the Loan
Documents; (11) any defense that may arise by reason of the failure of Bank
to file or enforce a claim against the Borrowers in any bankruptcy or other
proceeding; (12) the voluntary or involuntary liquidation, dissolution,
sale of all or substantially all of the property of Borrowers or Guarantor,
the marshalling of assets and liabilities, or other similar proceeding
affecting Borrowers or any of its assets; (13) the release of Borrowers or
Guarantor from the performance or observance of any of the agreements,
covenants, terms, or conditions contained in the Loan Documents by
operation of law; (14) the release or discharge of any other surety or
guarantor of the Obligations; or (15) any other circumstances which might
otherwise constitute a legal or equitable discharge of, or defense
available to, a guarantor or surety.
2.2 Guarantor agrees that so long as this Agreement is in effect
Guarantor will maintain all of Guarantor's assets. If Guarantor is a
corporation it will not consolidate with or merge into another corporation
or permit one or more other corporations to consolidate with or merge into
Guarantor unless Guarantor is the surviving corporation. If consolidation,
merger, sale, or other transfer is made as provided in this paragraph, the
provisions of this paragraph shall continue in full force and effect and no
further consolidation, merger, sale, or other transfer shall be made except
in compliance with the provisions of this paragraph.
2.3 Guarantor covenants that until payment and performance in full of
the Obligations, Guarantor will furnish to Bank any financial statements of
Guarantor as required by the Loan Agreement.
2.4 Guarantor shall furnish to Bank promptly upon request by Bank
such additional financial and business information concerning Guarantor as
Bank may reasonably request.
III. WAIVERS
3.1 Guarantor hereby waives and agrees not to exercise any rights
which it may acquire by way of subrogation or reimbursement under this
Guaranty as a result of any payment made hereunder or otherwise.
3.2 Guarantor hereby waives (a) any presentment for payment, notice
of nonpayment, demand, protest, or notice of acceptance of this Agreement,
(b) any right to notice of advances made to Borrowers from tune to time
under the provisions of the Loan Documents, and (c) any notice of any
matters described or referred to in Article II above.
3.3 Guarantor hereby further waives any and all notice of every kind
to which Guarantor might otherwise be entitled with respect to the
incurring of any further or increased obligation or liability by Borrower's
to Bank, the demand for payment or the payment of all or any obligations or
liabilities of Borrowers to Bank (whether now existing or hereafter
arising) or the presentment of any instrument for payment at any time in
connection with any obligation or liability of Borrowers or the protest or
nonpayment thereof. Guarantor hereby further waives, surrenders, and agrees
not to claim or enforce any right to require the marshalling of any assets
of Borrowers, which right of subrogation or marshalling might otherwise
arise from any partial payment of the Obligations by Guarantor. Guarantor
hereby further waives all applicable statutes of limitation which may exist
at any time in favor of Guarantor.
IV. REPRESENTATIONS AND WARRANTIES
Guarantor represents, warrants, and covenants to and with Bank that:
4.1 There is no action or proceeding pending or, to the knowledge of
Guarantor, threatened against Guarantor before any court or administrative
agency which might result in any material adverse change in the business or
condition of Guarantor or in the property of Guarantor, or which might
affect the legality, validity, or enforceability of this Agreement.
4.2 Guarantor has filed all Federal and State income tax returns
which Guarantor has been required to file and has paid all taxes as shown
on said returns and on all assessments received by Guarantor to the extent
that such taxes have become due.
4.3 Neither the execution nor delivery of this Agreement, nor the
fulfillment of or compliance with the terms and provisions hereof, will
conflict with, or result in a breach of, the terms, conditions, or
provisions of, or constitute a default under, or result in the creation of
any lien, charge, or encumbrance upon any property or assets of Guarantor
under, any agreement or instrument to which Guarantor is now a party or by
which Guarantor may be bound.
4.4 The execution and delivery of this Agreement and Guarantor's
compliance with the terms and provisions hereof has been duly authorized by
the Board of Directors of Guarantor and (if required) by the stockholders
of Guarantor, or the partners of Guarantor, as applicable, and no further
consents, approvals, or authorizations thereof are required on the part of
Guarantor.
4.5 This Agreement is a valid and legally binding agreement of
Guarantor and is enforceable against Guarantor in accordance with its
terms.
4.6 Guarantor has examined the Loan Documents.
4.7 Guarantor has the full power, authority, and legal right to
execute and deliver this Agreement.
4.8 Guarantor acknowledges that this Agreement is necessary to induce
Bank to advance the credit for the Obligations and Guarantor is willing and
able to deliver this Agreement because Guarantor will receive direct and
material benefit from Bank's extension of credit to Borrowers.
4.9 Guarantor is now and will be completely familiar with the
business, operations, and condition of Borrowers and Guarantor hereby
waives and relinquishes any duty on the part of Bank to disclose any
matter, fact, or thing relating to the business, operation, or condition of
Borrowers now known or hereafter known by Bank.
V. DEFAULT AND ENFORCEMENT
5.1 In addition to all liens upon and rights of set-off against
moneys, securities, or other property of Guarantor given to Bank by law or
equity, Bank shall have a lien upon, security interest in, and right of
immediate set-off against all moneys, instruments, notes, bonds, commercial
paper, securities, and other property of Guarantor now or hereafter in the
possession of or on deposit with Bank, whether held in a general or special
account for deposit, safe-keeping, or otherwise. Every such lien and right
of set-off may be exercised after the occurrence of an Event of Default
under the Loan Agreement (and expiration of all notice and cure periods),
or a default by Guarantor under this Agreement, and expiration of
applicable cure periods, without further notice or demand to Guarantor, and
Bank may sell or cause to be sold, at public or private sale, in any manner
and place which may be lawful, for cash or credit and upon such terms as
Bank may see fit, and without demand or notice to Guarantor, all or any of
such property, and Bank or any other person may purchase such property,
rights, or interests so sold and thereafter hold the same free of any claim
or right of whatsoever kind, including any right of equity or redemption of
Guarantor, such demand, notice, or right of equity or redemption being
hereby expressly waived and released.
5.2 Each and every right, remedy, and power hereby granted to Bank or
allowed it by law or other agreement shall be cumulative and not exclusive
of any other, and may be exercised by Bank at any time and from time to
time. In the event that the Obligations of Borrowers to Bank exceed in any
respect any amount by which this Agreement may be limited, any payments by
Borrowers, or any collections or recovery by Bank from any sources other
than this Agreement, may be applied first by Bank to any portion of the
Obligations which exceeds the limits of this Agreement.
5.3 Notwithstanding anything contained in this Agreement or in the
Loan Documents to the contrary, Guarantor shall be in default under this
Agreement upon the occurrence of an Event of Default under the Loan
Agreement (and expiration of applicable cure periods), or upon the making
by Guarantor of an assignment for the benefit of creditors, or,the
appointment of a trustee or receiver from Guarantor, or for any property of
Guarantor, or the commencement of any proceeding by or against Guarantor,
under any bankruptcy, reorganization, arrangement, insolvency,
readjustment, receivership, or similar law, provided that any involuntary
proceeding shall not be dismissed within ninety (90) days after the date of
commencement. Upon the occurrence of any such default, Bank may, at its
option, as to Guarantor, accelerate the indebtedness evidenced and secured
by the Loan Documents.
5.4 This shall be an agreement of suretyship as well as of guaranty,
and Bank may proceed directly against Guarantor whenever any payment or
performance required pursuant to the Obligations is not made or rendered to
Bank without being required to make demand upon or proceed first against
Borrowers or any other person or entity, or against any security for
Borrowers's or Guarantor's Obligations under the Loan Documents or
hereunder, or exhaust its remedies against Borrowers or any other surety or
guarantor. It is expressly agreed that Bank may at any time following an
Event of Default under the Loan Agreement or a default by Guarantor
hereunder, make demand for payment on, or bring a claim against, Guarantor.
5.5 If Bank employs counsel to enforce this Agreement by suit or
otherwise, Guarantor will reimburse Bank, upon demand, for all expenses
incurred in connection therewith (including, without limitation, reasonable
attorneys' fees), whether or not suit is actually instituted.
5.6 Any controversy or claim between or among the parties hereto,
including but not limited to those arising out of or relating to this
Agreement or any related agreements or instruments, including any claim
based on or arising from an alleged tort, shall be determined by binding
arbitration in accordance with the Federal Arbitration Act (or if not
applicable, the applicable state law), the Rules of Practice and Procedure
for the Arbitration of Commercial Disputes or Judicial Arbitration and
Mediation Services, Inc. ("J.A.M.S. ") and the "Special Rules" set forth
below. In the event of any inconsistency, the Special Rules shall control.
Judgment upon any arbitration award may be entered in any court having
jurisdiction. Any party to the Agreement may bring an action, including a
summary or expedited proceeding, to compel arbitration of any controversy
or claim to which this Agreement applies in any court having jurisdiction
over such action.
(A) Special Rules. The arbitration shall be conducted in
Nashville, Tennessee, and administered by J.A.M.S. who will appoint an
arbitrator. If J.A.M.S. is unable or legally precluded from
administering the arbitration, then the American Arbitration
Association will serve. All arbitration hearings will be commenced
within ninety (90) days of the demand for arbitration; further, the
arbitrator shall only, upon a showing of cause, be permitted to extend
the commencement of such hearing for an additional sixty (60) days.
(B) Reservation of Rights. Nothing in this Agreement shall be
deemed to (i) limit the applicability of any otherwise applicable
statutes of limitation or repose and any waivers contained in this
Agreement; or (ii) be a waiver by the Bank of the protection afforded
to it by 12 U.S.C. <section> 91 or any substantially equivalent state
law; or (iii) limit the right of the Bank hereof (a) to exercise self
help remedies such as (but not limited to) setoff, or (b) to
foreclosure against any real or personal property collateral, or (c)
to obtain from a court provisional or ancillary remedies such as (but
not limited to) injunctive relief, writ of possession or the
appointment of a receiver. The Bank may exercise such self help
rights, foreclosure upon such property, or obtain such provisional or
ancillary remedies before, during or after the pendency of any
arbitration proceeding brought pursuant to this Agreement. Neither the
exercise or self help remedies nor the institution or maintenance of
an action for foreclosure or provisional or ancillary remedies shall
constitute a waiver of the right of any party, including the claimant
in such action, to arbitrate the merits of the controversy or claim
occasioning resort to such remedies.
VI. MISCELLANEOUS
6.1 In the event Bank is required at any time to refund or repay to
any person for any reason any sums collected by it on account of the
obligations subject to this Agreement, including but not limited to sums
repaid to a Trustee in Bankruptcy as a result of an avoided preferential
transfer or fraudulent conveyance, Guarantor agrees that all such sums
shall be subject to the terms of this Agreement and that Bank shall be
entitled to recover such sums from Guarantor notwithstanding the fact that
this Agreement previously may have been returned to Guarantor or that
Guarantor previously may have been discharged from further liability under
this Agreement.
6.2 Any notice, demand, or request by Bank to Guarantor or by
Guarantor to Bank shall be made in accordance with the provisions of the
Loan Agreement.
6.3 This Agreement constitutes the entire agreement, and supersedes
all prior agreements and understandings, both written aid oral, between
Guarantor and Bank with respect to the subject matter hereof. If any
clause, provision, or section of this Agreement is determined to be illegal
or invalid by any court, the invalidity of such clause, provision, or
section shall not affect any of the remaining clauses, provisions, or
sections hereof and this Agreement shall be construed and enforced as if
such illegal or invalid clause, provision, or section had not been
contained herein. In case any agreement or obligation contained in this
Agreement be held to be in violation of law, then such agreement or
obligation hall be deemed to be the agreement or obligation of Guarantor,
as the case may be, to the full extent permitted by law.
6.4 No set-off, claim, reduction, or diminution of any obligation or
defense of any kind or nature, which Guarantor or Borrowers have or may
have against Bank, shall be available hereunder to Guarantor against Bank.
6.5 No act of commission or omission of any kind or at any time on
the part of Bank in respect of any matter whatsoever shall in any way
effect or impair this Agreement. This Agreement is in addition to and not
in substitution for or discharge of any other suretyship held by Bank.
6.6 This Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the laws of the
State of Tennessee. The invalidity or unenforceability of any one or more
phrases, sentences, clauses, or provisions in this Agreement shall not
affect the validity or enforceability of the remaining portions of this
Agreement or any part thereof.
6.7 If there is more then one entity executing this Agreement as
Guarantor, each such person or entity by their respective signatures agrees
that the liabilities hereunder shall be joint and several. These presents
shall bind Guarantor and Guarantor's successors and assigns and the
benefits hereof shall inure to its successors and assigns. Bank may,
without any notice whatsoever to Guarantor, sell, assign, or transfer all
or any part of the Obligations, and in that event each and every immediate
and successive assignee, transferee, or holder of all or any part of the
Obligations shall have the right to enforce this Agreement, by suit or
otherwise, for the benefit of such assignee, transferee, or holder, as
fully as though such assignee, transferee, or holder were herein by name
given such rights, powers, and benefits; provided, however, that Bank shall
have an unimpaired right, prior and superior to that of any assignee,
transferee, or holder, to enforce this Agreement for the benefit of Bank as
to so much of the Obligation that Bank has not sold, assigned, or
transferred.
WITNESS the due execution hereof as of the 1st day of May, 1996.
AVIATION EDUCATION SYSTEMS, Inc., a
Delaware corporation
BY:
TITLE:
Address: 633 E. Vine Street
Murfreesboro, TN 37130-4381
Attn: Tom Eisenman
WITNESSED BY NATIONSBANK
OF TENNESSEE, N.A.
BY:
TITLE:
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the 1st day of September, 1993,
by and between Aviation Education Systems, Inc., a Delaware corporation
("Company"), with its princIpal place of business at 633 East Vine Street,
Murfreesboro, Tennessee 37130, and Cindy L. Rollins, an individual,
residing at 422 Gresham Lane, Murfreesboro, Tennessee 37129 ("Employee"),
to evidence employment of Employee by Company under the following terms and
conditions. Employee acknowledges that this Agreement is entered into for
good and valuable consideration, the sufficiency of which is hereby
acknowledged.
1. EMPLOYMENT TERM. The Company agrees to employ Employee, and
Employee accepts employment as Vice President, Chief Financial Officer, of
Company for a term of five (5) years commencing on September 1, 1993.
Following the expiration of the initial term hereof, this Agreement shall
be automatically renewed for successive one (1) year terms unless either
party gives written notice to the other of its intention not to renew
between thirty (30) and ninety (90) days prior to the end of the initial or
any renewal term.
2. DUTIES. Employee shall devote her full business time, attention,
skill and effort exclusively to the affairs of the Company and shall have
the responsibility, subject to the direction, approval and control of the
President for the financial operations of the Company. Employee shall,
during the term of her employment, in addition serve in the capacity of
Vice President for Finance and Administration of the Company's subsidiary,
BARTON ATC, Inc. Employee will not engage in any activities or render any
services of a business or commercial nature for anyone other than Company,
unless Employee obtains advance approval in writing from the President of
the Company; provided, however, that Employee may devote a reasonable
amount of her time to community service or other not-for-profit
organizations.
3. LOCATION OF EMPLOYMENT. Company agrees that Employee shall be
primarily based in Company's Murfreesboro, Tennessee facility, but only for
so long as the Company shall maintain a facility in that location, and
subject also to temporary relocations of less than six months to which the
Company and Employee may reasonably agree. With respect to any such
temporary relocations Employee shall be entitled to receive a reasonable
relocation and living allowance, and all out-of-pocket expenses of Employee
for such relocation shall be paid by Company.
4. COMPENSATION.
(a) BASE SALARY. For all services rendered by the Employee, the
Company shall pay the Employee a salary of Forty Eight Thousand Dollars
($48,000) per year (the "Base Salary"), payable in installments not less
often than monthly; subject to applicable withholdings. On an annual basis,
on or about the anniversary of Employee's initial employment date,
Employee's performance and salary will be reviewed by the Company for merit
increases;
(b) BONUS. Employee shall not be entitled to receive a Bonus in
connection with her employment under this Agreement.
5. INSURANCE. Employee shall be provided coverage under the
Company's standard health and other insurance programs (which shall be at
least equal to that of all identities affiliated with the Company) for
Employee and Employee's dependents at no cost to Employee, other than
standard deductibles.
6. GENERAL EMPLOYEE BENEFITS. This Agreement is not intended to and
shall not be deemed to be in lieu of any rights, privileges, and benefits
to which Employee may be entitled as an Employee of the Company under any
general retirement, pension or other plan which may now be in effect or
which hereafter be adopted, it being understood that the Employee shall
have the same rights and privileges as other management employees of the
Company and any entities affiliated with the Company, except to the extent
that such rights and privileges conflict with or duplicate, benefits
provided to Employee under this Agreement.
7. VACATIONS. Employee shall be entitled to four (4) weeks vacation
during each annual period that this Agreement or any extension hereof is in
effect; provided however that any unused vacation time may not be carried
forward into subsequent annual periods.
8. COMPENSATION ON DEATH OR DISABILITY. As further compensation,
Company shall pay Employee, if living, or, in the event of Employee's
death, to Employee's estate the following sums upon the terms and
conditions and for the periods hereinafter set forth:
(a) PAYMENTS UPON DISABILITY. In the event of the disability of
Employee on or before the expiration of this Agreement or any extension
hereof, the Company shall continue to pay to Employee her salary through
the date on which payments begin under the Company's disability insurance
policy and, if the Company does not then maintain a disability insurance
policy, through the date which shall be three (3) months following a
determination of disability pursuant to Section 8(c) hereof. Subject to any
rights to continue health insurance benefits under applicable laws,
Employee's participation in and receipt of all other benefits provided
hereunder or otherwise shall cease as of the date of disability, and this
Agreement shall terminate.
(b) PAYMENTS UPON DEATH. In the event of Employee's death on or
before the expiration of this Agreement or any extension hereof, Company
shall continue to pay, to Employee's estate the salary payable to Employee
through the date of death. Subject only to any rights of Employee's
beneficiaries to continue health or other insurance benefits under
applicable laws, entitlement to all other benefits provided hereunder or
otherwise shall cease as of the date of death, and this Agreement shall
terminate.
(c) DISABILITY DEFINED. For the purposes of Section 8(a) hereof,
the obligations of the Company to make payments upon the disability of
Employee shall not become effective unless and until all of the following
conditions are met: (i) Employee shall become physically or mentally
incapable (excluding infrequent and temporary absences due to ordinary
illness) of properly and effectively performing the services required of
her under this Agreement, (ii) such incapacity shall exist or be expected
to exist with medical certainty for more than ninety (90) days in the
aggregate during any consecutive twelve (12) month period, and (iii) either
Employee or the Company shall have given the other thirty (30) days written
notice of her or its intention to terminate Employee's employment because
of disability. In the event the Company and Employee are in material
disagreement regarding Employee's physical or mental condition under
Sections 8(c) (i) and 8(c) (ii) hereof, the Company and Employee shall
authorize a panel of three (3) physicians licensed in the State of
Tennessee one of which shall be selected by the Company and one of which
shall be selected by Employee, and the third to be selected by the two
physicians so selected by the Company and the Employee to examine Employee
to conclusively determine by a majority whether the conditions of such
Sections have been met.
9. RESTRICTIVE COVENANTS. Employee agrees to the following
restrictions upon her activities:
(a) DISCLOSURE OF CONFIDENTIAL COMMERCIAL INFORMATION. Employee
agrees and acknowledges that she has acquired prior to entering into this
Agreement and will acquire information and knowledge concerning the
business operations of the Company and its subsidiaries, the identity of
vendors, customers, and suppliers of the Company and its subsidiaries, the
identity of and information concerning the Company's and its subsidiaries
shareholders, directors, officers and employees, the Company's and its
subsidiaries methods of operation and doing business, business practices,
financial information, procedures and data related to the operation of the
Company's and its subsidiaries business (all of such information shall be
referred to herein as "Confidential Commercial Information"). Employee
shall not, so long as Company complies with all of its obligations
hereunder, at any time during or after termination of her position or
expiration of the term of her employment hereunder, divulge to any person,
firm, corporation or other entity any knowledge, information, or fact
related to the Confidential Commercial Information, which information
Company shall hold in trust in a fiduciary capacity for the sole benefit of
the Company, its successors and assigns. This provision does not preclude
the confidential disclosure by Employee of Confidential Commercial
Information to third parties, such as financial institutions or trade
creditors, where disclosure is in the ordinary course of business and is in
the best interest of the Company or its subsidiaries, nor does this
provision apply to Confidential Commercial Information that has become
generally publicly available from the Company or its subsidiaries or other
third parties unaffiliated with Employee prior to the time of disclosure by
the Employee. Employee shall likewise be permitted to disclose such
Confidential Information as is necessary to her personal counsel in an
attorney-client relationship, and to disclose such Confidential Commercial
Information to the extent necessary to enforce her rights under this
Agreement in any legal proceeding, or as may otherwise be required by law.
(b) NON-COMPETE. So long as Company complies with all of its
obligations hereunder, for the greater of (a) the period ending August 31,
1998, or (b) a period equivalent to the actual term of Employee's
employment by the Company, the Employee will not engage, directly or
indirectly, by way of ownership, management, employment, consultation or
control, in the sale, manufacture, development, importation, distribution,
provision or promotion of products or services which perform the same
function as products manufactured, developed, imported, sold, distributed
or promoted or services provided by the Company or its subsidiaries within
the United States, including all current business activities of the Company
or of its subsidiaries, and future activities prior to and at the time of
termination, resignation, or retirement. The sole fact of ownership by
Employee of less than five percent (5%) of the stock of a publicly traded
company which may have product or service lines which compete with product
or service lines of the Company or its subsidiaries shall not constitute a
violation hereunder. Employee agrees that the scope, duration and
geographic area coverage of this covenant not to compete are reasonable. In
the event that any court determines that the scope, duration or geographic
area is unreasonable and that such covenant is to that extent
unenforceable, it is the intent of the parties, and Employee and Company
agree, that the covenant shall remain in full force and effect for the
greatest time period and in the greatest area that would not render it
unenforceable. Employee and Company intend that this covenant shall be
deemed to be a series of separate covenants, one for each and every state
of the United States.
(c) NON-SOLICITATION. So long as Company complies with all of its
obligations hereunder, during Employee's employment, and for a period of
three (3) years after termination, resignation or retirement from the
Company, Employee will not, directly or indirectly, alone, with or for the
benefit of others, solicit, entice or persuade any other employee of
Company or its subsidiaries to leave the services of the Company or its
subsidiaries for any reason.
10. TRADE SECRETS. As part of her employment, Employee recognizes
that in the future she will be given access to and knowledge of matters not
available to the public concerning the business of the Company and its
subsidiaries, including but not being limited to the Company's and its
subsidiaries financial information and projections, information concerning
customers financial status, payment history, buying habits and servicing
needs, the prices of which each of the Company and its subsidiaries obtains
or has obtained from the sale of, or at which each sells or has sold, its
products, the Company's and its subsidiaries projected costs and pricing
for products and components, and information from the Company and its
subsidiaries regarding development of services, products, marketing
strategy, development of patents and trademarks, and internal product
testing and performance information (all of which shall herein be referred
to as "Trade Secret Information"). All information which Employee has
obtained to date prior to the entering into this Agreement concerning the
industry in which the Company and its subsidiaries operate and what
otherwise be deemed to be Trade Secret Information shall not be subject to
this Section 9, however, during the term of this Agreement Employee shall
not disclose such information, but for the benefit of the Company or its
subsidiaries. Employee further recognizes and agrees that she will be given
access to this Trade Secret Information only in a fiduciary capacity.
Without regard to whether any or all of these matters will be deemed
confidential, material or important to others, the parties hereto recognize
and agree that the Company expressly considers them to be secret,
confidential and highly proprietary in nature and that the Company desires
them to be kept secret and confidential by Employee. The parties hereto
further stipulate that as between themselves, the same are important,
material, confidential and gravely affect the effective and successful
conduct of the Company's business and its goodwill. Therefore, so long as
the Company complies with all if its obligations hereunder Employee agrees
that she will not, at any time or in any manner whatsoever, either during
or after termination of her employment with the Company, divulge, disclose
or otherwise make known to any person, firm, corporation or entity such
Trade Secret Information and that she will not make use of such Trade
Secret Information for any purposes other than for the benefit of Company,
without the express prior written authorization of the President of the
Company. Employee further agrees that upon termination of employment, she
will return to Company all copies of Trade Secret Information, including
all lists, summaries or other documents containing Trade Secret
Information. This provision does not preclude the confidential disclosure
by Employee of Trade Secret Information to third parties, such as the U.S.
Office of Patents and Trade Marks or financial institutions, where such
disclosure is in the ordinary course of business and is in the best
interest of the Company, nor does the provision apply to Trade Secret
Information that has become generally publicly available from the Company
or its subsidiaries, or third parties unaffiliated with Employee prior to
the time of disclosure by the Employee. Employee shall likewise be
permitted to disclose such Trade Secret Information as is necessary to her
personal counsel in an attorney-client relationship, and to disclose such
Trade Secret Information to the extent necessary to enforce her rights
under this Agreement in any legal proceeding, or as may otherwise be
required by law.
11. EMPLOYEE DEVELOPMENTS. The Company shall be entitled to own and
control all inventions, improvements, discoveries, concepts, ideas,
processes, materials, including works of expression and all copyrights in
such works (collectively "Employee Developments"), that are developed,
created, or conceived by Employee solely or jointly with others during the
period of her employment with the Company which relate to Company's current
or reasonably anticipated products or business, or are otherwise used by
the Company. Employee will disclose, delivery and assign to Company at the
request of Company and without charge to the Company, but at the Company's
expense, all such Employee Developments. Employee further agrees to execute
all documents, instruments, patent applications or other arrangements
necessary to further document such ownership and/or assignment to the
Company and to take whatever other steps may be needed to give Company the
full benefit of them. Employee specifically agrees that all copyrightable
materials generated or developed under this Agreement, including but not
limited to, computer programs and documentation, shall be considered works
made for hire under the copyright laws of the United States and shall, upon
creation, be owned exclusively by the Company. To the extent that any such
materials, under applicable law, may not be considered works for hire,
Employee hereby assigns to the Company the ownership of all copyrights and
such materials, without the necessity of any further consideration, and
Company shall be entitled to register and hold in its own name all
copyrights and respective such materials.
12. INJUNCTION AND DAMAGES. Employee acknowledges and agrees that a
material breach by her of the covenants contained in paragraphs 9, 10, and
11 above will result in harm and continuing damage to the Company, its
successors or assigns, for which there is no adequate remedy at law" and,
in the event of a material breach of such covenants by the Employee, and so
long as the Company has complied with all of its obligations hereunder the
Company shall be entitled to injunctive relief as well as such other and
further relief, including damages, as may be proper. Employee acknowledges
that a material breach of such covenants will result in substantial
detriment and damage to the Company for which the Employee agrees that the
Company shall be entitled to have and recover any and all actual damages,
expenses, and costs resulting from said breach so long as Company is in
full compliance with all of its obligations hereunder.
13. TERMINATION BY COMPANY FOR CAUSE. Notwithstanding any other
provisions of this Agreement, the Company may, at any time, without prior
notice, discharge the Employee for any of the following causes:
(a) Any intentionally illegal, dishonest or malfeasant conduct
which materially and adversely affects the business of the Company or which
involves Company funds or assets; or
(b) Any intentional or material damage to property or business
of the Company which is of a material nature: or
(c) Conviction by a court of competent jurisdiction (including a
guilty plea) of theft, embezzlement or misappropriation of Company
property: or
(d) Conviction by a court of competent jurisdiction (including a
guilty plea) of a crime which renders the employee "infamous" pursuant to
the laws of the State of Tennessee; or
(e) The willful failure of Employee to carry out her duties as
an employee of the Company; or
(f) A breach of the warranties and covenants set forth in
Sections 9, 10 and 11;
(g) In the event that the Company relocates outside the
Murfreesboro, Tennessee, area and the Employee refuses to relocate.
Termination pursuant to this Section shall result in Employee's
immediate forfeiture of all rights and privileges, under this Agreement,
excluding accrued Base Salary only through the date of termination, payable
in the manner and at the times set forth in Section 4(a) hereof, allowing
for deduction or setoff of any amounts then due and owing to the Company as
of the date of termination by Employee, with respect to which Employee
hereby agrees that setoff is permissible.
14. TERMINATION FOR ANY OTHER REASON. Except as terminated pursuant
to Section 13 hereof, employment may only be terminated under the following
terms and conditions:
(a) TERMINATION BY EMPLOYEE OR COMPANY WITHOUT CAUSE. Either the
Employee or Company may terminate this Agreement by giving written notice
of termination pursuant to Section 1 hereof. In the event of any
termination pursuant to this Section 14(a), Employee shall retain any
vested pension rights, shall be entitled to exercise rights to continue
health insurance benefits under applicable laws.
(b) TERMINATION BY EMPLOYEE FOR CAUSE. Notwithstanding any other
provision of this Agreement, Employee may, upon no less than thirty (30)
days prior written notice, terminate this Agreement for cause upon written
notice, within thirty (30) days of the occurrence of any of the following
causes:
(i) Any decision by the Company to reduce Employee's Base
Salary or the failure of the Company to pay any other compensation or
provide any other benefit which may be due hereunder at the time and in the
manner prescribed herein; or
(ii) Any material change in the duties assigned to Employee
by Company; or
(iii) A change in the place of employment of Employee that
is located further than 60 miles from Murfreesboro, Tennessee (except for a
temporary relocation as is permitted by Section 3, or in the event the
Company should relocate as set forth in Section 13(g)), unless otherwise
agreed to in writing by Employee; and
(iv) A change in the management and operation of the Company
to the extent that Employee shall not have direct reporting authority to
the President of the Company.
In the event of any such termination by Employee, Employee shall be
entitled to receive, in a lump-sum payment within thirty (30) days of the
date of termination, a payment equal to the greater of the remaining
amounts due under the term of this Agreement (giving consideration to all
fringe benefits and bonuses as would be (or may be reasonably calculated to
be) paid hereunder or one (1) year's then current Base Salary and an amount
equal to the prior year's bonus determined pursuant to Section 4(b) hereof,
less applicable withholdings and allowing for deduction and setoff of any
amounts due and owing to Company by Employee as of the date of termination,
with respect to which Employee agrees that setoff is permissible.
15. RETURN OF COMPANY MATERIALS. Upon the request of Company, and in
the event of termination of Employee's employment for any reason, so long
as the Company is in full compliance with all of its obligations hereunder,
Employee will return to Company all records, materials and other physical
objects relating to Employee's employment, including tools, passwords and
other identification materials, computer programs, documentation,
memoranda, notes, records, drawings, manuals or other documents pertaining
to Company's, or any subsidiaries, business or Employee's employment
(including all copies thereof). This obligation applies to all materials
concerning any Employee Developments, Trade Secret Information,
Confidential Commercial Information or otherwise relating to the affairs of
each of the Company and AES or any of its customers, clients, vendors or
agents that may be in Employee's possession or control.
16. SURVIVAL OF REPRESENTATIONS AND COVENANTS. Notwithstanding any
other provisions hereof, and without limiting the surviving obligations of
Employee, the obligations of the Employee pursuant to paragraphs 9, 10, 11,
12 and 15 hereof shall survive the termination of this Agreement, so long
as the Company is in full compliance with all of its obligations hereunder.
17. NOTICES. Any notice to the Company under this Agreement shall be
deemed to have been given if and when delivered in person to an officer of
the Company (other than Employee) or if and when mailed by registered mail
to the Company (Attention: Chairman of the Board of Directors) at its
address stated above, or such other address as the Company may from time to
time designate in writing by notice to Employee. Any notice to Employee
under this Agreement shall be deemed to have been given if and when
delivered in person to her or if and when mailed by registered mail to her
at the address stated above, or at such other address as she may designate
in writing by notice to the Company.
18. WAIVER. Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver of such
term, covenant or condition, nor shall any waiver or relinquishment of such
right or power at any other time or times.
19. BINDING EFFECT. This Agreement shall inure to the benefit of, and
be binding upon, Company, together with its successors and assigns, and
Employee, together with Employee's executor, administrator, personal
representatives, heirs and legatees.
20. SEVERABILITY. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision.
21. ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes the
entire understanding and agreement between the Company and the Employee
with regard to all matters herein. There are no other agreements,
conditions or representations, oral or written, express or implied between
the Company and Employee concerning the Employee's employment. This
Agreement may be amended only in writing signed by both parties hereto.
22. TIME OF PERFORMANCE. Time is of the essence with respect to the
obligations of the parties to this Agreement.
23. BUSINESS EXPENSES. Employee shall be entitled to be reimbursed by
the Company for all reasonable and necessary business, travel, and
entertainment expenses which she incurs on behalf of the Company. Employee
shall be required to provide evidence of such expenditures as are
reasonably required by the Company's auditors and which comply with IRS
guidelines.
24. APPLICABLE LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Tennessee. Employee and Company
agree that any dispute arising under this Agreement shall be subject to the
exclusive jurisdiction and venue of state courts located in Rutherford
County, Tennessee, or the United States District Court for the Middle
District of Tennessee.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
Attest:
CINDY L. ROLLINS
AVIATION EDUCATION SYSTEMS, INC.
Attest: By:
ROBERT W. LYNCH, JR.
PRESIDENT
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the 1st day of July, 1993, by and
between TITAN SERVICES, INC., a Tennessee corporation ("Company"), with its
principal place of business at 815 USA Today Way, Murfreesboro, Tennessee
37129, and RICHARD R. HULBERT, an individual, residing at 1812 Harpeth
River Drive, Brentwood, Tennessee 37027 ("Employee"), to evidence
employment of Employee by Company under the following terms and conditions.
Employee acknowledges that this Agreement is entered into for good and
valuable consideration, the sufficiency of which is hereby acknowledged.
1. EMPLOYMENT TERM. The Company agrees to employ Employee, and
Employee accepts employment as President of Company for a term of five (5)
years commencing on September 1, 1993. Following the expiration of the
initial term hereof, this Agreement shall be automatically renewed for
successive one (1) year terms unless either party gives written notice to
the other of its intention not to renew between thirty (30) and ninety (90)
days prior to the end of the initial or any renewal term.
2. DUTIES. Employee shall devote his full business time, attention,
skill and effort exclusively to the affairs of the Company and shall have
the responsibility, subject to the direction, approval and control of the
Board of Directors for the operation of the Company. Employee shall
additionally from time to time assist in the management and operations of
an affiliated company, Southeastern Technology, Inc. ("STI"). Employee
will not engage in any activities or render any services of a business or
commercial nature for anyone other than Company or STI, unless Employee
obtains advance approval in writing from the Board of Directors of the
Company; provided, however, that Employee may devote a reasonable amount of
his time to community service or other not-for-profit organizations.
3. LOCATION OF EMPLOYMENT. Company agrees that Employee shall be
primarily based in Company's Murfreesboro, Tennessee facility, but only for
so long as the Company shall have in effect an active contract with Saturn
Corporation ("Saturn"), and subject also to temporary relocations of less
than six months to which the Company and Employee may reasonably agree.
With respect to any such temporary relocations Employee shall be entitled
to receive a reasonable relocation and living allowance, and all out-of-
pocket expenses of Employee for such relocation shall be paid by Company.
Other than on a temporary basis as is herein provided, Employee shall in no
event be required to relocate his place of employment to a location outside
of the United States.
4. COMPENSATION.
(a) BASE SALARY. For all services rendered by the Employee, the
Company shall pay the Employee a salary of One Hundred Thousand Dollars
($100,000.00) per year (the "Base Salary"), payable in installments not
less often than monthly, subject to applicable withholdings. On an annual
basis, on or about the anniversary of Employee's initial employment date,
Employee's performance and salary will be reviewed by the Company for merit
increases; provided, however, that, in addition to any other adjustments,
Employee's Base Salary will be annually increased on a percentage basis
equivalent to the increase in the Consumer Price Index, with August, 1993
as the base month. The term "Consumer Price Index" means the unadjusted
monthly Consumer Price Index for All Urban Consumers (CPI-U), U.S. City
Average (all items) (1982-84=100) published by the Bureau of Labor
Statistics of the United States Department of Labor, or if such index is
revised or discontinued, such other government index or computation with
which it is replaced shall be used, together with any applicable conversion
factor, in order to obtain substantially the same results that would be
obtained if the Consumer Price Index had not been revised or discontinued.
There shall be no decrease in the Base Salary in the event that there is a
decrease in the Consumer Price Index.
(b) BONUS. In addition to the Base Salary, Employee shall also
be paid an annual bonus with two components, payable within ninety (90)
days following the end of the Company's fiscal year. First, such bonus
shall be paid to the extent that there is an increase in the combined pre-
tax profit of the Company and STI (the "Companies") over the Base Year (as
hereinafter defined), and then second there shall be an additional bonus to
the extent that such combined pre-tax profit of the Companies exceeds the
Stepped Up Profits Basis (as hereinafter defined). The term "Base Year"
shall mean the fiscal years of the Companies calculated to end on June 30,
1993. The term "Stepped Up Profits Basis" shall mean the combined pre-tax
profit of the Companies as of the Base Year, plus, on a cumulative basis,
$150,000 per year thereafter. As an example, if the pre-tax profit of the
Companies is $500,000 for the Base Year (1993), then the Stepped Up Profits
Basis for 1994 will be $650,000; $800,000 for 1995; $950,000 for 1996, etc.
Employee shall receive for the first component of his bonus an amount equal
to five percent (5%) of such combined pre-tax profit of the Companies in
excess of the combined pre-tax profits of the Companies for the Base year
up to the Stepped Up Profits Basis. As the second component of the bonus
Employee shall receive ten percent (10%) for all combined pre-tax profit of
the Companies which equals or exceeds the Stepped Up Profits Basis. In
computing the pre-tax profit of the Companies the following items will be
excluded: (i) non-recurring items of income or loss which are not incurred
in the ordinary course of business (specifically to be excluded shall be
all payments to directors of SEtech, Inc. in settlement of any issue
related to the non-issuance of certain warrants to such directors), and
(ii) all inter-company allocations of overhead or other expense (except to
the extent that such represent approximately similar allocations presently
charged by SEtech, Inc. to either of the Companies), or to the extent that
any such expense represents any debt service on any obligations which are
issued in replacement of those certain existing subordinated promissory
notes of SEtech, Inc. in the approximate principal amount of $634,500.00.
5. INSURANCE. Employee shall be provided coverage under the
Company's standard health insurance program (which shall be at least equal
to that of all entities affiliated with the Company) for Employee and
Employee's dependents at no cost to Employee, other than standard
deductibles. Employee shall be provided long-term disability insurance at
no cost to Employee, which coverage shall provide for the payment of 60% of
Employee's Base Salary beginning three (3) months after the beginning of a
disability and continuing throughout the period of disability. Employee
shall be provided, at no cost to Employee, a Five Hundred Thousand Dollar
($500,000.00) split-dollar life insurance policy payable to a beneficiary
or beneficiaries designated by Employee. Employee acknowledges (i) that
benefits to Employee under this Section 5 are chargeable as income to
Employee to the extent required by applicable law and (ii) that
developments in the structure of and payment for health and related
insurance programs may necessitate a review and substantial alteration of
the health insurance and disability benefits to be provided by Company.
6. GENERAL EMPLOYEE BENEFITS. This Agreement is not intended to and
shall not be deemed to be in lieu of any rights, privileges, and benefits
to which Employee may be entitled as an employee of the Company under any
general retirement, pension or other plan which may now be in effect or
which may hereafter be adopted, it being understood that the Employee shall
have the same rights and privileges as other management employees of the
Company and any entities affiliated with the Company, except to the extent
that such rights and privileges conflict with, or duplicate, benefits
provided to Employee under this Agreement.
7. VACATIONS. Employee shall be entitled to four (4) weeks vacation
during each annual period that this Agreement or any extension hereof is in
effect; provided however, that any unused vacation time may not be carried
forward into subsequent annual periods.
8. COMPENSATION ON DEATH OR DISABILITY. As further compensation,
Company shall pay Employee, if living, or, in the event of Employee's
death, to Employee's estate, the following sums upon the terms and
conditions and for the periods hereinafter set forth:
(a) PAYMENTS UPON DISABILITY. In the event of the disability of
Employee on or before the expiration of this Agreement or any extension
hereof, the Company shall continue to pay to Employee, in the manner and at
the times as provided in Section 4(a) hereof, his Base Salary through the
date on which payments begin under the Company's disability insurance
policy, and, if the Company does not then maintain a disability insurance
policy, through the date which shall be three (3) months following a
determination of disability pursuant to Section 8(c) hereof, and Employee
shall be entitled to receive a pro-rata bonus under Section 4(b) hereof for
the period beginning on July 1 of any year and ending on the date of
disability prior to the immediately succeeding July 1. Subject to any
rights to continue health insurance benefits under applicable laws,
Employee's participation in and receipt of all other benefits provided
hereunder or otherwise shall cease as of the date of disability, and this
Agreement shall terminate; provided, however, that Employee shall have the
option of purchasing the life insurance policy purchased for Employee at
its interpolated terminal reserve value, subject to the requirements and
restrictions of such policy.
(b) PAYMENTS UPON DEATH. In the event of Employee's death on or
before the expiration of this Agreement or any extension hereof, Company
shall continue to pay, in the manner and at the times as provided in
Section 4(a) hereof, to Employee's estate the Base Salary payable to
Employee through the date of death and shall pay to the Employee's estate a
pro rata bonus under Section 4(b) hereof for the period beginning on July 1
of any year and ending on the date of death prior to the immediately
succeeding July 1. Subject only to any rights of Employee's beneficiaries
to continue health or other insurance benefits under applicable laws,
entitlement to all other benefits provided hereunder or otherwise shall
cease as of the date of death, and this Agreement shall terminate.
(c) DISABILITY DEFINED. For the purposes of Section 8(a)
hereof, the obligations of the Company to make payments upon the disability
of Employee shall not become effective unless and until all of the
following conditions are met: (i) Employee shall become physically or
mentally incapable (excluding infrequent and temporary absences due to
ordinary illness) of properly and effectively performing the services
required of him under this Agreement, (ii) such incapacity shall exist or
be expected to exist with medical certainty for more than ninety (90) days
in the aggregate during any consecutive twelve (12) month period, and (iii)
either Employee or the Company shall have given the other thirty (30) days'
written notice of his or its intention to terminate Employee's employment
because of disability. In the event the Company and Employee are in
material disagreement regarding Employee's physical or mental condition
under Sections 8(c)(i) and 8(c)(ii) hereof, the Company and Employee shall
authorize a panel of three (3) physicians licensed in the State of
Tennessee one of which shall be selected by the Company and one of which
shall be selected by Employee, and the third to be selected by the two
physicians so selected by the Company and the Employee to examine Employee
to conclusively determine by a majority whether the conditions of such
Sections have been met.
9. RESTRICTIVE COVENANTS. Employee agrees to the following
restrictions upon his activities:
(a) DISCLOSURE OF CONFIDENTIAL COMMERCIAL INFORMATION. Employee
agrees and acknowledges that he has acquired prior to entering into this
Agreement and will acquire information and knowledge concerning the
business operations of the Company, STI, and Aviation Education Systems,
Inc., a Delaware corporation ("AES") the identity of vendors, customers,
and suppliers of the Company, STI, and AES the identity of and information
concerning the Company's, STI's and AES's shareholders, directors, officers
and employees, the Company's, STI's, and AES's methods of operation and
doing business, business practices, financial information, procedures and
data related to the operation of the Company's, STI's, AES's business (all
of such information shall be referred to herein as "Confidential Commercial
Information"). Employee shall not, so long as Company complies with all of
its obligations hereunder, at any time during or after termination of his
position or expiration of the term of his employment hereunder, divulge to
any person, firm, corporation or other entity any knowledge, information,
or fact related to the Confidential Commercial Information, which
information Employee shall hold in trust in a fiduciary capacity for the
sole benefit of the Company, its successors and assigns. This provision
does not preclude the confidential disclosure by Employee of Confidential
Commercial Information to third parties, such as financial institutions or
trade creditors, where disclosure is in the ordinary course of business and
is in the best interest of the Company, STI, or AES nor does this provision
apply to Confidential Commercial Information that has become generally
publicly available from the Company, STI, or AES or other third parties
unaffiliated with Employee prior to the time of disclosure by the Employee.
Employee shall likewise be permitted to disclose such Confidential
Information as is necessary to his personal counsel in an attorney-client
relationship, and to disclose such Confidential Commercial Information to
the extent necessary to enforce his rights under this Agreement in any
legal proceeding, or as may otherwise be required by law.
(b) NON-COMPETE. So long as Company complies with all of its
obligations hereunder, for the greater of (a) the period ending August 31,
1998, or (b) a period equivalent to the actual term of Employee's
employment by the Company, the Employee will not engage, directly or
indirectly, by way of ownership, management, employment, consultation or
control, in the sale, manufacture, development, importation, distribution,
provision or promotion of products or services which perform the same
function as products manufactured, developed, imported, sold, distributed
or promoted or services provided by the Company or by STI, within the
United States, including all current business activities of the Company,
and future activities prior to and at the time of termination, resignation,
or retirement. In the event that at any time during the term of
employment, the Companies shall engage in any business in Europe, the
provisions of this Section 9 shall also apply to Europe. The sole fact of
ownership by Employee of less than five percent (5%) of the stock of a
publicly traded company which may have product or service lines which
compete with product or service lines of the Company or STI shall not
constitute a violation hereunder. Employee agrees that the scope, duration
and geographic area coverage of this covenant not to compete are
reasonable. In the event that any court determines that the scope,
duration or geographic area is unreasonable and that such covenant is to
that extent unenforceable, it is the intent of the parties, and Employee
and Company agree, that the covenant shall remain in full force and effect
for the greatest time period and in the greatest area that would not render
it unenforceable. Employee and Company intend that this covenant shall be
deemed to be a series of separate covenants, one for each and every state
of the United States.
(c) NON-SOLICITATION. So long as Company complies with all of
its obligations hereunder, during Employee's employment, and for a period
of three (3) years after termination, resignation or retirement from the
Company, Employee will not, directly or indirectly, alone, with or for the
benefit of others, solicit, entice or persuade any other employee of
Company or STI to leave the services of the Company or STI for any reason.
10. TRADE SECRETS. As part of his employment Employee recognizes
that in the future he will be given access to and knowledge of matters not
available to the public concerning the business of the Company, STI, and
AES including but not being limited to the Company's, STI's, and AES's
financial information and projections, information concerning customers'
financial status, payment history, buying habits and servicing needs, the
prices at which each of the Company, STI, and AES obtains or has obtained
from the sale of, or at which each sells or has sold, its products, the
Company's, STI's, and AES's projected costs and pricing for products and
components, and information from the Company, STI, and AES regarding
development of services, products, marketing strategy, development of
patents and trademarks, and internal product testing and performance
information (all of which shall herein be referred to as "Trade Secret
Information"). All information which Employee has obtained to date prior
to the entering into this Agreement concerning the industry in which the
Company operates and what might otherwise be deemed to be Trade Secret
Information shall not be subject to this Section 10, however, during the
term of this Agreement Employee shall not disclose such information, but
for the benefit of the Company. Employee further recognizes and agrees
that he will be given access to this Trade Secret Information only in a
fiduciary capacity. Without regard to whether any or all of these matters
will be deemed confidential, material or important to others, the parties
hereto recognize and agree that the Company expressly considers them to be
secret, confidential and highly proprietary in nature and that the Company
desires them to be kept secret and confidential by Employee. The parties
hereto further stipulate that as between themselves, the same are
important, material, confidential and gravely affect the effective and
successful conduct of the Company's business and its good will. Therefore,
so long as the Company complies with all of its obligations hereunder
Employee agrees that he will not, at any time or in any manner whatsoever,
either during or after termination of his employment with Company, divulge,
disclose or otherwise make known to any person, firm, corporation or entity
such Trade Secret Information and that he will not make use of such Trade
Secret Information for any purposes other than for the benefit of Company,
without the express prior written authorization of the Board of Directors
of the Company. Employee further agrees that upon termination of
employment, he will return to Company all copies of Trade Secret
Information, including all lists, summaries or other documents containing
Trade Secret Information. This provision does not preclude the
confidential disclosure by Employee of Trade Secret Information to third
parties, such as the U.S. Office of Patents and Trademarks or financial
institutions, where such disclosure is in the ordinary course of business
and is in the best interest of the Company, nor does the provision apply to
Trade Secret Information that has become generally publicly available from
the Company, STI, or AES or third parties unaffiliated with Employee prior
to the time of disclosure by the Employee. Employee shall likewise be
permitted to disclose such Trade Secret Information as is necessary to his
personal counsel in an attorney-client relationship, and to disclose such
Trade Secret Information to the extent necessary to enforce his rights
under this Agreement in any legal proceeding, or as may otherwise be
required by law.
11. EMPLOYEE DEVELOPMENTS. The Company shall be entitled to own and
control all inventions, improvements, discoveries, concepts, ideas,
processes, materials, including works of expression and all copyrights in
such works (collectively "Employee Developments"), that are developed,
created, or conceived by Employee solely or jointly with others during the
period of his employment with the Company which relate to Company's current
or reasonably anticipated products or business, or are otherwise used by
the Company. Employee will disclose, deliver and assign to Company at the
request of Company and without charge to the Company, but at Company's
expense, all such Employee Developments. Employee further agrees to
execute all documents, instruments, patent applications or other
arrangements necessary to further document such ownership and/or assignment
to Company and to take whatever other steps may be needed to give Company
the full benefit of them. Employee specifically agrees that all
copyrightable materials generated or developed under this Agreement,
including but not limited to, computer programs and documentation, shall be
considered works made for hire under the copyright laws of the United
States and shall, upon creation, be owned exclusively by the Company. To
the extent that any such materials, under applicable law, may not be
considered works for hire, Employee hereby assigns to the Company the
ownership of all copyrights and such materials, without the necessity of
any further consideration, and Company shall be entitled to register and
hold in its own name all copyrights and respective such materials.
12. INJUNCTION AND DAMAGES. Employee acknowledges and agrees that a
material breach by him of the covenants contained in paragraphs 9, 10 and
11 above will result in harm and continuing damage to the Company, its
successors or assigns, for which there is no adequate remedy at law; and,
in the event of a material breach of such covenants by the Employee, and so
long as the Company has complied with all of its obligations hereunder the
Company shall be entitled to injunctive relief as well as such other and
further relief, including damages, as may be proper. Employee acknowledges
that a material breach of such covenants will result in substantial
detriment and damage to the Company for which the Employee agrees that the
Company shall be entitled to have and recover any and all actual damages,
expenses, and costs resulting from said breach so long as Company is in
full compliance with all of its obligations hereunder.
13. TERMINATION BY COMPANY FOR CAUSE. Notwithstanding any other
provisions of this Agreement, the Company may, at any time, without prior
notice, discharge the Employee for any of the following causes:
(a) Any intentionally illegal, dishonest or malfeasant conduct
which materially and adversely affects the business of the Company or which
involves Company funds or assets; or
(b) Any intentional or material damage to property or business
of the Company; or
(c) Conviction by a court of competent jurisdiction (including a
guilty plea) of theft, embezzlement or misappropriation of Company
property; or
(d) Conviction by a court of competent jurisdiction (including a
guilty plea) of a crime which renders the Employee "infamous" pursuant to
the laws of the State of Tennessee; or
(e) The willful failure of Employee to carry out his duties as
an employee of the Company; or
(f) A breach of the warranties and covenants set forth in
Sections 9, 10 and 11.
Termination pursuant to this Section shall result in Employee's
immediate forfeiture of all rights and privileges under this Agreement,
excluding accrued Base Salary only through the date of termination, payable
in the manner and at the times set forth in Section 4(a) hereof, allowing
for deduction or setoff of any amounts then due and owing to the Company as
of the date of termination by Employee, with respect to which Employee
hereby agrees that setoff is permissible.
14. TERMINATION OF ANY OTHER REASON. Except as terminated pursuant
to Section 13 hereof, employment may only be terminated under the following
terms and conditions:
(a) TERMINATION BY EMPLOYEE OR COMPANY WITHOUT CAUSE. Either
the Employee or Company may terminate this Agreement by giving written
notice of termination pursuant to Section 1 hereof. In the event of any
termination pursuant to this Section 14(a), Employee shall be entitled to
purchase the life insurance policy provided to Employee at its interpolated
terminal reserve value (subject to the requirements and restrictions of
such policy), shall retain any vested pension rights, shall be entitled to
exercise rights to continue health insurance benefits under applicable
laws, and shall be entitled to a bonus calculated pursuant to Section 4(b)
hereof.
(b) TERMINATION BY EMPLOYEE FOR CAUSE. Notwithstanding any
other provision of this Agreement, Employee may, upon no less than thirty
(30) days prior written notice, terminate this Agreement for cause upon
written notice, within thirty (30) days of the occurrence of any of the
following causes:
(i) Any decision by the Company to reduce Employee's Base
Salary or the failure of the Company to pay any other compensation or
provide any other benefit which may be due hereunder at the time and
in the manner prescribed herein; or
(ii) Any material change in the duties assigned to Employee
by Company; or
(iii) A change in the place of employment of Employee that
is located outside of the United States (except for a temporary
relocation as is permitted by Section 3), unless otherwise agreed to
in writing by Employee (it being understood by the Company and
Employee that there shall be no material relocation of Employee's
place of employment [i.e. a 60 mile radius of Murfreesboro, Tennessee]
except for temporary relocations as permitted by Section 3, except in
the event that the Saturn contract is no longer in existence); and
(iv) A change in the management and operation of the Company
to the extent that Employee shall not have direct reporting authority
to the Board of Directors of the Company and direct access to the
Board of Directors of AES.
In the event of any such termination by Employee, Employee shall be
entitled to receive, in a lump-sum payment within thirty (30) days of the
date of termination, a payment equal to the greater of the remaining
amounts due under the term of this Agreement (giving consideration to all
fringe benefits and bonuses as would be (or may be reasonably calculated to
be) paid hereunder or one (1) year's then current Base Salary and an amount
equal to the prior year's bonus determined pursuant to Section 4(b) hereof,
less applicable withholdings and allowing for deduction and setoff of any
amounts due and owing to Company by Employee as of the date of termination,
with respect to which Employee hereby agrees that setoff is permissible.
15. RETURN OF COMPANY MATERIALS. Upon the request of Company, and in
the event of termination of Employee's employment for any reason, so long
as the Company is in full compliance with all of its obligations hereunder,
Employee will return to Company all records, materials and other physical
objects relating to Employee's employment, including tools, passwords and
other identification materials, computer programs, documentation,
memoranda, notes, records, drawings, manuals or other documents pertaining
to Company's or STI's business or Employee's employment (including all
copies thereof). This obligation applies to all materials concerning any
Employee Developments, Trade Secret Information, Confidential Commercial
Information or otherwise relating to the affairs of each of the Company and
AES or any of its customers, clients, vendors or agents that may be in
Employee's possession or control.
16. SURVIVAL OF REPRESENTATIONS AND COVENANTS. Notwithstanding any
other provisions hereof, and without limiting the surviving obligations of
Employee, the obligations of the Employee pursuant to paragraphs 9, 10, 11,
12 and 15 hereof shall survive the termination of this Agreement, so long
as the Company is in full compliance with all of its obligations hereunder.
17. NOTICES. Any notice to the Company under this Agreement shall be
deemed to have been given if and when delivered in person to an officer of
the Company (other than Employee) or if and when mailed by registered mail
to the Company (Attention: Chairman of the Board of Directors) at its
address stated above, or such other address as the Company may from time to
time designate in writing by notice to Employee. Any notice to Employee
under this Agreement shall be deemed to have been given if and when
delivered in person to him or if and when mailed by registered mail to him
at the address stated above, or at such other address as he may designate
in writing by notice to the Company.
18. WAIVER. Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver of such
term, covenant or condition, nor shall any waiver or relinquishment of any
right or power hereunder at any one or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
19. BINDING EFFECT. This Agreement shall inure to the benefit of,
and be binding upon, Company, AES, and their subsidiaries and affiliates,
together with their successors and assigns, and Employee, together with
Employee's executor, administrator, personal representatives, heirs and
legatees.
20. SEVERABILITY. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of
any other provision.
21. ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes the
entire understanding and agreement between the Company and the Employee
with regard to all matters herein. There are no other agreements,
conditions or representations, oral or written, express or implied between
the Company and Employee concerning the Employee's employment. This
Agreement may be amended only in writing signed by both parties hereto.
22. TIME OF PERFORMANCE. Time is of the essence with respect to the
obligations of the parties to this Agreement.
23. BUSINESS EXPENSES. Employee shall be entitled to be reimbursed
by the Company for all reasonable and necessary business, travel, and
entertainment expenses which he incurs on behalf of the Company. Employee
shall be required to provide evidence of such expenditures as are
reasonably required by the Company's auditors and which comply with IRS
guidelines.
24. MOVING EXPENSES. In the event that there is no active contract
with Saturn and the Employee is required to relocate his place of
employment to another location within the United States, all moving
expenses associated with such relocation shall be fully reimbursed to the
Employee by the Company upon presentment of expense claims for such move.
Items to be reimbursed shall include, but shall not be limited to the
movement of all household goods, temporary living expenses for the Employee
and his family, real estate commissions associated with the sale or
purchase of Employee's home, etc.
25. APPLICABLE LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of Tennessee. Employee and
Company agree that any disputes arising under this Agreement shall be
subject to the exclusive jurisdiction and venue of state courts located in
Rutherford County, Tennessee, or the United States District Court for the
Middle District of Tennessee.
26. AES GUARANTEE. All obligations of the Company hereunder are
fully guaranteed as to their performance by AES.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
TITAN SERVICES, INC.
By:
Title:
RICHARD R. HULBERT
AVIATION EDUCATION SYSTEMS, INC.
By:
Title:
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the 29th day of January, 1995, by
and between SOUTHEASTERN TECHNOLOGY, INC., a Tennessee corporation
("Company"), with its principal place of business at 905 Industrial Drive,
Murfreesboro, Tennessee 37129, and ANTHONY MORRIELLO, an individual,
residing at 4110 Faithway Drive, Murfreesboro, Tennessee 37129
("Employee"), to evidence employment of Employee by Company under the
following terms and conditions. Employee acknowledges that this Agreement
is entered into for good and valuable consideration, the sufficiency of
which is hereby acknowledged.
1. EMPLOYMENT TERM. The Company agrees to employ Employee, and
Employee accepts employment as President of Company for a term of one (1)
year commencing as of January 29, 19995. Following the expiration of the
initial term hereof, this Agreement shall automatically terminate unless
the Board of Directors of the Company shall, within thirty (30) days prior
to the initial or subsequent termination date, extend this Agreement for an
additional one (1) year term.
2. DUTIES. Employee shall devote his full business time, attention,
skill and effort exclusively to the affairs of the Company and shall have
the responsibility, subject to the direction, approval and control of the
Board of Directors for the operation of the Company. Employee shall
additionally from time to time assist in the management and operations of
an affiliated company, Titan Services, Inc. ("Titan"). Employee will not
engage in any activities or render any services of a business or commercial
nature for anyone other than Company or Titan, unless Employee obtains
advance approval in writing from the Board of Directors of the Company;
provided, however, that Employee may devote a reasonable amount of his time
to community service or other not-for-profit organizations.
3. COMPENSATION/BASE SALARY. For all services rendered by the
Employee, the Company shall pay the Employee a salary of Seventy Thousand
Dollars ($70,000.00) per year (the "Base Salary"), payable in twenty-six
installments per annum, subject to applicable withholdings. On an annual
basis, on or about the anniversary of Employee's initial employment date,
(and assuming any extension of this Agreement) Employee's performance and
salary will be reviewed by the Company for merit increases.
4. INSURANCE. Employee shall be provided coverage under the
Company's standard health insurance, long term disability and short term
disability insurance and life insurance programs (which shall be at least
equal to that of an entities affiliated with the Company) for Employee and
Employee's dependents, with Employee bearing such costs thereunder in
accordance with the terms of such programs.
5. GENERAL EMPLOYEE BENEFITS. This Agreement is not intended to and
shall not be deemed to be in lieu of any rights, privileges, and benefits
to which Employee may be entitled as an employee of the Company under any
general retirement, pension or other plan which may now be in effect or
which may hereafter be adopted, it being understood that the Employee shall
have the same rights and privileges as other management employees of the
Company and any entities affiliated with the Company, except to the extent
that such rights and privileges conflict with, or duplicate, benefits
provided to Employee under this Agreement.
6. VACATIONS. Employee shall be entitled to four (4) weeks vacation
during each annual period that this Agreement or any extension hereof is in
effect; provided however, that any unused vacation time may not be carried
forward into any subsequent annual periods. Employee shall be entitled to
paid holidays in accordance with the then existing policy of the Company.
7. RESTRICTIVE COVENANT. Employee agrees to the following
restrictions upon his activities:
(a) DISCLOSURE OF CONFIDENTIAL COMMERCIAL INFORMATION. Employee
agrees and acknowledges that he has acquired prior to entering into this
Agreement and will acquire information and knowledge concerning the
business operations of the Company, Titan, and Aviation Education Systems,
Inc., a Delaware corporation ("AES") the identity of vendors, customers,
and suppliers of the Company, Titan, and AES the identity of and
information concerning the Corn )any's, Titan's and AES's shareholders,
directors, officers and employees, the Company's, Titan's, and AES's
methods of operation and doing business, business practices, financial
information, procedures and data related to the operation of the Company's,
Titan's, AES's business (all of such information shall be referred to
herein as "Confidential Commercial Information"). Employee shall not, so
long as Company complies with all of its obligations hereunder, or any time
during or after termination of his position or expiration of the term of
his employment hereunder, divulge to any person, firm, corporation or other
entity any knowledge, information, or fact related to the Confidential
Commercial Information, which information Employee shall hold in trust in a
fiduciary capacity for the sole benefit of the Company, its successors and
assigns. This provision does not preclude the confidential disclosure by
Employee of Confidential Commercial Information to third parties, such as
financial institutions or trade creditors, where disclosure is in the
ordinary course of business and is in the best interest of the Company,
Titan, or AES nor does this provision apply to Confidential Commercial
Information that has become generally publicly available from the Company,
Titan, or AES or other third parties unaffiliated with Employee prior to
the time of disclosure by the Employee. Employee shall likewise be
permitted to disclose such Confidential Information as is necessary to his
personal counsel in an attorney-client relationship, and to disclose such
Confidential Commercial Information to the extent necessary to enforce his
rights under this Agreement in any legal proceeding, or as may otherwise be
required by law.
(b) NON-COMPETE. So long as Company complies with afl of its
obligations hereunder, for the greater of (a) the period ending August 31,
1998, or (b) a period equivalent to the actual term of Employee's
employment by the Company, the Employee with not engage, directly or
indirectly, by way of ownership, management, employment consultation or
control, in the sale, manufacture, development, importation, distribution,
provision or promotion of products or services which perform the same
function as products manufactured, developed, imported, sold, distributed
or promoted or services provided by the Company or by Titan, within the
United States, including all current business activities of the Company,
and future activities prior to and at the time of termination, resignation,
or retirement. In the event that at any time during the term of employment,
the Companies shall engage in any business in Europe, the provisions of
this Section 7 shall also apply to Europe. The sole fact of ownership by
Employee of less than five percent (5%) of the stock of a publicly traded
company which may have product or service lines which compete with pct or
service lines of the Company or Titan shall not constitute a violation
hereunder. Employee agrees that the scope, duration and geographic area
coverage of this covenant not to compete are reasonable. In the event that
any court determines that the scope, duration or geographic area is unable
and that such covenant is to that extent unenforceable, it is the intent of
the parties, and Employee and Company agree, that the covenant shall remain
in full force and effect for the greatest time period and in the greatest
area that would not render it unenforceable. Employee and Company intend
that this covenant shall be deemed to be a series of separate covenants,
one for each and every state of the United States.
(c) NON-SOLICITATION. So long as Company complies with all of
its obligations hereunder, during Employee's employment and for a period of
three (3) years after termination, resignation or retirement from the
Company, Employee will not, directly or indirectly, alone, with or for the
benefit of others, solicit, entice or persuade any other employee of
Company or Titan to leave the services of the Company or Titan for any
reason.
8. TRADE SECRETS. As part of his employment Employee recognizes that
in the future he will be given access to and knowledge of matters not
available to the public concerning the business of the Company, Titan, and
AES including but not being limited to the Company's, Titan's, and AES's
financial information and projections, information concerning customers'
financial status, payment history, buying habits and servicing needs, the
places at which each of the Company, Titan, and AES obtains or has obtained
from the sale of, or at which each sells or has sold, its products, the
Company's, Titan's, and AES's projected costs and pricing for products and
components, and information from the Company, and AM regarding development
of services, products, marketing strategy, development of patents and
trademarks, and internal product testing and performance information (all
of which shall herein be referred to as "Trade Secret Information"). All
information which Employee has obtained to date prior to the entering into
this Agreement concerning the industry in which the Company operates and
what might otherwise be deemed to be Trade Secret Information shall not be
subject to this Section 8, however, during the term of this Agreement
Employee shall not disclose such information, but for the benefit of the
Company. Employee further recognizes and agrees that he with be given
access to this Trade Secret Information only in a fiduciary capacity.
Without regard to whether any or all of these matters with be deemed
confidential material or important to others, the parties hereto recognize
and agree that the Company expressly considers them to be secret,
confidential and highly in nature and that the Company desires them to be
kept secret and confidential by Employee. The parties hereto further
stipulate that as between themselves, the same are important, material
confidential and gravely affect the effective and successful conduct of the
Company's business and its good will. Therefore, so long as the Company
complies with all of its obligations hereunder Employee agrees that he with
not, at any time or in any manner whatsoever, either during or after
termination of his employment with Company, divulge, disclose or otherwise
make known to any person, firm, corporation or entity such Trade Secret
Information and that he with not make use of such Trade Secret Information
for any purposes other than for the benefit of Company, without the express
prior written authorization of the Board of Directors of the Company.
Employee further agrees that upon termination of employment, he will return
to Company all copies of Trade Secret Information, including all lists,
summaries or other documents containing Trade Secret Information. This
provision does not preclude the confidential disclosure by Employee of
Trade Secret Information to the parties, such as the U.S. Office of Patents
and Trademarks or financial institutions, where such disclosure is in the
ordinary course of business and is in the best interest of the Company, nor
does the provision apply to Trade Secret Information that has become
generally publicly available from the Company, Titan, or AES or the parties
unaffiliated with Employee prior to the time of disclosure by the Employee.
Employee shall likewise be permitted to disclose such Trade Secret
Information as is necessary to his personal counsel in an attorney-client
relationship, and to disclose such Trade Secret Information to the extent
necessary to enforce his rights under this Agreement in any legal
proceeding, or as may otherwise be required by law.
9. EMPLOYEE DEVELOPMENTS. The Company shall be entitled to own and
control all inventions, improvements, discoveries, concepts, ideas,
processes, materials, including works of expression and all copyrights in
such works (collectively "Employee Developments"), that are developed,
created or conceived by Employee solely or jointly with others during the
period of his employment with the Company which relate to Company's current
or reasonably anticipated products or business, or are otherwise used by
the Company. Employee with disclose, deliver and assign to Company at the
request of Company and without charge to the Company, but at Company's
expense, all such Employee Developments. Employee further agrees to execute
all documents, instruments, patent applications or other arrangements
necessary to further document such ownership and/or assignment to Company
and to take whatever other steps may be needed to give Company the full
benefit of them. Employee specifically agrees that all copyrightable
materials generated or developed under this Agreement, including but not
Company; or limited to, computer programs and documentation, shall be
considered works made for hire under the copyright laws of the United
States and shall, upon creation, be owned exclusively by the Company. To
the extent that any such materials, under applicable law, may not be
considered works for hire, Employee hereby assigns to the Company the
ownership of all copyrights and such materials, without the necessity of
any further consideration, and Company shall be entitled to register and
hold in its own name all copyrights and respective such materials.
10. INJUNCTION AND DAMAGES. Employee acknowledges and agrees that a
material breach by him of the covenants contained in paragraphs 7, 8 and 9
above with result in harm and continuing damage to the Company, its
successors or assigns, for which there is no adequate remedy at law; and,
in the event of a material breach of such covenants by the Employee, and so
long as the Company has complied with all of its obligations hereunder the
Company shall be entitled to injunctive relief as well as such other and
further relief, including damages, as may be proper. Employee acknowledges
that a material breach of such covenants will result in substantial and
damage to the Company for which the Employee agrees that the Company shall
be entitled to have and recover any and all actual damages, expenses, and
costs resulting from said breach so long as Company is in fun compliance
with all of its obligations hereunder.
11. TERMINATION BY COMPANY FOR CAUSE. Notwithstanding any other
provisions of this Agreement, the Company may, at any time, without prior
notice, discharge the Employee for any of the following causes:
(a) Any intentionally illegal, dishonest or malfeasant conduct
which materially and adversely affects the business of the Company or which
involves Company funds or assets; or
(b) Any intentional or material damage to property or business
of the __________________; or
(c) Conviction by a court of competent jurisdiction (including a
guilty plea) of theft, embezzlement or misappropriation of Company
properly; or
(d) Conviction by a court of competent jurisdiction (including a
guilty plea) of a crime which renders the Employee "infamous" pursuant to
the laws of the State of Tennessee; or
(e) The willful failure of Employee to carry out his duties as
an employee of the Company; or
(f) A breach of the warranties and covenants set forth in
Sections 7, 8 and 9.
Termination pursuant to this Section shall result in Employee's
immediate forfeiture of all rights and privileges under this Agreement,
excluding accrued Base Salary only through the date of termination, payable
in the manner and at the times set forth in Section 3 hereof, allowing for
deduction or setoff of any amounts then due and owing to the Company as of
the date of termination by Employee, with respect to which Employee hereby
agrees that setoff is permissible.
12. TERMINATION BY EMPLOYEE FOR CAUSE. Notwithstanding any other
provision of this Agreement Employee may, upon no less than thirty (30)
days prior written notice, terminate this Agreement for cause upon written
notice, within thirty (30) days of the occurrence of any of the following
causes:
(a) Any decision by the Company to reduce Employee's Base Salary
or the failure of the Company to pay any other compensation or provide any
other benefit which may be due hereunder at the time and in the manner
prescribed herein; or
(b) Any material charge in the duties assigned to Employee by
Company.
13. RETURN OF COMPANY MATERIAL. Upon the request of Company, and in
the event of termination of Employee's employment for any reason, so long
as the Company is in full compliance with all of its obligations hereunder,
Employee will return to Company all records, materials and other physical
objects relating to Employee's employment including tools, passwords and
other identification materials, computer programs, documentation,
memoranda, notes, records, drawings, manuals or other documents pertaining
to Company's or Titan's business or Employee's employment (including all
copies thereof). This obligation applies to all materials concerning any
Employee Developments, Trade Secret Information, Confidential Commercial
Information or otherwise relating to the affairs of each of the Company and
AES or any of its customers, clients, vendors or agents that may be in
Employee's possession or control.
14. SURVIVAL OF REPRESENTATIONS AND COVENANTS. Notwithstanding any
other provisions hereof, and without limiting the surviving obligations of
Employee, the obligations of the Employee pursuant to Sections 7, 8, 9, 10
and 13 hereof shall survive the termination of this Agreement so long as
the Company is in full compliance with all of its obligations hereunder.
15. NOTICES. Any notice to the Company under this Agreement shall be
deemed to have been given if and when delivered in person to an officer of
the Company (other than Employee) or if and when mailed by registered mail
to the Company (Attention: Chairman of the Board of Directors) at its
address stated above, or such other address as the Company may from time to
time designate in writing by notice to Employee. Any notice to Employee
under this Agreement shall be deemed to have been given if and when
delivered in person to him or if and when mailed by registered mail to him
at the address stated above, or at such other address as he may designate
in writing by notice to the Company.
16. WAIVER. Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver of such
term, covenant or condition, nor shall any waiver or relinquishment of any
right or power hereunder at any one or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
17. BINDING EFFECT. This Agreement shall inure to the benefit of and
be binding upon, Company, AES, and their subsidiaries and affiliates,
together with their successors and assigns, and Employee, together with
Employee's executor, administrator, personal representatives, heirs and
legatees.
18. SEVERABILITY. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision.
19. ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes the
entire understanding and agreement between the Company and the Employee
with regard to all matters herein. There are no other agreements,
conditions or representations, oral or written, express or implied between
the Company and Employee concerning the Employee's employment. This
Agreement may be amended only in writing signed by both parties hereto.
20. TIME OF PERFORMANCE. Time is of the essence with respect to the
obligations of the parties to this Agreement.
21. BUSINESS EXPENSES. Employee shall be entitled to be reimbursed by
the Company for all reasonable and necessary business, travel, and
entertainment expenses which he incurs on behalf of the Company. Employee
shall be required to provide evidence of such expenditures as are
reasonably required by the Company's auditors and which comply with IRS
guidelines.
22. APPLICABLE LAW. This Agreement shall be consumed and enforced in
accordance with the laws of the State of Tennessee. Employee and Company
agree that any disputes arising under this Agreement shall be subject to
the exclusive jurisdiction and venue of state courts located in Rutherford
County, Tennessee, or the United States District Court for the Middle
District of Tennessee.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SOUTHEASTERN TECHNOLOGY, INC.
By:
Title:
ANTHONY MORRIELLO
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the 1st day of September, 1993,
by and between BARTON ATC, Inc., a Delaware corporation ("Company"), with
its principal place of business at 633 East Vine Street, Murfreesboro,
Tennessee 37130, and Travis L. Pierson, an individual, residing at 1714
Celtic Court, Murfreesboro, Tennessee 37129 ("Employee"), to evidence
employment of Employee by Company under the following terms and conditions.
Employee acknowledges that this Agreement is entered into for good and
valuable consideration, the sufficiency of which are hereby acknowledged.
1. EMPLOYMENT TERM. The Company agrees to employ Employee, and
Employee accepts employment as Vice President, Chief Operating Officer, of
Company for a term of five (5) years commencing on September 1, 1993.
Following the expiration of the initial term hereof, this Agreement shall
be automatically renewed for successive one (1) year terms unless either
party gives written notice to the other of its intention not to renew
between thirty (30) and ninety (90) days prior to the end of the initial or
any renewal term.
2. DUTIES. Employee shall devote his full business time, attention,
skill and effort exclusively to the affairs of the Company and shall have
the responsibility, subject to the direction, approval and control of the
President for the operation of the Company. Employee shall during the term
of his employment, in addition serve in the capacity of Facility Security
Officer for Aviation Education Systems, Inc. and, as required, for its
subsidiary corporations, including BARTON ATC, Inc. Employee will not
engage in any activities or render any services of a business or commercial
nature for anyone other than Company, unless Employee obtains advance
approval in writing from the President of the Company; provided, however,
that Employee may devote a reasonable amount of his time to community
service or other not-for-profit organizations.
3. LOCATION OF EMPLOYMENT. Company agrees that Employee shall be
primarily based in Company's Murfreesboro, Tennessee facility, but only for
so long as the Company shall maintain a facility in that location, and
subject also to temporary relocations of less than six months to which the
Company and Employee may reasonably agree. With respect to any such
temporary relocations Employee shall be entitled to receive a reasonable
relocation and living allowance, and all out-of-pocket expenses of Employee
for such relocation shall be paid by Company in accordance with then
current Company policy.
4. COMPENSATION.
(a) BASE SALARY. For all services rendered by the Employee, the
Company shall pay the Employee a salary of Sixty Thousand Dollars ($60,000)
per year (the "Base Salary's, payable in installments not less often than
monthly; subject to applicable withholdings. On an annual basis, on or
about the anniversary of Employee's initial employment date, Employee's
performance and salary will be reviewed by the Company for merit increases;
(b) BONUS. In addition to the Base Salary, Employee shall also
be paid a bonus, payable within ninety (90) days following the end of the
Company's fiscal year which shall be an amount equal to five percent (5%)
of the increase in the pre-tax profit of the Company above that of the
immediately preceding fiscal year ending June 30.
5. INSURANCE. Employee shall be provided coverage under the
Company's standard health and other insurance programs (which shall be at
lease equal to that of all entities affiliated with the Company) for
Employee and Employee's dependents at no cost to Employee, other than
standard deductibles.
6. GENERAL EMPLOYEE BENEFITS. This Agreement is not intended to and
shall not be to be in lieu of any rights, privileges, and benefits to which
Employee may be entitled as an Employee of the Company under any general
retirement pension or other plan which may now be in effect or which
hereafter be adopted, it being understood that the Employee shall have the
same rights and privileges as other management employees of the Company and
any entities affiliated with the Company, except to the extent that such
rights and privileges conflict with or duplicate, benefits provided to
Employee under this Agreement.
7. VACATIONS. Employee shall be entitled to four (4) weeks vacation
during each annual period that this Agreement or any extension hereof is in
effect; provided however that any unused vacation time may not be carried
forward into subsequent annual periods.
8. COMPENSATION ON DEATH OR DISABILITY. As further compensation,
Company shall pay Employee, if living, in the event of Employee's death, to
Employee's estate the following sums upon the terms and conditions and for
the periods hereinafter set forth:
(a) PAYMENTS UPON DISABILITY. In the event of the disability of
Employee on or before the expiration of this Agreement or any extension
hereof, the Company shall continue to pay to Employee, in the manner and at
the times as provided in Section 4(a) hereof, his Base Salary through the
date on which payments begin under the Company's disability insurance
policy, and, if the Company does not then maintain a disability insurance
policy, through the date which shall be three (3) months following a
determination of disability pursuant to Section 8(c) hereof, and Employee
shall be entitled to receive a pro-rata bonus under Section 4(b) hereof for
the period beginning July I of any year and ending on the date of
disability prior to the immediately succeeding July 1. Subject to any
rights to continue health insurance benefits under applicable laws,
Employee's participation in and receipt of all other benefits provided
hereunder or otherwise shall cease as of the date of disability, and this
Agreement shall terminate.
(b) PAYMENT UPON DEATH. In the event of Employee's death on or
before the expiration of this Agreement or any extension hereof, Company
shall continue to pay, in the manner and at the times as provided in
Section 4(a) hereof, to Employee's Base Salary payable to Employee through
the date of death and shall pay to Employee's estate a pro rata bonus under
Section 4(b) hereof for the period beginning on July 1 of any year and
ending on the date of death prior to the immediately succeeding July 1.
Subject only to any rights of Employee's beneficiaries to continue health
or other insurance benefits under applicable laws, entitlement to all other
benefits provided hereunder or otherwise shall cease as of the date of
death, and this Agreement shall terminate.
(c) DISABILITY DEFINED. For the purposes of Section 8(a) hereof,
the obligations of the company to make payments upon the disability of
Employee shall not become effective unless and until all of the following
conditions are met: (i) Employee shall become physically or mentally
incapable (excluding infrequent and temporary absences due to ordinary
illness) of properly and effectively performing the services required of
him under this Agreement, (ii) such incapacity shall exist or be expected
to exist with medical certainty for more than ninety (90) days in the
aggregate during any consecutive twelve (12) month period, and (iii) either
Employee or the Company shall have given the other thirty (30) days written
notice of his or its intention to terminate Employee's employment because
of disability. In the event the Company and Employee are in material
disagreement regarding Employee's physical or mental condition under
Sections 8(c)(i) and 8(c)(ii) hereof, the (Company and Employee shall
authorize a panel of three (3) physicians licensed in the State of
Tennessee one of which shall be selected by the Company and one of which
shall be selected by Employee, and the third to be selected by the two
physicians so selected by the Company and the Employee to examine Employee
to conclusively determine by a majority whether the conditions of such
Sections have been met.
9. RESTRICTIVE COVENANTS. Employee agrees to the following
restrictions upon his activities:
(a) DISCLOSURE OF CONFIDENTIAL COMMERCIAL INFORMATION. Employee
agrees and acknowledges that he has acquired prior to entering into this
Agreement and will acquire information and knowledge concerning the
business operations of the Company, its parent company and its
subsidiaries, the identity of vendors, customers, and suppliers of the
Company, its parent company and as subsidiaries, the identity of and
information concerning the Company, its parent company and its
subsidiaries, shareholders, directors, officers and employees, the Company,
its parent company and its subsidiaries methods of operation and doing
business, business practices, financial information, procedures and data
related to the operation of the Company, its parent company and its
subsidiaries, business (all of such information shall be referred to herein
as "Confidential Commercial Information"). Employee shall not, so long as
Company complies with all of its obligations hereunder, at any time during
or after termination of his position or expiration of the term of his
employment hereunder, divulge to any person, firm, corporation or other
entity any knowledge, information, or fact related to the Confidential
Commercial Information, which information Employee shall hold in trust in a
fiduciary capacity for the sole benefit of the Company, its successors and
assigns. This provision does not preclude the confidential disclosure by
Employee of Confidential Commercial Information to third parties, such as
financial institutions or trade creditors, where disclosure is in the
ordinary course of business and is in the best interest of the Company, its
parent company and its subsidiaries, nor does this provision apply to
Confidential Commercial Information that has become generally publicly
available from the Company, its parent company and its subsidiaries, or
other third parties unaffiliated with Employee prior to the time of
disclosure by the Employee. Employee shall likewise be permitted to
disclose such Confidential Information as is necessary to his personal
counsel in an attorney-client relationship, and to disclose such
Confidential Commercial Information to the extent necessary to enforce his
rights under this Agreement in any legal proceeding, or as may otherwise be
required by law.
(b) NON-COMPETE. So long as Company complies with all of its
obligations hereunder, for the greater of (a) the period ending August 31,
1998, or (b) a period equivalent to the actual term of Employee's
employment by the Company, the Employee will not engage, directly or
indirectly, by way of ownership, management, employment, consultation or
control, in the sale, manufacture, development, importation, distribution,
provision or promotion of products or services which perform the same
function as products manufactured, developed, imported, sold, distributed
or promoted or services provided by the Company, its parent company or its
subsidiaries within the United States, including all current business
activities of the Company, its parent company and its subsidiaries, and
future activities prior to and at the time of termination, resignation, or
retirement. The sole fact of ownership by Employee of less than five
percent (5%) of the stock of a publicly traded company which may have
product or service lines which compete with product or service lines of the
Company, its parent company or its subsidiaries shall not constitute a
violation hereunder. Employee agrees that the scope, duration and
geographic area coverage of this covenant not to compete are reasonable. In
the event that any court determines that the scope, duration or geographic
area is unreasonable and that such covenant is to that extent
unenforceable, it is the intent of the parties, and Employee and Company
agree, that the covenant shall remain in full force and effect for the
greatest time period and in the greatest area that would not render it
unenforceable. Employee and Company intend that this covenant shall be
deemed to be a series of separate covenants, one for each and every state
of the United States.
(c) NON-SOLICITATION. So long as Company complies with all of
its obligations hereunder, during Employee's employment, and for a period
of three (3) years after termination, resignation or retirement from the
Company, Employee will not directly or indirectly, alone, with or for the
benefit of others, solicit, entice or persuade any other employee of the
Company, its parent company or its subsidiaries to leave the services of
the Company, its parent company or its subsidiaries for any reason.
10. TRADE SECRETS. As part of his employment, Employee recognizes
that in the future he will be given access to and knowledge of matters not
available to the public concerning the business of the Company, its parent
Company and subsidiaries, including but not being limited to the Company
and its parent Company and subsidiaries financial information and
projections, information concerning customers financial status, payment
history, buying habits and servicing needs, the prices of which each of the
Company and its parent company and subsidiaries obtains or has obtained
from the sale on or at which each sells or has sold, its products, those of
its parent company or its subsidiaries, projected costs and pricing for
products and components, and information from the Company and its parent
company or its subsidiaries regarding development of services, products,
marketing strategy, development of patents and trademarks, and internal
product testing and performance information (all of which shall herein be
referred to as "Trade Secret Information"). All information which Employee
has obtained to date prior to the entering into this Agreement concerning
the industry in which the Company and its parent company and its
subsidiaries operate and what otherwise be deemed to be Trade Secret
Information shall not be subject to this Section 10, however, during the
term of this Agreement Employee shall not disclose such information, but
for the benefit of the Company, its parent company, or its subsidiaries.
Employee further recognizes and agrees that he will be given access to this
Trade Secret Information only in a fiduciary capacity. Without regard to
whether any or all of these matters will be deemed confidential, material
or important to others, the parties hereto recognize and agree that the
Company expressly considers them to be secret, confidential and highly
proprietary in nature and that the Company desires them to be kept secret
and confidential by Employee. The parties hereto further stipulate that as
between themselves, the same are important, material, confidential and
gravely affect the effective and successful conduct of the Company's
business and its goodwill. Therefore, so long as the Company complies with
all of its obligations hereunder, Employee agrees that he will not, at any
time or in any manner whatsoever, either during or after termination of his
employment with the Company, divulge, disclose or otherwise make known to
any person, firm, corporation or entity such Trade Secret Information and
that he will not make use of such Trade Secret Information for any purposes
other than for the benefit of Company, without the express prior written
authorization of the President of the Company. Employee further agrees that
upon termination of employment, he will return to Company all copies of
Trade Secret Information, including all lists, summaries or other documents
containing Trade Secret Information. This provision does not preclude the
confidential disclosure by Employee of Trade Secret Information to third
parties, such as the U.S. Office of Patents and Trade Marks or financial
institutions, where such disclosure is in the ordinary course of business
and is in the best interest of the Company, nor does the provision apply to
Trade Secret Information that has become generally publicly available from
the Company, its parent company, or its subsidiaries, or third parties
unaffiliated with Employee prior to the time of disclosure by the Employee.
Employee shall likewise be permitted to disclose such Trade Secret
Information as is necessary to his personal counsel in an attorney-client
relationship, and to disclose such Trade Secret Information to the extent
necessary to enforce his rights under this Agreement in any legal
proceeding, or as may otherwise be required by law.
11. EMPLOYEE DEVELOPMENTS. The Company shall be entitled to own and
control all inventions, improvements, discoveries, concepts, ideas,
processes, materials, including works of expression and all copyrights in
such works (collectively "Employee Developments"), that are developed,
created, or conceived by Employee solely or jointly with others during the
period of his employment with the Company which relate to Company's current
or reasonably anticipated products or business, or are otherwise used by
the Company. Employee will disclose, deliver and assign to Company at the
request of Company and without charge to the Company, but at the Company's
expense, all such Employee Developments. Employee further agrees to execute
all documents, instruments, patent applications or other arrangements
necessary to further document such ownership and/or assignment to the
Company and to take whatever other steps may be needed to give Company the
full benefit of them. Employee specifically agrees that all copyrightable
materials generated or developed under this Agreement, including but not
limited to, computer programs and documentation, shall be considered works
made for hire under the copyright laws of the United States and shall upon
creation, be owned exclusively by the Company. To the extent that any such
materials, under applicable law, may not be considered works for hire,
Employee hereby assigns to the Company the ownership of all copyrights and
such materials, without the necessity of any further consideration, and
Company shall be entitled to register and hold in its own name all
copyrights and respective such materials.
12. INJUNCTION AND DAMAGES. Employee acknowledges and agrees that a
material breach by him of the covenants contained in paragraphs 9, 10, and
11 above will result in harm and continuing damage to the Company, its
successors or assigns, for which there is no adequate remedy at law; and,
in the event of a material breach of such covenants by the Employee, and so
long as the Company has complied with all of its obligations hereunder the
Company shall be entitled to injunctive relief as well as such other and
further relief, including damages, as may be proper. Employee acknowledges
that a material breach of such covenants will result in substantial
detriment and damage to the Company for which the Employee agrees that the
Company shall be entitled to have and recover any and all actual damages,
expenses, and costs resulting from said breach so long as Company is in
full compliance with all of its obligations hereunder.
13. TERMINATION BY COMPANY FOR CAUSE. Notwithstanding any other
provisions of this Agreement, the Company may, at any time, without prior
notice, discharge the Employee for any of the following causes:
(a) Any intentionally illegal, dishonest or malfeasant conduct
which materially and adversely affects the business of the Company or which
involves Company funds or assets; or
(b) Any intentional or material damage to property or business
of the Company which is of a material nature; or
(c) Conviction by a court of competent jurisdiction (including a
guilty plea) of theft, embezzlement or misappropriation of Company
property; or
(d) Conviction by a court of competent jurisdiction (including a
guilty plea) of a crime which renders the Employee "infamous" pursuant to
the laws of the State of Tennessee; or
(e) The willful failure of Employee to carry out his duties as
an employee of the Company; or
(f) A breach of the warranties and covenants set forth in
Sections 9, 10 and 11; or
(g) In the event that the Company relocates outside the
Murfreesboro, Tennessee, area and the Employee refuses to relocate.
Termination pursuant to this Section shall result in Employee's
immediate forfeiture of all rights and privileges, under this Agreement,
excluding accrued Base Salary only through the date of termination, payable
in the manner and at the times set forth in Section 4(a) hereof, allowing
for deduction or setoff of any amounts then due and owing to the Company as
of the date of termination by Employee, with respect to which Employee
hereby agrees that setoff is permissible.
14. TERMINATION FOR ANY OTHER REASON. Except as terminated pursuant
to Section 13 hereof, employment may only be terminated under the following
terms and conditions:
(a) TERMINATION BY EMPLOYEE OR COMPANY WITHOUT CAUSE. Either the
Employee or Company may terminate this Agreement by giving written notice
of termination pursuant to Section 1 hereof. In the event of any
termination pursuant to this Section 14(a), Employee shall be entitled to a
bonus calculated pursuant to Section 4(b) hereof.
(b) TERMINATION BY EMPLOYEE FOR CAUSE. Notwithstanding any other
provision of this Agreement, Employee may, upon no less than thirty (30)
days prior written notice, terminate this Agreement for cause upon written
notice, within thirty (30) days of the occurrence of any of the following
causes:
(i) Any decision by the Company to reduce Employee's Base
Salary or the failure of the Company to pay any other compensation or
provide any other benefit which may be due hereunder at the time and in the
manner prescribed herein; or
(ii) Any material change in the duties assigned to Employee
by Company; or
(iii) A change in the place of employment of Employee that
is located further than 150 miles from Murfreesboro, Tennessee (except for
a temporary relocation as is permitted by Section 3, or in the event the
Company should relocate as set forth in Section 13(g)), unless otherwise
agreed to in writing by Employee; and
(iv) A change in the management and operation of the Company
to the extent that Employee shall not have direct reporting authority to
the President of the Company.
In the event of any such termination by Employee, Employee shall be
entitled to receive, in a lump-sum payment within thirty (30) days of the
date of termination, a payment equal to the greater of the remaining
amounts due under the terms of this Agreement (giving consideration to all
fringe benefits and bonuses as would be (or may be reasonably calculated to
be) paid hereunder or one (1) year's then current Base Salary and an amount
equal to the prior year's bonus determined pursuant to Section 4(b) hereof,
less applicable withholdings and allowing for deduction and setoff of any
amounts due and owing to Company by Employee as of the date of termination,
with respect to which Employee agrees that setoff is permissible.
15. RETURN OF COMPANY MATERIALS. Upon the request of Company, and in
the event of termination of Employee's employment for any reason, so long
as the Company is in full compliance with all of its obligations hereunder,
Employee will return to Company all records, materials and other physical
objects relating to Employee's employment, including tools, passwords and
other identification materials, computer programs, documentation,
memoranda, notes records, drawings, manuals or other documents pertaining
to the Company, its parent company or its subsidiaries, business or
Employee's employment (including all copies thereof). This obligation
applies to all materials concerning any Employee Developments, Trade Secret
Information, Confidential Commercial Information or otherwise relating to
the affairs of each of the Company, its parent company and its
subsidiaries, or any of their customers, clients, vendors or agents that
may be in Employee's possession or control.
16. SURVIVAL OF REPRESENTATIONS AND COVENANTS. Notwithstanding any
other provisions hereof, and without limiting the surviving obligations of
Employee, the obligations of the Employee pursuant to paragraphs 9, 10, 11,
12 and 15 hereof shall survive the termination of this Agreement so long as
the Company is in full compliance with all of its obligations hereunder.
17. NOTICES. Any notice to the Company under this Agreement shall be
deemed to have been given if and when delivered in person to an officer of
the Company (other than Employee) or if and when mailed by registered mail
to the Company (Attention: Chairman of the Board of Directors) at its
address stated above, or such other address as the Company may from time to
time designate in writing by notice to Employee. Any notice to Employee
under this Agreement shall be deemed to have been given if and when
delivered in person to him or if and when mailed by registered mail to him
at the address stated above, or at such other address as he may designate
in writing by notice to the Company.
18. WAIVER. Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver of such
term, covenant or condition, nor shall any waiver or relinquishment of such
right or power at any other time or times.
19. BINDING EFFECT. This Agreement shall inure to the benefit of, and
be binding upon, Company, and its subsidiaries, together with their
successors and assigns, and Employee, together with Employee's executor,
administrator, personal representatives, heirs and legatees.
20. SEVERABILITY. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision.
21. ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes the
entire understanding and agreement between the Company and the Employee
with regard to all matters herein. There are no other agreements,
conditions or representations, oral or written, express or implied between
the Company and Employee concerning the Employee's employment. This
Agreement may be amended only in writing signed by both parties hereto.
22. TIME OF PERFORMANCE. Time is of the essence with respect to the
obligations of the parties to this Agreement.
23. BUSINESS EXPENSES. Employee shall be entitled to be reimbursed by
the Company in accordance with then existing Company policy, for all
reasonable and necessary business, travel, and entertainment expenses which
he incurs on behalf of the Company. Employee shall be requited to provide
evidence of such expenditures as are reasonably required by the Company's
auditors and which comply with IRS guidelines.
24. APPLICABLE LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Tennessee. Employee and Company
agree that any dispute arising under this Agreement shall be subject to the
exclusive jurisdiction and venue of state courts located in Rutherford
County, Tennessee, or the United States District Court for the Middle
District of Tennessee.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
Attest: By:
Travis L. Pierson
BARTON ATC, Inc.
Attest: By:
Robert W. Lynch, Jr.
President
<PAGE>
MODIFICATION NO. 1 TO EMPLOYMENT AGREEMENT
THIS MODIFICATION NO. 1 TO EMPLOYMENT AGREEMENT (the "Modification")
is made and entered into this 6th day of May, 1994, by and between BARTON
ATC, INC., a Delaware Corporation (the "Company"), and TRAVIS L. PIERSON
(the "Employee").
WITNESSETH:
WHEREAS, the Company and the Employee entered into a certain
Employment Agreement, dated September 1, 1993 (the "Employment Agreement"),
a copy of said Employment Agreement is attached hereto as EXHIBIT 1;
WHEREAS, the Employee and the Company desire to continue their
employment relationship for the duration of the period of employment, and
with the same amount of compensation and employee benefits, as contained in
the Employment Agreement but not in the employee's present capacity as Vice
President, Chief Operating Officer of BARTON ATC, Inc.;
WHEREAS, the Company desires that the Employee serve in the capacity
of President of the Company;
NOW THEREFORE, in consideration of the foregoing, of the mutual
promises, rights, duties and covenants hereinafter set forth, and for other
good and valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Paragraph 1 shall be, and hereby is, amended by deleting the
words Vice President, Chief Operating Officer of the Company and inserting
the words, President of the Company.
2. Paragraph 2 shall be deleted in its entirety and the following
new paragraph 2 shall be inserted:
2. DUTIES. Employee shall devote his full business
time, attention, skill and effort exclusively to the
affairs of the Company and shall have the
responsibility, subject to the direction, approval and
control of the Chief Executive Officer of the Company.
Employee shall, during the term of his employment, in
addition serve in the capacity of Facility Security
Officer for Aviation Education Systems, Inc. and, as
required, for its subsidiary corporations, including
BARTON ATC, Inc. Employee will not engage in any
activities or render any services of a business or
commercial nature for anyone other than Company, unless
Employee obtains advance approval in writing from the
Chief Executive Officer of the Company; provided,
however, that Employee may devote a reasonable amount
of his time to community service or other not for
profit organizations.
3. The effective date of this Modification shall be May 6, 1994.
4. All other terms and conditions of the Employment Agreement shall
remain unchanged and in full force and effect.
5. This Modification shall be executed in two (2) counterparts, each
of them shall be deemed an original, but both of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Modification
to be ably executed as of the date first above written.
THE COMPANY:
BARTON ATC, INC.
ATTEST:
By:
Its:
THE EMPLOYEE:
Travis L. Pierson
<PAGE>
EXHIBIT 10.5
AGREEMENT
THIS AGREEMENT made as of the 31st day of January, 1996, by and
between AVIATION EDUCATION SYSTEMS, INC., a Delaware corporation (herein
"AES"), and ROBERT W. LYNCH, JR., a resident of Murfreesboro, Tennessee
(herein "Lynch").
WHEREAS, Lynch is a significant stockholder of AES, owning 20,368,200
shares of the outstanding common stock of AES (the "Shares"), and has been
employed since 1992 as the President and Chairman of the Board of AES;
WHEREAS, prior to the employment of Lynch, AES had encountered
significant financial difficulties and has, in large part through the
efforts of Lynch, overcome a substantial number of such difficulties;
WHEREAS, Lynch and the Board of Directors of AES consider that his
efforts in stabilizing the business and financial situation of AES since
1992 have made possible the retirement of Lynch without adversely affecting
the business and affairs of AES;
WHEREAS, Lynch and AES desire to effectuate the retirement of Lynch as
an officer and director of AES and certain of its subsidiaries and to cause
the purchase by AES of the Shares;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereto, each intending to be
legally bound, agree as follows:
1. RETIREMENT OF LYNCH. Effective as of the date of this Agreement,
Lynch shall retire as an officer and director of AES and of all
subsidiaries of which he is presently an officer or director. The
retirement of Lynch shall be deemed a termination by Lynch without cause
pursuant to Section 14(a) of the employment agreement between Lynch and AES
dated as of July 1, 1993, as amended (the "Lynch Employment Agreement").
AES hereby waives the provisions of Section 1 of the Lynch Employment
Agreement relating to term and notice.
2. PURCHASE OF SHARES. On the Closing Date (hereinafter defined),
AES shall purchase, and Lynch shall sell all c.f the Shares in the manner
and for the consideration set forth in this Section 2.
(a) On the Closing Date, Lynch shall deliver to AES stock
certificates evidencing all of the Shares, duly endorsed in blank.
(b) On the Closing Date, AES shall deliver to Lynch, by certified
check or by wire transfer of immediately available funds to an account
designated by Lynch, the purchase price for the Shares as set forth in
Section 2(c) hereof.
(c) The purchase price for the Shares shall be $1,264,000.
(d) The "Closing Date" shall be a date which shall be thirty days
following the date of this Agreement.
3. ACKNOWLEDGEMENT OF OTHER FINANCIAL ARRANGEMENTS. (a) The parties
hereto acknowledge that Lynch is the holder of certain debentures of AES
and is the lessor of a building in Murfreesboro, Tennessee, of which AES is
the lessee. Payments under such debentures (the amortization table for
which is attached hereto as Exhibit A) and lease shall continue to be made
by AES in accordance with the terms thereof.
(b) Lynch shall receive his Base Salary (as defined in the Lynch
Employment Agreement) through the date of this Agreement.
(c) The parties acknowledge that, other than as set forth or
referenced in this Agreement, there are no obligations existing
between them (including, for such purpose, any subsidiary of ALES).
4. MUTUAL RELEASE OF CLAIMS. Each of the parties hereto hereby
forever releases and discharges the other party, its or his successors,
assigns, officers, directors, stockholders, subsidiaries, agents and
employees, from and against any and all claims, known or unknown, which
such party may have against the other, attributable to events occurring
prior to the date of this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF LYNCH. Lynch represents and
warrants to AES that (i) he is the sole owner of the Shares, (ii) the
Shares are free and clear of all liens and encumbrances and (iii) he
neither owns nor has any rights to any shares of AES other than the Shares.
6. LYNCH EMPLOYMENT AGREEMENT. Except as set forth herein and in
Section 16 of the Lynch Employment Agreement (relating to the survival of
certain paragraphs of the Lynch Employment Agreement), the Lynch Employment
Agreement shall be terminated as of the date of this Agreement and of no
further force and effect.
7. MISCELLANEOUS. This Agreement constitutes all of the agreements
between the parties with respect to the subject matter hereof, shall be
construed in accordance with the laws of the State of Tennessee and may be
amended only by means of a writing executed by both of the parties hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
AVIATION EDUCATION SYSTEMS, INC.
By:
Title:
ROBERT W. LYNCH, JR.
<PAGE>
EXHIBIT 10.8
AGREEMENT BETWEEN BARTON ATC INTERNATIONAL, INC.
(FORMERLY JOHNSON-BARTON, INC.)
AND
THE FEDERAL AVIATION ADMINISTRATION
Contract No. DTFA01-94-C-0065
<PAGE>
Contract No. DTFA01-94-C-0065
PART I - THE SCHEDULE
SECTION C - DESCRIPTION/SPECIFICATION/WORK STATEMENT
C.1.0 SCOPE
The contractor shall furnish the labor, supervision, materials, required
equipment, supplies, and services necessary to operate the Federal Aviation
Administration (FAA) contract tower (FCT) as outlined below. Equipment,
supplies, and services supplied by the Government are also outlined below
in C.5.0 and C.6.0.
C.2.0 DEFINITIONS
AIRPORT TRAFFIC CONTROL TOWER (ATCT) - A terminal facility that uses
air/ground communications, visual signaling, and other devices to provide
air traffic control (ATC) services to aircraft operating in the vicinity of
an airport or on the movement area.
CONTACT FAA FACILITY - The FAA facility that functions as the FCT's point
of contact for daily operational coordination.
CONTRACTOR - The person, persons, or state or local organization/ authority
that has a prime contract with FAA for management of one or more FCT's and
for provision of ATC services at such locations.
CONTROLLER - A person authorized to provide air traffic control service.
(Also Air Traffic Control Specialist)
FAA CONTRACT TOWER (FCT) - A low-activity (Level I) visual flight rules
(VFR) ATCT providing ATC services under contract with FAA.
FCT PROGRAM OFFICE - The FAA headquarters office assigned oversight
responsibility for the FCT Program.
FEDERAL AVIATION REGULATIONS - The general and permanent rules published in
the Federal Register by FAA, codified under title 14 of the Code of Federal
Regulations (CFR).
PILOT DEVIATION - The actions of a pilot that result in the violation of a
Federal Aviation Regulation or a North American Aerospace Defense Command
(NORAD) Air Defense Identification Zone (ADIZ) tolerance.
QUALITY ASSURANCE - The identification of commendable activities which
enhance and/or deficiencies which detect from the quality of ATC service,
and the establishment of a mechanism that ensures action is taken which
corrects deficiencies so that problems do not recur.
SUBCONTRACTOR - Any supplier, distributor, vendor, or firm that furnishes
supplies or services to or for a prime contractor or another subcontractor.
VISUAL FLIGHT RULES (VFR) - Rules that govern the procedures for conducting
flight under visual conditions.
GOVERNMENT - The Federal Government and/or FAA and it's sub-organizations.
C.3.0 OPERATIONAL DOCUMENTS, DIRECTIVES, AND REGULATIONS
C.3.1 The contractor and all the subcontractors shall comply with all
procedures outlined in the documents, directives, and regulations listed in
Appendix 1 to ensure the safe, orderly, and expeditious movement of air
traffic. The Government shall notify the contractor when items are added to
the listed items. Additions, deletions, or changes to the items listed in
the appendix shall not be cause for an adjustment in the contract price
unless such changes are substantive and constitute a major change to
existing operational policies, practices, and/or procedures.
C.3.1.1 Prior to contract award, the items listed in Appendix 1 will be
available for review or purchase at the addresses listed in Appendix 2.
C.3.2 DISTRIBUTION
After contract award, FAA will provide the contractor with all documents
listed in or added to Appendix I and with subsequent changes to those
documents. The contractor shall ensure timely distribution of documents and
their changes to subcontractors and ATC personnel. Time critical documents,
such as General Notices (GENOT), Regional Notices (RENOT), Notices to
Airmen (NOTAM), etc., shall be provided by FAA directly to ATC personnel at
each FCT.
C.4.0 CONTRACTOR RESPONSIBILITIES
C.4.1 PROVISION OF ATC SERVICES
The contractor shall operate a VFR ATCT at all FCT locations under contract
and provide ATC services in accordance with the procedures specified in
Federal Aviation Regulations, Part 65, Subpart B (excluding paragraph
65.46), and in the documents, directives, and regulations listed in
Appendix 1.
C.4.1.1 The contractor shall provide staffing for each FCT in accordance
with the Staffing Plan submitted by them in Step I of the Two-Step Sealed
Bidding Procedure. Modifications to this plan must be approved by the FAA
Contracting Officer prior to implementation.
C.4.1.2 The contractor shall advise FAA whenever staffing changes occur, or
are forecasted to occur, which may impact the provision of ATC services.
C.4.1.3 The contractor shall submit requests for changes to operating hours
to the FCT Program Office for FAA review and processing.
C.4.1.4 To satisfy the requirements of this contract, the contractor may
need to perform certain activities, such as taking weather observations,
changing recorder tapes, or inspecting runway lights, to prepare the FCT
for opening and closing on each day of operation. These preparatory and
closing activities, although not necessarily performed during the hours of
operation specified in Attachment 4, shall be considered integral to the
required ATC services and shall not be cause for future contract price
adjustments.
C.4.2 NOTIFICATION OF TERMINATION OF ATC SERVICES
When it is known at least 24 hours in advance that ATC services will be
terminated, either temporarily or permanently, the contractor shall notify
the Technical Officer (TO) or Alternate Technical Officer (ATO). The
contractor shall coordinate with the contact FAA facility as soon as
practicable when the TO/ATO cannot be reached or when circumstances
preclude such advance notification; e.g., emergencies, physical or
equipment problems, etc.
C.4.3 CONTROLLER QUALIFICATION
Controller and supervisory control personnel employed by the contractor for
the purpose of performing this contract shall meet qualifications
stipulated in Federal Aviation Regulations, Part 65, Subpart B (excluding
paragraph 65.46).
C.4.4 NON-ATC DUTIES
The contractor shall not impose non-ATC duties during the hours of
operation under this contract that will in any way impede FCT controllers
from providing ATC services. Non-ATC workload factors shall not in any way
influence the dollar value of the subject contract between FAA and the
contractor.
C.4.5 OPERATIONAL DATA
The contractor shall comply with the provisions of appropriate FAA
directives in Appendix 1 concerning documentation of operational data and
maintenance of records, such as daily/monthly traffic count data and
operational position sign-on/off information. Additionally, the contractor
shall permit FAA access to this data upon request.
C.4.6 DIRECTIVES AND CHARTS
The contractor is authorized to enter into letters of agreement (LOA),
letters of procedure, etc., with FAA facilities and/or National Airspace
System (NAS) users in accordance with FAA directives in Appendix 1. The
contractor shall develop and maintain a current operational contingency
plan. Facility charts and diagrams shall be kept current and legible.
C.4.7 FACILITY TRAINING PROGRAM
The contractor shall establish, document, and implement a facility training
program for operational controllers. The training program shall be
administered in a uniform and standardized manner, reviewed and updated at
least annually, and is subject to FAA evaluations in accordance with FAA
Order 7010.1.
C.4.7.1 The facility training program shall incorporate the following
elements:
- Federal Aviation Regulations, Part 91, General Operating and Flight
Rules; and Part 93, Special Air Traffic Rules and Airport Traffic Patterns
- FAA Order 7220.1, Certification and Rating Procedures Handbook
- Applicable paragraphs of FAA Terminal Instructional Program Guide
(IPG), TP-12-0-1
- FAA Order 3120.4, Air Traffic Control Training, including refresher,
proficiency, and remedial training. The program shall include: FAA National
Air Traffic Training Program Terminal Proficiency/Refresher Units, such as
operations, runway incursion avoidance, anticipated and departure
separation; all required briefing items of national and regional concern
(including GENOT, RENOT, SIGMET, etc.); and other required FCT items as
determined by regional Air Traffic division personnel.
C.4.7.2 The contractor shall maintain an FAA Form 3120-1, Training and
Proficiency Record, for all operational controllers.
C.4.7.3 Except as provided in the approved phase-in/phase-out plan, on-the-
job instruction shall be conducted by facility rated contract personnel.
The contractor shall schedule facility rating certifications, control tower
operator (CTO) testing and certification, and National Weather Service
(NWS) testing and certification with the contact FAA facility (see C.5.3,
below).
C.4.7.4 The contractor shall provide training for contractor-furnished
equipment. After the initial phase-in, the contractor shall provide new
contract personnel with training on Government-furnished equipment (GFE).
C.4.7.5 Contract personnel are not authorized to participate in the FAA
familiarization travel program.
C.4.8 QUALITY ASSURANCE PROGRAM
FAA Office of Air Traffic System Effectiveness (ATH) is charged with
evaluating the air traffic operational and administrative functions at all
levels within FAA, including contract towers. FAA Order 7010.1 contains a
dynamic checklist utilized for evaluating FCT's which is modified as
changes are made to national directives and/or policies. The contractor
shall establish and maintain a quality assurance program, in Accordance
with FAA Orders 7210.3 and 7010.1, which is subject to these evaluations.
This program shall include provisions for internal full-facility
evaluations and for written responses regarding corrective actions for any
problems identified and/or remaining open as a result of an ATH full-
facility, followup, or in-flight/pre-flight evaluation.
C.4.9 ACCIDENT/INCIDENT REPORTING
The contractor shall report accidents/incidents and collect applicable data
in accordance with FAA Order 8020.11, Aircraft Accident and Incident
Notification, Investigation, and Reporting.
C.4.10 DRUG TESTING PROGRAM
The contractor shall establish and maintain a drug free workplace and drug
testing program in accordance with policies and directives stated in
Appendix 3 and Federal Acquisition Regulation clauses in Sections I and K.
C.4.11 ALCOHOL MISUSE PREVENTION PROGRAM
The contractor shall establish and maintain a program in accordance with
FAA "Alcohol Misuse Prevention Program' published on February 15, 1994, in
the Federal Register, Volume 59, Number 31, pages 7380 - 7411.
C.4.12 PROVISION OF INFORMATION
The contractor shall provide information in response to requests from FAA,
such as data for aeronautical studies, operational statistics, etc.
C.4.13 REPORTS
C.4.13.1 The contractor shall submit biannual reports to the FCT Program
Office for each FCT location currently under contract. The report shall
include a current list of documents of the type specified in C.4.13 2,
below; site-specific activities conducted during the previous 6-month
period (excluding weather reporting); and staffing figures by category,
i.e., supervisory or non supervisory, full or part time, non-facility
rated, etc.
C.4.13.2 The contractor shall ensure that the FCT Program Office has a
current copy of any internal directives regarding the provision of ATC
services and any external documents to which the FCT is a signatory, such
as LOA's, contingency plans, etc.
C.4.13.3 The contractor shall forward a copy of each internal evaluation
done at an FCT location and all written responses regarding corrective
actions for any problems identified and/or remaining open as a result of an
ATH full-facility, follow-up, or in-flight/pre-flight evaluation to the FCT
Program Office.
C.4.13.4 The contractor shall ensure that reports on the Drug Testing
Program and Alcohol Misuse Prevention Program are submitted to the FCT
Program Office in accordance with the plan in the technical proposal (see
Section H.3).
C.4.14 PHASE-IN/PHASE-OUT PLAN
The contractor shall establish a phase-in/phase-out plan, including time
requirements, for use during the initial phase-in and any subsequent
transition.
C.4.15 SITE-SPECIFIC RESPONSIBILITIES
The contractor shall provide other site-specific services as identified in
Part 1, Section F, and Appendix 4, including hours of operation, weather
reporting requirements, etc.
C.4.16 MAINTENANCE
The contractor shall be responsible for janitorial services in the space
allocated to the contractor and for maintenance of contractor-furnished
equipment and supplies.
C.5.0 FAA RESPONSIBILITIES
C.5.1 CONTACT FAA FACILITY
FAA shall furnish the contractor with the identity of the contact FAA
facility(ies) on or prior to the startup date of the contract, and shall
keep the contractor apprised of changes thereto. The contact FAA facility
will ensure pertinent operational information is exchanged with the
contractor.
C.5.2 OPERATIONAL FORMS, PUBLICATIONS, AND CHARTS
FAA shall provide operational forms required by the documents, directives,
and regulations in Appendix 1, such as FAA Form 7230-4, Daily Record of
Facility operations. FAA shall provide the FCT locations with current
operational publications and charts, such as Terminal Area Charts,
sectionals, etc.
C.5.3 TESTING, CERTIFICATION, AND TRAINING
FAA shall perform facility rating certifications; CTO testing,
certification, and periodic evaluations; and WS testing and certification
for FCT operational personnel. When required, FAA will provide training for
new, different, or modified GFE. At FCT locations where the Government
furnishes a unit for computer-based instruction (CBI), FAA shall provide
appropriate CBI disks and updates.
C.5.3.1 During the contract start-up phase, the FAA shall provide on-the-
job training for contractor personnel.
C.5.4 DOCUMENT REVIEW/APPROVAL AUTHORITY
During the term of the contract, FAA reserves the right to review/approve
contractor-initiated changes to the contractor's operational directives,
contingency plan, facility training program, quality assurance program,
phase-in/phase-out plan, drug testing program, and alcohol misuse
prevention program.
C.5.5 OPERATING HOURS
The Government reserves the right to adjust operating hours at any FCT
location. If this is done, any price increase or decrease as a result of
this change will be mutually agreed upon based on prices submitted in Step
2 of the Two-Step Sealed Bidding Procedure. The FCT Program Office is
responsible for review of requests to change operating hours submitted by
the contractor. Only the Contracting Officer may effect contract changes or
modifications, per Federal Acquisition Regulations.
C.5.6 EVALUATIONS
FAA will conduct full-facility, followup, and in-flight/pre-flight
evaluations at FCT locations in accordance with FAA Order 7010.1.
C.5.7 MAINTENANCE
FAA shall provide routine and corrective maintenance for all GFE and
retains the right to modify existing equipment and/or install new or
different GFE in accordance with FAA standards.
C.5.8 SPACE ALLOCATION AND BUILDING MAINTENANCE
Unless a site-specific requirement is stated in Appendix 4, FAA shall
provide FAA-owned or leased space suitable for the provision of ATC
services, administration, and storage of operational supplies, equipment,
and records. FAA shall be responsible for maintenance, such as repair,
upkeep, etc., only for FAA-owned space allocated to the contractor. This
does not include janitorial services or landscaping of grounds (see
C.4.16).
C.6.0 EQUIPMENT
C.6.1 GOVERNMENT-FURNISHED EQUIPMENT (GFE)
FAA will furnish the contractor with all operational equipment required for
the provision of ATC and weather reporting services, such as: voice
recorder, wind speed and direction readout, telecommunications equipment to
operational positions with loudspeaker, altimeter, clock, radio frequency
selector, light gun, transmitter/receivers, operational data transfer lines
(where applicable), space for airport and approach light controls, and
headsets/handsets. The FAA will provide necessary office furnishings for
the administrative space, such as: desk, chair, and file cabinet.
C.6.1.1 An itemized inventory of GFE for each FCT location will be provided
to the contractor on or prior to the contract startup date for that FCT
location. The contractor shall sign the inventory to acknowledge custody of
the equipment.
C.6.1.2 The contractor shall be responsible for initiating trouble calls to
the contact FAA facility when troubles occur with GFE, and shall provide
necessary coordination and assistance to FAA to accomplish routine and
corrective GFE maintenance during normal hours of operation. The contractor
shall not modify GFE.
C.6.1.3 The contractor shall check, change, and handle the operational
voice recorder tapes in accordance with the provisions in FAA Order 7210.3.
At locations where the recorders are not convenient to operating quarters,
the contractor shall execute an agreement with the Airways Facilities (AF)
manager assigning responsibility for checking and changing recorder tapes.
C.6.2 CONTRACTOR FURNISHED EQUIPMENT
C.6.2.1 The contractor shall provide and maintain a minimum of one
commercial, public access telephone line. If additional site-specific
equipment is required, it is specified in Appendix 4.
C.6.2.2 The contractor shall furnish administrative supplies, such as
paper, writing implements, etc.
C.7.0 ENFORCEMENT ACTIONS
C.7.1 Failure to comply with any of the standard procedures, requirements,
or guidelines in this statement of work will subject the contractor to the
enforcement remedies identified in the documents, directives, and
regulations listed in Appendix 1.
C.7.2 The contractor will be immediately notified, upon inspection and/or
evaluation by FAA, if the FCT is found to be operating in a manner which
does not ensure the safe, orderly, and expeditious movement of air traffic
in the Class D airspace under its jurisdiction. The contractor shall take
immediate action to correct any condition,which has an adverse effect on
the provision of ATC services. FAA reserves the right and authority under
the provisions of clause 52.249-8, "Default", of Part II, Section 1, to
terminate all or part of the contract for default if the contractor fails
to take immediate corrective action that is satisfactory to FAA.
APPENDIX 1. OPERATIONAL DOCUMENTS, DIRECTIVES, AND REGULATIONS
The following documents, directives and regulations are applicable, in
whole or part:
- Federal Aviation Regulations, Parts 01, 65 (excluding Subpart b,
paragraph 65.46), 67, 91, and 93 (14 CFR Parts 01, 65, 67, 91 and 93;
49 CFR 830.2; and 49 CFR Part 40)
- Airman's Information Manual (AIM)
- FAA Order 3120.4, AIR TRAFFIC CONTROL TRAINING
- FAA Order 7010.1, AIR TRAFFIC EVALUATION PROCEDURES
- FAA Order 7110.65, AIR CONTROL
- FAA Order 7210.3, FACILITY OPERATION AND ADMINISTRATION
- FAA Order 7220.1, CERTIFICATION AND RATING PROCEDURES
- FAA Order 7232.5. REDUCED OR INCREASED OPERATING HOURS FOR AIRPORT
TRAFFIC CONTROL TOWERS/APPROACH CONTROL FACILITIES
- FAA Order 7340.1, CONTRACTIONS
- FAA Order 7356.6, LOCATION IDENTIFIERS
- FAA Order 7400.2, PROCESS FOR HANDLING AIRSPACE MATTERS
- FAA Order 7610.4, SPECIAL MILITARY OPERATIONS
- FAA Order 8020.11, AIRCRAFT ACCIDENT AND INCIDENT NOTIFICATION,
INVESTIGATION AND REPORTING
- FAA Terminal Instructional Program Guide (IPG), TP-12-0-1
- FAA National Air Traffic Training Program, Terminal Proficiency and
Refresher Units
- Federal Meteorological Handbook, FMH-9, AVIATION WEATHER
OBSERVATIONS
APPENDIX 2. AVAILABILITY IN APPENDIX 1
The items listed below are available for purchase from:
Superintendent of Documents
U.S. Government Printing Office
Washington, DC 20402
(202) 783-3238
- Federal Aviation Regulations, Parts 01, 65 (excluding Subpart B,
paragraph 65-46), 67, 91 and 93 (14 CFR Parts 01, 65, 67, 91 and 93;
49 CFR 830.2; and 49 CFR Part 40)
- Airman's Information Manual (AIM)
- FAA Order 7110.65, AIR TRAFFIC CONTROL
- FAA Order 7340.1, CONTRACTIONS
- FAA Order 7350.6, LOCATION IDENTIFIERS
- FAA Terminal Instructional Program Guide (IPG), TP-12-0-1
- FAA National Air Traffic Training Program, Terminal Proficiency and
Refresher Units
The items listed below are available for purchase from:
NAS Document Control Center
400 Virginia Avenue, SW
Washington, DC 20024
(202) 646-2047
- FAA Order 3120.4, AIR TRAFFIC CONTROL TRAINING
- FAA Order 7010.1, AIR TRAFFIC EVALUATION PROCEDURES
- FAA Order 7220.1, CERTIFICATION AND RATING PROCEDURES
- FAA Order 7232.5, REDUCED OR INCREASED OPERATING HOURS FOR AIRPORT
TRAFFIC CONTROL TOWERS/APPROACH CONTROL FACILITIES
- FAA Order 7400.2, PROCEDURES FOR HANDLING AIRSPACE MATTERS
- FAA Order 7610.4, SPECIAL MILITARY OPERATIONS
- FAA Order 8020.11, AIRCRAFT ACCIDENT AND INCIDENT NOTIFICATION,
INVESTIGATION, AND REPORTING
Federal Meteorological Handbook, FMH-9, AVIATION WEATHER OBSERVATIONS, is
available by contacting the individual at the National Weather Service
office listed:
Jack Fey, Alaska Region Kevin Murray, Eastern Region
(907) 271-5124 (516) 244-0146
Alvin Gughikuma, Pacific Region Steve Shild, Central Region
(808) 541-1653 (816) 426-3226
David Lamb, Western Region
(801) 524-5120
The items listed in Appendix 1 are available for review at the following
FAA locations by contacting the individual listed:
Hank Williams, AAL-510 Brian Romer, ACE-510
Alaskan Region Central Region
222 W. 7th Avenue, #14 601 E. 12th Street
Anchorage, AK 99533 Kansas City, MO 64106
(907) 271-5828 (816) 426-3400
Ron Regerie, AEA-510 Debra Griffith, AGL-510
Eastern Region Great Lakes Region
JFK International Airport O'Hare Lake Office Center
Fitzgerald Federal Building 2300 East Devon Avenue
Jamaica, NY 11430 Des Plaines, IL 60018
(718) 553-1221 (708) 294-7482
Tom Killian, ANE-520 Dale Realph, ANM-510
New England Region Northwest Mountain Region
12 New England Executive Park 1601 Lind Avenue, SW
Burlington, MA 01803 Renton, WA 98055-4056
(617) 238-7516 (206) 227-2516
Richard Brewer, ASO-510 Mike Durham, ASW-510
Southern Region Southwest Region
1707 Columbia Avenue 2601 Meacham Boulevard
College Park, GA 30320 Fort Worth, TX 76137-4298
(404) 305-5547 (817) 222-5583
John Maloney, AWP-510 Jon Harris, ATR-120
Western-Pacific Region Washington Headquarters
15000 Aviation Boulevard 800 Independence Avenue, SW
Hawthorne, CA 90009 Washington, DC 20591
(310) 297-1617 (202) 267-9176
APPENDIX 3. DRUG TESTING PROGRAM
I. SCOPE. This appendix contains the standards and components that must
be included in an anti-drug program required by this contract.
II. DEFINITIONS. For the purpose of this appendix, the following
definitions apply:
ACCIDENT means an occurrence associated with the operation of an
aircraft which takes place between the time any person boards the aircraft
with the intention of flight and all such persons have disembarked, and in
which any person suffers death or serious injury, or in which the aircraft
receives substantial damage (49 CFR 830.2).
ANNUALIZED RATE for the purposes of unannounced testing of employees
based on random selection means the percentage of specimen collection and
testing of employees performing ATC functions during a calendar year. The
employer shall determine the annualized percentage rate by referring to the
total number of covered employees at the beginning of a calendar year or by
an alternative method specified in the employer's drug testing plan
approved by FAA.
CONTRACTOR is the person, persons, state or local organization
/authority that has management and control responsibility for the specific
airport including the ATCT and a prime contract with FAA.
EMPLOYEE is a person who performs air traffic control duties.
EMPLOYER is an ATC facility not operated by FAA or the U.S. military
that directly employs persons to perform ATC services.
FAILING A DRUG TEST means that the test results show positive evidence
of the presence of a prohibited drug or drug metabolite in an employee's
system.
MEDICAL REVIEW OFFICER (MRD) is a licensed physician responsible for
receiving laboratory results generated by an employer's drug testing
program who has knowledge of substance abuse disorders and has appropriate
medical training to interpret and evaluate an individual's positive test
result together with his or her medical history and any other relevant
biomedical information.
PASSING A DRUG TEST means that the test result does not show positive
evidence of the presence of A prohibited drug or drug metabolite in an
employee's system.
POSITIVE EVIDENCE means the presence of a drug or drug metabolite in a
urine sample at or above the test levels listed in the DOT "Procedures for
Transportation Workplace Drug Testing Programs" (49 CFR Part 40).
PROHIBITED DRUG means marijuana, cocaine, opiates, phencyclidine
(PCP), and amphetamines.
REFUSAL TO SUBMIT means refusal by an individual to provide a urine
sample after he or she has received notice of the requirement to be tested
in accordance with this appendix,.
III. FCT PROCEDURES. It shall be the responsibility of the employer to
maintain or have immediate access to all regulations, policies, and
directives referenced in this appendix.
Each employer shall ensure that drug testing programs conducted pursuant to
the execution of this agreement comply with the requirements of this
appendix and 49 CFR Part 40. An employer shall only use or contract with a
drug testing laboratory that is certified by the Department of Health and
Human Services (DHHS) pursuant to the DHHS "Mandatory Guidelines for
Federal Workplace Drug Testing Programs" (53 FR 11970; April 11, 1988).
An employer that does not directly employ persons to perform ATC services
but causes ATC services to be performed by a contractor or consortium shall
require the contractor or consortium to comply with the provisions of 14
CFR Parts 65, 67 and Appendix I to Part 121 as they apply to airmen medical
certification, use of prohibited drugs, and anti-drug programs.
IV. EMPLOYEES WHO MUST BE TESTED. Each person who performs ATC duties must
be tested pursuant to an FAA-approved anti-drug program conducted in
accordance with this appendix.
V. SUBSTANCES FOR WHICH TESTING MUST BE CONDUCTED. Each employer shall test
covered employees for the prohibited drugs during each test required by
section VI of this appendix.
VI. TYPES OF DRUG TESTING REQUIRED. Each employer shall conduct the
following types of testing in accordance with the procedures set forth in
this appendix and 49 CFR Part 40:
A. PREEMPLOYMENT TESTING. No employer may hire any person to perform
ATC duties unless the applicant passes a drug test for that employer. The
employer shall advise an applicant at the time of application that
preemployment testing will be conducted for the prohibited drugs.
B. PERIODIC TESTING. Each covered employee shall submit to a
periodic drug test. The employee shall be tested for the prohibited drugs
during the first calendar year of implementation of the employer's anti-
drug program. The test shall be conducted in conjunction with the first
medical evaluation of the employee or in accordance with an alternative
method for collecting periodic test specimens detailed in an employer's
approved anti-drug program. An employer may discontinue periodic testing of
its employees after the first full year of implementation of the employer's
anti-drug program.
C. RANDOM TESTING. Each employer shall randomly select covered
employees for unannounced testing for prohibited drugs in an employee's
system using a random number table or a computer-based number generator
that is matched with an employee's social security umber, payroll
identification number, or any other alternative method approved by FAA.
(1) During the first 2 months following implementation of
unannounced testing based on random selection pursuant to this appendix, an
employer shall meet the following conditions:
(a) The unannounced testing based on random selection of
employees shall be spread reasonably throughout the 12-month period.
(b) The last collection of specimens for random testing
during the year shall be conducted at an annualized rate equal to not less
than 50 percent of covered employees.
(c) The total number of unannounced tests based on random
selection during the 12-months shall be equal to not less than 25 percent
of covered employees.
(2) Following the first 12 months, an employer shall achieve and
maintain an annualized rate equal to not less than 50 percent of covered
employees.
D. POSTACCIDENT TESTING. Each employer shall test each covered
employee for the prohibited drugs if that employee's performance either
contributed to an accident or cannot be completely discounted as a
contributing factor to the accident. The employee shall be tested as soon
as possible but not later than 32 hours after the accident. The decision
not to administer a test under this section must be based on a
determination, using the best information available at the time of the
accident, that the employee's performance could not have contributed to the
accident. (Postaccident testing is required and authorized only for
accidents meeting the definition in paragraph II., above.)
E. TESTING BASED ON REASONABLE CAUSE. Each employer shall test any
covered employee who is reasonably suspected by the employer of using a
prohibited drug. At least two of the employee's supervisors, one who is
trained in detection of possible symptoms of drug use, shall substantiate
and concur in the decision to test an employee who is reasonably suspected
of drug use. The decision to test must be based on a reasonable and
articulable belief that the employee is using a prohibited drug on the
basis of specific, contemporaneous, physical behavioral, or performance
indicators of probable drug use.
F. TESTING AFTER RETURN TO DUTY. Each employer shall implement a
reasonable program of unannounced testing of each individual who has been
hired and each individual who has been returned to duty to perform ATC
functions after failing a drug test conducted in accordance with this
appendix, or after refusing to submit to a drug test required by this
appendix. The individual or employee shall be subject to unannounced
testing for not more than 60 months after the individual has been hired or
the employee has returned to duty to perform ATC functions.
VI. ADMINISTRATIVE MATTERS.
A. COLLECTION, TESTING, AND REHABILITATION RECORDS. Each employer
shall maintain all records related to the collection process, including all
logbooks and certification statements, for 2 years. Each employer shall
maintain records of employee confirmed positive drug test results and
employee rehabilitation for 5 years. The employer shall maintain records of
negative test results for 12 months. The employer shall permit FAA
Administrator or the Administrator's representative to examine these
records.
B. LABORATORY INSPECTIONS. The employer shall contract only with a
laboratory that permits preaward inspections by the employer before the
laboratory is awarded a testing contract and unannounced inspections,
including examination of any and all records at any time by the employer,
the FAA Administrator, or the Administrator's representative.
C. EMPLOYEE REQUEST TO RETEST A SPECIMEN. Not later than 60 days
after receipt of a confirmed positive test result, and employee may submit
a written request to the MRO for retesting of the specimen producing the
positive test result. Each employee may make one written request that a
sample of the specimen be provided to the original or another DHHS-
certified laboratory for testing. The laboratories shall follow chain-of-
custody procedures. The employee shall pay the costs of the additional test
and all handling and shipping costs associated with the transfer of the
specimen to the laboratory.
D. RELEASE OF DRUG TESTING INFORMATION. An employer may release
information regarding an employee's drug testing results or rehabilitation
to a third party only with the specific, written consent of the employee
authorizing release of the information to an identified person. Information
regarding an employee's drug testing results or rehabilitation shall be
released to the National Transportation Safety Board as part of an accident
investigation, to FAA upon request, or as required by section VII.C.5. of
this appendix.
VII. REVIEW OF DRUG TESTING RESULTS. The employer shall designate or
appoint an MRO. If the employer does not have a qualified individual on
staff to serve as MRO, the employer may contract for the provision of MRO
services as part of its drug testing program.
A. MRO QUALIFICATIONS. The MRO must be a licensed physician (M.D. or
D.O.) with knowledge of drug abuse disorders.
B. MRO DUTIES. The MRO shall perform the following functions for the
employer:
1. Review the results of the employer's drug testing program
before the results are reported to the employer and summarized for FAA.
2. Within a reasonable time, notify an employee of a confirmed
positive test result.
3. Review and interpret each confirmed positive test result in
order to determine if there is a legitimate explanation for the confirmed
positive test result. The MRO shall perform the functions prescribed in 49
CFR Part 40 as part of the review of a confirmed positive test result.
4. Process employee requests to retest a specimen in accordance with
section VI.C. of this appendix.
5. Determine whether and when, consistent with an employer's anti-
drug program, a return-to-duty recommendation for a current employee or a
decision to hire an individual to perform ATC functions after failing a
test conducted in accordance with this appendix or after refusing to submit
to a test required by this appendix, including review of any rehabilitation
program in which the individual or employee participated, may be made.
6. Ensure that an individual or employee has been tested in
accordance with the procedures of this appendix and 49 CFR Part 40 before
the individual is hired or the employee returns to duty.
7. Determine a schedule of unannounced testing for an individual who
has been hired or an employee who has returned to duty to perform ATC
functions after the individual or employee has failed a drug test conducted
in accordance with this appendix or has refused to submit to a drug test
required by this appendix.
C. MRO DETERMINATIONS.
1. If the MRO determines, after appropriate review, that there
is a legitimate explanation for the confirmed positive test result that is
consistent with legal drug use, the MRO shall conclude that the test result
is negative and shall report the test as a negative test result.
2. If the MRO determines, after appropriate review, that there
is no legitimate explanation for the confirmed positive test result that is
consistent with legal drug use, the MRO shall refer the employee to an
employer's rehabilitation program if available or to a personnel or
administrative officer for further proceedings in accordance with the
employer's anti-drug program.
3. Based on a review of laboratory inspection reports quality
assurance and quality control data, and other drug test results, the MRO
may conclude that a particular drug test result is scientifically
insufficient for further action. Under these circumstances, the MRO shall
conclude that the test is negative for the presence of drugs or drug
metabolites in an employee's system.
4. In order to make a recommendation to hire an individual to
perform ATC functions or to return an employee to ATC duties after the
individual or employee has failed a drug test conducted in accordance with
this appendix or refused to submit to a drug test required by this
appendix, the MRO shall:
a. Ensure that the individual or employee is drug free
based on a drug test that shows no positive evidence of the presence of a
drug or a drug metabolite in the person's system;
b. Ensure that the individual or employee has been
evaluated by a physician or rehabilitation program counselor for drug use
or abuse; and
c. Ensure that the individual or employee demonstrates
compliance with any conditions or requirements of any rehabilitation
program in which the person participated.
5. Notwithstanding any other section in this appendix, the MRO
shall make the following determinations in the case of an employee or
applicant who holds, or is required to hold, a medical certificate issued
pursuant to 14 CFR Part 67 in order to perform ATC duties for an employer:
a. The MRO shall mike a determination of probable drug
dependence or nondependence as specified in 14 CFR Part 67. If the MRO
makes a determination of nondependence, the MRO has authority to recommend
that the employee return to duty in a position that requires the employee
to hold a certificate issued under 14 CFR Part 67. The MRO shall forward
the determination of nondependence, the return-to-duty decision, and any
supporting documentation to the Federal Air Surgeon for review.
b. If the MRO makes a determination of probable drug
dependence at any time, the MRO shall report the name of the individual and
identifying information, the determination of probable drug dependence, and
any supporting documentation to the Federal Air Surgeon. The MRO does not
have the authority to recommend that the employee return to duty in a
position that requires the employee to hold a certificate issued under 14
CFR Part 67. The Federal Air Surgeon shall determine if the individual may
retain or may be issued a medical certificate consistent with the
requirements of 14 CFR Part 67.
c. The MRO shall report to the Federal Air Surgeon the
name of any employee who is required to hold a medical certificate issued
pursuant to 14 CFR Part 67 and who fails a drug test. The MRO shall report
to the Federal Air Surgeon the name of any person who applies for a
position that requires the person to hold a medical certificate issued
pursuant to 14 CFR Part 67 and who fails a preemployment drug test.
d. The MRO shall forward the information specified in
paragraphs a., b., and c. of this section to the Federal Air Surgeon,
Federal Aviation Administration, (Attention: AAM-800), 400 Seventh Street
SW., Washington, DC 20590.
VIII. EMPLOYEE ASSISTANCE PROGRAM (EAP). The employer shall provide an EAP
for employees. The employer may establish the EAP as a part of its internal
personnel services or the employer may contract with an entity that will
provide EAP services to an employee. Each EAP must include education and
training on drug use for employees and training for supervisors making
determinations for testing of employees based on reasonable cause.
A. EAP EDUCATION PROGRAM. Each EAP education program must include at
least the following elements: display and distribution of informational
material; display and distribution of a community service hot-line
telephone number for employee assistance and display and distribution of
the employer's policy regarding drug use in the workplace.
B. EAP TRAINING PROGRAM. Each employer shall implement a reasonable
program of initial training for employees. The employee training program
must include at least the following elements: the effects and consequences
of drug use on personal health, safety, and work environment; the
manifestations and behavioral cues that may indicate drug use and abuse;
and documentation of training given to employees and employer's supervisory
personnel. The employer's supervisory personnel who will determine when an
employee is subject to testing based on reasonable cause shall receive
specific training on the specific, contemporaneous physical, behavioral,
and performance indicators of probable drug use in addition to the training
specified above. The employer shall ensure that supervisors who will make
reasonable cause determinations receive at least 60 minutes of initial
training. The employer shall implement a reasonable recurrent training
program for supervisory personnel making reasonable case determinations
during subsequent years. The employer shall identify the employee and
supervisor EAP training in the employer's drug testing plan submitted to
FAA for approval.
IX. EMPLOYER'S DRUG TESTING PLAN. Each employer shall submit a drug
testing plan for approval, to FAA at the time of contract proposal
submission (prior to contract award) in accordance with the plan format
attached to this appendix. The anti-drug plan must include the required
data elements shown in the plan format to be acceptable.
X. REPORTING RESULTS OF DRUG TESTING PROGRAM.
A. Each employer shall submit a semiannual report to the Office of
Aviation Medicine (Attention: AAM-800), 400 Seventh Street SW., Washington,
DC 20590, summarizing the results of its drug-testing program and covering
the period from January 1- June 30. Each employer shall submit an annual
report summarizing the results of its drug testing program and covering the
period from January 1-December 31. Each employer shall submit these reports
no later than 45 days after the last day of the report period.
B. Each report shall contain:
1. The total number of tests performed and the total number of
tests performed for each category of test.
2. The total number of employees tested if different from item
1.
3. The total number of positive test results by category of
test and the total number of positive test results by the type of drug
shown in a positive test result.
4. The disposition of an individual who failed a drug test
conducted in accordance with this appendix or who refused to submit to a
drug test required by this appendix by each category of test.
XI. PREEMPTION. This appendix does not preempt provisions of State
criminal law that impose sanctions for reckless conduct of an individual
that leads to actual loss of life, injury, or damage to property whether
such provisions apply specifically to aviation employees or generally to
the public.
<PAGE>
ANTI-DRUG PLAN
1. AIR TRAFFIC CONTROL FACILITY NAME/ADDRESS:
2. ANTI-DRUG PROGRAM MANAGER NAME/ADDRESS/TELEPHONE:
3. NUMBER OF ATC EMPLOYEES SUBJECT TO TESTING:
4. MEDICAL REVIEW OFFICER NAME/ADDRESS/TELEPHONE/STATE LICENSE NUMBER AND
DATE ISSUED:
(The MRO must be a licensed physician, either a Doctor of Medicine or
Doctor of Osteopathy, and MUST PERFORM all duties and determinations
in accordance with the DOT regulation, 49 CFR Part 40 and Section VII,
Appendix 3, of the Statement of Work. A statement to that effect in
the plan is acceptable to confirm that the MRO will carry out the
responsibilities required by the anti-drug regulations. If the
employer elects to list MRO duties and determinations, ALL
responsibilities must be included.)
5. DRUG TESTING LABORATORY NAME/ADDRESS/TELEPHONE:
(Must be DHHS/NIDA-Certified)
6. COLLECTION COMPANY/ADDRESS/TELEPHONE:
(Collection procedures MUST fully comply with 49 CFR Part 40. A
statement that collections will be accomplished in accordance with 49
CFR Part 40 is acceptable.
7. EMPLOYEE ASSISTANCE PROGRAM (EAP) MANAGER NAME/ADDRESS/ TELEPHONE
NUMBER:
8. EAP EDUCATION/TRAINING PROGRAM:
(Employee education and supervisory training MUST include ALL elements
of Section VIII, Appendix 3, of the Statement of Work. A statement to
that effect in the plan is acceptable. The employer may expand drug
abuse education and training if desired.)
9. REQUIRED TYPES OF TESTING:
(Include a statement that employee urine samples will be tested only
for marijuana, cocaine, opiates, phencyclidine (PCP), and amphetamines
or a metabolite of those drugs.)
FULLY DESCRIBE the procedures and methods to be used in conducting the
types of tests required by Section VI, Appendix 3, of the Statement of
Work. Explain the procedures for EACH type of test; e.g.:
PREEMPLOYMENT:
PERIODIC:
RANDOM:
POSTACCIDENT:
REASONABLE CAUSE:
RETURN TO DUTY:
10. RECORDKEEPING/RELEASE OF DRUG TEST INFORMATION:
(Describe the procedures to be used to ensure safeguarding of drug
test records as required by Section VI.A. and the release of drug test
information as required by Section VI.D., Appendix 3, of the Statement
of Work.)
11. TYPED NAME/TITLE AND SIGNATURE OF INDIVIDUAL SUBMITTING PLAN AND DATE
SUBMITTED:
APPENDIX 4. SITE-SPECIFIC INFORMATION
Prospective contract tower sites have been grouped into four (4) areas of
the United States, including Guam, Puerto Rico, and the Virgin Islands.
This appendix identifies site-specific information for prospective FCT
locations and is organized into sections which correspond to the four (4)
contract bidding areas.
- AREA 1 includes Connecticut, Delaware, Maine, Maryland,
Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode
Island, Vermont, Virginia, and West Virginia. Area 1 locations are numbered
0001 through 0100.
- AREA 2 includes Alabama, Arkansas, Georgia, Florida, Kentucky,
Louisiana, Mississippi, New Mexico, North Carolina, Oklahoma, Puerto Rico,
South Carolina, Tennessee, Texas, and the Virgin Islands. Area 2 locations
are numbered 0101 through 0200.
- AREA 3 includes Illinois, Indiana, Iowa, Kansas, Michigan,
Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and
Wisconsin. Area 3 locations are numbered 0201 through 0300.
- AREA 4 includes Alaska, Arizona, California, Colorado, Guam, Hawaii,
Idaho, Montana, Nevada, Oregon, Utah, Washington and Wyoming. Area 4
locations are numbered 0301 through 0400.
AREA 4
FCT LOCATION 0301: Palmdale, CA
HOURS OF OPERATION: 0530 - 2400
HOURS OF WEATHER REPORTING SERVICES: 0530 - 2400
OTHER SITE-SPECIFIC REQUIREMENTS: Contractor must execute a Joint
Use Agreement with the City of Los Angeles and the U.S. Air Force, in
accordance with the current FAA agreement, prior to startup date. Site
supervisory and control personnel must be U.S. citizens.
FCT LOCATION 0302: Salinas Municipal, CA
HOURS OF OPERATION: 0700 - 1900
HOURS OF WEATHER REPORTING SERVICES: None
(In the event of FSS relocation, will be required 0700 - 1900)
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0303: Molokai, HI
HOURS OF OPERATION: 0700 - 1830
HOURS OF WEATHER REPORTING SERVICES: 0700 - 1830
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0304: Lewiston-Nez Perce County, ID
HOURS OF OPERATION: 0600 - 2200
HOURS OF WEATHER REPORTING SERVICES: Varying times between 0600 - 2200
whenever National Weather Service is closed.
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0305: Pocatello Regional, ID
HOURS OF OPERATION: 0600 - 2200
HOURS OF WEATHER REPORTING SERVICES: None
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0306: McNary Field, OR
HOURS OF OPERATION: 0700 - 2100
HOURS OF WEATHER REPORTING SERVICES: None
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0307: Kenai Municipal, AK
HOURS OF OPERATION: 0600 - 2200
HOURS OF WEATHER REPORTING SERVICES: 0600 - 2200
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0308: King Salmon, AK
HOURS OF OPERATION: 0800 - 2000, except 0700 - 2300 during summer fish haul
mid-June - July (dates and hours issued by NOTAM)
HOURS OF WEATHER REPORTING SERVICES: None
OTHER SITE-SPECIFIC REQUIREMENT: Housing and goods are scarce and
expensive. Access is by air only; there is no road system. The FAA
will provide sufficient numbers of Government housing units for the
use of contractor ATC personnel. The number of units provided will be
based on the staffing numbers submitted in the technical proposal.
After contract award, the contract price for King Salmon will be
adjusted to reflect any rental or other monies required of the
contractor for such units. BIDDERS SHOULD NOT ADD ANY MONIES TO THE
BID PRICE TO COVER HOUSING COSTS.
FCT LOCATION 0309: Kodiak, AK
HOURS OF OPERATION: 0700 - 2200, April - September
0700 - 2000, October - March
HOURS OF WEATHER REPORTING SERVICES: None
OTHER SITE-SPECIFIC REQUIREMENTS: Housing is limited and expensive. The
location is accessed by air year-round and ferry in the summer, only.
FCT LOCATION 0310: Chico Municipal, CA
HOURS OF OPERATION: 0700 - 1900
HOURS OF WEATHER REPORTING SERVICES: 0700 - 1900
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0311: Modesto City-County, CA
HOURS OF OPERATION: 0700 - 2100
HOURS OF WEATHER REPORTING SERVICES: 0700 - 2100
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0312: Oxnard, CA
HOURS OF OPERATION: 0700 - 2100
HOURS OF WEATHER REPORTING SERVICES: 0700 - 2100
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0313: Redding Municipal, CA
HOURS OF OPERATION: 0630 - 2130
HOURS OF WEATHER REPORTING SERVICES: None
(In the event of NWS closure, will be required 0630 - 2130)
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0314: San Luis Obispo County, CA
HOURS OF OPERATION: 0700 - 2000
HOURS OF WEATHER REPORTING SERVICES: 0700 - 2000
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0315: Santa Maria Public, CA
HOURS OF OPERATION: 0600 - 2000
HOURS OF WEATHER REPORTING SERVICES: 0600 - 2000, visibility only
(In the event of NWS closure, will be required 0600 - 2000)
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0316: Grand Junction, CO*
HOURS OF OPERATION: 0600 - 2200
HOURS OF WEATHER REPORTING SERVICES: None
OTHER SITE-SPECIFIC REQUIREMENTS: None
*Currently a non-radar approach control. Prior to contract award, IFR
operations will be relocated to an adjacent facility.
FCT LOCATION 0317: Keahole, HI
HOURS OF OPERATION: 0600 - 2000
HOURS OF WEATHER REPORTING SERVICES: 0600 - 2000
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0318: Lihue, HI
HOURS OF OPERATION: 0700 - 2100
HOURS OF WEATHER REPORTING SERVICES: None
(In the event of NWS closure, will be required 0600 - 2000)
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0319: Fanning Field, ID
HOURS OF OPERATION: 0600 - 2200
HOURS OF WEATHER REPORTING SERVICES: None
(In the event of FSS relocation, will be required 0600 - 2000)
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0320: Helena Regional, MT*
HOURS OF OPERATION: 0600 - 2400, Monday - Friday
0600 - 2200, Saturday and Sunday
HOURS OF WEATHER REPORTING SERVICES: None
OTHER SITE-SPECIFIC REQUIREMENTS: None
*Currently a non-radar approach control. Prior to contract award, IFR
operations will be relocated to an adjacent facility.
FCT LOCATION 0321: Missoula International, MT*
HOURS OF OPERATION: 0600 - 2400
HOURS OF WEATHER REPORTING SERVICES: None
OTHER SITE-SPECIFIC REQUIREMENTS: None
*Currently a non-radar approach control. Prior to contract award, IFR
operations will be relocated to an adjacent facility.
FCT LOCATION 0322: Klamath Falls International, OR
HOURS OF OPERATION: 0700 - 2200*
HOURS OF WEATHER REPORTING SERVICES: None
(In the event of military relocation, will be required 0600 - 2000)
OTHER SITE-SPECIFIC REQUIREMENTS: None
*As of 7/11/94, hours of operation have been temporarily reduced, as
indicated. BID PRICE FOR THIS LOCATION SHOULD BE BASED ON 24 HOUR
OPERATIONS AS INDICATED IN YOUR APPROVED STAFFING PLAN. Price decrease as a
result of this change will be in accordance with Section C.5.5.
FCT LOCATION 0323: Portland-Troutdale, OR
HOURS OF OPERATION: 0700 - 2200
HOURS OF WEATHER REPORTING SERVICES: 0700 - 2200
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0324: Ogden-Hinckley Municipal, UT
HOURS OF OPERATION: 0600 - 2200
HOURS OF WEATHER REPORTING SERVICES: 0600 - 2200
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0325: Felts Field, WA
HOURS OF OPERATION: 0600 - 2200
HOURS OF WEATHER REPORTING SERVICES: None
(In the event of FSS relocation, will be required 0600 - 2200)
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0326: Flagstaff-Pulliam, AZ
HOURS OF OPERATION: 0600 - 2100, April - September
0700 - 1900, October - March
HOURS OF WEATHER REPORTING SERVICES: None
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0327: Whiteman, CA
HOURS OF OPERATION: 0800 - 2000
HOURS OF WEATHER REPORTING SERVICES: 0800 - 2000
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0328: Friedman Memorial, ID
HOURS OF OPERATION: 0700 - 2300
HOURS OF WEATHER REPORTING SERVICES: 0700 - 2300
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0329: Pendleton Municipal, OR
HOURS OF OPERATION: 0600 - 2000
HOURS OF WEATHER REPORTING SERVICES: None
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0330: Bellingham International, WA
HOURS OF OPERATION: 0000 - 2400
HOURS OF WEATHER REPORTING SERVICES: 0000 - 2400
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0331: Lake Tahoe, CA
HOURS OF OPERATION: 0800 - 2000
HOURS OF WEATHER REPORTING SERVICES: 0800 - 2000
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0332: Twin Falls-Sun Valley Regional, ID*
HOURS OF OPERATION: 0600 - 2200
HOURS OF WEATHER REPORTING SERVICES: 0600 - 2200
OTHER SITE-SPECIFIC REQUIREMENTS: None
*Currently a non-radar approach control. Prior to contract award, IFR
operations will be relocated to an adjacent facility.
FCT LOCATION 0333: Cheyenne, WY*
HOURS OF OPERATION: 0600 - 2200
HOURS OF WEATHER REPORTING SERVICES: None
OTHER SITE-SPECIFIC REQUIREMENTS: None
*Currently a non-radar approach control. Prior to contract award, IFR
operations will be relocated to an adjacent facility.
FCT LOCATION 0334: Olympia, WA
HOURS OF OPERATION: 0800 - 2000
HOURS OF WEATHER REPORTING SERVICES: None
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0335: Walla Walla Regional, WA
HOURS OF OPERATION: 0600 - 2200
HOURS OF WEATHER REPORTING SERVICES: None
(In the event of FSS relocation, will be required 0600 - 2200)
OTHER SITE-SPECIFIC REQUIREMENTS: None
FCT LOCATION 0336: Yakima Air Terminal, WA*
HOURS OF OPERATION: 0600 - 2200
HOURS OF WEATHER REPORTING SERVICES: None
OTHER SITE-SPECIFIC REQUIREMENTS: None
*Pending reclassification to Level I. Currently a non-radar approach
control. Prior to contract award, IFR operations will be relocated to an
adjacent facility.
FCT LOCATION 0337: Agana, Guam*
HOURS OF OPERATION: 0000 - 2400
HOURS OF WEATHER REPORTING SERVICES: None
OTHER SITE-SPECIFIC REQUIREMENTS: None
*Will be operated as a VFR tower.
FCT LOCATION 0338 - 0400: (Reserved)
HOURS OF OPERATION:
HOURS OF WEATHER REPORTING SERVICES:
OTHER SITE-SPECIFIC REQUIREMENTS:
<PAGE>
Contract No. DTFA01-94-C-0065
PART I - THE SCHEDULE
SECTION E - INSPECTION AND ACCEPTANCE
I. FEDERAL ACQUISITION REGULATION (48 CFR CHAPTER 1) CLAUSES
52.246-4 INSPECTION OF SERVICES - FIXED-PRICE (FEBRUARY 1992.)
(a) Definitions. "Services," as used in this clause, includes services
performed, workmanship, and material furnished or utilized in the
performance of services.
(b) The contractor shall provide and maintain an inspection system
acceptable to the Government covering the services under this contract.
Complete records of all inspection work performed by the contractor shall
be maintained and made available to the Government during contract
performance and for as long afterwards as the contract requires.
(c) The Government has the right to inspect and test all services called
for by the contract, to the extent practicable at all times and places
during the. term of the contract. The Government shall perform inspections
and tests in a manner that will not unduly delay the work.
(d) If the Government performs inspections or tests on the premises of the
Contractor or subcontractor, the Contractor shall furnish, and shall
require subcontractors to furnish, with additional charge, all reasonable
facilities and assistance for the safe and convenient performance of these
duties.
(e) If any of the services do not conform with contract requirements, the
Government may require the Contractor to perform the services again in
conformity with contract requirements, at no increase in contract amount.
When defects in services cannot be corrected by reperformance, the
Government may: (1) require the contract or to take necessary action to
ensure that future performance conforms to contract requirements, and (2)
reduce the contract price to reflect the reduced value of the services
performed.
(f) If the Contractor fails to promptly perform the services again or to
take necessary action to ensure future performance in conformity with
contract requirements, the Government may: (1) by contract or otherwise,
perform the services and charge to the Contractor any cost incurred by the
Government that is directly related to the performance of such service, or
(2) terminate the contract for default.
(End of clause)
<PAGE>
Contract No. DTFA01-94-C-0065
PART I - THE SCHEDULE
SECTION F - DELIVERIES OR PERFORMANCE
F-I FAR 52.252-2 CLAUSES INCORPORATED BY REFERENCE (JUNE 1988)
This contract incorporates one or more clauses by reference, with the same
force and effect as if they were given in full text. Upon request, the
Contracting Officer will make heir full text available.
(End of clause)
I. FAR (48 CHAPTER 1) CLAUSES
52.212-13 STOP-WORK ORDER (AUGUST 1989)
II. TRANSPORTATION ACQUISITION REGULATION (48 CHAPTER 12) CLAUSES
1252.212-71 NOTICE OF DELAY (APRIL 1984)
F-2 PERIOD OF PERFORMANCE
The period of this contract is from date of contract award, no sooner than
August 2, 1994, through September 30, 1994. Pursuant to FAR 52.217-9,
"Option to Extend the Term of the Contract," the FAA may annually extend
this contract through September 30, 1998 and may add any or all of the
additional sites specified in Appendix 4 of the SOW at the beginning of any
calendar month during any of the option years. The FAA will unilaterally
exercise any option period(s) by contract modification.
F-3 AVAILABILITY OF FUNDS FOR FUTURE PERFORMANCE
Pursuant to FAR 52.232-18, "Availability of Funds," funds are not presently
available for future year's performance. Any extension of this contract is
contingent upon receipt of appropriated funds.
(End of clause)
F-4 PLACE OF PERFORMANCE
The Contractor shall provide air traffic control (ATC) services at the
sites indicated in Appendix 4 to Section C for the area(s) for which the
offeror is bidding. Notwithstanding the provisions of FAR 52.243-1,
"Changes - Fixed Price - Alternate I," the Government will not change the
place of performance of services under this contract without the consent of
the Contractor.
(End of clause)
F-5 DAYS AND HOURS OF WORK
The contractor shall provide ATC services during the days and hours slated
in Appendix 4 to Section C for the area(s) for which the offeror is
bidding.
(End of clause)
F-6 HOLIDAYS
ATC services are required as slated in Appendix 4 to Section C. Overtime
pay may be required for those working on federally recognized legal
holidays listed below:
New Year's Day January 1
Martin Luther King's Birthday Third Monday in January
President's Day Third Monday in February
Memorial Day Last Monday in May
Independence Day July 4
Labor Day First Monday in September
Columbus Day Second Monday in October
Veterans Day November 11
Thanksgiving Day Fourth Thursday in November
Christmas Day December 25
F-7 DELIVERY SCHEDULE
The chart below outlines initial base year sites and potential sites to be
added during the four (4) one-year option periods by AREA. It is the
intention of the FAA to exercise options to add sites on or around the
beginning of the Fiscal Year. It is also the intention of the FAA to evenly
spread the addition of sites over option years one through three. We are
unable to determine which sites will be added in any particular year, at
this time, therefore, we present the chart below:
RANGE OF SITES TO BE ADDED ANNUALLY
AREA I AREA 2 AREA 3 AREA 4 TOTAL
Fiscal Year 1994
Base Contract 6 9 4 6 25
Fiscal Year 1995
1st Option Year 0 - 22 0 - 38 0 - 33 0 - 31 0 - 124
Fiscal Year 1996
2nd Option Year 0 - 22 0 - 38 0 - 33 0 - 31 0 - 124
Fiscal Year 1997
3rd Option Year 0 - 22 0 - 38 0 - 33 0 - 31 0 - 124
Fiscal Year 1998
4th Option Year 0 - 22 0 - 38 0 - 33 0 - 31 0 - 124
TOTALS 28 47 37 37 149
<PAGE>
Contract No. DTFA01-94-C-0065
PART I - THE SCHEDULE
SECTION G - CONTRACT ADMINISTRATION DATA
G.1 PAYMENT
The Contractor shall submit a properly executed original and two (2) copies
of the Contractor's regular invoice to Federal Aviation Administration,
Accounts Payable Branch, AAA-220, 800 Independence Avenue, SW, Washington,
DC 20591.
G.2 METHOD OF PAYMENT
A. Payments under this contract will be made by check or by wire
transfer through the Treasury Financial Communications System at the option
of the Government. Payments will be made monthly, in arrears, in accordance
with FAR 2.232-25, "Prompt Payment".
B. The Contractor shall forward the following information in writing
to the Federal Aviation Administration, Accounts Payable Branch, AAA-220,
800 Independence Avenue, SW, Washington, D.C. 20591 no later than seven (7)
days after receipt of notice of award.
(1) Full name (where practicable), title, phone number, and
complete mailing address of responsible official(s)
(i) To whom check payments are to be sent, and
(ii) Who may be contacted concerning the bank account
information requested below.
(2) The following bank account information required to
accomplish wire transfers:
(i) Name, address, and telegraphic abbreviation of the
receiving financial institution.
(ii) Receiving financial institution's 9-digit American
Bankers Association (ABA) identifying number for routing transfer of funds.
(Provide this number only if the receiving financial institution has access
to the Federal Reserve Communications System.)
(iii) Recipient's name and account number at the receiving
financial institution to be created with the funds.
(iv) If the receiving financial institution does not have
access to the Federal Reserve Communications System, provide the name of
the correspondent financial institution through which the receiving
financial institution receives electronic funds transfer messages. If a
correspondent financial institution is specified, also provide:
(a) Address and telegraphic abbreviation of the
correspondent financial institution.
(b) The correspondent financial institution's 9-digit
ABA identifying number for routine transfer of funds.
C. Any changes to the information furnished under paragraph (B)
clause shall be furnished to the Federal Aviation Administration, Accounts
Payable Branch, AAA-220, 800 Independence Avenue, SW, Washington, DC 20591,
in writing at least 30 days before the effective date of the change. It is
the Contractor's responsibility to furnish these changes promptly to avoid
payments to erroneous addresses or bank accounts.
D. The document furnishing the information required in paragraphs
(B) and (C) must be dated and contain the signature, title, and telephone
number of the Contractor Official authorized to provide it, as well as the
Contractor's name and contract number.
G.3 SUBMISSION
The Contractor shall submit requests for payment under this contract as
shown below. Distribution of all copies shall be concurrent. Unless
otherwise indicated, the common street address for all destinations is:
Federal Aviation Administration, 800 Independence Avenue, SW, Washington,
DC 20591.
NO. OF COPIES DESTINATION
Original & 2 Contract and Miscellaneous Section,
AAA-220
1 Contracting Officer, ASU-310
1 Technical Officer, ATR-120.1
G.4 FAA TECHNICAL OFFICER
a. The Contracting Officer has designated Mr. Jon Harris, ATR-120,
(202) 267-9176, as the Technical Officer (TO) to assist in monitoring the
work under this contract. The TO is responsible for the liaison with the
Contractor.
b. The Contracting Officer has designated Ms. Diane Bodenhamer, ATR-
120, (202) 267-3178, as the Alternate Technical Officer (ATO) to assist in
monitoring the work under this contract. The ATO is the alternate to the TO
and has the same responsibilities as the TO for liaison with the
Contractor.
c. The TO/ATO is not authorized to change the scope of work or
specifications in the contract, make any commitments or otherwise obligate
the Government, or authorize any changes which affect the contract price,
delivery schedule, period of performance, or other terms and conditions of
the contract.
d. The Contracting Officer may designate other Government personnel
to act as his or her authorized representative for one or more contract
administration functions which do not involve changing the scope, price,
terms, or conditions of the contract. Such designations will be in writing,
set forth by separate letter signed by the Contracting Officer, and will
contain specific instructions as to the extent to which the representative
may take action for the Contracting Officer. Such designation will not
contain authority to sign contractual documents, nor will it authorize the
designee to order contract changes, modify contract terms, or create any
liability on the part of the Government different from that set forth in
the contract.
G.5 CORRESPONDENCE PROCEDURES
To promote timely and effective contract administration, correspondence
(except for invoices and deliverable items) submitted under this contract
shall be subject to the following procedures:
a. TECHNICAL CORRESPONDENCE OF A ROUTINE NATURE shall be addressed
to the designated (TO/ATO), with an information copy of the correspondence
to the Contracting Officer, ASU-310.
b. OTHER CORRESPONDENCE, including technical correspondence where
patent data issues are involved, and correspondence which purpose or
otherwise involves waivers, deviations or modification to the contract,
requirements, terms or conditions shall be a dressed to the Contracting
Officer, ASU-310, with an information copy of this correspondence to the
TO/ATO.
c. All correspondence shall contain a reference line commencing with
the contract number, and a subject line.
G.6. SUBCONTRACTING PLAN REPORTS
Two copies each of Standard Forms 294 and 295 [see FAR 52.219-9(d)(10)]
shall be completed in accordance with their instructions and sent to:
Federal Aviation Administration
Management, Plans an( Evaluation Division, ASU-100
(1 copy) and
Navigation and Landing Aids Branch, ASU-310A (1 copy)
860 Independence Avenue, SW,
Washington, DC 20591
G.7 EXERCISE OF OPTIONS
Notice of Exercise of Options will be provided to the Contractor by the
Contracting Officer at least thirty (30) days prior to the option exercise
date.
Options shall be exercised by the issuance of a unilateral modification to
the contract by the Contracting Officer. The Government has requested
numerous Options in the solicitation. Options for continuation of services
at locations already under contract must be exercised on or before October
1 of the applicable fiscal year. Options for the initiation of services at
a new site or sites may be exercised at any time during the fiscal-year
that funding for that site becomes available, at the discretion of the
Government. Since this contract involves operations funds (one year funds),
no funds may be "carried over" from one fiscal year to the next. Also,
funds are not always available for immediate use o the first day of a new
fiscal year. Therefore the Contracting Officer may exercise any option
without funds by so stating and indicating that funds are not currently
available. When funds become available, a subsequent modification for
funding will be executed by the Contracting Officer with an effective date
of the first day of the new fiscal year.
G.8 GOVERNMENT FURNISHED PROPERTY
a. If the Government will furnish any property, in the condition
indicated, to the Contractor performance of this contract, then such
property will be shown in Part III, Section J. Control and accounting for
Government property shall be in accordance with FAR Part 45 and TAR Part
1245.
b. If Government property has been furnished for Contractor use, the
Contractor shall promptly notify the Contracting Officer in writing of any
property that is excess to the needs of the Contractor to complete
performance of the contract. The Contractor shall dispose of such items as
directed or authorized by the Contracting Officer.
G.9 QUALIFICATION OF CONTRACTOR EMPLOYEES
The Government reserves the right for the Contracting Officer and/or the
Technical Officer to review and verify Contractor employee qualifications.
In the event that an employee is determined to be unacceptable, the
Contractor shall immediately remove that person upon receipt of written
notice from the Contracting Officer.
G.10 PUBLIC RELEASE OF CONTRACT
The contract(s) resulting from this solicitation is/are public documents,
releasable to the general public. Such contract document may be released to
the public without the consent of the Contractor(s) and without notice to
the Contractor(s).
<PAGE>
Contract No. DTFA01-94-C-0065
PART I - THE SCHEDULE
SECTION H - SPECIAL CONTRACT REQUIREMENTS
H.1 52.252-2 CLAUSES INCORPORATED BY REFERENCE (JUNE 1988)
This contract incorporated one or more clauses by reference, with the same
force and effect as if they were given in full text. Upon request, the
contracting officer will make their full text available.
(End of clause)
NOTICE - The following contract clause or clauses pertinent to this section
are hereby incorporated by reference:
I. FAR (48 CFR CHAPTER 1) CLAUSES
1252.222-72 STRIKES OR PICKETING AFFECTING ACCESS TO FAA FACILITY (APRIL
1988)
H.2 1252.222.79 SERVICE CONTRACT ACT REQUIREMENTS AS TO VACATION PAY
(JANUARY 1985)
H.2.1 EMPLOYEE CREDIT FOR SERVICE WITH A PREDECESSOR CONTRACTOR
This paragraph applies if the contract wage determination contains a
provision referring to a "successor" contractor, e.g., "1 week paid
vacation after 1 year of service with a contractor or successor."
"Successor" as used in such provisions means the contractor on this
contract when the contractor employs, without a break in service, a service
employee formerly employed by the immediately preceding contractor under a
similar Government contract at the same location ("predecessor
contractor"). Consequently, if the contractor employs without a break in
service, any service employee who was employed by its predecessor
contractor for similar work at the same location, the contractor in
computing the employee's "year of service" shall include all continuous
service for the predecessor contractor subsequent to the later of the
following dates: (1) the date of employment by the predecessor contractor;
or (2) if, while employed by the predecessor contractor, the employee has
an anniversary date or dates on which the employee became entitled to
vacation benefits, the most recent of such employee's full vacation benefit
on such anniversary date even though during part of the "year of service"
the employee had been employed by the predecessor contractor.
H.18 SAVE HARMLESS AND INDEMNIFICATION
The Government shall not be responsible for, and the contractor shall hold
harmless and indemnify the Government, its officers, employees, and agents
from, any and all liability, claims, demands, suits, and costs for the loss
of or damage to any property and death of or injury to any person, which
loss, damages, death or injury arises from or is incident to the
performance of this contract, including but not limited to the loss or
damage to the property of, and the death of or injury to, the following:
1. The contractor;
2. The contractor's officers, agents, employees, and invitees;
3. The officers, agents, employees, and invitees of any contractor
or supplier of the contractor; and
4. Third persons, including but not limited to aircraft owners,
operators, and passengers provided, however, that the provisions of this
clause do not apply to the extent that the loss, damage, death, or injury
is caused directly and exclusively by a defect or malfunction in Government
property used in performance of this contract and the contractor has not
failed to comply with any and all obligations on its part to maintain said
property as may be required by this or any other contract.
H.19 SAVE HARMLESS AND INDEMNIFICATION CERTIFICATION
H.19.1 The contractor must have the authority to comply with the "Save
Harmless and Indemnification" clause in Section H, and to hold the
Government harmless in the amount of at least $1 million. Proof of coverage
beginning on the day of contract award must be submitted with the
Contractor's technical proposal.
H.19.2 All insurance required to back up the same harmless obligation
shall cover either:
1. Solely the Government's liability, with all insurance proceeds
payable solely to the Government; or
2. Both the liability of the Government and that of the contractor
or subcontractor.
3. In the latter case, the Government shall be an additional named
insured on the insurance policy. Where the required insurance covers a
contractor's or subcontractor's operations at more than one location, the
$1 million coverage shall apply to each location. Each such insurance
policy shall not have any deductibles totalling more than $50,000.
H-19.3 Before contract extension, the contractor shall provide the
contracting officer with a copy of the policy or certificate of insurance
for any required insurance. Any guarantee shall be reflected by appropriate
legal documentation, supported by a written legal opinion of the
guarantor's principal legal officer, and shall be provided before contract
renewal.
H.20 SERVICE CONTRACT ACT MINIMUM WAGE DETERMINATION
This contract is subject to the Service Contract Act of 1965, as amended.
If a Service Contract Act minimum wage determination is furnished for any
site covered by this contract, the wage determination(s) will be shown in
Attachment J-2 in Section J.
In order to be properly classified as a supervisory controller, an
individual must devote at least 80 percent of work time to supervisory
duties as described in 29 CFR Part 541.1 and satisfy the other requirements
prescribed in those regulations.
H.21 UNRESTRICTED ACCESS
The contractor grants unto the Government the right of unrestricted ingress
and egress to the work site at all times during the term of this contract
for the purpose of allowing the Government's electronic and communications
technicians to install, operate, maintain, and inspect the Government's
equipment located within, outside, and on the roof of the premises.
H.22 WAGE RATE DETERMINATION
a. Any and all wage determinations that are applicable to air traffic
controller services, and is attached and made a part hereof shall be
adhered-to by the Contractor and/or Subcontractor(s); however, this
provision shall not relieve the contractor or any subcontractor of any
obligation under any State minimum wage law which may require the
payment of a higher wage.
b. When, as result of an increased or decreased wage determination
applied to the categories of labor under this contract by operation of
law or an amendment to the Fair Labor Standards Act of 1938, AS
AMENDED (29 U.S.C. 201 ET SEQ.), enacted subsequent to award of this
contract or subsequent to the exercise of an option to extend this
contract, affecting the minimum wage, which becomes applicable to this
contract under law, the Contractor increases or decreases wages or
fringe benefits of employees working on this contract to comply
therewith the contract price or contract unit price labor rates will
be adjusted to reflect such increases or decreases. ANY SUCH
ADJUSTMENT WILL BE LIMITED TO INCREASES OR DECREASES IN WAGES OR
FRINGE BENEFITS AS DESCRIBED ABOVE, AND THE CONCOMITANT INCREASES OR
DECREASES IN SOCIAL SECURITY AND UNEMPLOYMENT TAXES AND WORKMEN'S
COMPENSATION INSURANCE, BUT SHALL NOT OTHERWISE INCLUDE ANY AMOUNT FOR
GENERAL AND ADMINISTRATIVE COSTS, OVERHEAD, OR PROFITS.
c. The Contractor shall notify the Contracting Officer of any increases
claimed under the clause within thirty (30) days after the effective
date of the wage change, unless this period is extended by the
Contracting Officer in writing. In the case of any decrease under this
clause, the Contractor shall promptly notify the Contracting Officer
of such decrease but nothing herein shall preclude the Government from
asserting a claim within the period permitted by law. The notice shall
contain a statement of the amount claimed and any other relevant data
in support thereof, which may reasonably be required by the
Contracting Officer. Upon agreement of the parties, the contract price
or contract unit labor rates shall be modified in writing. Pending
agreement on or definitization of, any such adjustment and its
effective date, the Contractor shall continue performance.
H.23 SMALL BUSINESS/SMALL DISADVANTAGED BUSINESS/WOMEN OWNED SMALL
BUSINESS SUBCONTRACTING GOALS
The Contractor, if not a small business, must establish the following below
listed subcontracting goals in their subcontracting plan submitted in
accordance with FAR 52.219-9 and make every attempt, in good faith, to
attain them:
Small Business 45%
Small Disadvantaged Business 10%
Women Owned Small Business 01%
These goals are expressed in terms of percentages of total planned
subcontracting dollars.
H.24 REOPENER CLAUSE IN THE EVENT OF PASSAGE OF FEDERALLY MANDATED
HEALTHCARE REFORM ACT
The Government recognizes that since this solicitation requires the
offerors to submit Firm Fixed Prices for a five (5) year period, and that
certain congressional action may affect the requirements or cost of
requirements for fringe benefits included in the pricing submitted by the
offerors, this contract may be modified. Certain fringe benefits are
required to be provided and these include health care. In the event that
the Congress passes and the President signs a Federal Health Care Act, and
this ACT causes the cost to the Contractor to increase more than ten (10)
percent over the cost included in their pricing of this contract, the
Government will allow the Contractor to request a modification of the
contract pricing for the affected time period.
When the Law is enacted and is applicable to this contract under the law,
and the Contractor is required to comply therewith, the contract price or
contract unit price labor rates will be adjusted to reflect such increase.
ANY SUCH ADJUSTMENT WILL BE LIMITED TO INCREASES IN HEALTH CARE COSTS ONLY
AS DESCRIBED ABOVE, AND THE CONCOMITANT INCREASE IN WORKMEN'S COMPENSATION
INSURANCE, BUT SHALL NOT OTHERWISE INCLUDE ANY AMOUNT FOR GENERAL AND
ADMINISTRATIVE COSTS, OVERHEAD, OR PROFITS.
The Contractor shall notify the Contracting Officer of any increases
claimed under the clause within thirty (30) days after the effective date
of the increase in health care costs, unless this period is extended by the
Contracting Officer in writing. Upon agreement of the parties, the contract
price or contract unit labor rates shall be modified in writing. Pending
agreement on or definitization of, any such adjustment and its effective
date, the Contractor shall continue performance.
H.25 SECURITY
The contractor shall provide suitable personnel for the performance of the
services required by this contract and shall require any subcontractor to
provide suitable personnel. "Suitable personnel" are determined through a
National Agency Check or a National Agency Check and Inquiries. The
Contractor shall have each employee complete and forward to the Government
Standard Form 85P, "Questionnaire for Public Trust Positions", and
fingerprint card FD-258. Background investigations are not required for FAA
controllers immediately transferring to tie Contractor's workforce and
remaining at their present work sites pursuant to Clause H.16, "RIGHT OF
FIRST REFUSAL". The Contractor may obtain forms SF-85P and FD-258 from the
Technical Officer/Alternate Technical Officer. Fingerprinting must be
performed in compliance with the standards prescribed on FD-258. The
Government reserves the right to disqualify any of the Contractor's
personnel based upon the results of the background investigation.
H.25.1 The Government reserves the right to require that contract personnel
are U.S. citizens at any or all sites, as specified in Appendix 4 to the
SOW.
H.25.2 From time to time under the contract, the Government may provide the
contractor with certain sensitive information concerning the interdiction
of stolen aircraft or aircraft suspected of being involved in drug
trafficking.
H.25.2.1 The contractor shall not disclose, and shall prohibit any
subcontractor from disclosing such information other than to those
personnel who need the information to assist in the interdiction of the
aircraft.
H.25.2.2 The contractor shall take appropriate measures (and shall require
any subcontractor to take such measures) to ensure that this information is
not disclosed to other persons.
H.25.2.3 The contractor shall maintain a list of its personnel, and those
of any subcontractor, to whom such sensitive information is disclosed and
shall make such lists available to the contracting officer upon request.
H.25.2.4 The contractor shall promptly report to the contracting officer
any known incidents of illegal drug use or dealing, alcohol abuse,
felonious conduct or improper use or distribution of Government-provided
sensitive information by personnel of the contractor or of any
subcontractor under this contract.
H.25.3 The Government may, at any time or times, conduct a security
investigation of contractor or subcontractor personnel providing services
under the contract. When notified of such an investigation by the
contracting officer, the contractor and its subcontractor(s) shall provide
necessary information to the Government on security forms furnished by the
contracting officer. If directed in writing to do so by the contracting
officer, the contractor shall promptly remove from the performance of
services under the contract any of its employees whom the Government finds
are other than suitable personnel and require its subcontractor(s) to
remove from performance of services under the contract any employees of
such subcontractor(s whom the Government finds are other than suitable
personnel.
H.25.4 The contractor shall provide such physical security at the facility
where the contract services are provided as is necessary to preclude
unauthorized access, intrusion, and loss of or damage to Government
property, operations capability or reduction of required service.
H.25.4,1 Contract-tower operators and employees shall also comply with
local airport authority security requirements and meet physical security
standards and protective measures as prescribed by FAA Order 1600.6C,
Physical Security Management Program (PSMP) for FAA facilities, along with
the following specific requirements:
1. Maintain an access control roster of designated personnel
assigned to the tower.
2. Maintain positive control of the tower cab.
3. Escort all visitors.
4. Limit visitor access to normal daylight operational hours.
5. Maintain a visitor log,
6. Restrict tower access during hours of darkness to employees,
airport authorities, and Federal, State, and local government personnel on
official business.
7. Secure the facility by locking all entry and exit points when
unattended.
8. Maintain key control aid accountability.
9. Maintain an up-to-date inventory of all GFE for review during
security inspections.
H.25.4.2 All contract tower physical security safeguards, operating
procedures, access, and visitor control shall be subject to security
inspection by FAA Special Agents. Written notification of such inspections
shall be coordinated by the responsible Servicing Security Element (SSE).
However, unannounced inspections may be conducted at the discretion of the
SSE when determined to be in the best interest of the FAA and national
security. Presentation of official FAA Special Agent credentials shall be
considered authority for entry, agent identification, and authorization to
conduct inspections under the provisions of this contract, FAA orders, or
in the interest of national security.
H.25.4.3 Security deficiencies noted during inspections shall be corrected
by the contractor within 45 days of an inspection. Corrective actions shall
be submitted in writing to the SSE when completed.
H.25.4.4 Contractors and their employees requiring access to classified
information must have a valid security clearance granted by the Defense
Investigative Service and meet all security requirements specified by the
Defense Industrial Security Program as outlined in the Department of
Defense Industrial Security Manual DoD 5200.22M.
H.26 FAA SUPPLEMENTAL STAFFING FOR SPECIAL EVENTS
The Government reserves the right to assign FAA controllers for
supplemental staffing at FCT locations whenever the FAA determines that
such staffing is needed for special events.
H.26.1 The TO/ATO will coordinate with the Contractor in advance to d
provide details such as number of controllers assigned, assignment dates,
an supervisory responsibilities (see H.26.2, below). The FCT Program Office
may delegate this coordination to the associated regional air traffic
division.
H.26.2 The FAA will ensure that FAA personnel are on-site for the duration
of the event to act as a focal point and provide leadership. When present,
FAA personnel assume supervisory ATC responsibilities for contractor
control personnel. At no time will contractor personnel be responsible for
supervision of FAA personnel.
H.26.3 The FAA retains liability for the actions of all FAA personnel
during the event; the Contractor retains liability for the actions of
contractor personnel in accordance with Sections H.18 and H.19.
<PAGE>
Contract No. DTFA01-94-C-0065
PART II - CONTRACT CLAUSES
SECTION I - CONTRACT CLAUSES
I.1 52.252-2 CLAUSES INCORPORATED BY REFERENCE. (JUN 1988)
This contract incorporates one or more clauses by reference, with the same
force and effect as if they were given in full text. Upon request, the
Contracting Officer will make their full text available.
(End of clause)
I. FEDERAL ACQUISITION REGULATION (48 CFR CHAPTER 1) CLAUSES
52.202-1 DEFINITIONS. (SEP 1991)
52.203-1 OFFICIALS NOT TO BENEFIT. (APR 1984)
52.203-3 GRATUITIES. (APR 1984)
52.203-5 COVENANT AGAINST CONTINGENCIES. (APR 1984)
52.203-6 RESTRICTIONS ON SUBCONTRACTOR SALES TO THE GOVERNMENT. (JUL
1985)
52.203-7 ANTI-KICKBACK PROCEDURES. (OCT 1988)
52.203-10 PRICE OR FEE ADJUSTMENT FOR ILLEGAL OR IMPROPER ACTIVITY. (SEP
1990)
52.207-3 RIGHT OF FIRST REFUSAL OF EMPLOYMENT. (NOV 1991)
52.209-6 PROTECTING THE GOVERNMENT'S INTEREST WHEN SUBCONTRACTING WITH
CONTRACTORS DEBARRED, SUSPENDED, OR PROPOSED FOR DEBARMENT.
(NOV 1992)
52.209-7 ORGANIZATIONAL CONFLICTS OF INTEREST CERTIFICATE - MARKETING
CONSULTANTS, (NOV 1991)
52.212-13 STOP WORK ORDER. (AUG 1989)
52.212-15 GOVERNMENT DELAY OF WORK. (APR 1984)
52.214-26 AUDIT--SEALED BIDDING. (APR 1985)
52.214-27 PRICE REDUCTION FOR DEFECTIVE COST OR PRICING DATA-
MODIFICATIONS--SEALED BIDDING. (APR 1988)
52.214-28 SUBCONTRACT(R COST OR PRICING DATA--MODIFICATIONS--SEALED
BIDDING. (DEC 1991)
52.214-29 ORDER OF PRECEDENCE--SEALED BIDDING. (JAN 1986)
52.215-26 INTEGRITY Of UNIT-PRICES. (APR 1991)
52.215-30 FACILITIES CAPITOL COST OF MONEY. (SEP 1987)
52.217-8 OPTION TO EXTEND SERVICES.(AUG 1989)
52.219-8 UTILIZATION OF SMALL BUSINESS CONCERNS AND SMALL DISADVANTAGED
BUSINESS CONCERNS. (FEB 1990)
52.219-9 SMALL BUSINESS AND SMALL DISADVANTAGED BUSINESS SUBCONTRACTING
PLAN. (JAN 1991) ALTERNATE 1. (JAN 1991)
52.219-13 UTILIZATION OF WOMEN-OWNED SMALL BUSINESSES. (AUG 1986)
52.219-16 LIQUIDATED DAMAGES - SMALL BUSINESS SUBCONTRACTING PLAN. (AUG
1989)
52.220-3 UTILIZATION OF LABOR SURPLUS AREA CONCERNS. (APR 1984)
52.220-4 LABOR SURPLUS AREA SUBCONTRACTING PROGRAM. (APR 1984)
52.222-1 NOTICE TO THE GOVERNMENT OF LABOR DISPUTES. (APR 1984)
52.222-19 WALSH-HEALEY PUBLIC CONTRACTS ACT REPRESENTATION. (APR 1984)
52.222-26 EQUAL OPPORTUNITY. (APR 1984)
52.222-35 AFFIRMATIVE ACTION FOR SPECIAL DISABLED AND VIETNAM ERA
VETERANS. (APR 1984)
52.222-36 AFFIRMATIVE ACTION FOR HANDICAPPED WORKERS. (APR 1984)
52.222-37 EMPLOYMENT REPORTS ON SPECIAL DISABLED VETERANS AND VETERANS
OF THE VIET NAM ERA. (JAN 1988)
52.222-41 SERVICE CONTRACT ACT OF 1965, AS AMENDED. (MAY 1989)
52.222-45 NOTICE OF COMPENSATION OF PROFESSIONAL EMPLOYEES. (APR 1984)
52.222-46 EVALUATION OF COMPENSATION FOR PROFESSIONAL EMPLOYEES. (APR
1984)
52.223-2 CLEAN AIR AND WATER. (APR 1984)
52.223-6 DRUG-FREE WORKPLACE. (JUL 1990)
52.225-3 BUY AMERICA ACT--SUPPLIES. (JAN 1989)
52.225-16 BUY AMERICA ACT-SUPPLIES UNDER EUROPEAN COMMUNITY AGREEMENT
CERTIFICATE, (MAY 1993)
52.225-17 BUY AMERICA ACT-SUPPLIES UNDER EUROPEAN COMMUNITY AGREEMENT.
(MAY 1993)
52.227-1 AUTHORIZATION AND CONSENT. (APR 1984)
52.227-2 NOTICE AND ASSISTANCE REGARDING PATENT AND COPYRIGHT
INFRINGEMENT. (APR 1984)
52.227-14 RIGHTS IN DATA--GENERAL (JUN 1987)
52.228-5 INSURANCE - WORK ON A GOVERNMENT INSTALLATION. (SEP 1989)
52.229-3 FEDERAL, STATE, AND LOCAL TAXES. (JAN 1991)
52.229-5 TAXES--CONTRACTS PERFORMED IN U.S. POSSESSIONS OR PUERTO RICO.
(APR 1984)
52.232-1 PAYMENTS. APR 1984)
52.232-8 DISCOUNTS FOR PROMPT PAYMENT. (APR 1989)
52.232-9 LIMITATION ON WITHHOLDING OF PAYMENTS. (APR 1984)
52.232-11 EXTRAS. (APR 1984)
52.232-16 PROGRESS PAYMENTS. (AUG 1987)
52.232-18 AVAILABILITY OF FUNDS. (APR 1984)
52.232-23 ASSIGNMENT CLAIMS. (JAN 1986)
52.232-25 PROMPT PAYMENT. (SEP 1992)
52.232-28 ELECTRONIC FUNDS TRANSFER PAYMENT METHODS. (APR 1989)
52.233-1 DISPUTES. (DEC 1991) - ALTERNATE I. (DEC 1991)
52.233-3 PROTEST AFTER AWARD. (AUG 1989)
52.237-3 CONTINUITY OF SERVICES. (APR 1984)
52.242-1 NOTICE OF INTENT TO DISALLOW COSTS. (APR 1984)
52.242-13 BANKRUPTCY. (APR 1991)
52.243-1 CHANGES--FIXED-PRICE. (AUG 1987)
52.244-1 SUBCONTRACTS UNDER FIXED-PRICE CONTRACTS. (APR 1991)
52.245-2 GOVERNMENT PROPERTY (FIXED PRICE CONTRACTS). (DEC 1989)
52.248-1 VALUE ENGINEERING. (MAR 1989)
52.249.2 TERMINATION FOR CONVENIENCE OF THE GOVERNMENT (FIXED PRICE).
(APR 1984)
52.249-8 DEFAULT (FIXED-PRICE SUPPLY AND SERVICE) (APR 1984)
II. TRANSPORTATION ACQUISITION REGULATION (48 CFR CHAPTER 12)
1252.212-71 NOTICE OF DELAY. (APR 1984)
1252.223-71 ACCIDENT AND FIRE REPORTING, (APR 1984)
1252.242-72 DISSEMINATION OF CONTRACT INFORMATION. (APR 1984)
* * *
1.252.203-9 REQUIREMENT FOR CERTIFICATE OF PROCUREMENT INTEGRITY
MODIFICATION. (NOV 1990)
(a) Definitions. The definitions set forth in FAR 3.104-4 are hereby
incorporated in this clause.
(b) The Contractor agrees as that it will execute the certification
set forth in paragraph (c) of this clause when requested by the Contracting
Officer in connection with the execution of any modification of this
contract.
(c) Certification. As required in paragraph (b) of this clause, the
officer or employee responsible for the modification proposal shall execute
the following certification:
CERTIFICATE OF PROCUREMENT INTEGRITY - MODIFICATION (Nov 1990)
(1) I, Ralph J. Blanchard (Name of certifier) the officer or employee
responsible for the preparation of this modification proposal and hereby
certify that, to the best of my knowledge and belief, with the exception of
any information described in this certification, I have no information
concerning a violation or possible violation of subsection 27(a), (b), (d)
or (f) of the Office of Federal Procurement Policy Act, as amended* (41
U.S.C. 423); (hereinafter referred to as "the Act"), as implemented in the
FAR, occurring during the conduct of this procurement DTFA01-94-C-0065
(contract and modification number).
(2) As required by subsection 27(s)(1)(B) of the Act, I further
certify to the best of my knowledge and belief, each officer, employee,
agent, representative, and consultant of JOHNSON-BARTON, INC. (Name of
offeror) who has participated personally and substantially in the
preparation or submission of this proposal has certified that he or she is
familiar with, and will comply with the requirements of subsection 27(a) of
the Act as implemented in the FAR, and will report immediately to me any
information concerning a violation or possible violation of subsection
27(a), (b), (c), (d), or (f) of the Act, as implemented in the FAR,
pertaining to this procurement.
(3) Violations or possible violations: (Continue on plain bond paper
if necessary and label Certificate of Procurement Integrity Modification
(Continuation Sheet), ENTER "NONE" IF NONE EXISTS)
NONE
(Signature of the Officer or Employee
Responsible for the Modification Proposal and Date)
RALPH J. BLANCHARD
(Typed Name of the Officer or Employee
Responsible for the Modification Proposal)
*The Act became effective on December 1, 1990.
THIS CERTIFICATION CONCERNS A MATTER WITHIN THE JURISDICTION OF AN AGENCY
OF THE UNITED STATES AND THE MAKING OF A FALSE, FICTITIOUS, OR FRAUDULENT
CERTIFICATION MAY RENDER THE MAKER SUBJECT TO PROSECUTION UNDER TITLE 18,
UNITED STATES CODE, SECTION 1001.
(End of Certification)
(d) In making the certification in paragraph (2) of the certificate,
the officer or employee of the competing Contractor responsible for the
offer or bid, may rely upon a one-time certification from each individual
required to submit a certification to the competing Contractor,
supplemented by periodic training. These certifications shall be obtained
at the earliest possible date after an individual required to certify
begins employment or association with the contractor. If a contractor
decides to rely on a certification executed prior to the suspension of
section 27 (i.e., prior to December 1, 1989), the Contractor shall ensure
that an individual who has so certified is notified that section 27 has
been reinstated. These certifications shall be maintained by the Contractor
for a period of 6 years from the date a certifying employee's employment
with the company ends or, for an agency, representative, or consultant, 6
years from the date such individual ceases to act on behalf of the
contractor.
(e) The certification required by paragraph (c) of this clause is a
material representation of fact upon which reliance will be placed in
executing this modification.
(End of clause)
I.3 52.203-12 LIMITATION ON PAYMENTS TO INFLUENCE CERTAIN FEDERAL
TRANSACTIONS. (JAN 1990)
(a) Definitions:
"Agency," as used in this clause means executive agency as
defined in 2.101.
"Covered Federal action." as used in this clause, means any of
the following Federal actions:
(a) The awarding of any Federal contract.
(b) The making of any Federal grant.
(c) The making of any Federal loan.
(d) The entering into any cooperative agreement.
(e) The extension, continuation, renewal, amendment, or
modification of any Federal contract, grant, loan, or cooperative
agreement.
"Indian tribe" and "tribal organization," as used in this clause, have
the meaning provided in section 4 of the Indian Self-Determination and
Education Assistance Act (25 J.S.C. 450B) and include Alaskan natives.
"Influencing or attempting to influence," as used in this clause,
means making, with the intent to influence, any communication to or
appearance before any officer or employee of any agency, a Member of
Congress, or any employee of a Member of Congress in connection with any
covered Federal action.
"Local government" as used in this clause, means a unit of government
in a State and, if chartered, established, or otherwise recognized by a
State for the performance of a governmental duty, including a local public
authority, a special district, an intrastate district, a council of
governments, a sponsor group representative organization, and any other
instrumentality of a local government.
"Officer or employee of an agency," as used in this clause, includes
the following individuals who are employed by an agency:
(a) An individual who is appointed to a position in the Government
under title 5, United States Code, including a position under a temporary
appointment.
(b) A member of the uniformed services, as defined in subsection
101(3), title 37, United States Code.
(c) A special government employee, as defined in section 202, title
18, United States Cod(.
(d) An individual who is a member of a Federal advisory committee, as
defined by the Federal Advisory Committee Act, title 5, United States Code,
appendix 2.
"Person," as used in this clause, means an individual, corporation,
company, association, authority, firm, partnership, society, State, and
local government, regardless of whether such entity is operated for profit,
or not for profit. This term excludes an Indian tribe, tribal organization,
or any other Indian organization with respect to expenditures specifically
permitted by other Federal law.
"Reasonable compensation," as used in this clause, means, with respect
to expenditures specifically permitted by other Federal law.
"Reasonable payment," as used in this clause, means, with respect to
professional and other technical services, a payment in an amount that is
consistent with the amount normally paid for such services in the private
sector.
"Recipient," as used in this clause, includes the Contractor and all
subcontractors. This term excludes an Indian tribe, tribal organization, or
any other Indian organization with respect to expenditures specifically
permitted by other Federal law.
"Regularly employed," as used in this clause, means, with respect to
an officer or employee of a person requesting or receiving a federal
contract, and officer or employee who is employed by such person for at
least 130 working days within 1 year immediately proceeding the date of the
submission that initiates agency consideration of such person for receipt
of such contract, An officer or employee who is employed by such person for
less than 130 working days within 1 year immediately preceding the date of
the submission that initiates agency consideration of such person shall be
considered to be regularly employed. as soon as he or she is employed by
such person for 130 working days.
"State," as used in this clause, means a State of the United States,
the District of Columbia, the Commonwealth of Puerto Rico, a territory or
possession of the United States, an agency or instrumentality of a State,
and multi-State, regional, or interstate entity having governmental duties
and powers.
(b) Prohibitions.
(1) Section 1352 of title 31, United States Code, among other
things, prohibits a recipient of a Federal contract, grant, loan, or
cooperative agreement from using appropriated funds to pay any person for
influencing or attempting to influence an officer or employee of any
agency, a Member of Congress, an officer or employee of Congress, or an
employee of a Member of Congress in connection with any of the following
covered Federal actions: the awarding of any federal contract: the making
of any Federal grant: the making of any Federal loan: the entering into of
any cooperative agreement; or the modification of any Federal contract,
grant, loan, or cooperative agreement.
(2) The Act also requires Contractors to furnish a disclosure if any
funds other than Federal appropriated funds (including profit or fee
received under a covered Federal transaction) have been paid, or will be
paid, to any person for influencing or attempting to influence an officer
or employee of any agency, a Member of Congress, an officer or employee of
Congress, or an employee of a Member of Congress in connection with a
Federal contract, grant, loan, or cooperative agreement.
(3) The prohibitions of the Act do not apply under the following
conditions:
(i) Agency and legislative liaison by own employees.
(A) The prohibition on the use of appropriated funds, in
subparagraph (b)(1) of this clause, does not apply in the case of a payment
of reasonable compensation made to an officer or employee of a person
requesting or receiving a covered Federal action if the payment is for
agency and legislative liaison activities not directly related to a covered
federal action.
(B) For the purpose of subdivision (b)(3)(i)(A) of this
clause, providing any information specifically requested by an agency or
Congress is permitted at any time.
(C) The following agency and legislative liaison activities
are permitted at any time where they are not related to a specific
solicitation for any covered Federal action:
(1) Discussing with an agency the qualities and
characteristics (including individual demonstrations) of the person's
products or services, conditions or terms of sale, and service
capabilities.
(2) Technical discussions and other activities
regarding the application or adaption of the person's products or services
for an agency's use.
(D) The following agency and legislative liaison activities
are permitted where they are prior to formal solicitation of any covered
Federal action:
(1) Providing any information not specifically
requested but necessary for an agency to make an informed decision about
initiation of a covered Federal action;
(2) Technical discussions regarding the preparation of
an unsolicited proposal prior to its official submission; and
(3) Capability presentations by persons seeking awards
from an agency pursuant to the provisions of the Small Business Act, as
amended by Pub. L. 95-507, and subsequent amendments.
(E) Only hose services expressly authorized by subdivision
(b)(3)(i)(A) of this clause are permitted under this clause.
(ii) Professional and technical services.
(A) The prohibition on the use of appropriated funds, in
subparagraph (b)(i) of this clause, does not apply in the case of:
(1) A payment of reasonable compensation made to an
officer or employee of a person requesting or receiving a covered Federal
action or an extension, continuation, renewal, amendment, or modification
of a covered Federal action, if payment is for professional or technical
services rendered directly in the preparation, submission, or negotiation
of any bid, proposal, or application for that Federal action or for meeting
requirements imposed by or pursuant to law as a condition for receiving
that Federal action.
(2) Any reasonable payment to a person, other than an
officer or employee of a person requesting or receiving a covered Federal
action or an extension, continuation, renewal, amendment, or modification
of a covered Federal action if the payment is for professional or technical
services rendered directly in the preparation, submission, or negotiation
of any bid, proposal, or application for that Federal action or for meeting
requirements imposed by or pursuant to law as a condition for receiving
that Federal action. Persons other than officers or employees of a person
requesting or receiving a covered Federal action include consultants and
trade associations.
(B) For purposes of subdivision (b)(3)(ii)(A) of this
clause, "professional and technical services" shall be limited to advice
and analysis directly applying any professional or technical discipline.
For example, drafting of a legal document accompanying a bid or proposal by
a lawyer is allowable. Similarly, technical advice provided by an engineer
on the performance or operational capability of a piece of equipment
rendered directly in the negotiation of a contract is allowable. However,
communications with the intent to influence made by a professional (such as
a licensed lawyer) or a technical person (such as a licensed accountant)
are not allowable under this section unless they provide advice and
analysis directly applying their professional or technical expertise and
unless the advice or analysis is rendered directly and solely in the
preparation, submission or negotiation of a covered Federal action. Thus,
for example, communications with the intent to influence made by a lawyer
that do not provide legal advice or analysis directly and solely related to
the legal aspects of his or her clients's proposal, but generally advocate
one proposal over another are not allowable under this section because the
lawyer is not providing professional legal services. Similarly,
communications with the intent to influence made by an engineer providing
an engineering analysis prior to the preparation of submission of a bid or
proposal are not allowable under this section since the engineer is
providing technical service, but not directly in the preparation,
submission or negotiation of a covered Federal action.
(C) Requirements imposed by or pursuant to law as a
condition for receiving a covered Federal award include those required by
law or regulation and any other requirements in the actual award documents.
(D) Only those services expressly authorized by
subdivisions (b)(3)(ii)(A)(1) and (2) of this clause are permitted under
this clause.
(E) The reporting requirements of FAR 3.803(a) shall not
apply with respect to payments of reasonable compensation made to regularly
employed officers or employees of a person.
(c) Disclosure.
(1) The Contractor who requests or receives from an agency a
Federal contract shall file with that agency a disclosure form, OMB
standard form LLL, Disclosure of Lobbying Activities, if such person has
made or has agreed to make any payment using non-appropriated funds (to
include profits from any covered Federal action), which would be prohibited
under subparagraph (b)(1) of this clause, if paid for with appropriated
funds.
(2) The Contractor shall file a disclosure form at the end of
each calendar quarter in which there occurs any event that materially
affects the accuracy of the information contained in any disclosure form
previously filed by such person under subparagraph (c)(1) of this clause.
An event that materially affects the accuracy of the information reported
includes-
(i) A cumulative increase of $25,000 or more in the amount
paid or expected to be paid for influencing or attempting to influence a
covered Federal action; or
(ii) A change ii the person(s) or individual(s) influence or
attempt to influence a covered Federal action.
(iii) A change in the officer(s), employee(s), or Member(s)
contacted to influence or attempt to influence a covered Federal action.
(3) The Contractor shall require the submittal of a
certification, and if required, a disclosure form by any person who
requests or received any subcontract exceeding $100,000 under the Federal
contract.
(4) All subcontractor disclosure forms (but not certifications)
shall be forwarded from tier to tier until received by the prime
Contractor. The prime Contractor shall submit all disclosures to the
Contracting Officer at the end of the calendar quarter in which the
disclosure form is submitted by the subcontractor. Each subcontractor
certification shall be retained in the subcontract file of the awarding
Contractor.
(d) Agreement. The Contractor agrees not to make any payment
prohibited by this clause.
(e) Penalties.
(1) Any person who makes an expenditure prohibited under
paragraph (a) of this clause or who fails to file or amend the disclosure
form to be filed or amended by paragraph (b) of this clause shall be
subject to civil penalties as provided for by 31 U.S.C. 1352. An imposition
of a civil penalty does not prevent the Government from seeking any other
remedy that may be applicable.
(2) Contractors may rely without liability on the representation
made by their subcontractors in the certification and disclosure form.
(f) Cost allowability. Nothing in this clause makes allowable or
reasonable any costs which would otherwise be unallowable or unreasonable.
Conversely, costs made specifically unallowable by the requirements in this
clause will not be made allowable under any other provision.
(End of clause)
I.4 52.214-16 MINIMUM BID ACCEPTANCE PERIOD. (APR 1984)
(a) "Acceptance Period" as used in this provision, means number of
calendar days available to the Government for awarding a contract from the
date specified in this solicitation for receipt of bids.
(b) This provision supersedes any language pertaining to the
acceptance period that may appear elsewhere in this solicitation.
(c) The Government requires a minimum period of one hundred twenty
(120) calendar days.
(d) In the space provided immediately below, bidders may specify a
longer acceptance period than the Government's minimum requirement. The
bidder allows the following acceptance period:
.............................. calendar days.
(e) A bid allowing less than the Governments minimum acceptance
period will be rejected.
(f) The bidder agrees to execute all that it has undertaken to do, in
compliance with its bid, if that bid is accepted in writing within (1) the
acceptance period stated in paragraph (c) of this clause or (2) any longer
acceptance period stated in paragraph (d) of this clause.
(End of clause)
I.5 52.217-7 OPTION FOR INCREASED QUANTITY - SEPARATELY PRICED LINE
ITEM. (MAR 1989)
The Government may require delivery of the numbered line item, identified
in the Schedule as an option item, in the quantity and at the price stated
in the Schedule. The Contracting Officer may exercise the option by written
notice to the Contractor within one (1) calendar day of the day of option
exercise. Delivery of added items/services shall continue at the same rate
that like items/services are called for under the contract, unless the
parties otherwise agree.
(End of Clause)
1.6 52.217-9 OPTION TO EXTEND THE TERM OF THE CONTRACT. (MAR 1989)
(a) The Government may extend the term of this contract by written
notice to the Contractor within one (1) calendar day of the exercise of an
option; provided that the Government shall give the Contractor a
preliminary written notice of its intent to extent at least thirty (30)
days before the contract expires. The preliminary notice does not commit
the Government to an extension.
(b) If the Government exercises this option, the extended contract
shall be considered to include this option provision.
(c) The total duration of this contract, including the exercise of
any options under this clause shall not exceed five (5) years.
(End of Clause)
I.7 52.214-27 PRICE REDUCTION FOR DEFECTIVE COST OR PRICING
DATA--MODIFICATIONS--SEALED BIDDING. (DEC 1991)
(a) This clause shall become operative only for any modification to
this contract involving aggregate increases and/or decreases in costs, plus
applicable profits, of more than $100,000 or for the Department of Defense,
the National Aeronautics and Space Administration and the Coast Guard, more
than $500,000 except that this clause does not apply to any modification
for which the price is--
(1) Based on adequate price competition;
(2) Based on established catalog or market prices of commercial
items sold in substantial quantities to the general public; or
(3) Set by law or regulation.
(b) If any price, including profit, negotiated in connection with any
modification under this clause, was increased by any significant amount
because (1) the Contractor or a subcontractor furnished cost or pricing
data that were not complete, accurate, and current as certified in its
Certificate of Current Cost or Pricing Data, (2) a subcontractor or
prospective subcontractor furnished the Contractor cost or pricing data
that were not complete, accurate, and current as certified in the
Contractor's Certificate of Current Cost or Pricing Data, or (3) any of
these parties furnished data of any description that were not accurate, the
price shall be reduced accordingly and the contract shall be modified to
reflect the reduction. This right to a price reduction is limited to that
resulting from defects in data relating to modifications for which this
clause becomes operative under paragraph (a) above.
(c) Any reduction in the contract price under paragraph (b) above due
to defective data from a prospective subcontractor that was not
subsequently awarded the subcontract shall be limited to the amount, plus
applicable overhead and profit markup, by which (1) the actual subcontract
or (2) the actual cost to the Contractor, if there was no subcontract, was
less than the prospective subcontract cost estimate submitted by the
Contractor; provided, that the actual subcontract price was not itself
affected by defective cost or pricing data.,
(d)(1) If the Contracting Officer determines under paragraph (b) of
this clause that a price or cost reduction should be made, the Contractor
agrees not to raise the following matters as a defense:
(i) The Contractor or subcontractor was a sole source supplier
or otherwise was in a superior bargaining position and thus the price of
the contract would not have been modified even if accurate, complete, and
current cost or pricing data had been submitted;
(ii) The Contracting Officer should have known that the cost or
pricing data in issue were defective even though the Contractor or
subcontractor took no affirmative action to bring the character of the data
to the attention of the Contracting Officer;
(iii) The contract was based on an agreement about the total cost
of the contract and there was no agreement about the cost of each item
procured under the contract; or
(iv) The Contractor or subcontractor did not submit a Certificate
of Current Cost or Pricing Data.
(2)(i) Except as prohibited by subdivision (d)(2)(ii) of this
clause, an offset in an amount determined appropriate by the Contracting
Officer based upon the facts shall be allowed against the amount of a
contract price reduction if:
(A) The Contractor certifies to the Contracting Officer
that, to the best of the Contractor's knowledge and belief, the Contractor
is entitled to the offset in the mount requested; and
(B) The Contractor proves that the cost or pricing data were
available before the date of agreement on the price of the contract (or
price of the modification) and that the data were not submitted before such
date.
(ii) An offset shill not be allowed if:
(A) The understated data was known by the Contractor to be
understated when the Certificate of Current Cost or Pricing Data was
signed; or
(B) The Government proves that the facts demonstrate that
the contract price would not have increased in the amount to be offset even
if the available data had been submitted before the date of agreement on
price.
(e) If any reduction in the contract price under this clause reduces
the price of items for which payment was made prior to the date of the
modification reflecting the price reduction, the Contractor shall be liable
to and shall pay the United States at the time such overpayment is repaid:
(1) Simple interest on the amount of such overpayment to be
computed from the date(s) of overpayment to the Contractor to the date the
Government is repaid by the Contractor at the applicable underpayment rate
effective for each quarter prescribed by the Secretary of the Treasury
under 26 U.S.C. 6621(a)(2); and
(2) For Department of Defense contracts only, a penalty equal to
the amount of the overpayment, if tie Contractor or subcontractor knowingly
submitted cost or pricing data which were incomplete, inaccurate, or
noncurrent.
(End of clause)
1.8 52.217-6 OPTION FOR INCREASED QUANTITY. (MAR 1989)
The Government may increase the quantity of supplies called for in the
Schedule at the unit price specified. The Contracting officer may exercise
the option by written notice to the Contractor WITHIN THIRTY (30) DAYS of
the expiration of the current contract.
Delivery of the added items shall continue at the same rate as the like
items called for under the contract, unless the parties otherwise agree.
(End of clause)
I.9 52.220-1 PREFERENCE FOR LABOR SURPLUS AREA CONCERNS. (APR 1984)
(a) This acquisition is not set aside for labor surplus area (LSA)
concerns. However, the officer's status as such a concern may affect (1)
entitlement to award in case of the offers or (2) offer evaluation in
accordance with the Buy American Act provision of this solicitation. In
order to determine whether the officer is entitled to a preference under
(1) or (2) above, the offeror must identify, below, the LSA in which the
costs to be incurred on account of manufacturing or production (by the
offeror or the first-tier subcontractors) amount to more than 50 percent of
the contract price.
.................................................................
.................................................................
(b) Failure to identify the locations as specified above will
preclude consideration of the offeror as an LSA concern. If the offeror is
awarded a contract as an LSA concern and would not have otherwise qualified
for award, the offeror shall perform the contract or cause the contract to
be performed in accordance with the obligations of an LSA concern.
(End of provision)
I.10 52.225-11 RESTRICTIONS ON CERTAIN FOREIGN PURCHASES. (MAY 1992)
(a) Unless advance written approval of the Contracting Officer is
obtained, the Contractor shall not acquire for use in the performance of
this contract--
(1) Any supplies or services originating from sources within the
Communist areas of North Korea, Vietnam, Cambodia, or Cuba;
(2) Any supplies that are or were located in or transported from
or through North Korea, Vietnam, Cambodia, or Cuba; or
(3) Arms, ammunition, or military vehicles produced in South
Africa, or manufacturing data for such articles.
(b) The Contractor shall not acquire for use in the performance of
this contract supplies or service originating from sources within Iraq, any
supplies that are or were located in or transported from or through Iraq,
or any supplies or services from entities controlled by the Government of
Iraq.
(c) The Contractor agrees to insert the provisions of this clause,
including this paragraph (c) in all subcontracts hereunder.
(End of clause)
I.11 52.232-17 INTEREST. (JAN 1991)
(a) Notwithstanding any other clause of this contract, all amounts
except amounts that are repayable and which bear interest under a Price
Reduction for Defective Cost or Pricing Data clause that become payable by
the Contractor to the Government under this contract (net of any applicable
tax credit under the Internal Revenue Code (26 U.S.C. 1481)) shall bear
simple interest from the date due until paid unless paid within 30 days of
becoming due. The interest rate shall be the interest rate established by
the Secretary of the Treasury as provided in Section 12 of the Contract
Disputes Act of 1978 (Public Law 95-5 3), which is applicable to the period
in which the amount becomes due, as provided in paragraph (b) of this
clause, and then at the rate applicable for each six-month period as fixed
by the Secretary until the amount is paid.
(b) Amounts shall be due at the earliest of the following dates:
(1) The date fixed under this contract.
(2) The date of the first written demand for payment consistent
with this contract, including any demand resulting from a default
termination.
(3) The date the Government transmits to the Contractor a
proposed supplemental agreement to confirm completed negotiations
establishing the amount of debt.
(4) If this contract provides for revision of prices, the date
of written notice to, the Contractor stating the amount of refund payable
in connection with a pricing proposal or a negotiated pricing agreement not
confirmed by contract modification.
(c) The interest charge made under this clause may be reduced under
the procedures prescribed in 32.614-2 of the Federal Acquisition Regulation
in effect on the date of this contract.
(End of clause)
1.12 52.243-7 NOTIFICATION OF CHANGES. (APR 1984)
(a) Definitions. "Contracting Officer, as used in this clause, does
not include any representative of the Contracting Officer. "Specifically
Authorized Representative (SAR)," as used in this clause, means any person
the Contracting Officer has so designated by written notice (a copy of
which shall be provided to the Contractor) which shall refer to this
subparagraph and shall be issued to the designated representative before
the SAR exercises such authority.
(b) Notice. The primary purpose of this clause is to obtain prompt
reporting of Government conduct that the Contractor considers to constitute
a change to this contract. Except for changes identified as such in writing
and signed by the Contracting Officer, the Contractor shall notify the
Administrative Contracting Officer in writing promptly, within ten calendar
days from the date that the Contractor identifies any Government conduct
(including actions, inactions, and written or oral communications) that the
Contractor regards as a change to the contract terms and conditions. On the
basis of the most accurate information available to the Contractor, the
notice shall state--
(1) The date, nature, and circumstances of the conduct regarded
as a change;
(2) The name, function, and activity of each Government
individual and Contractor official or employee involved in or knowledgeable
about such conduct;
(3) The identification of any documents and the substance of any
oral communication involved in such conduct;
(4) In the instance of alleged acceleration of scheduled
performance or delivery, the basis upon witch it arose;
(5) The particular elements of contract performance for which
the Contractor may seek an equitable adjustment under this clause,
including--
(i) What contract line items have been or may be affected
by the alleged change;
(ii) What labor or materials or both have been or may be
added, deleted, or wasted by the alleged change;
(iii) To the extent practicable, what delay and disruption
in the manner and sequence of performance and effect on continued
performance have been or may be caused by the alleged change;
(iv) What adjustments to contract price, delivery schedule,
and other provisions affected by the alleged change are estimated; and
(6) The Contractor's estimate of the time by which the
Government must respond to the Contractor's notice to minimize cost, delay
or disruption of performance.
(c) Continued performance. Following submission of the notice
required by (b) above, the Contractor shall diligently continue performance
of this contract to the maximum extent possible in accordance with its
terms and conditions as construed by the Contractor, unless the notice
reports a direction of the Contracting Officer or a communication from a
SAR of the Contracting Officer, in either of which events the Contractor
shall continue performance; provided, however, that if the Contractor
regards the direction or communication as a change is described in (b)
above, notice shall be given in the manner provided. All directions,
communications, interpretations, orders and similar actions of the SAR
shall be reduced to writing promptly and copies furnished to the Contractor
and to the Contracting Officer. The Contracting Officer shall promptly
countermand any action which exceeds the authority of the SAR.
(d) Government response. The Contracting Officer shall promptly,
within sixty (60) calendar days after receipt of notice, respond to the
notice in writing. In responding, the Contracting Officer shall either--
(1) Confirm that the conduct of which the Contractor gave notice
constitutes a change and when necessary direct the mode of further
performance;
(2) Countermand any communication regarded as a change;
(3) Deny that the conduct of which the Contractor gave notice
constitutes a change and when necessary direct the mode of further
performance; or
(4) In the event the Contractor's notice information is
inadequate to make a decision under (1), (2), or (3) above, advise the
Contractor what additional information is required, and establish the date
by which it should be furnished and the date thereafter by which the
Government will respond.
(e) Equitable adjustments.
(1) If the Contracting Officer confirms that Government conduct
effected a change as alleged by the Contractor, and the conduct causes an
increase or decrease in the Contractor's cost of, or the time required for,
performance of any part of the work under this contract, whether changed or
not changed by such conduct, an equitable adjustment shall be made--
(i) In the contract price or delivery schedule or both; and
(ii) In such other provisions of the contract as may be
affected.
(2) The contract shall be modified in writing accordingly. In
the case of drawings, designs or specifications which are defective and for
which the Government is responsible, the equitable adjustment shall include
the cost and time extension for delay reasonably incurred by the Contractor
in attempting to comply with the defective drawings, designs or
specifications before the Contractor identified, or reasonably should have
identified, such defect. When the cost of property made obsolete or excess
as a result of a change confirmed by the Contracting Officer under this
clause is included in the equitable adjustment, the Contracting Officer
shall have the right to prescribe the manner of disposition of the
property. The equitable adjustment shall not include increased costs or
time extensions for delay resulting from the Contractor's failure to
provide notice or to continue performance as provided, respectively, in (b)
and (c) above.
NOTE: The phrases "contract price" and "cost" wherever they appear in
the clause, may be appropriately modified to apply to cost-reimbursement or
incentive contracts, or to combinations thereof.
(End of clause)
<PAGE>
EXHIBIT 21
SUBSIDIARIES
SUBSIDIARY STATE OF INCORPORATION
BARTON ATC, Inc. Delaware
BARTON ATC International, Inc. Tennessee
Southeastern Technology, Inc. Tennessee
Titan Services, Inc. Tennessee
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Financial
Statements and Independent Auditor's Report of Aviation Education Systems, Inc.
and Subsidiaries and is qualifed in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,704,654
<SECURITIES> 0
<RECEIVABLES> 6,064,793
<ALLOWANCES> 1,665
<INVENTORY> 9,523,621
<CURRENT-ASSETS> 18,336,327
<PP&E> 3,865,736
<DEPRECIATION> 2,737,729
<TOTAL-ASSETS> 22,143,014
<CURRENT-LIABILITIES> 14,211,870
<BONDS> 1,331,906
0
0
<COMMON> 54,139
<OTHER-SE> 6,545,099
<TOTAL-LIABILITY-AND-EQUITY> 22,143,014
<SALES> 270,282
<TOTAL-REVENUES> 20,987,442
<CGS> 172,436
<TOTAL-COSTS> 17,014,879
<OTHER-EXPENSES> 2,683,202
<LOSS-PROVISION> 5,835
<INTEREST-EXPENSE> 578,767
<INCOME-PRETAX> 819,595
<INCOME-TAX> (579,644)
<INCOME-CONTINUING> 1,399,239
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,399,239
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.24
</TABLE>
