SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended MAY 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to
_______________________
Commission File Number 0-18352
INTERNATIONAL AIRLINE SUPPORT GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware 59-2223025
(State or other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or organization)
1954 Airport Road, Suite 200,
Atlanta, Georgia 30341
(Address of principal executive offices) (Zip Code)
(770) 455-7575
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of class Name of each exchange on
which registered
Common Stock, $.001 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein and will not be
contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ X]
At August 12, 1997, the aggregate market value of common stock held
by non-affiliates of the Registrant was approximately $19,415,203.50.
The number of shares of the Registrant's Common Stock outstanding
as of August 12, 1997 was 2,395,095.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Proxy Statement for the Annual Meeting of
Stockholders to be held on September 22, 1997 are incorporated by reference in
Parts III and IV.
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP INC.
ANNUAL REPORT OF FORM 10-K
FOR THE YEAR ENDED MAY 31, 1997
TABLE OF CONTENTS
PAGE
PART I............................................................1
Item 1. Business 1
Item 2. Properties 7
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
PART II...........................................................8
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters........................................8
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of
Operations 10
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes in and Disagreements with Accountants on
Accountingand Financial Disclosure..................14
PART III.........................................................15
Item 10. Directors and Executive Officers of the Registrant 15
Item 11. Executive Compensation 15
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................15
Item 13. Certain Relationships and Related Transactions 15
PART IV..........................................................16
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K..................................................16
SIGNATURES.......................................................19
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
PART I
ITEM 1. BUSINESS.
ALL STATEMENTS CONTAINED HEREIN THAT ARE NOT HISTORICAL FACTS ARE
BASED ON CURRENT EXPECTATIONS. THESE STATEMENTS ARE FORWARD LOOKING IN NATURE
AND INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES. ACTUAL RESULTS MAY DIFFER
MATERIALLY. AMONG THE FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY ARE THE FOLLOWING: BUSINESS CONDITIONS AND THE GENERAL ECONOMY,
COMPETITIVE FACTORS SUCH AS THE DEMAND FOR OLDER AIRCRAFT, THE COMPANY'S
ABILITY TO MAINTAIN INVENTORY THAT MEETS APPLICABLE REGULATORY STANDARDS AND
CLIENT DEMAND, THE AVAILABILITY OF NEW PARTS AND GENERAL RISKS OF INVENTORY
OBSOLESCENCE, THE ONGOING TREND FOR CUSTOMERS TO USE FEWER SUPPLIERS CAUSING A
LOSS OF CUSTOMERS, THE LOSS OF A PRINCIPAL CUSTOMER IN A GIVEN PERIOD IF THE
COMPANY IS UNABLE TO REPLACE SALES TO SUCH CUSTOMER AND THE OTHER RISK FACTORS
DESCRIBED IN THE COMPANY'S REPORTS FILED FROM TIME TO TIME WITH THE SECURITIES
AND EXCHANGE COMMISSION. THE COMPANY WISHES TO CAUTION READERS NOT TO PLACE
UNDUE RELIANCE ON ANY SUCH FORWARD LOOKING STATEMENTS, WHICH STATEMENTS ARE
MADE PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND, AS
SUCH, SPEAK ONLY AS OF THE DATE MADE.
General
International Airline Support Group, Inc. (the "Company") is a
worldwide supplier of spare parts to the aviation redistribution market. The
Company sells spare parts to major commercial passenger airlines, air cargo
carriers, maintenance and repair facilities and other redistributors. The
parts sold by the Company include avionics, rotable and expendable airframe and
engine components for commercial aircraft, including Airbus, Boeing and
McDonnell-Douglas aircraft and Pratt & Whitney and Rolls-Royce jet engines.
During the year ended May 31, 1997 ("fiscal 1997"), the Company supplied parts
to over 671 customers worldwide, 625 of whom were domestic customers and 46 of
whom were foreign customers. Currently, the Company specializes in replacement
parts for McDonnell-Douglas MD-80 and DC-9 aircraft. Management believes that
the Company has one of the most extensive inventories of aftermarket MD-80 and
DC-9 parts in the industry.
The Company became a supplier of aircraft parts in the early 1980s
by parting out Douglas DC-8 aircraft and reselling the resulting spare parts.
Based upon the Company's success in parting out DC-8 aircraft, which was last
produced in 1982, the Company began purchasing and parting out DC-9 aircraft in
1991. Production of DC-9 aircraft ceased in 1982. The DC-8 and DC-9 aircraft
have life expectancies that have exceeded the manufacturer's original
estimates. Beginning in 1992, the Company began purchasing and parting out
Boeing 727 aircraft. The Company has acquired thirty-eight DC-8, eight DC-9,
and six Boeing 727 aircraft for parting out since beginning operations. In
addition, the Company purchased the original testbed MD-80 from McDonnell-
Douglas and parted it out. The Company's extensive inventory of DC-9 parts
also enables it to sell parts to operators of the MD-80 because a substantial
number of DC-9 parts may be used on the MD-80.
The Company believes that the annual worldwide market for aircraft
spare parts is approximately $10 billion, of which approximately $1.3 billion
represents sales of aircraft spare parts to the redistribution market and that
the Company's sales represented approximately 2% of such market during fiscal
1997. The redistribution market is highly fragmented, with a limited number of
large, well capitalized companies selling a broad range of aircraft spare
parts, and numerous smaller competitors serving distinct market niches. The
Company believes that significant trends affecting the redistribution market
will continue to increase its overall size while reducing the number of
competitors. Factors causing the expansion of the redistribution market
include the increasing size and age of the world-wide airline fleet and the
increasing pressures on airlines and maintenance and repair facilities to
control their costs.
COMPANY STRATEGY
The Company's operating strategy has two components. First, the
Company intends to increase its revenues and operating income through continued
customer penetration in its existing markets and expansion into new markets.
The Company intends to achieve this by continuing to increase its share of the
market for spare parts for certain widely operated aircraft models, including,
in particular, the DC-9 and the MD-80. Although the DC-9 is no longer in
production, many of the DC-9's parts are interchangeable with the MD-80, which,
given the Company's experience and knowledge with the DC-9, gives it a
competitive advantage. The Company intends to capitalize on the limited
availability of spare parts for such aircraft models by acquiring (i) pools of
inventory from airlines that cease to operate such aircraft or that desire to
reduce their levels of parts inventory and (ii) aircraft for parting out when
the purchase price justifies doing so. In this regard, the Company purchased an
inventory of MD-80 parts from an airline in December 1996 for total
consideration of approximately $1.4 million. This inventory became available
following the airline's decision to eliminate the MD-80 aircraft type from its
fleet. The Company believes that its knowledge of the fleets of DC-9 and MD-80
aircraft currently in operation and its worldwide contacts in the commercial
aviation industry will permit it to acquire other inventory pools and aircraft
for parting out on favorable terms in the future.
The second component of the Company's operating strategy is to
achieve revenue and earnings growth by acquiring other companies engaged in the
sale of aircraft parts as well as companies with product lines that would
complement the Company's existing redistribution business. The Company
competes in a fragmented market in which numerous small companies serve
distinct market niches. The Company believes that small aircraft parts
redistributors, many of which are family owned and capital constrained, are
unable to provide the extensive inventory and quality control necessary to
comply with applicable regulatory and customer requirements and will provide
acquisition opportunities for the Company. The Company believes that such
acquisitions will permit it to expand its customer base by selling aircraft
parts to airlines and others that are not now customers, to expand its product
line with respect to aircraft in which the Company currently specializes, to
strengthen its relationships with existing customers and to expand the types of
aircraft in which the Company specializes.
INDUSTRY OVERVIEW
GENERAL. The Company believes that the world-wide aircraft fleet
is both growing and getting older. The World Jet Airplane Inventory for
calendar 1996 estimated that the combined aircraft fleets of aircraft operators
throughout the world at December 31, 1996 consisted of 12,814 jet aircraft, the
average age of which was 13.5 years. A significant number of the spare parts
used in these aircraft are supplied by different types of companies, including
original equipment manufacturers ("OEMs") and numerous redistributors, such as
the Company, fixed-base operators, FAA-certified overhaul facilities, traders
and brokers. Management believes that the fragmented nature of the aircraft
spare parts industry creates opportunities for small well-capitalized and
financed companies with proven infrastructures to exploit niche markets in
certain types of aircraft, such as the DC-9 and MD-80.
From time to time economic factors prompt many airlines to defer
aircraft procurement programs and extend the useful life of older equipment.
Currently, many aircraft operators are (i) operating under deferred delivery
schedules for new aircraft, pursuant to which they accept new aircraft for
delivery but at a slower pace than originally ordered, and (ii) retaining their
older aircraft. As a result, the worldwide jet aircraft fleet is both growing
and increasing in age. Certain U.S. and European operators have implemented
measures such as the installation of FAA-approved hush kits and extended-life
maintenance programs to extend the useful lives of older aircraft in their
fleets. In addition, many foreign and domestic start-up aircraft operators are
establishing their fleets through the acquisition of less expensive second-
generation aircraft even though such older aircraft typically require more
maintenance and replacement parts than new aircraft.
During the last several years, several start-up, low-cost airlines
using DC-9s and/or MD-80s, including ValuJet Airlines, Inc. ("ValuJet"), Spirit
Airlines and Reno Air, emerged as a result of the deregulation of the aircraft
industry and the availability of low-cost aircraft. The start-up airlines
generally offer service on specific high-traffic, short-haul routes rather than
attempting to compete with the extensive hub-and-spoke systems used by the
major carriers to obtain long-haul traffic. Second generation aircraft (such
as the DC-9) are able to operate profitably on these high-traffic, short-haul
routes. The emergence of these airlines has enhanced the value of the
Company's existing inventory because, in order to assure reliable operations,
such airlines need to maintain a minimum supply of spare parts or establish
relationships with spare parts suppliers. Because of the Company's position as
a primary source of DC-9 and MD-80 spare parts and because these airlines
generally lack the resources to maintain extensive supplies of spare parts, the
Company believes that it will continue to be an active parts supplier for such
airlines.
In addition to the growth in the number of older aircraft in
service, cost and availability considerations are causing airlines to reduce
the size of their spare parts inventories and, therefore, to utilize aircraft
spare parts sold by redistributors to provide parts that are no longer in
production. As airlines adopt just-in-time inventory procurement processes,
inventory storage and handling devolves to suppliers such as the Company, thus
increasing the percentage of parts sold by redistributors relative to those
sold by parts manufacturers. Furthermore, in order to reduce purchasing costs,
airlines have been reducing the number of "approved" suppliers.
As a result of these supplier reductions, there has been and the
Company believes there will continue to be a consolidation in the
redistribution market even as the redistribution market is expected to grow.
The Company believes that only those redistributors with extensive inventories,
adequate capital and the ability to comply with applicable regulatory and
customer requirements regarding part quality and traceability will be able to
capitalize on these trends. The Company currently maintains an inventory of
over 52,790 line items consisting of more than 560,138 parts, which the Company
believes will enhance its ability to respond well to such market trends.
AVAILABILITY OF REPLACEMENT PARTS. Aircraft and parts
manufacturers typically provide their customers with replacement parts
throughout the production life of the aircraft. Other sources for new aircraft
parts include authorized subcontractors for the OEMs, new parts distributors
and aircraft operators with excess inventories. Once an aircraft is no longer
in production, a manufacturer will continue to supply spare parts to its
customers for an extended period of time, which varies among aircraft types.
However, manufacturers generally have no obligation to supply or maintain parts
for an aircraft operator that was not the original purchaser of the aircraft.
As OEMs cease manufacturing replacement parts, and as other sources
of new parts become increasingly scarce, aircraft operators must locate
alternative sources for quality aftermarket parts to maintain the reliable
operation of their aircraft. Often, aircraft operators will opt for quality
aftermarket parts even when new parts are still in production. Aftermarket
aircraft parts must meet the same FAA standards as new parts but generally cost
less than new parts, and are often more readily available.
NOISE ABATEMENT REGULATIONS. The FAA classifies aircraft in three
groups, Stage 1, Stage 2 and Stage 3, in order of decreasing noise
characteristics. In 1980 the FAA adopted a rule prohibiting the operation of
Stage 1 aircraft in or to the United States. In response to a Congressional
requirement, the FAA submitted a report to Congress in April 1986 which
presented various approaches to encourage or require the replacement of Stage 2
aircraft with Stage 3 aircraft. The FAA noise abatement regulations that were
adopted require aircraft operators to phase out their noisier aircraft
gradually by either replacing them with quieter Stage 3 aircraft or equipping
them with hush kits to comply with noise abatement regulations according to the
following schedule: by December 31, 1994, each aircraft operator was required
either to reduce the number of Stage 2 aircraft it operated by 25% or operate a
fleet composed of not less than 55% Stage 3 aircraft; by December 31, 1996,
each aircraft operator must either reduce its Stage 2 aircraft by 50% or
operate a fleet composed of not less than 65% Stage 3 aircraft; by December 31,
1998 at least 75% of an aircraft operator's Stage 2 aircraft must be
eliminated, or its overall fleet must be composed of 75% Stage 3 aircraft; and
by December 31, 1999, 100% of the fleet must be composed of Stage 3 aircraft,
subject to certain waivers.
OPERATIONS OF THE COMPANY
INVENTORY ACQUISITION. The Company obtains most of its parts
inventory by purchasing excess inventory from aircraft operators or by
purchasing aircraft for parting out. The Company may also fill a customer
order for a part not held in the Company's inventory by locating the part for
the customer from another vendor, purchasing the part and then reselling the
part to the customer. A number of factors influence the relative importance to
the Company during a particular fiscal year of the two principal sources of
inventory. For example, several low-cost airlines commenced operations during
fiscal 1994 through 1996. During this period, the Company competed for
aircraft with such airlines, which often use narrow-body aircraft such as the
DC-9. Opportunities to purchase part-out aircraft during this period were
curtailed by such competition, which caused the sales prices for such aircraft
to increase. The Company acquires aircraft for parting out if its initial
estimate of the timing and value of parts sales for such aircraft would allow
the Company to recover the purchase price within 180 days through the sale of a
portion of the parts, and to sell the remaining parts for amounts in excess of
the purchase price over the subsequent five years. More recently, the growth
of low-cost airlines has slowed, creating more opportunities for the Company to
acquire aircraft at part-out prices.
The purchase and dismantling of an aircraft and the resale of the
dismantled parts for use on other aircraft is commonly called "parting out."
When the Company acquires an aircraft for parting out, the aircraft is
delivered to an inventory storage facility. The aircraft is then removed from
the U.S. registry. The seller of the aircraft will often provide the Company
with a computerized data base listing all the parts and equipment on the
aircraft which is verified by the Company. If a computerized listing of parts
is not available, the Company will conduct its own inventory of the aircraft to
be parted out. The parts and equipment are catalogued and all the relevant
information regarding the parts, including each part's repair history, is
entered into the Company's computer database. Management believes that it is
essential that such information be immediately available in order to facilitate
sales by the Company's sales personnel. In certain instances, parts which are
in high demand are pre-sold prior to the delivery of the aircraft to the
Company. High value parts such as engines and engine components are also often
pre-sold. Pre-selling allows the Company to recover a significant amount of
its investment within a short time from the date of the aircraft delivery.
An aircraft purchased for parting out is often in the same
condition as the aircraft that will utilize the spare parts. Sellers are
usually motivated to dispose of their aircraft at part out prices for a variety
of reasons, including the seller's need for immediate liquidity or inability to
economically lease the aircraft to third parties. Additionally, such aircraft
may require extensive maintenance or overhaul or may require government-
mandated improvements which are uneconomical for the seller to perform.
In addition to purchasing whole aircraft, the Company also acquires
spare parts by bidding on the inventory of companies that are eliminating
certain portions of their spare parts inventories due to the retirement of an
aircraft type from their fleets, inventory reduction programs to reduce costs,
the downsizing of their operations or the dissolution of their businesses as a
whole. Major passenger carriers may eliminate a type of aircraft to simplify
maintenance of their fleet, to achieve other operational efficiencies or to
reduce carrying costs attributable to inventory.
Modern aircraft design emphasizes the use of components that may be
reused repeatedly after inspection and overhaul. Because of the reusable
nature of such "rotable" parts, sales of rotable parts offer greater profit
potential than the nonreusable "consumable" parts. Vendors offer rotable parts
in different conditions, designated by industry standards. A component may be
sold in "serviceable" condition, meaning that the unit may be installed on an
aircraft without further inspection. "As removed - not for failure" designates
a component that was removed from an aircraft for some reason other than
malfunction and may be reinstalled after inspection. The remaining condition,
"unserviceable," designates the need for the part to be overhauled prior to
inspection and installation. The FAA requires rotable and other spare parts to
be inspected at FAA-certified repair facilities prior to installation on an
aircraft. However, the FAA does not prohibit the sale of aftermarket parts
that have not been inspected and certified.
PRODUCT LINES. Historically, the Company maintained a large
inventory of aftermarket parts for the DC-8 aircraft. The DC-8, an early model
Stage 1 aircraft, has not been produced since 1982. The FAA's enactment of
noise abatement restrictions in 1980 grounded all DC-8s powered by JT3 and JT4
class engines in use in the United States and required such aircraft to be
refitted with modern, quieter engines. Because of the expense involved in
installing new engines, the use of DC-8 aircraft in the United States declined.
Certain devices known as "hush kits" were invented in order to bring the JT3
engines within acceptable noise limits. In late 1985, the FAA approved the
first hush kit for certain JT3 engines and an additional hush kit was approved
for other JT3 engines in 1987. The effect of these changes was to create new
demand for DC-8 parts because a DC-8 equipped with a hush kit is among the
lowest cost aircraft to operate per ton mile. Accordingly, the Company
believes that the DC-8s will continue to be used by freight carriers and other
operators and that the sale of DC-8 parts will continue to be a source of
revenues in the foreseeable future. However, it is expected that sales of DC-8
parts will continue to decline in correspondence with the decrease of DC-8s in
operation.
Because of the limited number of DC-8s in operation, the Company
began expanding its inventory to include parts for Stage 2 aircraft, such as
the DC-9 aircraft. Currently, the Company specializes in replacement parts for
MD-80 and DC-9 aircraft. The noise abatement regulations issued by the FAA
require aircraft operators to phase out their noisier Stage 2 jets by the year
2000 unless they are retrofitted with hush kits to bring them into compliance
with the Stage 3 noise requirements. The Company believes that retrofitting
with hush kits as well as the extended life maintenance programs instituted by
many aircraft operators will increase the useful life of DC-9s. In addition to
the Company's inventory of McDonnell Douglas DC-8, DC-9 and MD-80 parts, the
Company's inventory also includes spare parts for the Boeing 727, 737, and 747
aircraft and the Lockheed L1011 aircraft and for the Pratt & Whitney JT-8D
engine series.
MARKETING. The Company has developed a sales and marketing
infrastructure which includes well-trained and knowledgeable sales personnel,
computerized inventory management, listing of parts in electronic industry data
bank catalogues and a home page on the Internet. Crucial to the successful
marketing of the Company's inventory is the Company's ability to make timely
delivery of spare parts in reliable condition. The Company believes aircraft
operators are more sensitive to reliability and timeliness than price.
Market forces establish the price for aftermarket aircraft parts.
No pricing service or catalogue exists for aftermarket components. Aftermarket
aircraft parts prices are determined by referencing new parts catalogues with
consideration given to existing supply and demand conditions. Often, aircraft
operators will opt for quality aftermarket parts even when new parts are still
in production. Aftermarket aircraft parts that meet the same FAA standards as
new parts cost less than the same new parts and are often more readily
available.
In addition to directly marketing its inventory, the Company lists
its inventory in the Air Transport Association's computerized data bank
("AIRS") and with the Inventory Locator Service ("ILS"), a proprietary
computerized data bank. Both of these data bases are 24 hour electronic
"marketplaces" where aircraft parts transactions take place.
CUSTOMERS
GENERAL. The Company's customer base includes major passenger and
cargo operators, smaller aircraft operators, overhaul facilities, FAA-certified
repair facilities and other redistributors who may in turn resell to end users.
Management believes that its customer relationships are important to the
Company's operational success. The Company has established relationships with
many domestic and foreign aircraft operators and maintains an adequate level of
inventory in order to service such customers in a timely manner. Management
believes that availability and timely delivery of quality spare parts are the
primary factors considered by customers when making a spare parts purchase
decision. The low-cost, start-up airlines and cargo airlines are among the
Company's principal customers. The low-cost, start-up airlines are important
customers because the Company is the primary source of spare parts for the MD-
80 and DC-9 model aircraft, which are favored by such airlines, and because
such airlines lack the resources to maintain extensive supplies of spare parts.
The cargo airlines are important customers because the fleets of such airlines
consist of older aircraft of the type for which the Company maintains an
extensive inventory of parts and because such airlines typically do not
maintain extensive supplies of spare parts.
In addition to selling parts, the Company also sells entire
aircraft from time to time. In a given period, a substantial portion of the
Company's revenues may be attributable to the sale of aircraft. Such sales are
unpredictable transactions, dependent, in part, upon the Company's ability to
purchase an aircraft and resell it within a relatively brief period of time.
The revenues from the sale of aircraft during a given period may result in the
purchaser of the aircraft being considered a major customer of the Company for
that period. The Company does not expect to make repeat aircraft sales to a
given customer; therefore, changes in the identity of major customers are
frequently due to the occurrence of aircraft sales.
MAJOR CUSTOMERS. In fiscal 1997, no customer accounted for 10% or
more of the Company's revenues. The Company believes that it has no customer,
the loss of which would have a material adverse effect on the Company's
business, results of operations and financial condition.
GEOGRAPHIC DISTRIBUTION OF CUSTOMERS. The Company sells aircraft
and aircraft parts and leases aircraft to foreign and domestic customers. The
Notes to the Consolidated Financial Statements of the Company, which are set
forth elsewhere in this Annual Report on Form 10-K, provide certain information
with respect to the geographic areas in which the Company has derived revenue
during the three fiscal years ended on May 31, 1997.
ADDITIONAL SERVICES
AIRCRAFT AND ENGINE SALES AND LEASING. The Company has determined
that its spare parts sales opportunities are enhanced by providing its existing
and new customers with whole aircraft and engines through sale transactions.
Such transactions allow the Company to expand its customer base for spare parts
and to reduce the cost basis in its aircraft. The Company currently owns five
aircraft, three of which are subject to leases expiring in the first quarter of
calendar year 1999. The Company expects to continue to broker sales of
aircraft and engines when opportunities to do so arise.
EXCHANGE TRANSACTIONS. An "exchange transaction" generally involves
a high value, high turnover rotable part which an operator frequently replaces
when performing aircraft maintenance. In an exchange transaction, a customer
typically pays an exchange fee and returns a "core" unit to the Company within
14 days. A "core" unit is the same part which is being delivered to the
customer by the Company, but in need of overhaul. The Company has the
customer's core unit overhauled and bills the customer for the overhaul charges
and retains the overhauled core unit in its inventory. The Company continues
to emphasize exchange transactions because they are profitable and ensure that
scarce parts remain in stock for future sales.
GOVERNMENT REGULATION
The aviation industry is highly regulated in the United States by
the FAA and in other countries by similar agencies. While the Company's
business is not regulated, the aircraft spare parts which it sells to its
customers must be accompanied by documentation that enables the customer to
comply with applicable regulatory requirements. There can be no assurance that
new and more stringent government regulations will not be adopted in the future
or that any such new regulations, if enacted, would not have an adverse impact
on the Company.
PRODUCT LIABILITY
The Company's business exposes it to possible claims for personal
injury or death which may result from the failure of an aircraft spare part
sold by it. In this regard, the Company maintains liability insurance in the
amount of $10 million. While the Company maintains what it believes to be
adequate liability insurance to protect it from such claims, and while no
lawsuit has ever been filed against the Company based upon a products liability
theory, no assurance can be given that claims will not arise in the future or
that such insurance coverage will be adequate. Additionally, there can be no
assurance that insurance coverages can be maintained in the future at an
acceptable cost. Any such liability not covered by insurance could have a
material adverse effect on the financial condition of the Company.
COMPETITION
The aircraft spare parts redistribution market is highly
fragmented. Customers in need of aircraft parts have access, through computer-
generated inventory catalogues, to a broad array of suppliers, including
aircraft manufacturers, airlines and aircraft service companies. The dominant
companies in the aircraft parts aftermarket are AAR Corp., The AGES Group,
Aviation Sales Company and Banner Aerospace, Inc. These companies are larger
than the Company and have greater financial resources. The Company also
competes with numerous smaller, independent dealers, which generally
participate in niche markets. Competition in the redistribution market is
generally based on price, availability and quality of product, including
traceability.
EMPLOYEES
As of August 12, 1997, the Company had 25 employees. The Company
is not a party to any collective bargaining agreement. The Company believes
its relations with its employees are good.
ITEM 2. PROPERTIES.
The Company's executive offices and operations are located at 1954
Airport Road, Suite 200, Atlanta, Georgia 30341, consisting of approximately
3,600 square feet of leased space pursuant to a lease expiring in January 2000.
The Company leases approximately 29,500 square feet of warehouse facilities in
Fort Lauderdale, Florida pursuant to a lease expiring in March 2002. The
Company consummated the sale of its previous corporate offices and adjacent
warehouse in March 1997.
The Company's property, as well as substantially all the other
assets of the Company, are subject to the lien securing amounts advanced
pursuant to the Company's secured credit facility.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not now a party to any litigation or other legal
proceeding. The Company may become a defendant in legal proceedings in the
ordinary course of business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year covered by this Annual Report on
Form 10-K.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.
The Company's Common Stock has been publicly traded since April 2,
1990. Prior to April 21, 1997, sales of the Common Stock were reported through
the National Quotation Bureau's National Daily Quotation Price Sheets.
Effective April 21, 1997 the Common Stock was listed and traded on the American
Stock Exchange under the symbol "YLF." The following table sets forth the high
and low bid quotations as reported by the National Quotation Bureau from
June 1, 1995 through April 18, 1997 and the high and low closing prices of the
Common Stock as reported on the American Stock Exchange thereafter, in each
case, as adjusted to give effect to a 1-for-27 reverse stock split consummated
on October 3, 1996.
<TABLE>
<CAPTION>
1996 FISCAL YEAR
HIGH LOW
-------- --------
<S> <C> <C> <C> <C>
First Quarter $ 11 13/16 $ 7 19/32
Second Quarter 7 19/32 4 7/32
Third Quarter 5 1/16 3 3/8
Fourth Quarter 5 29/32 3 3/8
1997 FISCAL YEAR HIGH LOW
-------- ---------
First Quarter 5 29/32 5 1/16
Second Quarter 5 29/32 3
Third Quarter 3 5/8 2 3/4
Fourth Quarter 4 1/2 3
</TABLE>
At May 31, 1997, there were 110 holders of record of the Company's
Common Stock and no holders of the Company's Preferred Stock.
The Company has never paid dividends on the Common Stock. The
Company's secured credit facility prohibits the Company from paying dividends
on the Common Stock as long as indebtedness issued pursuant to such facility
remains outstanding. It unlikely that the Company will pay dividends on the
Common Stock in the foreseeable future.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The selected consolidated financial data presented below for, and
as of the end of, each of the fiscal years in the five year period ended
May 31, 1997 have been derived from the Company's audited consolidated
financial statements. The consolidated financial statements of the Company as
of May 31, 1996 and 1997 and for the three-year period ended May 31, 1997 and
the accountant's reports thereon are included in Item 8 of this Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1993 1994 1995 1996 1997
------- ------- ------- ------ -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING DATA:
<S> <C> <C> <C> <C> <C>
Net sales $32,032 $16,747 $21,999 $21,410 $20,123
Lease revenue 1,473 1,986 2,984 1,795 1,109
------- -------- ------- ------ ------
Total revenues 33,505 18,733 24,983 23,205 21,232
Total operating expenses 29,456 34,932 23,343 18,528 17,423
------- -------- ------- ------ ------
Income (loss) from 4,049 (16,199) 1,640 4,677 3,809
continuing operations
Interest expense, net 2,503 2,866 2,254 2,377 1,550
------- -------- ------- ------ ------
Earnings (loss) before 1,546 (19,065) (614) 2,300 2,259
income taxes, equity
in earnings (loss) of
joint venture and
extraordinary item
Provision for income 510 (2,476) -- 14 --
taxes (benefit)
Equity in loss of joint (59) (424) -- -- --
venture
------- -------- ------- ------ ------
Earnings (loss) before 977 (17,013) (614) 2,286 2,259
extraordinary item
------- -------- ------- ------ ------
Extraordinary loss on -- (363) -- -- (531)
extinguishment of debt
------- -------- ------- ------ ------
Net earnings (loss) $977 $(17,376) $(614) $2,286 $1,728
======= ======== ======= ====== ======
PER SHARE DATA:
Primary earnings (loss) per common
and common equivalent
shares
Earnings (loss) before $6.59 $(113.65) $(4.10) $15.27 $1.25
extraordinary item
Extraordinary item -- (2.43) -- -- (0.29)
------- ------- ------- ------- ---------
Net earnings (loss) $6.59 $(116.08) $(4.10) $15.27 $0.96
======= ======= ======= ======= =========
Weighted average shares outstanding 148,054 149,696 149,696 149,696 1,806,938
used in primary calculation
Fully-diluted earnings (loss) per
common and common equivalent shares
Earnings (loss) before $6.59 $(113.65) $(4.10) $12.69 $1.25
extraordinary item
Extraordinary item -- (2.43) -- -- (0.29)
------- ------- ------- ------- ---------
Net earnings (loss) $6.59 $(116.08) $(4.10) $12.69 $0.96
======= ======= ======= ======= =========
Weighted average shares outstanding 148,054 149,696 149,696 242,228 1,806,938
used in fully-diluted calculation
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AT MAY 31,
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997
------- ------- ------- -------- -----
BALANCE SHEET DATA:
Working capital $17,088 $(18,312) $(13,489) $(10,841) $9,143
(deficit)
Total assets 35,709 25,553 14,511 16,132 21,287
Total debt 23,484 26,173 20,335 18,144 13,749
Stockholder's 8,173 (9,088) (9,702) (7,416) 4,660
equity (deficit)
</TABLE>
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
OVERVIEW
The Company is primarily engaged in the sale of aircraft,
aircraft engines, aircraft parts, leasing of aircraft and related services.
The Company's total revenues include net parts sales revenues and lease
revenue. Net parts sales revenues includes revenues from parts sales and
revenue from aircraft and engine sales. Aircraft and engine sales are
unpredictable transactions, dependent, in part, upon the Company's ability to
purchase an aircraft or engine and resell it within a relatively brief period
of time. In a given period, a substantial portion of the Company's revenues
may be attributable to the sale of aircraft or engines. Cost of sales consists
primarily of inventory, aircraft and engine costs and shipping charges. The
cost of aircraft parts is determined on a specific identification basis and
inventory is stated at the lower of cost or market. The Company's operating
results are affected by many factors, including the timing of orders from large
customers, the timing of aircraft and engine sales, the timing of expenditures
to purchase parts inventory, aircraft and engines and the mix of parts
contained in the Company's inventory. The Company does not obtain long-term
purchase orders or commitments from its customers.
Revenue from the sale of parts is recognized when products
are shipped to the customer. Revenue from aircraft and engine sales is
recognized when the Company has received the sale price and the buyer has taken
delivery of the aircraft. Lease revenue is recognized on an accrual basis,
unless collectability is uncertain.
On October 3, 1996, the Company completed a restructuring
of its capital structure (the "Restructuring"). Pursuant to the Restructuring,
the Company (i) effected a 1-for-27 reverse split of its Common Stock; (ii)
issued approximately 2,245,400 shares of its Common Stock, after giving effect
to the reverse split, in exchange for the entire $10,000,000 principal amount
outstanding of, and related accrued interest on, its 8% Convertible Debentures
due 2003 (the "Debentures"); and (iii) redeemed the entire $7,700,000 principal
amount outstanding of its 12% Senior Notes due July 17, 1997 (the "Senior
Notes") with the proceeds of an advance under a credit agreement entered into
on October 3, 1996 (the "Credit Agreement"). The terms of the Restructuring
and impact on the Company's liquidity and capital resources are discussed in
the Company's Proxy Statement/Prospectus filed with the Securities and Exchange
Commission on August 29, 1996.
RESULTS OF OPERATIONS
FISCAL 1997 COMPARED WITH FISCAL 1996.
Net parts sales increased by 3% or $515,000, from $17.9
million in fiscal 1996 to $18.4 million in fiscal 1997. Aircraft and engine
sales decreased to $1.7 million in fiscal 1997, compared to $3.5 million in
fiscal 1996. Aircraft and engine sales are unpredictable transactions and may
fluctuate significantly from year to year, dependent, in part, upon the
Company's ability to purchase an aircraft or engine at an attractive price and
resell it within a relatively brief period of time, as well as the overall
market for used aircraft or engines. During fiscal 1997, the Company acquired
three aircraft and sold or traded two aircraft, as compared to fiscal 1996,
during which the Company sold three aircraft and acquired one. Lease revenue
decreased to $1.1 million in fiscal 1997 from $1.8 million in fiscal 1996, as
certain leases that were in existence during the prior year were terminated and
not renewed. Going forward, however, the Company's lease revenues will be
positively affected by the Company's acquisition and lease of three aircraft
during the fourth quarter of fiscal 1997. Although the Company was able to
replace reduced sales to one large customer, the increase in parts sales was
insufficient to offset the decrease in aircraft sales and lease revenues and,
as a result, total revenues for fiscal 1997 decreased 8.6% to $21.2 million
from $23.2 million for fiscal 1996.
Fiscal 1996 revenues were increased as a result of the
settlement of certain disputes with a customer. Pursuant to the settlement,
the customer paid the Company $660,000 and the Company canceled a note
receivable from the customer. The Company also released all claims it had
against the customer, which included, among other things, claims for the
purchase price of parts purchased by the customer on open account or pursuant
to a consignment arrangement. The customer released certain claims it had
against the Company as part of the settlement. The transaction resulted in a
net gain to the Company of approximately $345,000, consisting of the excess of
cash received over the net carrying value of the note receivable and cost of
inventory. The Company recorded as net sales the cost of the inventory plus
the amount of the net gain.
Cost of sales decreased 4.9% from $13.2 million in fiscal
1996 to $12.7 million in fiscal 1997. Cost of sales as a percentage of total
revenues increased from 56.9% in fiscal 1996 to 59.7% in fiscal 1997,
respectively. The increase in cost of sales as a percentage of total revenues
from fiscal 1996 to fiscal 1997 was primarily due to lower aircraft and engine
sales, which typically have a lower cost of sales. Cost of aircraft and engine
sales was 49.9% of aircraft and engine revenues in fiscal 1997 compared to
45.5% in fiscal 1996. Cost of parts sales as a percentage of total parts sales
was 63.6% in fiscal 1997 compared to 62.9% in fiscal 1996.
Selling, general and administrative expenses decreased
$94,000, amounting to $3.8 million, or 18.0% of total revenues in fiscal 1997,
compared to $3.9 million, or 16.9% of total revenues in fiscal 1996.
Provision (recovery) for doubtful accounts was $123,000 in
fiscal 1997 compared to $464,000 in fiscal 1996. During fiscal 1996, the
Company instituted a policy whereby it records a provision of approximately 2%
of total revenues for estimated future write-off's of accounts receivable. For
fiscal 1997, the Company revised the policy to record a provision of
approximately 1% of net part sales.
Depreciation was $792,000 in fiscal 1997 compared to
$934,000 in fiscal 1996. Included in fiscal 1996 depreciation is a writedown
of $190,000 to the Company's headquarters facility to reduce its cost to
estimated market value. The sale of the building was consummated in March
1997. The net reduction from fiscal 1996 to fiscal 1997 was due primarily to a
decrease in depreciation of aircraft held for lease, resulting from the sale of
certain of the Company's aircraft which were previously held for lease during
fiscal 1996.
Interest expense in fiscal 1997 was $1.6 million, compared
to $2.4 million in fiscal 1996. The decrease in interest expense from fiscal
1996 to fiscal 1997 was due to a net reduction in total debt outstanding, to
$13.7 million at May 31, 1997 compared to $18.1 million at May 31, 1996.
Interest and other income for fiscal 1997 was $61,000, compared to $34,000 in
fiscal 1996. In connection with the Restructuring, the Company recorded an
extraordinary loss of $530,596 relating to the exchange of shares of its Common
Stock for the Debentures.
The Company's income tax expense in fiscal 1997 was zero
primarily as a result of the utilization of net operating loss carryforwards to
offset taxes that would otherwise have been payable. The Company has continued
to maintain approximately a 100% valuation allowance against its existing
deferred tax assets due to the Company's previous financial problems and its
relatively short history of profitability. If the Company remains profitable,
and there can be no assurance of such profitability, the Company expects to
further reduce the allowance in the future. The fiscal 1996 expense of $14,000
related to amendments of certain prior year state and federal tax returns.
Net earnings before an extraordinary loss for fiscal 1997
were $2,259,000, or $1.25 per share, compared to a net earnings of $2,286,000,
or $15.27 per share, during fiscal 1996. On a fully-diluted basis, earnings
per share were $12.69 per share during fiscal 1996. Net earnings, after
considering an extraordinary loss, were $1,728,493 or $.96 per share, for
fiscal 1997.
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS No. 128"). SFAS 128 establishes new standards for computing and
presenting earnings per share ("EPS"). Specifically, SFAS No. 128 replaces the
presentation of primary EPS with a presentation of basic EPS, requires dual
presentation of basic and diluted EPS on the face of the income statement for
all entities with a complex capital structure and requires a reconciliation of
the numerator and denominator of the diluted EPS computation. SFAS No. 128 is
effective for financial statements issued for periods ending after December 15,
1997; earlier application is not permitted. At this time, management has not
determined the impact of SFAS No. 128 on the earnings per share amounts
presented in the Consolidated Statement of Operations set forth elsewhere in
this Annual Report on Form 10-K.
FISCAL 1996 COMPARED WITH FISCAL 1995.
Net parts sales increased by 37% or $5.1 million, from
$13.8 million in fiscal 1995 to $18.9 million in fiscal 1996. The increase in
net parts sales is primarily attributable in part to the Company's sales to
ValuJet, which sales amounted to $4.8 million in fiscal 1996 compared to $1.4
million in 1995. Additionally, an improved operating environment within the
airline industry led to increased parts sales to new and existing customers.
Aircraft sales decreased to $2.5 million in fiscal 1996, compared to $8.1
million in fiscal 1995. Aircraft sales are unpredictable transactions and may
fluctuate significantly from year to year, dependent, in part, upon the
Company's ability to purchase an aircraft at an attractive price and resell it
within a relatively brief period of time, as well as the overall market for
used aircraft. During fiscal 1996, the Company acquired one aircraft and sold
three aircraft, as compared to fiscal 1995, during which the Company sold eight
aircraft and acquired none. Lease revenue deceased to $1.8 million in fiscal
1996 from $3.0 million in fiscal 1995, as certain leases that were in existence
during the prior year were terminated and not renewed (two of the aircraft
under such terminated leases were sold during fiscal 1996). The increase in
parts sales was insufficient to offset the decrease in aircraft sales and lease
revenue and, as a result, total revenues for fiscal 1996 decreased 7% to $23.2
million from $25.0 million for fiscal 1995.
Fiscal 1996 lease revenues included $139,000 in revenues
arising from a fiscal 1995 transaction. During fiscal 1995, the Company
accepted lease payments from a foreign customer in the customer's local
currency because conversion restrictions precluded the customer from obtaining
and paying U.S. dollars. Due to uncertainties regarding when and at what rate
the local currency could be converted to U.S. dollars, the Company valued the
local currency at an estimated value of $200,000 as of May 31, 1995 (included
in cash), such amount being less than the then current U.S. equivalent amount
at the official exchange rate. The Company subsequently was able to convert
the funds to U.S. dollars in the amount of $339,000, resulting in a gain of
$139,000, which was included in lease revenues during fiscal 1996.
In addition, fiscal 1996 revenues were increased as a
result of the settlement of certain disputes with a customer. Pursuant to the
settlement, the customer paid the Company $660,000 and the Company canceled a
note receivable from the customer. The Company also released all claims it had
against the customer, which included, among other things, claims for the
purchase price of parts purchased by the customer on open account or pursuant
to a consignment arrangement. The customer released certain claims it had
against the Company as part of the settlement. The transaction resulted in a
net gain to the Company of approximately $345,000, consisting of the excess of
cash received over the net carrying value of the note receivable and cost of
inventory. The Company recorded as net sales the cost of the inventory plus
the amount of the net gain.
Cost of sales decreased 25.4% from $17.7 million in fiscal
1995 to $13.2 million in fiscal 1996, primarily as a result of lower sales. In
addition, cost of sales as a percentage of total revenues also decreased from
70.9% to 56.9% in fiscal 1995 and fiscal 1996, respectively. The decrease in
cost of sales as a percentage of total revenues from fiscal 1995 to fiscal 1996
was primarily due to higher margin aircraft sales in fiscal 1996 as compared to
fiscal 1995. Cost of aircraft sales was 34.8% of aircraft sales revenues in
fiscal 1996 compared to 98.6% in fiscal 1995. The cost of aircraft sales
during fiscal 1995 was in excess of normal levels as the result of the sale at
cost of three DC-9 aircraft. Cost of parts sales as a percentage of total
parts sales was 63.4% in fiscal 1996 compared to 66.0% in fiscal 1995.
Selling, general and administrative expenses decreased $.5
million, amounting to $3.9 million, or 16.9% of total revenues in fiscal 1996,
compared to $4.4 million, or 17.4% of total revenues in fiscal 1995, primarily
as a result of the Company's ongoing cost reduction program.
Provision (recovery) for doubtful accounts was $464,000 in
fiscal 1996 compared to $(335,000) in fiscal 1995. During fiscal 1995, the
Company, primarily through litigation, recovered approximately $700,000 of
accounts receivable which had been written off or reserved during fiscal 1994.
The recoveries were offset during fiscal 1995 by a provision for doubtful
accounts of $350,000. During fiscal 1996, the Company instituted a policy
whereby it records a provision of approximately 2% of total revenues for
estimated future write-off's of accounts receivable. There were no other
significant provisions or recoveries made during fiscal 1996.
Depreciation was $934,000 in fiscal 1996 compared to $1.1
million in fiscal 1995. Included in fiscal 1996 depreciation is a writedown of
$190,000 to the Company's headquarters facility to reduce its cost to estimated
market value. The net reduction from fiscal 1995 to fiscal 1996 was due
primarily to a decrease in depreciation of aircraft held for lease, resulting
from the sale of certain of the Company's aircraft which were previously held
for lease during fiscal 1995.
The Company incurred losses from its service center
subsidiary of $676,000 in fiscal 1995. The amounts recorded relate to the
Company's wholly owned subsidiary, International Airline Service Center, Inc.,
which ceased operations in fiscal 1995.
Interest expense in fiscal 1996 was $2.4 million, compared
to $2.9 million in fiscal 1995. The decrease in interest expense from fiscal
1995 to fiscal 1996 was due to a net reduction in total debt outstanding, to
$18.1 million at May 31, 1996 compared to $20.3 million at May 31, 1995.
Interest and other income for fiscal 1996 was $34,000,
compared to $.6 million in fiscal 1995. Included in the fiscal 1995 amounts
were several non-recurring transactions, including approximately $340,000 of
interest income collected on notes receivable (such notes were retired during
the first quarter of fiscal 1996), a $66,000 gain on the sale of certain land
located in Kentucky, and approximately $120,000 received in connection with
consulting and other services provided to an insurance company.
During fiscal 1995, the Company incurred unusual and
nonrecurring items of $177,000. Included in these unusual and nonrecurring
items is an expense of $180,000 incurred in connection with certain
transactions between the Company and former officers of the Company, and a gain
of $375,000 relating to settlement of litigation which had previously been
accrued in an amount in excess of the settlement amount. There were no unusual
and nonrecurring items in fiscal 1996.
Although the Company had net operating loss carryforwards
sufficient to offset income, during fiscal 1996 it recorded a provision for
income taxes of $14,000. The Company has fully exhausted its carryback
benefits and recorded a 100% valuation allowance against the deferred tax asset
for net operating loss carryforwards. The $14,000 provision recorded in fiscal
1996 relates to alternative minimum taxes and amendments of certain prior year
state and federal tax returns.
Net earnings during fiscal 1996 were $2,286,000, or $15.27
per share, compared to a net loss of $614,000, or $4.10 per share, during
fiscal 1995. On a fully-diluted basis, earnings (loss) per share were $12.69
and $(4.10) per share during fiscal 1996 and 1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Credit Agreement entered into by the Company in
connection with the Restructuring provided for a $3 million term loan and up to
an $11 million revolving credit. During the fourth fiscal quarter of 1997 the
Credit Agreement was amended to create a new term loan facility of $3.75
million (collectively referred to as the "Credit Facility"). The Credit
Facility is secured by substantially all of the assets of the Company and
availability of amounts for borrowing is subject to certain limitations and
restrictions. Such limitations and restrictions are discussed in the Company's
Proxy Statement/Prospectus filed with the Securities and Exchange Commission on
August 29, 1996.
Net cash provided by operating activities for the fiscal
years ended May 31, 1997 and 1996 amounted to $582,000 and $2.1 million,
respectively. The primary use of cash in fiscal 1997 from operating activities
was an increase in inventories of $2.4 million and a decrease in accounts
payable and accrued expenses of $500,000.
Net cash used for investing activities for the fiscal year
ended May 31, 1997 amounted to $5.4 million. The primary usage of the funds
was the purchase of three aircraft, which are on lease to a major cargo
carrier. The Company received proceeds of $750,000 from the sale of its
headquarters facility in Miami during the fourth quarter of fiscal 1997. Net
cash provided by investing activities for fiscal 1996 amounted to $575,000.
The primary source of such funds was proceeds of $1.45 million from the sale of
aircraft held for lease.
Net cash provided by financing activities for the fiscal
year ended May 31, 1997 amounted to $4.4 million. The Company borrowed $6.75
million under term loans under which the Company's five aircraft and certain
engines are pledged as collateral. During fiscal 1997, the Company repaid $8.1
million of debt obligations including $7.7 million of Senior Notes pursuant to
the Restructuring. For fiscal 1997, the Company had net borrowings under the
Credit Facility of $7.4 million. Net cash used in financing activities for the
fiscal year ended May 31, 1996 amounted to $2.6 million dollars.
At May 31, 1997, the Company was permitted to borrow up to
an additional $2.9 million pursuant to the Credit Facility. The Company
believes that its working capital and amounts available under the Credit
Facility will be sufficient to meet the requirements of the Company for the
foreseeable future. As of August 12, 1997, the Company was permitted to borrow
up to an additional $4.4 million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Information with respect to this Item is contained in the
Company's consolidated financial statements and financial statement schedules
indicated in the Index on Page F-1 of this Annual Report on Form 10-K and is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information contained under the heading "Information as
to Directors and Executive Officers" in the Company's definitive proxy
statement for its annual meeting of stockholders to be held on September 22,
1997 (the "1997 Proxy Statement") is incorporated by reference herein.
ITEM 11. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION
The information contained under the heading "Executive
Compensation" in the 1997 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information contained under the headings "Directors and
Executive Officers" and "Principal Stockholders" in the 1997 Proxy Statement is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained under the heading "Executive
Compensation--Certain Transactions" in the 1997 Proxy Statement is incorporated
by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) FINANCIAL STATEMENTS PAGE OR METHOD OF FILING
(1) Index to Consolidated Financial Statements Page F-1
(2) Report of Grant Thornton LLP Page F-2
(3) Consolidated Financial Statements and Page F-3
Notes to Consolidated Financial Statements
of the Company, including Consolidated
Balance Sheets as of May 31, 1997 and 1996
and related Consolidated Statements of
Operations, Consolidated Cash Flows and
Consolidated Stockholders' Equity
(Deficit) for each of the years in the
three-year period ended May 31, 1997
(b) FINANCIAL STATEMENTS SCHEDULES PAGE OR METHOD OF FILING
(1) Report of Grant Thornton LLP as to Included in the report
Consolidated Financial Statement Schedules listed in (a)(2) above
for fiscal years ended May 31, 1997, 1996
and 1995
(2) Schedule II. Valuation and Qualifying Page S-1
Accounts
SCHEDULES NOT LISTED ABOVE AND COLUMNS WITHIN CERTAIN SCHEDULES HAVE
BEEN OMITTED BECAUSE OF THE ABSENCE OF CONDITIONS UNDER WHICH THEY ARE REQUIRED
OR BECAUSE THE REQUIRED MATERIAL INFORMATION IS INCLUDED IN THE CONSOLIDATED
FINANCIAL STATEMENTS OR NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS INCLUDED
HEREIN.
(C) Exhibits
Exhibit
NUMBER DESCRIPTION PAGE NUMBER OR METHOD OF
FILING
2.4 Credit Agreement between BNY Financial Incorporated by reference
Corporation and the Registrant, as amended. to Exhibit 2.4 to Amendment
No. 2 to the Company's
Registration Statement
on Form S-4 filed on
August 29, 1996
(File No. 333-08065).
3.1 Amended and Restated Certificate of Incorporated by reference
Incorporation of the Registrant. to Exhibit 3.1 to the
Company's Annual Report on
Form 10-K for the
fiscal year ended May 31,
1996 (the "1996 Form 10-K").
3.2 Restated and Amended Bylaws of the Incorporated by reference
Registrant. to Exhibit 3.2 to the 1996
Form 10-K.
4.1 Specimen Common Stock Certificate. Incorporated by reference
to Exhibit 4.1 to the 1996
Form 10-K.
10.1.1 Employment Agreement, dated as of Incorporated by reference
December 1, 1995, between the Registrant to Exhibit 10.1.1 to the
and Alexius A. Dyer III, as amended on 1996 Form 10-K
October 3, 1996.
10.1.2 Employment Agreement dated as of Incorporated by reference
October 3, 1996, between the Registrant to Exhibit 10.1.2 to the
and George Murnane III. Company's Quarterly Report
for the quarter ended
February 28, 1997.
10.2.1 1996 Long-Term Incentive and Share Incorporated by reference
Award Plan. to Appendix B to the Proxy
Statement/Prospectus
included in the Company's
Registration Statement on
Form S-4 (File No.
333-08065), filed on July
12, 1996.
10.2.2 401(k) Plan. Incorporated by reference
to Exhibit 10-H to the
Company's Annual Report on
Form 10-K for the
fiscal year ended May 31,
1992 (the "1992 Form 10-K").
10.2.3 Bonus Plan. Incorporated by reference
to Exhibit 10.2.4 to the
1992 Form 10-K.
10.2.4 Cafeteria Plan. Incorporated by reference
to Exhibit 10.2.5 of the
Company's Annual Report on
Form 10-K for the fiscal
year ended May 31, 1993.
10.2.5 Form of Option Certificate (Employee Incorporated by reference
Non-Qualified Stock Option). to Exhibit 10.2.5 to the
1996 Form 10-K.
10.2.6 Form of Option Certificate (Director Incorporated by reference
Non-Qualified Stock Option). to Exhibit 10.2.6 to the
1996 Form 10-K.
10.2.7 Form of Option Certificate (Incentive Incorporated by reference
Stock Option). to Exhibit 10.2.7 to the
1996 Form 10-K.
10.14 Commission Agreement dated December 1, Incorporated by reference
1995 between the Registrant and J.M. to Exhibit 10.14 to the
Associates, Inc. 1996 Form 10-K.
10.15 Aircraft Parts Purchase Agreement, Incorporated by reference
dated May 16, 1996, between Paxford Int'l, to Exhibit 10.15 to the
Inc. and the Registrant. Company's Registration
Statement on Form S- 4
(File No. 333-08065) filed
on July 12, 1996.
10.16 Contract for Sale and Purchase dated Filed herewith.
January 10, 1997 between the Registrant and
American Connector Corporation
10.17 Office Lease Agreement dated January Filed herewith.
31, 1997 between the Registrant and Globe
Corporate Center, as amended.
10.18 Lease Agreement dated March 31, 1997 Filed herewith.
between the Registrant and Port 95-4, Ltd.
11 Statement regarding computation of per Filed herewith.
share earnings.
21 Subsidiaries. Filed herewith.
23 Consent of Grant Thornton LLP to Filed herewith.
incorporation by reference.
27 Financial Data Schedule. Filed herewith.
(d) REPORTS ON FORM 8-K.
The Company did not file a Current Report on Form 8-K
during the last quarter of the fiscal year covered by this Annual Report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this report on
Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized this 18th day of August, 1997.
International Airline Support
Group, Inc.,
a Delaware corporation
By: /S/ A.A. DYER III
Alexius A. Dyer III
Chairman of the Board, Chief
Executive Officer
and President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report on Form 10-K has been signed below by the following persons
on behalf of the Company and in the capacities and on the dates indicated.
Signature Title Date
/S/ A.A. DYER III Chairman of the Board, Chief August 18,
Alexius A. Dyer III Executive Officer and President 1997
and Director
(Principal Executive Officer)
/S/ GEORGE MURNANE III Executive Vice President, August 18,
George Murnane III Chief Financial Officer 1997
and Director
(Principal Financial Officer)
/S/ JAMES M. ISAACSON Vice President of Finance, August 18,
James M. Isaacson Treasurer and Secretary 1997
(Principal Accounting Officer)
/S/ KYLE R. KIRKLAND Director August 18,
Kyle R. Kirkland 1997
/S/ E. JAMES MUELLER Director August 18,
E. James Mueller 1997
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PAGE
Report of independent certified public accountants F-2
Consolidated balance sheets as of May 31, 1997 and 1996 F-3
Consolidated statements of operations for the years ended
May 31, 1997, 1996 and 1995 F-4
Consolidated statements of stockholders' equity (deficit)
for the years ended May 31, 1997, 1996 and 1995 F-5
Consolidated statements of cash flows for the years ended
May 31, 1997, 1996 and 1995 F-6
Notes to consolidated financial statements F-7
<PAGE>
F-2
FINANCIAL STATEMENTS AND REPORT
OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
INTERNATIONAL AIRLINE SUPPORT
GROUP, INC. AND SUBSIDIARIES
MAY 31, 1997, 1996 AND 1995
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors
International Airline Support
Group, Inc.
We have audited the accompanying consolidated balance sheets of International
Airline Support Group, Inc. and Subsidiaries as of May 31, 1997 and 1996, and
the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for each of the three years in the period ended
May 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of International
Airline Support Group, Inc. and Subsidiaries as of May 31, 1997 and 1996 and
the consolidated results of its operations and its consolidated cash flows for
each of the three years in the period ended May 31, 1997, in conformity with
generally accepted accounting principles.
We have also audited Schedule II of International Airline Support Group, Inc.
and Subsidiaries for each of the three years in the period ended May 31, 1997.
In our opinion, this schedule presents fairly, in all material respects, the
information required to be set forth therein.
Fort Lauderdale, Florida
July 21, 1997
<PAGE>
F-3
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MAY 31, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Current assets
Cash and cash equivalents (Note A) $ 465,725 $ 940,274
Accounts receivable, net of allowance for doubtful accounts
of approximately $610,000 in 1997 and $735,000 in 1996 1,354,030 2,014,691
Inventories (Notes A, C and D) 11,645,284 9,277,315
Deferred tax benefit - current, net of valuation allowance
of $772,000 in 1997 and $960,000 in 1996 (Note F) - -
Other current assets 98,285 68,798
-------- --------
Total current assets 13,563,324 12,301,078
Property and equipment (Notes A, D, E)
Aircraft held for lease 6,914,458 2,974,760
Leasehold improvements 21,567 36,815
Machinery and equipment 908,590 972,507
-------- --------
7,844,615 3,984,082
Less accumulated depreciation 1,186,444 2,051,620
Land and building held for sale, net - 750,000
Property and equipment, net 6,658,171 2,682,462
-------- --------
Other assets
Deferred debt costs, net (Note A) 638,012 762,431
Deferred tax benefit, net of valuation allowance of
$1,814,000 in 1997 and $3,011,000 in 1996 (Note F) 72,663 -
Deferred restructuring fees - 334,860
Deposits and other assets 355,000 51,500
-------- --------
1,065,675 1,148,791
-------- --------
$ 21,287,170 $16,132,331
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Current maturities of long-term obligations (Note D) $ 1,542,488 $ 3,695,108
Long-term obligations in default classified as current - 14,041,667
Income tax payable 156,096 72,249
Accounts payable 486,854 2,171,496
Accrued liabilities (Note M) 2,234,350 3,160,982
-------- --------
Total current liabilities 4,419,788 23,141,502
Long-term obligations, less current maturities (Notes D) 12,207,113 406,760
Commitments and contingencies (Notes E) - -
Stockholders' equity (deficit) (Notes G and H)
Preferred Stock - $.001 par value; authorized 2,000,000
shares and 500,000 shares; no shares outstanding in 1997
and 1996 respectively - -
Common stock - $.001 par value; authorized 20,000,000
shares; issued and outstanding 2,395,095
and 4,041,779 shares in 1997 and 1996 respectively 2,395 4,042
Additional paid-in capital 13,003,686 2,654,332
Accumulated deficit (8,345,812)(10,074,305)
-------- --------
Total stockholders' equity (deficit) 4,660,269 (7,415,931)
-------- --------
$ 21,287,170 $16,132,331
========== ==========
</TABLE>
<PAGE>
F-4
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MAY 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- -----------
<S> <C> <C> <C>
Revenues
Net sales $ 20,123,196 $ 21,410,201 $ 21,998,869
Lease revenue 1,108,702 1,794,768 2,984,218
---------- ---------- -----------
Total revenues 21,231,898 23,204,969 24,983,087
Cost of sales 12,679,915 13,207,671 17,712,427
Selling, general and administrative expenses 3,828,020 3,921,795 4,358,119
Provision (recovery) for doubtful accounts 123,399 464,099 (334,571)
Depreciation 791,517 933,976 1,108,363
Unusual and nonrecurring items (Note N) - - (177,115)
Losses of service center subsidiary (Note O) - - 675,860
---------- ---------- -----------
Total operating costs 17,422,851 18,527,541 23,343,083
Income from operations 3,809,047 4,677,428 1,640,004
Interest expense 1,610,590 2,411,469 2,856,787
Interest and other income (60,632) (34,058) (602,943)
---------- ---------- -----------
Earnings (loss) before income taxes and
extraordinary loss 2,259,089 2,300,017 (613,840)
Provision for income taxes (Note F) - 14,048 -
---------- ---------- -----------
Earnings (loss) before extraordinary loss 2,259,089 2,285,969 (613,840)
Extraordinary loss on debt restructuring (Note B) 530,596 - -
Net earnings (loss) $ 1,728,493 $ 2,285,969 $ (613,840)
========== ========== ===========
Per share data:
Primary earnings (loss) per common and common
equivalent share
Earnings (loss) before extraordinary item $ 1.25 $ 15.27 $ (4.10)
Extraordinary item (.29) - -
---------- ---------- -----------
Net earnings (loss) $ .96 $ 15.27 $ (4.10)
========== ========== ===========
Weighted average shares outstanding used in
primary calculation 1,806,938 149,696 149,696
========== ========== ===========
Fully-diluted earnings (loss) per common and common
equivalent share
Earnings (loss) before extraordinary item $ 1.25 $ 12.69 $ (4.10)
Extraordinary item (.29) - -
---------- ---------- -----------
Net earnings (loss) $ .96 $ 12.69 $ (4.10)
========== ========== ===========
Weighted average shares outstanding used in
fully-diluted calculation 1,806,938 242,288 149,696
========== ========== ===========
</TABLE>
<PAGE>
F-5
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
COMMON STOCK Additional
Number of Par Paid-In Accumulated
<TABLE>
<CAPTION>
SHARES VALUE CAPITAL DEFICIT TOTAL
--------- -------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Balance at June 1, 1994 4,041,779 $ 4,042 $ 2,654,332 $ (11,746,434) $ (9,088,060)
Net loss - - - (613,840) (613,840)
--------- -------- --------- ---------- ---------
Balance at May 31, 1995 4,041,779 4,042 2,654,332 (12,360,274) (9,701,900)
Net earnings - - - 2,285,969 2,285,969
--------- -------- --------- ---------- ---------
Balance at May 31, 1996 4,041,779 4,042 2,654,332 (10,074,305) (7,415,931)
1-for - 27 reverse Stock
Split (Note B) (3,892,084) (3,892) - - (3,892)
Issuance of Common Stock in
exchange for
extinguishment of
Subordinated
Debentures (Note B) 2,245,400 2,245 11,224,755 - 11,227,000
Costs incurred related to
stock issuance (Note B) - - (875,401) - (875,401)
--------- -------- --------- ---------- ---------
Net earnings - - - 1,728,493 1,728,493
Balance at May 31, 1997 2,395,095 $ 2,395 $ 13,003,686 $ (8,345,812) $ 4,660,269
========= ======== ========= ========== =========
</TABLE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MAY 31, 1997, 1996 AND 1995
<PAGE>
The accompanying notes are an integral part of these statements.
F-6
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MAY 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 1,728,493 $ 2,285,969 $ (613,840)
Adjustments to reconcile net
earnings (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,010,302 1,372,979 1,693,301
Depreciation - service center - - 196,322
Gain on sale of aircraft held for lease - (864,795) -
Gain on Express One transaction - - (70,631)
Loss on Wellman transaction - - 33,575
Loss on restructuring 530,596 - -
(Increase) in deferred tax benefit (66,428) - (23,696)
Decrease in accounts receivable 640,461 577,770 1,224,560
Decrease in notes receivable - 313,490 806,510
Decrease in income tax refund - - 1,930,000
(Increase) decrease in inventories (2,433,481) (3,030,045) 4,910,834
(Increase) decrease in other current assets (29,487) (37,318) 154,271
(Increase) decrease in other assets (303,500) (51,500) 178,322
(Decrease) increase in accounts payable
and accrued expenses (494,754) 1,527,750 (4,591,430)
--------- --------- --------
Net cash provided by operating activities 582,202 2,094,300 5,828,098
Cash flows from investing activities:
Capital expenditures (6,197,955) (875,281) (135,936)
Proceeds from sale of aircraft held for lease - 1,450,000 -
Proceeds from sale of land and building 750,000 - -
--------- --------- --------
Net cash provided by (used in)
investing activities (5,447,955) 574,719 (135,936)
Cash flows from financing activities:
Net borrowings under line of credit 7,397,930 - -
Borrowings under term loans 6,750,000 - -
Payments under term loans (403,331) - -
Increase in deferred restructuring costs (540,641) (334,860) -
Increase in deferred debt costs (675,785) (50,000) -
Repayments of debt obligations (8,136,969) (2,192,216) (4,939,621)
--------- --------- --------
Net cash (used in) provided by
financing activities 4,391,204 (2,577,076) (4,939,621)
Net increase (decrease) in cash and
cash equivalents (474,549) 91,943 752,541
Cash and cash equivalents at beginning of year 940,274 848,331 95,790
--------- --------- --------
Cash and cash equivalents at end of year $ 465,725 $ 940,274 $ 848,331
========= ========= =========
Supplemental disclosures of cash flow
information (Note J):
Cash paid during the year for:
Interest $ 1,321,259 $ 1,206,028 $ 2,167,279
========= ========= =========
Income taxes $ 1,400 $ 36,910 $ -
========= ========= =========
</TABLE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MAY 31, 1997, 1996 AND 1995
<PAGE>
The accompanying notes are an integral part of these statements.
F-7
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997, 1996 AND 1995
NOTE A - DESCRIPTION OF COMPANY BUSINESS AND SIGNIFICANT
ACCOUNTING POLICIES
International Airline Support Group, Inc. and Subsidiaries (the "Company")
is primarily engaged in the sale of aircraft, aircraft parts, leasing of
aircraft and related services. Since its inception in 1982, the Company has
become a primary source of replacement parts for widely operated aircraft
models such as the McDonnell Douglas MD-80 and DC-9. The Company supplies
parts to over 600 customers worldwide.
a) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities
of three months or less at the time of purchase to be cash equivalents.
Included as cash equivalents at May 31, 1996 is $1,100,000 in certificates
of deposit with a stated maturity of seven days. Included in cash and cash
equivalents at May 31, 1997 is $90,564 of restricted cash representing
maintenance reserves received on certain aircraft held for lease.
b) INVENTORIES
Inventories are stated at the lower of cost or market. The cost of aircraft
and aircraft parts is determined on a specific identification basis.
c) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated life utilizing
straight-line and accelerated methods. The estimated lives of the
depreciable assets range from 3 to 7 years. Overhaul costs on aircraft held
for lease are capitalized and depreciated over the estimated service life of
the overhaul. For income tax purposes, accelerated methods of depreciation
are generally used. Deferred income taxes are provided for the difference
between depreciation expense for tax and financial reporting purposes.
d) DEFERRED DEBT COSTS
The deferred debt costs as of May 31, 1996 relate to the costs associated
with obtaining the Company's Senior Secured Notes and Convertible
Subordinated Debentures. However, in Fiscal 1997, these obligations were
settled and accordingly, the remaining unamortized balance of the deferred
debt costs were written off to amortization expense and extraordinary loss
on debt restructuring.
The deferred debt costs as of May 31, 1997 relate to the costs associated
with obtaining the Senior Secured Revolving Credit Loan Facility and the
Senior Secured Term Loans. These costs are being amortized using the
interest method over five years, the life of the respective debt issue.
Accumulated amortization at May 31, 1997 and 1996, was approximately $87,773
and $1,307,000, respectively.
(continued)
NOTE A - DESCRIPTION OF COMPANY BUSINESS AND SIGNIFICANT
ACCOUNTING POLICIES - Continued
e) EARNINGS PER SHARE
Primary earnings (loss) per share is computed by dividing net earnings
(loss) by the weighted average number of common shares outstanding and
common stock equivalents. Stock options and warrants are considered common
stock equivalents unless their inclusion would be antidilutive. For the
purpose of computing common stock equivalents for stock options and
warrants, the modified treasury stock method was not used as the effect
would be antiditulive. The Company's Convertible Subordinated Debentures
("Debentures") are not considered common stock equivalents for the purpose
of computing primary earnings per share as the effective yield on the
securities exceeded 66-2/3% of the average Aa corporate bond rate at the
time of issuance.
Earnings per share for fiscal 1997 is computed using the treasury stock
method. Fully diluted earnings (loss) per shares is computed for fiscal
1996 as if the Debentures were converted into common stock as of the
beginning of the period (see Note D). Stock options and warrants are not
considered common stock equivalents for the purpose of computing fully
diluted earnings (loss) per share as the effect would be antidilutive under
the modified treasury stock method. The Debentures and stock options and
warrants are not considered common stock equivalents in fiscal year 1995 due
to the net losses for those periods.
f) REVENUE RECOGNITION
Revenue from the sale of parts is recognized when products are shipped to
the customer. Revenue from the sale of aircraft is recognized when all
consideration has been received and the buyer has taken delivery and
acceptance of the aircraft. Lease revenue is recognized on an accrual
basis, unless collectibility is uncertain.
g) EMPLOYEE BENEFIT PLAN
In fiscal 1992, the Company established a contributory 401(K) plan. The
plan is a defined contribution plan covering all eligible employees of the
Company, to which the Company makes certain discretionary matching
contributions based upon the level of its employees' contributions. The
amount charged to earnings in fiscal 1997, 1996 and 1995 were insignificant.
The Company does not provide any health or other benefits to retirees.
h) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents, trade receivables, and
accounts payable approximate fair value due to the short-term maturities of
these instruments.
i) INCOME TAXES
Income taxes are provided based on earnings reported for tax return purposes
in addition to a provision for deferred income taxes. Deferred income taxes
are provided in order to reflect the tax consequences in future years of
differences between the financial statement and tax basis of assets and
liabilities at each year end.
j) MANAGEMENT ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
May 31, 1997 and 1996 and revenues and expenses during the periods then
ended. The actual outcome of the estimates could differ from these
estimates made in the preparation of the financial statements.
NOTE A - DESCRIPTION OF COMPANY BUSINESS AND SIGNIFICANT
ACCOUNTING POLICIES - Continued
k) LAND AND BUILDING HELD FOR SALE
The land and building (the "property") held for sale represented the
Company's corporate offices and adjacent warehouse located in Miami,
Florida. As of May 31, 1996, the property was written down to $750,000.
Included in depreciation expense for the year ended May 31, 1996 is
approximately $190,000 relating to this write down. In fiscal 1997, the
Company sold the property for approximately $750,000, after related selling
expenses.
l) NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standard Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No.
128"). SFAS 128 establishes new standards for computing and presenting
earnings per share ("EPS"). Specifically, SFAS No. 128 replaces the
presentation of primary EPS with a presentation of basic EPS, requires dual
presentation of basic and diluted EPS on the face of the income statement
for all entities with a complex capital structure and requires a
reconciliation of the numerator and denominator of the diluted EPS
computation. SFAS No. 128 is effective for financial statements issued for
periods ending after December 15, 1997; earlier application is not
permitted. At this time, management has not determined the impact of SFAS
No. 128 on the earnings per share amounts presented in the accompanying
statements of operations.
m) RECLASSIFICATIONS
Certain amounts in the prior year financial statements have been
reclassified to conform to the current year presentation.
NOTE B - RESTRUCTURING OF CAPITAL
On October 3, 1996, the Company completed a restructuring of its capital
structure. Pursuant to the restructuring, the Company effected a 1-for-27
reverse split of its common stock, issued approximately 2,245,400 shares of
common stock in exchange for the entire $10 million principal amount
outstanding and related accrued interest of its 8% Convertible Debentures of
$1,227,000, and redeemed the entire $7.7 million principal amount
outstanding of its 12% Senior Notes with the proceeds of an advance under a
credit agreement entered into on October 3, 1996 with the Bank of New York
(See Note D). Consummation of the restructuring cured all defaults with
respect to the Debentures and the Senior Notes. Upon completion of the
restructuring, costs incurred related to the restructuring and issuance of
common stock of $875,401 were recorded as an offset to paid in capital. The
transaction resulted in an after tax charge of $530,596, which has been
recorded as an extraordinary item.
NOTE C - INVENTORY
Inventories at May 31, 1997 and 1996 consisted of the following:
1997 1996
---------- ----------
Aircraft parts $ 10,758,867 $ 7,938,049
Aircraft available for sale 886,417 1,339,266
========== ==========
$ 11,645,284 $ 9,277,315
NOTE D - LONG-TERM OBLIGATIONS
Long-term obligations at May 31, 1997 and 1996 consisted of the following:
1997 1996
-------- ----------
12% Senior Secured Notes $ - $ 7,700,000
8% Convertible Subordinated Debentures - 10,000,000
Mortgage note payable to bank - 429,260
Senior Secured Revolving Credit Loans 7,397,931 -
Senior Secured Term Loan - A 2,766,669 -
Senior Secured Term Loan - B 3,580,000 -
Notes payable due in equal monthly
installments through October 1997,
bearing interest at 9.5% to 11.5%
collateralized by equipment 2,471 8,000
Capitalized lease obligations 2,530 6,275
-------- --------
13,749,601 18,143,535
Less: Current maturities and
long-term obligations in
default classified as current 1,542,488 17,736,775
-------- ---------
$ 12,207,113 $ 406,760
========== =========
In October 1996 the Company entered into a Credit Agreement with the Bank
of New York, which provides for a $3 million term loan and up to an $11
million revolving credit. The Credit Facility is secured by substantially
all of the assets of the Company and availability of amounts for borrowing
is subject to certain limitations and restrictions. The interest rate is the
higher of the prime rate plus 2% or the federal funds effective rate plus
2.5% per annum. The revolving line of credit was increased to $13 million
in March 1997. As of May 31, 1997, the available line of credit is
$2,912,260. The credit agreement includes certain covenants which provide,
among other things, restrictions relating to the maintenance of consolidated
net worth and other financial ratios, as well as a restriction on the
payment of dividends.
In March 1997, the Company entered into a Second Term Loan with the Bank
of New York for an additional $3,750,000. The Term Loan is collateralized by
certain aircraft purchased by the Company with the proceeds from the loan.
The interest rate is the higher of the prime rate plus 2% or the federal
funds effective rate plus 2.5% per annum.
(continued)
NOTE D - LONG-TERM OBLIGATIONS - Continued
In July 1992, the Company issued $18.0 million of five (5) year 12% Senior
Secured Notes ("Notes") due July 1997. In October 1996, the Company paid
the remaining outstanding principal on these Notes.
In September 1993, the Company issued $10.0 million in Convertible
Subordinated Debentures ("Debentures"), due August 2003, through a private
placement offering. The Debentures were redeemed in whole on October 3,
1996 as part of the Company's restructuring of capital (see Note B).
Pursuant to the restructuring, the Company issued approximately 2,245,400
shares of common stock in exchange for the entire $10 million principal
amount outstanding and the related accrued interest of $1,227,000.
In September 1992, the Company entered into a promissory note and mortgage
and security agreement with a bank. In fiscal 1997, the Company sold the
land and building in Miami, and with the proceeds from the sale, paid the
remaining balance on the promissory note.
The scheduled maturities of long-term obligations in each of the next five
years subsequent to May 31, 1997 are as follows: 1998 - $1,542,488, 1999 -
$1,516,664, 2000 - $2,256,664, 2001 -$766,660, and 2002 - $7,662,124.
NOTE E - LEASES
The Company leases warehouse and hangar facilities as well as certain
equipment under long-term operating lease agreements. Rental expense under
these leases for the years ended May 31, 1997, 1996 and 1995 was
approximately $36,000, $53,000 and $220,000, respectively. At May 31, 1997,
the future minimum payments on non-cancellable operating leases are as
follows: 1998 - $244,669, 1999 - $249,625, 2000 - $236,167, 2001 -$205,977,
and 2002 - $210,961.
The Company currently leases aircraft and engines to customers under long-
term operating lease agreements. In addition to minimum base rentals, the
lease agreement requires additional rent based upon aircraft and engine
usage. The net investment in aircraft and engines held for or leased to
customers was approximately $6,124,000 and $1,849,000 at May 31, 1997 and
1996, respectively.
NOTE F - INCOME TAXES
The provision for income taxes for the years ended May 31, 1997, 1996 and
1995 is as follows:
1997 1996 1995
--------- ---------- ---------
Current provision:
Federal $ 72,663 $ 14,048 $ -
State - - -
--------- ---------- ---------
72,663 14,048 -
Deferred provision (72,663) - -
$ - $ 14,048 $ -
========= ========= =========
(continued)
NOTE F - INCOME TAXES - Continued
The tax effect of the Company's temporary differences and carryforwards is
as follows:
1997 1996
----------- -----------
Deferred tax (benefits) - current:
Reserve for overhaul costs $ (103,000) $ (332,000)
Bad debt reserve (257,000) (276,000)
Inventory capitalization (187,000) (145,000)
Accrued payroll (131,000) -
Accrued legal settlement costs - (1,000)
Accrued vacation (15,000) (15,000)
Accrued - other - (4,000)
Accrued repair costs - (187,000)
Reserve for inventory (79,000) -
----------- -----------
$ (772,000) $ (960,000)
1997 1996
----------- -----------
Deferred tax liabilities
(benefits) - non-current:
Depreciation and amortization $ (647,000) $ (17,000)
Aircraft - capitalized maintenance 36,000 36,000
Restructuring charges (135,000) (160,000)
Net operating loss carryforward - federal (759,000) (2,467,000)
Net operating loss carryforward - state (177,000) (260,000)
Minimum tax credit - federal (196,000) (135,000)
Other, net (8,000) (8,000)
----------- -----------
$ (1,886,000)$(3,011,000)
The Company has recorded valuation allowances equal to the amount of the
deferred tax benefits at May 31, 1996 and 1997. The valuation allowance has
decreased by $1,385,000 in fiscal 1997.
The following table summarizes the differences between the Company's
effective tax rate and the statutory federal rate as follows:
1997 1996 1995
----- ----- -----
Statutory federal rate 34.0% 34.0% (34.0)%
Operating losses with no current
tax benefit -. -. 34.0
Tax benefit from net operating loss
carryforward (30.7) (33.4) -.
Other (3.3) -. -.
----- ----- -----
Effective tax rate -. % 0.6% -. %
===== ===== =====
The Company has net operating loss carryforwards for federal tax purposes of
approximately $2.0 million. The net operating losses will expire at various
points through the year 2010. The Company has a federal minimum tax credit
carryover of approximately $195,000 which may be utilized in future years to
the extent that the regular tax liability exceeds the alternative minimum
tax. Certain provisions of the tax law may limit the net operating loss and
credit carryforwards available for use in any given year in the event of a
significant change in ownership interest.
NOTE G - COMMON AND PREFERRED STOCK
In July 1993, the Company amended the Articles of Incorporation to authorize
the issuance of up to 500,000 shares of preferred stock. No such stock has
been issued.
In October 1996, the Company amended the Articles of Incorporation to
authorize the issuance of up to 2,000,000 shares of preferred stock. No such
stock has been issued.
NOTE H - STOCK OPTIONS
The Stockholders in October 1989 approved a Stock Option Plan pursuant to
which 350,000 shares of the Company's common stock were reserved for the
grant of options to employees and directors of the Company or its
subsidiaries. The issuance of the options and the form of the options shall
be at the discretion of the Company's Compensation Committee. However, upon
the completion of the restructuring of the Company's capital in October
1996, the Company terminated this plan and the stockholders concurrently
approved a New Stock Option Plan, pursuant to which 598,782 shares of common
stock were reserved. In fiscal 1997, options were granted to purchase
598,609 shares of common stock at exercise prices ranging from $2.75 - $3.00
per share and expire 10 years from the date of the grant. Prior to May 31,
1996, the Company accounted for such options under APB Opinion 25 and
related Interpretations. Commencing June 1, 1996, the Company accounts for
non-qualified options issued to non-employees, under SFAS 123, Accounting
for Stock Based Compensation.
The exercise price of all options granted by the Company equals the market
price at the date of the grant. No compensation expense has been recognized.
Had compensation cost for the Stock Option Plan and non-qualified options to
employees been determined based on the fair value of the options at the
grant dates consistent with the method of SFAS 123, the Company's net income
and earnings per share would have been changed to the pro forma amounts
below. Disclosure of such amounts is not required for the fiscal year ended
May 31, 1995 and accordingly is not presented below.
1997 1996
----------- -----------
Net income
As reported $ 1,728,493 $ 2,285,969
Pro forma $ 1,150,122 $ 2,285,969
Primary earnings per share
As reported $ .96 $ 15.27
Pro forma $ .63 $ 15.27
The above pro forma disclosures may not be representative of the effects on
reported net income for future years as certain options vest over several
years and the Company may continue to grant options to employees.
The fair value of each option grant is estimated on the date of grant using
the binomial option-pricing model with the following weighted-average
assumptions used for grants in fiscal 1997 and fiscal 1996, respectively:
dividend yield of 0.0 percent for all years; expected volatility of 30
percent; risk-free interest rates of 6.25 percent; and expected holding
periods of 4 years.
(continued)
NOTE H - STOCK OPTIONS - Continued
A summary of the status of the Company's fixed stock options as of May 31,
1997 and 1996, and changes during the years ending on those dates is as
follows:
MAY 31, 1997 MAY 31, 1996
Weighted - Weighted-
Average Average
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
-------- -------------- ------ --------------
Outstanding at beginning of
year 269,500 $ .70 295,000 $ .65
Granted 598,609 2.99 -
Exercised - -
Expired - -
Cancelled (269,500) .70 (25,500) .19
--------- ------ -------- -------
Outstanding at end of year 598,609 2.99 269,500 .70
Options exercisable at end of
year 392,430 269,500
Weighted-average fair value
of options granted during
the year $ .97 $ -
The following information applies to options outstanding at May 31, 1997:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
Weighted -
Average
Remaining Weighted - Weighted -
Ranges of Contractual Average Average
EXERCISE PRICES SHARES LIFE EXERCISE PRICE SHARES EXERCISE PRICE
---------------- ------ -------- -------------- ------ ------------
$2.75 - $3.00 598,609 9.4 years $ 2.99 392,430 $ 2.98
NOTE I - SALES TO MAJOR CUSTOMERS/FOREIGN AND DOMESTIC
The Company sells aircraft and aircraft parts, and leases aircraft to
foreign and domestic customers. Most of the Company's sales take place on
an unsecured basis, and a majority of the sales are to aircraft operators.
The information with respect to sales and lease revenue, by geographic
area, is presented in the table below for the years ended May 31, 1997, 1996
and 1995.
(IN THOUSANDS)
1997 1996 1995
------- ------- -------
United States $ 18,067 $ 19,800 $ 18,048
Africa and Middle East 402 623 1,204
Europe 319 177 1,350
Latin America 408 2,454 4,347
Canada 133 - 34
Asia 1,903 151 -
------- ------- -------
$ 21,232 $ 23,205 $ 24,983
======= ======= =======
NOTE I - SALES TO MAJOR CUSTOMERS/FOREIGN AND DOMESTIC - Continued
No customer accounted for more than 10% of the Company's sales in fiscal
1997. The Company had part sales to a domestic customer which accounted for
approximately 21% of net sales in fiscal 1996 and less than 10% of net sales
in both fiscal 1997 and 1995. No other customer accounted for more than 10%
of the Company's sales in fiscal 1996.
The Company had sales to a Venezuelan customer which accounted for
approximately 11% of net sales in fiscal 1995. There were no sales to this
customer in fiscal 1997 or fiscal 1996. Additionally, the Company sold 3
aircraft to a United States customer which represented 23% of net sales in
fiscal 1995. The Company did not have any sales to this customer in
previous fiscal years.
The Company's allowance for doubtful accounts is based on management's
estimates of the creditworthiness of its customers, and, in the opinion of
management is believed to be set in an amount sufficient to respond to
normal business conditions. Should such conditions deteriorate or any major
credit customer default on its obligations to the Company, this allowance
may need to be increased which may have an adverse impact upon the Company's
earnings.
NOTE J - SUPPLEMENTAL CASH FLOW DISCLOSURE
In fiscal 1997, the Company completed a restructuring of its capital (See
Note B). In conjunction with this restructuring, the Company incurred the
following noncash financing activity:
Decrease in Subordinated Debentures $ 10,000,000
Decrease in Accrued Interest 1,224,755
Decrease in Common Stock 2,245
Increase in Paid in Capital (10,892,140)
Decrease in Deferred Restructuring Fees (334,860)
In fiscal 1997, the Company exchanged an aircraft with a net book value
of $237,552 for certain inventory. No gain or loss was recorded on the
exchange.
The net change in inventory in fiscal 1997 and 1996, as derived from the
change in balance sheet amounts, has been adjusted for the following items:
1997 1996
---------- ----------
Net increase in inventory $ 2,367,969 $ 2,780,045
Write-down of aircraft - 250,000
Transfer of aircraft from inventory
to held for lease 303,064 -
Exchange of aircraft held for lease
for inventory (237,552) -
---------- ----------
Cash flow impact from change in
inventory $ 2,433,481 $ 3,030,045
=========== ==========
NOTE K - RELATED PARTY TRANSACTIONS
In connection with obtaining the Credit Agreement with the Bank of New
York, the Company agreed to pay the placement agent a $250,000 placement
fee. A director of the Company was a principal of the placement agent. In
fiscal 1997, the Company paid the placement agent $200,000 of this fee, and
the remaining $50,000 will be paid in fiscal 1998.
NOTE L - FOURTH QUARTER ADJUSTMENTS
In fiscal 1997, the Company recorded a fourth quarter tax benefit of
approximately $102,000 as a result of adjusting the estimated effective tax
rate used during the year.
In 1996, the Company recorded a fourth quarter adjustment in the amount
of approximately $385,000 which related to capitalizing the costs incurred
as a result of the planned restructuring (see Note B). Approximately
$306,000 of these costs were expensed in the first three quarters of fiscal
1996.
NOTE M - ACCRUED LIABILITIES
Accrued liabilities consist of the following items:
1997 1996
-------- --------
Customer deposits $ 361,153 $ 367,669
Accrued repair costs 507,161 187,157
Accrued legal costs 10,000 -
Accrued interest 9,014 1,165,468
Accrued payroll 559,270 399,886
Accrued property taxes 28,695 31,144
Accrued commissions 167,741 167,741
Reserve for repair of leased aircraft 579,143 480,308
Other 12,173 361,609
-------- --------
$ 2,234,350 $ 3,160,982
NOTE N - WELLMAN TRANSACTION
In January 1995, the Company entered into an agreement with the former
Chairman and former Secretary of the Company whereby the Company transferred
all of the outstanding stock of Brent Aviation, a wholly-owned subsidiary,
to an affiliate of the former employees. In addition, the Company also
transferred certain spare parts, components, inventory and equipment for B-
727 series aircraft, and a McDonnell Douglas DC-4 aircraft. In
consideration, the Company received $230,000 and agreed to lease a B-727 to
the affiliate on a month-to-month basis.
In addition, the employees resigned from all positions as officers or
directors, granted a proxy to the Company enabling the Company's directors
to vote 1.98 million shares of common stock held by the employees for a
period of two years, and agreed not to compete or interfere with any of the
businesses of the Company and its remaining subsidiaries for a period of two
years. The Company further agreed to pay the former Secretary one year's
salary as severance. The Company also agreed to terminate its leasehold
interest in a facility located at Grayson County, Texas Airport, allowing
Brent Aviation to lease such facility for its operations.
NOTE O - DISPOSAL OF SERVICE CENTER OPERATIONS
In June 1994, the Company's Board of Directors unanimously voted to cease
operations and to sell or otherwise dispose of the Company's wholly-owned
subsidiary, International Airline Service Center, Inc. ("IASC"), which was
an FAA certified repair facility engaged in the performance of maintenance
check required by the FAA on narrow body aircraft, following the sale of
certain of the Company's aircraft being serviced under contract by IASC.
During the third quarter of 1995, IASC fulfilled its obligations to
service the aircraft and ceased operations. On January 31, 1995, IASC
entered into an agreement with a third party, pursuant to which IASC
assigned its interest in a certain equipment lease with a net book value of
$826,965 at May 31, 1995, to the third party, and the third party assumed
IASC's interests and obligations under such lease. IASC's interest in the
lease as of May 31, 1995 was $897,596. Thus a gain of $70,631 was
recognized as a result of the transaction. Pursuant to the transaction,
IASC disposed of substantially all of its operating assets.
NOTE P - EMPLOYMENT AGREEMENTS
In October 1996, the Company entered into employment agreements with two
of its executive officers for a period of five years. The agreements
provide the employees with a certain minimum annual salary plus bonus. The
agreements provide the employees with an option to terminate their
agreements and receive a lump sum payment equal to the employee's average
annual compensation paid by the Company for the most recent two years upon a
change in control of the Company.
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MAY 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
Balance at Charged to Charged Balance at
Beginning Costs and to Other End of
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
<S> <C> <C> <C> <C>
YEAR ENDED MAY 31, 1995
Reserves deducted from assets to which they apply:
Allowance for possible losses on
accounts receivable $ 940,214 $ 406,147 $ - $ 727,176 (a) $ 619,185
YEAR ENDED MAY 31, 1996
Reserves deducted from assets to which they apply:
Allowance for possible losses on
accounts receivable $ 619,185 $ 482,375 $ - $ 366,874 (a) $ 734,686
YEAR ENDED MAY 31, 1997
Reserves deducted from assets to which they apply:
Allowance for possible losses on
accounts receivable $ 734,686 $ 123,375 $ - $ 247,585 (a) $ 610,476
</TABLE>
(a) Write-off of accounts receivable against the reserve.
<PAGE>
EXHIBIT 21
SUBSIDIARIES
IASG - Virgin Islands, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<CASH> 465,725
<SECURITIES> 0
<RECEIVABLES> 1,955,030
<ALLOWANCES> 610,000
<INVENTORY> 11,645,284
<CURRENT-ASSETS> 13,563,324
<PP&E> 7,844,615
<DEPRECIATION> 1,186,444
<TOTAL-ASSETS> 21,287,170
<CURRENT-LIABILITIES> 4,419,788
<BONDS> 12,207,113
<COMMON> 2,395
0
0
<OTHER-SE> 4,657,874
<TOTAL-LIABILITY-AND-EQUITY> 21,287,170
<SALES> 20,123,196
<TOTAL-REVENUES> 1,108,702
<CGS> 12,679,915
<TOTAL-COSTS> 16,507,935
<OTHER-EXPENSES> 791,517
<LOSS-PROVISION> 123,399
<INTEREST-EXPENSE> 1,610,590
<INCOME-PRETAX> 2,259,089
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (530,596)
<CHANGES> 0
<NET-INCOME> 1,728,493
<EPS-PRIMARY> .96
<EPS-DILUTED> .96
</TABLE>
EXHIBIT 23
AUDITOR'S CONSENT
We have issued our report dated July 21, 1997, accompanying the
consolidated financial statements and schedules included in the Annual
Report of International Airline Support Group, Inc. and Subsidiaries on
Form 10-K for the year ended May 31, 1997. We hereby consent to the
incorporation by reference of the aforementioned report in the Registration
Statement of International Airline Support Group, Inc. on Form S-8 (File
No. 333-13979, effective October 12, 1996).
Fort Lauderdale, Florida
August 12, 1997
EXHIBIT 10.17
STATE OF GEORGIA
COUNTY OF DEKALB
OFFICE LEASE AGREEMENT
THIS LEASE is made and entered into the 31st day of January 1997
by and between Globe Corporate Center hereinafter called
"Landlord", and International Airline Support Group, Inc.,
hereinafter called "Tenant".
WITNESSETH:
1. PREMISES AND TERM
Landlord hereby leases to Tenant and Tenant hereby rents and
leases from Landlord, for the term and on the conditions herein
set out the following described office space, hereinafter called
the "Premises"
Approximate Square Feet of Area: 2,315
Floor Number 2nd
Present Numbering of Suite: 200
located in the Globe Corporate Center building in land lot 270 of
the 18t district in DEKALB County, Georgia (hereinafter called
the "Building"), the address of which building is 1954 Airport
Road, Chamblee, Georgia 30341, the premises being more
particularly shown and outlined on the floor plans attached
hereto as Exhibit "A" and made a part hereof, for a term to
commence on the 1st day of February 1997 and end at midnight on
the 31st day of January 2000 such period being hereinafter called
the "Term".
2. RENTAL
Tenant agrees to pay Landlord at 1954 Airport Rd., Chamblee, GA
30341 or such other place as Landlord may from time to time
designate in writing, without demand, deduction or set-off,
annual rental in the amount of $31,252.50 hereinafter called
"Base Rental" payable in equal monthly installments of $2,604.38
in advance on the first day of each calendar month. (A pro rata
monthly installment shall be paid for the first and last month of
the Term should the Term begin or end on other than the first or
last day of the calendar month.)
3. USE
Tenant agrees to use and occupy the Premises as office space
only. Tenant's use of the Premises shall not violate any
ordinance, law or regulation of any government body or the "Rules
and Regulations" of Landlord herein provided for. Tenant
specifically agrees not to use the premises or to permit them to
be used in any manner which could be reasonably objected to by
other tenants of the Building as interfering with the conduct of
their business.
4. ACCEPTANCE OF PREMISES
The entering into possession of Premises by Tenant at
commencement of the Term shall be deemed to be an acceptance of
the Premises by Tenant, who thereby acknowledges that Premises
and the Building are in appropriate and satisfactory condition
for Tenant's intended use.
5. TENANT'S OBLIGATION FOR CARE OF PREMISES
IMPROVEMENTS; PERSONAL PROPERTY
(1) Tenant agrees that, at Tenant's expense, tenant will take
good care of Premises and the fixtures and appurtenances therein,
and will suffer no active or permissive waste or injury thereof.
Tenant agrees that it will, at Tenant's expense, but under the
direction of Landlord, promptly repair any injury or damage to
Premises or Building caused by the misuse or neglect thereof by
Tenant, and by persons permitted on Premises by Tenant, and by
Tenant moving into or out of Premises.
(2) Tenant agrees that it will not, without Landlord's prior
written consent, make alterations, additions or improvements in
or about Premises, and will not do anything to or on the Premises
which will increase the rate of any fire insurance which could be
applicable to the Building. Tenant agrees to promptly pay when
due the cost of all alterations, additions, or improvements of a
permanent nature made or installed by Tenant to the Premises,
which shall become the property of Landlord at the expiration of
this Lease. Notwithstanding the consent of Landlord granted for
Tenant improvements, Landlord nonetheless reserves the right, at
Landlord's option, to require Tenant at the end of the Term to
remove any improvements or additions made to the Premises by
Tenant, and to repair and restore Premises to their condition
prior to such alteration, addition, or improvement, natural wear
and tear only excepted. Lessor, at the time of its written
consent to such alterations, additions, or improvements, shall
notify Tenant in writing whether Tenant shall be requested to
remove same at the end of the term. Tenant shall on demand of
Landlord promptly pay or otherwise cause to be discharged any
lien for material or labor which is claimed against the Premises
on account of Tenant's work if such claim should arise, and
Tenant hereby indemnifies and holds Landlord harmless from and
against any and all costs, expenses, or liabilities incurred by
landlord as a result of such liens.
(3) Tenant agrees that all personal property brought into the
Premises by Tenant, its employees, licenses, and invitees shall
be at the sole risk of Tenant, and that Landlord shall not be
liable for theft thereof, or of money deposited therein, or for
any damages thereto, such theft or damage being the sole
responsibility of Tenant. Tenant agrees that it will, no later
than the last day of the Term, remove all of Tenant's personal
property and repair all injury done by or in connection with
installation or removal of said property and surrender the
Premises together with all keys to Premises in as good condition
as they were at the beginning of the Term, reasonable wear and
tear excepted. All property of Tenant remaining on the Premises
after expiration of the Term shall be deemed conclusively
abandoned and may be removed by Landlord, and Tenant shall
reimburse Landlord for the cost of removing the same. Tenant
agrees not to remove Tenant's personal property from the Premises
during the continuance of any default by Tenant under this Lease.
(4) Tenant agrees not to place or maintain any food or drink
coin-operated or vending machines within Premises or Building
without the written consent of Landlord.
6. SERVICES
Landlord agrees to provide, at Landlord's expense for the benefit
of Tenant, reasonable heating and cooling of the premises,
electric power for lighting and for small desk-top or hand-held
types of office machines such as typewriters, personal computers,
and the like (but not including any free standing equipment such
as main line computers) during the hours of 8:00 a.m. to 7:00
p.m. on Mondays thru Sundays, holidays excepted. Landlord agrees
to furnish maintenance services for the public areas of the
building and grounds. Tenant agrees that landlord shall not be
or become liable for any injury or damage to Tenant or Tenant's
property which occurs as a result of Landlord's failure to
provide these services to Tenant unless such failure occurs due
to landlord's gross negligence.
7. DESTRUCTION OR DAMAGE TO PREMISES
(1) If the Premises are totally destroyed (or so substantially
damaged as to be untentable) by storm, fire, earthquake, or other
casualty, rent shall abate from the date of such damage or
destruction. In the event the Landlord elects not to complete
restoration of the Premises within 120 days of such damage or
destruction, this Lease may be terminated as of the date of such
damage or destruction upon written notice from either party to
the other given not more than ten (10) days following the
expiration of the said 120 day period. In the event such notice
is not given, then this lease shall remain in force and effect
and rent shall commence upon delivery of the Premises to Tenant
in a tenantable condition.
(2) If the Premises are damaged but not rendered wholly
untentable by any of the events of casualty referred to in
subparagraph (a) above, rental shall abate in such proportion as
the Premises are untentable and Landlord shall have the option to
restore the Premises, whereupon full rent shall commence again.
If Lessor elects not to restore the Premises, Tenant may
terminate this lease upon 30 days' advance written notice.
(3) Notwithstanding the foregoing, rent shall not abate if the
damage or destruction of the Premises, whether total or partial,
is the result of any negligence of Tenant, its agents, or
employees.
8. DEFAULT BY TENANT - LANDLORD'S REMEDIES
(1) If Tenant continues in default for five (5) calendar days
after Landlord gives Tenant written notice of default by Tenant
in paying any and all rentals or additional rentals reserved
herein; or if Tenant continues in default for five (5) calendar
days after Landlord gives written notice to Tenant of Tenant's
default in performing the obligations of Tenant hereunder, or is
adjudicated bankrupt; or if a permanent receiver is appointed for
Tenant's property, including Tenant's interest in the premises,
and such receiver is not removed within sixty (60) days after
written notice from Landlord to Tenant to obtain such removal; or
if, whether voluntarily or involuntarily, Tenant takes advantage
of any debtor relief proceedings under any present or future law,
whereby the rent or any part thereof is deferred; or if Tenant
makes an assignment for the benefit of creditors; or if the
Premises or Tenant's effects or interest therein should be levied
or dissolved within fifteen (15) days after written notice from
Landlord to Tenant to obtain satisfaction thereof, or if the
premises shall be abandoned by Tenant or become vacant during the
term hereof (after an authorized assignment or subletting, the
occurring of any of the foregoing defaults or events shall affect
this lease only if upon the occurrence of any of said events,
Landlord at its option may at once, or within six (6) months
thereafter, but only during continuance of such default or
condition, without being deemed to have made an election among
remedies or to have waived any of its other rights.
(1) Terminate this lease by written notice to Tenant, whereupon
this Lease shall end. Upon such termination by Landlord, Tenant
will at once surrender possession of the Premises to Landlord and
remove all of Tenant's effects therefrom, and Landlord may
forthwith re-enter the Premises, repossess itself thereof, and
remove all persons and effects therefrom, using such force as may
be necessary without being guilty of trespass, forcible entry or
detainer or other tort; or
(2) Terminate Tenant's right to possession and enter upon and
rent the Premises to the best price obtainable by reasonable
effort, without advertisement, and by private negotiations and
for any term Landlord deems proper, Tenant shall, upon receipt of
such notice, surrender possession of premises to Landlord and
remove all of Tenant's effects therefrom, and Landlord may
forthwith re-enter the premises and repossess itself thereof,
remove all persons and effects therefrom, using such force as may
be necessary without being guilty of trespass, forcible entry or
detainer or other tort. Tenant shall be liable to Landlord for
the deficiency, if any, between the amount of all rent in the
Lease and the net rent, if any, collected by Landlord in
reletting the premises, which deficiency shall be due and payable
by Tenant immediately upon notice from Landlord. Net rent shall
be computed by deducting from gross rents collected all expenses
or costs of whatsoever nature incurred by Landlord in reletting
including, but no limited to, attorneys, fees, brokers
commissions, and the cost of renovating or remodeling the
Premises, amortized over the remaining term of the lease.
(2) Any installment of rent required to be paid by Tenant which
is not paid when due, shall bear interest at the rate of twelve
percent (12%) per annum from the due date until paid, or Tenant
shall pay to Landlord the sum of Ten dollars ($10.00), whichever
sum is greater, as a late charge for the purpose of reimbursing
Landlord for expenses incurred by reason of such failure by
Tenant, which charges Tenant acknowledges to be a reasonable and
ordinary expense of Landlord.
(3) No termination of this Lease, except as permitted in
paragraph 7, prior to the normal ending thereof by lapse of time
or otherwise shall affect Tenant's obligation to pay and
Landlord's right to collect the entire rent reserved in this
lease prior to termination.
(4) In the event Landlord elects to terminate this Lease as
herein above provided, Landlord may, in addition to any other
remedies it may have, recover from Tenant all damages Landlord
may incur by reason of such default, including the cost of
recovering the premises, reasonable attorney's fees and including
the worth at the time of such termination of the excess, if any,
of the amount of rent in this Lease for the remainder of the Term
over the then reasonable rental value of Premises for the
remainder of the Term, all of which amounts shall be immediately
due and payable from Tenant to Landlord on a present value basis.
The term "reserved" as applied to rent or additional rent in
this Lease shall mean any and all payments to which Landlord is
entitled hereunder during the entire term of the Lease.
(5) Pursuit of any of the foregoing remedies by Landlord shall
not preclude Landlord's pursuit of any of the other remedies
herein provided or any other remedies provided by law.
(6) Tenant agrees to pay all attorneys' fees incurred by
Landlord as a result of any breach or default by Tenant under
this Lease, including the collection of any rents owning under
this Lease.
9. ASSIGNMENT AND SUBLETTING
Tenant agrees that it will not, without the prior written consent
of Landlord, assign this Lease or any interest thereunder, or
sublet Premises or any part thereof, or permit the use of
Premises by any party other than Tenant, but Landlord shall not
unreasonably withhold said consent. Consent by Landlord to one
assignment or sublease shall not destroy or waive this provision,
and all later assignments and subleases shall likewise be made
upon prior written consent of Landlord. Sublessees and assignees
shall become liable directly to Landlord for all obligations of
Tenant hereunder without relieving Tenant's liability.
10. CONDEMNATION
If all or any part of the Premises are either taken under power
of eminent domain or purchased under threat of and in lieu of
such taking, this Lease shall expire on the date when title shall
vest in such condemnor. Any rent paid for any period beyond said
date shall be repaid to Tenant. Tenant shall not be entitled to
any part of such condemnation award or purchase price of any
payment in lieu thereof.
11. INSPECTIONS
Landlord may enter Premises at reasonable hours to exhibit same
to prospective purchasers or tenants; to inspect Premises to see
that Tenant is complying with all of its obligations hereunder;
and to make repairs required of Landlord under the terms hereof
and repairs to any other space in the building, as long as such
inspection or repairs do not unreasonably disrupt Tenant's normal
business operations.
12. SUBORDINATION
At Landlord's option, this Lease may be made subject and
subordinate to any underlying land leases and deeds to secure
debt which may now or hereafter affect the real property of which
the promises form a part, and also to all renewals,
modifications, extensions, consolidations, and replacements of
such underlying land leases and deeds to secure debt. Tenant
hereby nominates and appoints Landlord as Tenant's attorney-in-
fact for the limited purpose of authorizing and empowering
Landlord to make and execute in Tenant's name and in Tenant's
behalf, at any time and from time to time, all documents in
recordable form which are required, in Landlord's sole judgment,
to accomplish such subordination of Tenant's rights and interest
in and under this Lease. This power of attorney is coupled with
an interest and is irrevocable by Tenant. In confirmation of the
subordination set forth in this Paragraph 12, Tenant agrees that
it will, at Landlord's request, execute and deliver such further
instruments as may be desired by any lessor under any underlying
land leases to further evidence this subordination of Tenant's
interest.
13. INDEMNITY AND HOLD HARMLESS
Tenant agrees to indemnify, defend, and hold harmless the
Landlord at Tenant's expense, against any default by Tenant or
any sub-tenant hereunder, any act negligence of Tenant or its
agents, contractors, employees, sub-tenants, invitees, or
licensees, and any and all claims for damages to persons or
property, costs or penalties by reason of Tenant's use or
occupancy of the Premises.
14. TENANTS INSURANCE AND WAIVER OF SUBROGATION
Tenant shall carry fire and extended coverage insurance insuring
its interest in Tenant's improvements in Premises and its
interest in its office furniture, equipment, supplies, and other
personal property, and Tenant hereby waives any rights of action
against Landlord for loss or damage to its improvements,
fixtures, and personal property in premises.
15. PARKING ARRANGEMENTS
Landlord shall maintain the existing parking facilities adjacent
to said Building for the purpose of accommodating Tenant, other
tenants of the building, and all tenants' invitees and employees
on a non-exclusive bases.
16. SECURITY DEPOSIT
Tenant has this day deposited with Landlord a sum equal to the
amount of one month's rent as security for the performance by
Tenant of all the terms, covenants, and conditions of this Lease
upon Tenant's part to be performed, which sum shall be returned
to Tenant within thirty (30) days after the expiration of the
Term hereof, provided Tenant has fully performed hereunder.
Landlord shall have the right to apply any part of said deposit
to cure any default of Tenant and if Landlord does so, Tenant
shall, upon demand, deposit with Landlord the amount so applied
so that Landlord shall have the full deposit on hand at all times
during the Term of this Lease. In the event of a sale of the
Building or a lease of the Building, subject to this Lease,
Landlord shall transfer the security to the vendee or lessee,
Landlord shall thereupon be released from all liability for the
return of such security, and Tenant shall look solely to the new
landlord for the return of said security. This provision shall
apply to every transfer or assignment made of the security to a
new landlord. The security deposited under this Lease shall not
be assigned or encumbered by Tenant without the written consent
of Landlord, and any such attempted assignment or encumbrance
shall be void without such consent.
17. BUILDING RULES AND REGULATIONS
Tenant covenants and agrees for itself, its employees, agents,
and invitees to abide by Landlord's Building Rules and
Regulations which are attached hereto as Exhibit "B", and further
to abide by all other rules and regulations which may in the
future, from time to time, be reasonably promulgated by Landlord.
18. MISCELLANEOUS PROVISIONS
(1) The rights given to Landlord herein are in addition to any
rights that may be given to Landlord by any statute or under law,
and not in lieu thereof.
(2) If Tenant remains in possession of the Premises after
expiration of the Term hereof with Landlord's written
acquiescence but without any new written agreement between the
parties, Tenant shall be deemed to be a tenant at will, and such
tenancy shall be subject to all the provisions of the Lease,
except only the Term hereof. Nothing in this Paragraph shall be
construed as a consent by Landlord to the possession of the
Premises by Tenant after the expiration of the Term.
(3) If Tenant remains in possession of the Premises after
expiration of the Term without the written acquiescence of
Landlord, then Tenant shall be deemed to be a tenant at
sufferance . Notwithstanding any of the foregoing, nothing
contained herein shall be construed to mean that the Tenant
remaining in possession creates a renewal of this Lease, nor any
tenancy by operation of law.
(4) This Lease contains the entire agreement of parties hereto
and no representation, inducements, promises, or agreements, oral
or otherwise, between the effect. The failure of either party to
insist in any instance on strict performance of any covenant or
condition not be construed a waiver of such covenant, condition,
or option in any other instance. This Lease cannot be changed or
terminated orally.
(5) The headings in this Lease are included for convenience only
and shall not be taken into consideration in any construction or
interpretation of the Lease or any of its provisions.
(6) Any notice by either party to the other shall be valid only
if in writing and shall be deemed to be duly given if either
actually delivered or if mailed, postage prepaid, and sent by
registered or certified mail addressed to Tenant, at:
International Airline Support Group, Inc.
1954 Airport Road, Suite 260
Chamblee, GA 30341
and if to Landlord, at:
Globe Corporate Center
c/o DeKalb Management Co., Inc.
2392 Mt. Vernon Road, Suite 202
Dunwoody, GA 30338
or at such other address for Landlord as Landlord may designate
by notice to Tenant. Notices shall be deemed given, if
personally delivered upon delivery thereof, or, if mailed upon
the mailing thereof.
(7) Tenant hereby appoints as its agents to receive service of
all dispossessory or distraint proceedings, then person in charge
of Premises; and if there is no person occupying same, then such
service may be made by attachment thereof on the main entrance of
Premises.
(8) The provisions of this Lease shall bind and inure to the
benefit of the Landlord and Tenant, and their respective
successors, heirs, legal representatives, and assigns. The term
"Landlord" as used in the Lease, means only the owner for the
time being of the land and Building of which Premises are a Part,
so that in the event of any sale or sales of said property or of
any lease thereof, the Landlord named herein shall be deemed,
without further agreement, that such purchaser, has assumed and
agreed to carry out any and all covenants and obligations of
Landlord hereunder during the period such purchaser has
possession of the land and Building. Should the land and the
entire Building be severed as to ownership by sale and/or lease,
then the owner of the entire Building or lessee of the entire
Building that has the right to lease space in the Building to
tenants shall be deemed the "Landlord". Tenant shall be bound to
any such succeeding party landlord for performance by Tenant of
all the terms, covenants, and conditions of this Lease and agrees
to execute any attornment agreement not in conflict with the
terms and provisions of this Lease at the request of any such
succeeding landlord.
(9) The designations "Landlord," "Tenant," and "Agent," and
pronouns relating thereto, as used herein, shall include male,
female, singular and plural, corporation, partnership or
individual, as may fit the particular parties.
Tenant has only a usufruct under this agreement, not subject to
levy or sale; no estate shall pass out of Landlord.
(10) Time is of the essence of this Agreement.
(11) Tenant acknowledges that premises and all areas of building
are to maintain as a smoke free environment. No smoking will be
allowed in any areas inside building.
19. PAYMENTS
All payments shall be made to the Lessor at such place and to
such person as the Lessor may from time to time designate in
writing. Failure to make such payment by the first day of each
month shall constitute a default under this Lease. Rental
payments not received by the fifth (5th) day of the month shall
be subject to a late charge penalty of $260.44 (10%) per month
until paid.
20. BROKERAGE
DeKalb Management Co., Inc. has represented the Lessor in this
transaction and will be compensated by same.
21. SPECIAL STIPULATIONS
(1) Tenant shall have three (3) one-year options to renew this
Lease with an increase of five (5) percent for the first year of
said renewal. Rent shall increase in years two and three by 3%
annually.
(2) Landlord will make tenant improvements as discussed by
Tenant and Landlord's representatives subject to final drawings
and approval by both parties.
(3) Landlord will furnish one door sign and one sign on
stairwell wall with Landlord's approval of sign and design.
Tenant may install sign on pylon at Tenant's expense and with
Landlord's prior approval.
(4) Tenant may install new window coverings at Tenant's expense
and with Landlord's prior approval.
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals, in two counterparts, each of which shall be deemed to be
an original, the day and year first above written.
Tenant:
INTERNATIONAL AIRLINE SUPPORT
GROUP, INC.
By: __________________________________
Landlord:
EDGAR A. NEELY III
d/b/a GLOBE CORPORATE CENTER
By: __________________________________
Edgar A. Neely III
AMENDMENT TO LEASE AGREEMENT
THIS AGREEMENT is made and entered into this 31st day of
January, 1997, between Globe Corporate Center (hereinafter
referred to as "Landlord") and International Airline Support
Group, Inc. (hereinafter referred to as "Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into that certain Lease
Agreement dated January 31, 1997, which Lease Agreement is made a
part hereof by reference; and
WHEREAS, Landlord and Tenant wish to amend the agreement;
NOW, THEREFORE, for and in consideration of the sum of Ten
and No/100 ($10.00) Dollars, in hand paid and receipt thereof is
hereby acknowledged, Landlord and Tenant hereby agree as follows:
I. Tenant shall have the right of first refusal to lease the
adjacent Suite 202, consisting of 893 rentable square feet,
if and when said space becomes available.
II. The following lease terms are good for 90 days and are as
follows:
A. Lease Term to be concurrent with International Airline
Support Group, Inc.'s original lease on Suite 200.
B. Rent shall be $13.50 psf or $1,004.63 per month.
C. Landlord will remove two walls, cut a door between two
suites as shown on attached floor plan, paint all
walls, and recarpet entire suite.
D. Landlord will add a glass wall and door in Suite 200 as
shown on attached plan and bill Tenant for this cost.
III. A. If Suite 200 is not ready for occupancy by February 1,
1997, then Tenant will pay a pro-rated rent from the
date of occupancy.
B. Tenant Finish in Suite 200 consists of reconfiguring
spaces as per the Exhibit attached to that lease,
installing double French doors with transom and
sidelights in corner suite, and repainting and
recarpeting entire suite.
IN WITNESS WHEREOF, the parties have hereunto set their
hands and seals, in two counterparts, each of which shall be
deemed to be an original, the day and year first above written.
Tenant:
INTERNATIONAL AIRLINE SUPPORT
GROUP, INC.
By: /s/ A.A. Dyer
___________________________________
Landlord:
EDGAR A. NEELY, III
d/b/a GLOBE CORPORATE CENTER
By: /s/ Edgar A. Neely, III
____________________________________
Edgar A. Neely, III
AMENDMENT TO LEASE AGREEMENT
THIS AGREEMENT is made and entered into this 27th day of
February, 1997, between Globe Corporate Center (hereinafter
referred to as "Lessor") and International Airline Support Group,
Inc. (hereinafter referred to as "Lessee").
WITNESSETH:
WHEREAS, Lessor and Lessee entered into that certain Lease
Agreement dated January 31, 1997, which Lease Agreement is made a
part hereof by reference; and
WHEREAS, Lessor and Lessee are desirous of amending said
lease;
NOW, THEREFORE, for and in consideration of the sum of Ten
and No/100 ($10.00) Dollars, in hand paid and receipt thereof is
hereby acknowledged, Lessor and Lessee hereby agree as follows:
1.
Beginning March 15, 1997, the square footage of the leased
premises shall be increased to include Suite 202 and 203,
consisting of an additional 1,288 square feet for a total leased
of 3,603 square feet.
2.
Rent for March 1997 shall be $3,304.19. The addition of 395
square feet shall be rent free for the months of April, May, and
June of 1997. The total rent due for this three month period
shall be $3,609.00 per month. Beginning July 1, 1997, the rent
shall be $4,004.00 per month.
3.
Rental payments not received by fifth (5th) day of the month
shall be subject to a late charge penalty of $400.40 (10%) per
month until paid.
4.
Landlord will make tenant improvements prior to March 15,
1997, as shown on attached floor plan.
5.
Except as amended herein, all other terms and conditions of
the Lease Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have hereunto set their
hands and seals, in two counterparts, each of which shall be
deemed to be an original, the day and year first above written.
Landlord:
EDGAR A. NEELY, III
d/b/a GLOBE CORPORATE CENTER
By: /s/ Edgar A. Neely, III
__________________________________
Edgar A. Neely, III
Tenant:
INTERNATIONAL AIRLINE SUPPORT
GROUP, INC.
By: /s/ James Isaacson
_____________________________________
EXHIBIT 10.16
CONTRACT FOR SALE AND PURCHASE
FLORIDA ASSOCIATION OF REALTORS AND THE FLORIDA BAR
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. ("Seller") and
AMERICAN CONNECTOR CORPORATION ("Buyer") hereby agree that Seller
shall sell and Buyer shall buy the following Real Property and
Personal property (collectively "Property") upon the following
terms and conditions which INCLUDE Standards for Real Estate
Transactions ("Standards") on the reverse side or attached hereto
and riders and addenda to this Contract for Sale and Purchase
("Contract").
I. DESCRIPTION:
(1) Legal description of Real Property located in DADE
County, Florida: KYM INDUSTRIAL PARK PB 116-41 LOT 3 LESS
W32FT & LOT 4 BLOCK 1, LOT SIZE: 66,107 SQ. FT.
(2) Street address, city, zip, of the Property is:
8095 NW 64 STREET, MIAMI, FL 33166
(3) Personal Property: ALL BUILDING AND MECHANICAL
SYSTEMS
_________________________________________________________________
_________________________________________________________________
II. PURCHASE PRICE $ 812,500.00
PAYMENT:
(a) Deposit held in escrow by LUCKY COMMERCIAL REALTY
ESCROW ACCT. In the amount of $ 25,000.00
(b) Additional escrow deposit within 5 days after
satisfactory completion of all inspections $ 25,000.00
(3) Subject to AND assumption of mortgage in good
standing in favor of ____________________________
having an approximate present principal balance of $ __________
(4) Purchase money mortgage and note (see addendum)
in the amount of $ __________
(5) Other: PURCHASER TO OBTAIN "SBA" 7(a) FINANCING
AT PREVAILING RATES AND TERMS
TO 90% OF THE PURCHASE PRICE
AT CLOSING UP $ 731,250.00
(6) Balance to close by U.S. cash, LOCALLY DRAWN
certified or cashier's check or third-party
loan, subject to adjustments and prorations $ 31,250.00
3. TIME FOR ACCEPTANCE OF OFFER; EFFECTIVE DATE; FACSIMILE: If
this offer is not executed by and delivered to all parties OR
FACT OF EXECUTION communicated in writing between the parties on
or before 01-10-97, the deposit(s) will, at Buyer's option, be
returned to Buyer and this offer withdrawn. The date of Contract
("Effective Date") will be the date when the last one of the
buyer and Seller has signed this offer. A facsimile copy of this
Contract and any signatures hereon shall be considered for all
purposes as originals.
4. FINANCING:
(1) If the purchase price or any part of it is to be
financed by a third-party loan, the Contract is conditioned
on Buyer obtaining a written commitment within 45 days after
Effective Date for (CHECK ONLY ONE): [ ] a fixed; [ ] an
adjustable; or [ X] a fixed or adjustable rate loan for the
principal amount of $731,250.00 at an initial interest rate
not to exceed N/A % discounted origination fee not to
exceed N/A % of the principal amount, and a term of
N/A years Buyer will make application within 5
days after Effective Date and use reasonable diligence to
obtain the loan commitment and, thereafter, to satisfy the
terms and conditions of the commitment and close the loan.
Buyer shall pay all loan expenses If Buyer fails to obtain
the commitment or fails to waive Buyer's rights under this
subparagraph within the time for obtaining the commitment,
or after diligent effort, fails to meet the terms and
conditions of the commitment, then either party thereafter,
by written notice to the other, may cancel this Contract and
Buyer shall be refunded the deposit(s); or
(2) The existing mortgage described in Paragraph II(c)
above has (CHECK ONLY ONE): [ ] a variable interest rate;
or [ ] a fixed interest rate of N/A % per annum. At
time of title transfer some fixed interest rates are subject
to increases. If increased, the rate shall not exceed N/A
% per annum. Seller shall, within N/A days after
Effective Date, furnish a statement from each mortgagee
stating principal balance, method of payment, interest rate
and status of mortgage. If Buyer has agreed to assume a
mortgage which requires approval of Buyer by the mortgagee
for assumption, then Buyer shall promptly obtain the
necessary application and diligently complete and return it
to the mortgagee.
(3) Any mortgagee charge(s) not to exceed $
N/A shall be paid by Buyer. If Buyer is not
accepted by mortgagee or the requirements for assumption are
not in accordance with the terms of this Contract or
mortgagee makes a charge in excess of the stated amount,
Seller or Buyer may rescind this Contract by written notice
to the other party unless either elects to pay the increase
in interest rate or excess mortgagee charges.
5. TITLE EVIDENCE: At least 20 days before the
closing date, but no earlier than N/A days after Seller
receives written notification that Buyer has obtained the loan
commitment or been approved for the loan assumption as provided
in Paragraphs IV(a), or (b), above, or, if applicable, waived the
financing requirements, (CHECK ONLY ONE): [ ] Seller shall, at
Seller's expense, deliver to Buyer or Buyer's attorney; or [ ]
Buyer shall at Buyer's expense obtain, in accordance with
Standard A, (CHECK ONLY ONE): [ ] abstract or title or [ ]
title insurance commitment (with legible copies of instruments
listed as exceptions) and, after closing. an owner's policy of
title insurance.
6. CLOSING DATE: This transaction shall be closed and the deed
and other closing papers delivered on 03-15-97 , unless
extended by other provisions of this Contract.
7. RESTRICTIONS; EASEMENTS; LIMITATIONS: Buyer shall take
title subject to: comprehensive land use plans, zoning,
restrictions, prohibitions and other requirements imposed by
governmental authority, restrictions and matters appearing on the
plat or otherwise common to the subdivision; public utility
easements of record (easements are to be located contiguous to
Real Property lines and not more than 10 feet in which as to the
rear or front lines and 7 feet in width as to the side lines,
unless otherwise stated herein); taxes for year of closing and
subsequent years; assumed mortgages and purchase money mortgages,
if any; (if other matters, see Paragraph XV); provided that there
exists at closing no violation of the foregoing; and none of them
prevents use of the Property for WAREHOUSE AND MANUFACTURING
OFFICE WAREHOUSE purpose(s)
8. OCCUPANCY: Seller warrants that there are no parties in
occupancy other than Seller; but, if Property is intended to be
rented or occupied beyond closing, the fact and terms thereof
shall be stated herein and the tenant(s) or occupants disclosed
pursuant to Standard F. Seller shall deliver occupancy of
Property at time of closing unless otherwise stated herein if
occupancy is to be delivered before closing. Buyer assumes all
risk of loss to Property from date of occupancy, shall be
responsible and liable for maintenance from that date, and shall
b deemed to have accepted Property in its existing condition as
of time of taking occupancy unless otherwise stated herein.
9. TYPEWRITTEN OR HANDWRITTEN PROVISIONS: Typewritten or
handwritten provisions, riders and addenda shall control all
printed provisions of this Contract in conflict with them.
10. RIDERS: (CHECK those riders which are applicable AND are
attached to this Contract):
(a) [ ] COASTAL CONSTRUCTION CONTROL LINE RIDER
(b) [ ] CONDOMINIUM RIDER
(c) [ ] FHA/VA RIDER
(d) [ ] FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT RIDER
(e) [ ] INSULATION RIDER
(f) [ ] AS IS RIDER
(g) [ ] __________________________
(h) [ ] __________________________
11. ASSIGNABILITY: (CHECK ONLY ONE): Buyer [ ] may assign and
thereby be released from any further liability under this
Contract; [ ] may assign but not be released from liability
under this Contract; or [ ] may not assign the Contract.
12. TIME: Time is of the essence of this Contract.
13. DISCLOSURES: Buyer (CHECK ONLY ONE) [X] acknowledges; or [
] does not acknowledge receipt of the Agency/Radon/Compensation,
the Real Property Sales Expense Disclosure Warning, and, if
applicable, the Mandatory Homeowners' Association disclosures.
_____________________________ BUYER'S INITIALS.
14. MAXIMUM REPAIR COSTS: Seller shall not be responsible for
the payment of costs in excess of:
(1) $ N/A for treatment
and repair under Standard D (if blank, then 2% of the
Purchase Price).
(2) $ N/A for repair
and replacement under Standard N (if blank, then 3% of the
Purchase Price).
15. SPECIAL CLAUSES: If additional space is required, attach
addendum and CHECK HERE [ ].
THIS IS INTENDED TO BE A LEGALLY BINDING CONTRACT. IF NOT
FULLY UNDERSTOOD, SEEK THE ADVICE OF AN ATTORNEY PRIOR TO
SIGNING.
THIS FORM HAS BEEN APPROVED BY THE FLORIDA ASSOCIATION OF
REALTORS AND THE FLORIDA BAR.
Approval does not constitute an opinion that any of the terms and
conditions in this Contract should be accepted by the parties in
a particular transaction. Terms and conditions should
be negotiated based upon the respective interests, objectives and
bargaining positions of all interested persons.
___________________________________ ______________
(Buyer) (Date)
Social Security or Tax I.D. #_________________________
/s/ A.A. Dyer III 1/8/97
___________________________________ ______________
(Seller) (Date)
Social Security or Tax I.D. # 59-2223025
___________
____________________________________ ______________
(Buyer) (Date)
Social Security or Tax I.D. #________________________
____________________________________ ______________
(Seller) (Date)
Social Security or Tax I.D. #________________________
Deposit under Paragraph II(a) received; IF OTHER THAN CASH, THEN
SUBJECT TO CLEARANCE__________________________________(Escrow
Agent)
BROKER'S FEE: The brokers named below, including listing and
cooperating brokers, are the only brokers entitled to
compensation in connection with this Contract:
Name_________________________________________________________
_________________________________________________________
Listing Broker Cooperating Brokers, if any
STANDARDS FOR REAL ESTATE TRANSACTIONS
1. EVIDENCE OF TITLE: (1) An abstract of title prepared or
brought current by a reputable and existing abstract firm (if not
existing then certified as correct by an existing firm)
purporting to be an accurate synopsis of the instrument affecting
title to the Real Property recorded in the public records of the
county wherein Real Property is located through Effective Date
and which shall commence with the earliest public records, or
such later date as may be customary in the county. Upon closing
of this transaction, the abstract shall become the property of
Buyer, subject to the right of retention thereof by first
mortgagee until fully paid. (2) A title insurance commitment
issued by a Florida licensed title insurer agreeing to issue to
Buyer, upon recording of the deed to Buyer, an owner's policy of
title insurance in the amount of the purchase price insuring
Buyer's title to the Real Property, subject only to liens,
encumbrances, exceptions or qualifications set forth in this
Contract and those which shall be discharged by Seller at or
before closing. Seller shall convey marketable title subject
only to liens, encumbrances, exceptions or qualifications
specified in this Contract. Marketable title shall be determined
according to applicable Title Standards adopted by authority of
The Florida Bar and in accordance with law. Buyer shall have 30
days, if abstract, or 5 days, if title commitment, from date of
receiving evidence of title to examine it. If title is found
defective, Buyer shall within 3 days hereafter, notify Seller in
writing specifying defect(s). If the defect(s) render title
unmarketable, Seller will have 30 days from receipt of notice to
remove the defects, failing which Buyer shall, within five (5)
days after expiration of the thirty (30) day period, deliver
written notice to Seller either: (1) extending the time for a
reasonable period not to exceed 120 days within which Seller
shall use diligent effort to remove the defects; or (2)
requesting a refund of deposit(s) paid which shall immediately be
returned to Buyer. If Buyer fails to so notify Seller, Buyer
shall be deemed to have accepted the title as it then is. Seller
shall, if title is found unmarketable, use diligent effort to
correct defect(s) in the title within the time provided therefor.
If Seller is unable to remove the defects within the times
allowed therefor, Buyer shall either waive the defects or receive
a refund of deposit(s), thereby releasing Buyer and Seller from
all further obligation under this Contract.
2. PURCHASE MONEY MORTGAGE; SECURITY AGREEMENT TO SELLER: A
purchase money mortgage note to Seller shall provide for a 30-day
grace period in the event of default if a first mortgage and a
15-day grace period if a second or lesser mortgage; shall provide
for right of prepayment in whole or in part without penalty;
shall permit acceleration in event of transfer of the Real
Property; shall require all prior liens and encumbrances to be
kept in good standing and forbid modifications of or future
advances under prior mortgage(s) shall require Buyer to maintain
policies of insurance containing a standard mortgagee clause
covering all improvements located on the Real Property against
fire and all perils included within the term "extended coverage
endorsements and such other risks and perils as Seller may
reasonably require, in an amount equal to their highest insurable
value and the mortgage, note and security agreement shall be
otherwise in form and content required by Seller, but Seller may
only require clauses and coverage customarily found in mortgages,
mortgage notes and security agreements generally utilized by
savings and loan institutions or state or national banks located
in the county wherein Real Property is located. All Personal
Property and leases being conveyed or assigned will, at Seller's
option, be subject to the lien of a security agreement evidenced
by recorded financing statements. If a balloon mortgage, the
final payment will exceed the periodic payments thereon.
3. SURVEY: Buyer, at Buyer's expense, within time allowed to
deliver evidence of title and to examine same, may have the Real
Property surveyed and certified by a registered Florida surveyor.
If survey shows encroachment of Real Property or that
improvements located on Real Property encroach on setback lines,
easements, lands or others or violate any restrictions, Contract
covenants or applicable governmental regulations, the same shall
constitute a title defect.
4. TERMITES: Buyer, at Buyer's expense, within time allowed to
deliver evidence of title, may have the Property inspected by a
Florida Certified Pest Control Operator ("Operator") to determine
if there is any visible active termite infestation or visible
damage from termite infestation in the Property. If either or
both are found, Buyer will have 4 days from date of written
notice thereof within which to have cost of treatment, if
required, estimated by the Operator and all damage, inspected and
estimated by a licensed builder or general contractor Seller
shall pay valid costs of treatment and repair of all damage up to
the amount provided in Paragraph XIV(a). Should estimated costs
exceed that amount, Buyer shall have the option of canceling
Contract within 5 days after receipt of contractor's repair
estimate by giving written notice to Seller or Buyer may elect to
proceed with the transaction, in which event Buyer shall receive
a credit at closing of the amount provided in Paragraph XIV(a).
"Termites" shall be deemed to include all wood destroying
organisms required to be reported under the Florida Pest Control
Act.
5. INGRESS AND EGRESS: Seller warrants and represents that
there is ingress and egress to the Real Property sufficient for
its intended use as described in Paragraph VII hereof, title to
which is in accordance with Standard A.
6. LEASES: Seller shall, not less than 15 days before closing,
furnish to Buyer copies of all written leases and estoppel
letters from each tenant specifying the nature and duration of
the tenant's occupancy, rental rates, advanced rent and security
deposits paid by tenant. If Seller is unable to obtain such
letter from each tenant, the same information shall be furnished
by Seller to Buyer within that time period in the form of a
Seller's affidavit, and Buyer may thereafter contact tenants to
confirm such information. Seller shall, at closing, deliver and
assign all original leases to Buyer.
7. LIENS: Seller shall furnish to Buyer at time of closing an
affidavit attesting to the absence, unless otherwise provided for
herein, of any financing statement, claims of lien or potential
lienors known to Seller and further attesting that there have
been no improvements or repairs to the Property for 90 days
immediately preceding date of closing. If Property has been
improved or repaired within that time, Seller shall deliver
releases or waivers of construction liens executed by all general
contractors, subcontractors, suppliers and materialmen in
addition to Seller's lien affidavit setting forth the names of
all such general contractors, subcontractors, suppliers and
materialmen and further affirming that all charges for
improvements or repairs which could serve as a basis for a
construction lien or a claim for damages have been paid or will
be paid at closing of this Contract.
8. PLACE OF CLOSING: Closing shall be held in the county
wherein the Real Property is located at the office of the
attorney or other closing agent designated by Seller.
9. TIME PERIOD: In computing time periods of less than six (6)
days, Saturdays, Sundays and state or national legal holidays
shall be excluded. Any time periods provided for herein which
shall end on a Saturday, Sunday or a legal holiday shall extend
to 5:00 p.m. of the next business day.
10. DOCUMENTS FOR CLOSING: Seller shall furnish the deed,
bill of sale, construction lien affidavit, owner's possession
affidavit, assignments of leases, tenant and mortgagee estoppel
letters and corrective instruments. Buyer shall furnish closing
statement, mortgage, mortgage note, security agreement and
financing statements.
11. EXPENSES: Documentary stamps on the deed and recording
of corrective instruments shall be paid by Seller Documentary
stamps and intangible tax on the purchase money mortgage and any
mortgage assumed, and recording of purchase money mortgage to
Seller, deed and financing statements shall be paid by Buyer.
12. PRORATIONS; CREDITS: Taxes, assessments, rent
interest, insurance and other expenses and revenue of Property
shall be prorated through day before closing. Buyer shall have
the option of taking over any existing policies of insurance, if
assumable, in which event premiums shall be prorated. Cash at
closing shall be increased or decreased as may be required by
prorations. Prorations will be made through day prior to
occupancy if occupancy occurs before closing. Advance rent and
security deposits will be credited to Buyer and escrow deposits
held by mortgagee will be credited to Seller. Taxes shall be
prorated based on the current year's tax with due allowance made
for maximum allowable discount, homestead and other exemptions.
If closing occurs at a date when the current year's millage is
not fixed and current year's assessment is available, taxes will
be prorated based upon such assessment and the prior year's
millage. If current year's assessment is not available, then
taxes will be prorated on the prior year's tax. If there are
completed improvements on the Real Property by January 1st of
year of closing, which improvements were not in existence on
January 1st of the prior year, then taxes shall be prorated based
upon the prior year's millage and at an equitable assessment to
be agreed upon between the parties, failing which, request will
be made to the County Property Appraiser for an informal
assessment taking into consideration available exemptions. Any
tax proration based on an estimate shall, at request of either
Buyer or Seller, be subsequently readjusted upon receipt of tax
bill on condition that a statement to that affect is in the
closing statement.
13. SPECIAL ASSESSMENT LIENS: Certified, confirmed and
ratified special assessment liens as of date of closing (not as
of "Effective Date") are to be paid by Seller. Pending liens as
of date of closing shall be assumed by Buyer. If the improvement
has been substantially completed as of Effective Date, any
pending lien shall be considered certified, confirmed or ratified
and Seller shall, at closing, be charged an amount equal to the
last estimate of assessment for the improvement by the public
body.
14. [OMITTED]
15. RISK OF LOSS: If the Property is damaged by fire or
other casualty before closing and cost of restoration does not
exceed 3% of the assessed valuation of the Property so damaged,
cost of restoration shall be an obligation of the Seller and
closing shall proceed pursuant to the terms of this Contract with
restoration costs escrowed at closing. If the cost of
restoration exceeds 3% of the assessed valuation of the
improvements so damaged, Buyer shall have the option of either
taking Property as is, together with either the 3% or any
insurance proceeds payable by virtue of such loss or damage, or
of cancelling this Contract and receiving return of deposit(s).
16. PROCEEDS OF SALE; CLOSING PROCEDURES: The deed shall
be recorded upon clearance of funds. If abstract of title has
been furnished, evidence of title shall be continued at Buyer's
expense to show title in Buyer, without any encumbrances or
change which would render Seller's title unmarketable from the
date of the last evidence. Proceeds of the sale shall be held in
escrow by Seller's attorney or by another mutually acceptable
escrow agent for a period of not more than 5 days after closing
date. If Seller's title is rendered unmarketable, through no
fault of Buyer, Buyer shall, within the 5-day period, notify
Seller in writing of the defect and Seller shall have 30 days
from date of receipt of such notification to cure the defect. If
Seller fails to timely cure the defect, all deposit(s) and
closing funds shall, upon written demand by Buyer and within
5 days after demand, be returned to Buyer and, simultaneously
with such repayment. Buyer shall return the Personal Property,
vacate the Real Property and reconvey the Property to Seller by
special warranty deed and bill of sale. If Buyer fails to make
timely demand for refund, Buyer shall take title as is, waiving
all rights against Seller as to any intervening defect except as
may be available to Buyer by virtue of warranties contained in
the deed of bill of sale. If a portion of the purchase price is
to be derived from institutional financing or refinancing,
requirements of the lending institution as to place, time of day
and procedures for closing, and for disbursement of mortgage
proceeds shall control over contrary provision in this Contract.
Seller shall have the right to require from the lending
institution a written commitment that it will not withhold
disbursement of mortgage proceeds as a result of any title defect
attributable to Buyer-mortgagor. The escrow and closing
procedure required by this Standard shall be waived if title
agent insures adverse matters pursuant to Section 627.7841, F.S.
(1993), as amended.
17. ESCROW: Any escrow agent ("Agent") receiving funds or
equivalent is authorized and agrees by acceptance of them to
deposit them promptly, hold same in escrow and, subject to
clearance, disburse them in accordance with terms and conditions
of Contract. Failure of clearance of funds shall not excuse
Buyer's performance. If in doubt as to Agent's duties or
liabilities under the provisions of Contract, Agent may, at
Agent's option, continue to hold the subject matter of the escrow
until the parties mutually agree to its disbursements or until a
judgment or a court of competent jurisdiction shall determine the
rights of the parties or Agent may deposit same with the clerk of
the circuit court having jurisdiction of the dispute. Upon
notifying all parties concerned of such action, all liability on
the part of Agent shall fully terminate, except to the extent of
accounting for any items previously delivered out of escrow. If
a licensed real estate broker, Agent will comply with provisions
of Chapter 475, F.S. (1993), as amended. Any suit between Buyer
and Seller wherein Agent is made a party because of acting as
Agent hereunder, or in any suit wherein Agent interpleads the
subject matter of the escrow, Agent shall recover reasonable
attorney's fees and costs incurred with the fees and costs to be
paid from and out of the escrowed funds or equivalent and charged
and awarded as court costs in favor of the prevailing party.
Parties agree that Agent shall not be able to any party or person
for misdelivery to Buyer or Seller of items subject to this
escrow, unless such misdelivery is due to willful breach of the
Contract or gross negligence of Agent.
18. ATTORNEY'S FEES; COSTS: In any litigation, including
breach, enforcement or interpretation, arising out of this
Contract, the prevailing party in such litigation which, for the
purposes of this Standard, shall include Seller, Buyer and any
brokers acting in agency or nonagency relationships authorized by
Chapter 475, F.S. (1993), as amended, shall be entitled to
recover reasonable attorney's fees, costs and expenses.
19. FAILURE OF PERFORMANCE: If Buyer fails to perform this
Contract within the time specified, including payment of all
deposit(s), the deposit(s) paid by Buyer and deposit(s) agreed to
be paid, may be retained by or for the account of Seller as
agreed upon liquidated damages, consideration for the execution
of this Contract and in full settlement of any claims; whereupon
Buyer and Seller shall be relieved of all obligations under this
Contract; or Seller, at Seller's option, may proceed in equity to
enforce Seller's rights under this Contract. If for any reason
other than failure of Seller to make Seller's title marketable
after diligent effort, Seller fails, neglects or refuses to
perform this Contract, the Buyer may seek specific performance or
elect to receive the return of Buyer's deposit(s) without thereby
waiving any action for damages resulting from Seller's breach.
20. CONTRACT NOT RECORDABLE; PERSONS BOUND; NOTICE:
Neither this Contract nor any notice of it shall be recorded in
any public records. This Contract shall bind and inure to the
benefit of the parties and their successors in interest.
Whenever the context permits, singular shall include plural and
one gender shall include all. Notice given by or to the attorney
for any party shall be as effective as if given by or to that
party.
21. CONVEYANCE: Seller shall convey title to the Real
Property by statutory warranty, trustee's, personal
representative's or guardian's deed, as appropriate to the status
of Seller, subject only to matters contained in Paragraph VII and
those otherwise accepted by Buyer. Personal Property shall, at
request of Buyer, be transferred by an absolute bill of sale with
warranty of title, subject only to such matters as may be
otherwise provided for herein.
22. OTHER AGREEMENTS: No prior or present agreements or
representations shall be binding upon Buyer or Seller unless
included in this Contract. No modification or change in this
Contract shall be valid or binding upon the parties unless in
writing and executed by the party or parties intended to be bound
by it.
23. WARRANTY: Seller warrants that there are no facts known to
Seller materially affecting the value of the Property which are
not readily observable by Buyer or which have not been disclosed
to Buyer.
EXHIBIT 10.17
LEASE AGREEMENT
THIS AGREEMENT OF LEASE, by and between PORT 95-4, LTD. a
Florida limited partnership, (hereinafter referred to as the
"Landlord") and INTERNATIONAL AIRLINE SUPPORT GROUP, INC., a
Delaware corporation (hereinafter referred to as the "Tenant").
WITNESSETH, That in consideration of the mutual covenants
and agreements herein contained, it is agreed by and between
Landlord and Tenant as follows:
1. Basic Lease Provisions and Definitions. This Paragraph
1 is an integral part of this Lease and all of the terms hereof
are incorporated into this Lease in all respects. In addition to
the other provisions which are elsewhere defined in this Lease,
the following, whenever used in this Lease, shall have the
meanings set forth in this Paragraph, unless such meanings are
expressly contradicted, limited or expanded elsewhere herein:
1. DATE OF LEASE: As of this 26th day of March, 1997.
2. LANDLORD'S MAILING ADDRESS: 1812 S. W. 31st
Avenue, Pembroke Park, Florida 33009
3. TENANT'S CORPORATE MAILING ADDRESS: 1954 Airport
Road, Suite 200, Atlanta, GA 30341
4. INTENTIONALLY DELETED.
5. PRE-PAID RENT, SECURITY DEPOSITS (Par. 12):
$30,000.00 as Security Deposit
6. DEMISED PREMISES: See Exhibit A attached hereto
and made a part hereof; together with all improvements
therein such premises are deemed to be 29,520 sq. ft. in
Building 4, located at 3030 S.W. 42nd Street, Hollywood,
Florida.
7. LEASE TERM: ("Lease Term" or "term of this Lease")
(Par. 3): five (5) years. The commencement date of the
Lease Term is June 1, 1997 (the "Lease Commencement Date")
or upon receipt of a Certificate of Occupancy for the
warehouse portion of the Demised Premises from the City of
Hollywood Building, Dept., whichever occurs later.
8. MINIMUM RENT (Par. 4):
(1) During the first (1st) lease year ("Base Rent
Year"), (to-wit: June 1, 1997 through May 31, 1998 or the first
twelve months from the Rent Commencement Date as herein defined),
the minimum rent due the Landlord (the "Rent" or "Minimum Rent")
shall be in the amount of ONE HUNDRED NINETY-ONE THOUSAND EIGHT
HUNDRED EIGHTY AND NO/100 DOLLARS ($191,880.00) per annum,
consisting of $152,028.00 as "Base Rent" and $39,852.00 as
"Expenses," payable in advance, at the rate of FIFTEEN THOUSAND
NINE HUNDRED NINETY AND NO/100 DOLLARS ($15,990.00) per month,
together with applicable Florida sales and/or rent taxes thereon,
the payment of such Rent to commence on June 2, 1997 (the "Rent
Commencement Date") or one (1) day after the Lease Commencement
Date.
(2) Beginning the second lease year (to-wit: June
1, 1998 through May 31, 1999 or the second twelve months from the
Rent Commencement Date as herein above defined), the Rent due
Landlord annually for the Demised Premises shall be One Hundred
Ninety-Six Thousand Four Hundred Forty and Eighty-four Cents
($196,440.84) consisting of $156,588.84 as "Base Rent" and
$39,852.00 as "Expenses," plus any increased Expenses pursuant to
paragraph 1 (h)(3) below, payable monthly, in advance, at a rate
of Sixteen Thousand Three Hundred Seventy Dollars and Seven Cents
($16,370.07), plus any applicable sales and/or rent taxes
thereon; beginning the third lease year (to-wit: June 1, 1999
through May 31, 2000 or the third twelve months from the Rent
Commencement Date as herein above defined), the Rent due Landlord
annually for the Demised Premises shall be Two Hundred One
Thousand One Hundred Thirty-eight Dollars and Sixty Cents
($201,138.60), consisting of $161,286.60 as "Base Rent" and
$39,852.00 as "Expenses," plus any increased Expenses pursuant to
Paragraph 1 (h)(3) below, payable monthly, in advance, at a rate
of Sixteen Thousand Seven Hundred Sixty-One Dollars and Fifty-
Five Cents ($16,761.55), plus any applicable sales and/or rent
taxes thereon; beginning the fourth lease year (to-wit: June
1,2000 through May 31, 2001 or the fourth twelve months from the
Rent Commencement Date as herein above defined), the Rent due
Landlord annually for the Demised Premises shall be Two Hundred
Five Thousand Nine Hundred Seventy-Seven Dollars and Twenty-Four
Cents ($205,977.24) consisting of $166,125.24 as "Base Rent" and
$39,852.00 as "Expenses," plus any increased Expenses pursuant to
Paragraph 1 (h)(3) below, payable monthly, in advance, at a rate
of Seventeen Thousand One Hundred Sixty-Four Dollars and Seventy-
Seven Cents ($17,164.77), plus any applicable sales and/or rent
taxes thereon; beginning the fifth lease year (to-wit: June 1,
2001 through May 31, 2002 or the fifth twelve months from the
Rent Commencement Date as herein above defined), the Rent due
Landlord annually for the Demised Premises shall be Two Hundred
Ten Thousand Nine Hundred Sixty-One Dollars and Eight Cents
($210,961.08), consisting of $171,109.08 as "Base Rent" and
$39,852.00 as "Expenses," plus any increased Expenses pursuant to
Paragraph 1 (h)(3) below, payable monthly, in advance, at a rate
of Seventeen Thousand Five Hundred Eighty Dollars and Nine Cents
($17,580.09), plus any applicable sales and/or rent taxes
thereon.
(3) For the purpose of this Lease, "Expenses"
shall be defined as all reasonable expenses for operation,
repair, replacement and maintenance as necessary to keep the
Premises, the building of which the Demised Premises is a part
(the "Building"),. and the common areas surrounding the Building,
driveways, and parking areas associated therewith in good order,
condition and repair, including, but not limited to, utilities
for the common areas of and relating to the Building, Real
Property Taxes, insurance, expenses associated with the driveways
and parking areas (including sealing, restriping and trash
removal), security systems, lighting facilities, landscaped
areas, walkways, directional signage, curbs, drainage strips, and
water and sewer lines. Expenses shall not include costs for
capital expenditures, repairs or replacements, which under sound
accounting principles and practices should be classified as
capital expenditures; the cost of acquisition of new land or
construction of new buildings; depreciation on Landlord's
original investment; lease concessions; lease takeover
obligations; the cost of repair or other work, including
rebuilding occasioned by fire, windstorm, or other casualty or
condemnation; any expenses representing an amount paid to a
related corporation, entity, or person which is in excess of the
amount which would be paid in the absence of such relationship;
any cost to the extent that Landlord is entitled to be reimbursed
by any other tenant; the cost of any items for which Landlord is
reimbursed by insurance or otherwise compensated by parties other
than tenants of the Building; any cost, fines, or penalties due
to Landlord's violation of any governmental rule or authority;
all costs and expenses associated with the removal and clean up
of Hazardous or Toxic Substances, unless caused by Tenant; costs
incurred due to violations by Landlord of any of the terms and
conditions of this Lease. Landlord hereby represents that the
Base Rent Year Expenses referenced in this Lease represent a pro-
rata portion of expenses related to the Building allocable, and
allocated, in a fair manner, to Tenant's pro-rata portion
thereof. For the Base Rent Year, the Expenses payable by the
Tenant, shall be $ 1.35 per square foot of the Demised Premises
(the "Base Rent Year Expenses"). In the event the Expenses
incurred by Landlord for the Demised Premises or Building in any
lease year during the Lease Term after the Base Rent Year exceed
an amount equal to $ 1.35 per square foot of the Demised
Premises, Tenant will pay to Landlord such additional amount per
square foot of the Demised Premises (the "Additional Expenses")
as additional rent hereunder. Such payment shall be in addition
to the $ 1.35 per square foot payment, not in lieu thereof. In
any lease year after the Base Rent Year in which the Expenses
incurred by Landlord for the Demised Premises or Building exceed
an amount equal to $ 1.35 per square foot of the Demised
Premises, within a reasonable time after the end of such lease
year, Landlord shall submit to Tenant a statement of the actual
amount of Expenses for such lease year, and the actual amount
owed by Tenant, and Tenant shall pay such amount, in twelve (12)
installments, with the next twelve (12) payments of Rent
hereunder. Provided however, in no event shall the Expenses be
reduced below $ 1.35 per square feet of the Demised Premises, nor
shall the Additional Expenses be increased more than three
percent (3 %) over the "controllable" Base Rent Year Expenses for
the second lease year or more than three percent (3%) over the
sum of the "controllable" Base Rent Year Expenses and any
Additional Expenses ("controllable" only) for the prior lease
year. Notwithstanding the three percent (3%) cap as herein
identified, any wrongful or negligent acts by Tenant, its agents,
employees, contractors resulting in an increased cost thereafter
to Landlord, then the three percent (3%) cap does not apply to
that portion of the controllable Expenses, if incurred after the
wrongful or negligent act. During the 60-day period after Tenant
receives notice from Landlord that Landlord desires to collect
Expenses in excess of the Base Rent Year Expenses, Tenant shall
have the right to review and audit Landlord's records concerning
Expenses at Landlord's location stated in Paragraph 1 lb) above.
If such audit reveals that Landlord has overstated Expenses by
more than two percent (2%), then Landlord shall immediately
refund the overpayment to Tenant and shall, in addition,
immediately reimburse Tenant for all costs of such audit Tenant's
professional fees. In the event that Landlord has overstated
expenses by less than two percent (2%), then Landlord shall
immediately refund the overpayment to Tenant, but Landlord shall
not be liable for any costs incurred in connection with the
audit.
(4) Expenses shall not include:
(2) Costs of special services rendered to
individual tenants;
(3) Interest and principal payments on loans or
indebtedness secured by the Building;
(4) Costs of improvements for other tenants of
the Building;
(5) Legal fees, brokerage commissions,
advertising costs, or other related expenses incurred
by Landlord in connection with the leasing of space to
individual tenants in the Building;
(6) Repairs, alterations, additions,
improvements, or replacements made to rectify or
correct any defect in the original design, materials or
workmanship of the Building or common areas;
(7) Damage and repairs necessitated by the gross
negligence or willful misconduct of Landlord, or its
employees, contractors or agents;
(8) Executive salaries or salaries of service
personnel to the extent that such service personnel
perform services not in connection with the management,
operation, repair or maintenance of the Building;
(9) Landlord's general overhead expenses;
(10) Legal fees, accountants' fees and other
expenses incurred in connection with disputes with
tenants or other occupants of the Building or
associated with the enforcement of the terms of any
leases with tenants or the defense of Landlord's title
to or interest in the Building or any part thereof;
(11) Costs (including permit, license and
inspection fees) incurred in renovation or otherwise
improving, decorating or painting, or altering space
for individual tenants or vacant space in the Building;
(12) Costs incurred due to a violation by Landlord
or any other tenant of the Building of the terms and
conditions of a lease;
(13) Ground rental payments;
(14) The costs of alterations to the Premises or
the premises of other tenants of the Buildings, or work
furnished by Landlord; without charge as an inducement
for a tenant to lease space leg., free rent,
improvement allowances);
(15) Income or franchise taxes or other such taxes
unless imposed in lieu of Taxes imposed or measured by
the income of Landlord from the operation of the
Buildings;
(16) Legal expenses incurred in connection with
tenant(?) leases including, without limitation,
negotiations with prospective tenants and enforcing
provisions of this Lease or other leases in the
Buildings; and
(17) Debt costs or the costs of financing or
refinancing.
9. PERMITTED USE (Par. 9): The Tenant shall use the
Demised Premises solely as follows: aircraft engine repairs
and aircraft engine parts storage.
2. Demised Premises. Landlord leases to Tenant and Tenant
rents from Landlord a portion of the real property described and
shown on Exhibit "A" (the "Site Plan"), together with the
equipment and other improvements located therein.
It is expressly understood and agreed that the Demised
Premises together with all equipment, structures and improvements
therein and any and all fixtures, accessories and utilities
located therein or thereon, are delivered to Tenant and accepted
by Tenant in an AS-IS and WHERE-IS condition and repair and that
the Landlord makes no warranties, representations or guarantees
of any kind, nature or sort, express or implied with respect to
the Demised Premises, including but not limited to, any and all
fixtures, equipment, improvements, accessories and utilities
located in or upon the Demised Premises, unless stated to the
contrary herein.
3. Term/Commencement Dated. The term of this Lease, shall
be for the number of years in the Lease Term set forth in
Paragraph 1 (g) hereof, following the commencement thereof unless
sooner terminated or extended as hereinafter provided.
4. Rent. Minimum Rent: Tenant agrees to pay to Landlord
during the Lease Term, without previous demand therefor and
without any setoffs or deductions whatsoever, the Minimum Rent,
in advance, on the first day of each and every calendar month
throughout the Lease Term together with any and all applicable
Florida sales and/or rent taxes thereon ("Taxes"). In the event
the Rent Commencement Date is after June 1, 1997, or other than
the first day of a calendar month, the Minimum Rent (as well as
all additional rents and charges reserved under this Lease) for
the portion of the then current calendar month shall be prorated
on the basis of a thirty (30) day month and shall be due and paid
immediately on the Rent Commencement Date.
5. Additional Rent. The Landlord shall receive the rents,
additional rents and all sums payable by the Tenant under this
Lease free of all taxes, expenses, charges, damages and
deductions of any nature whatsoever and the Tenant covenants and
agrees to pay all sums which except for this Lease would have
been chargeable against the Demised Premises and payable by the
Landlord. The Tenant shall, however, be under no obligation to
pay interest on any mortgage on the fee of the Demised Premises,
any franchise, capital or income tax payable by the Landlord, or
any gift, inheritance, transfer estate or succession tax by
reason of any present or future law which may be enacted during
the term of this Lease. All taxes, charges, costs and expenses
which the Tenant is required to pay hereunder, together with all
interest that shall accrue thereon in the event of the Tenant's
failure to pay such amounts and all damages, costs and expenses
which the Landlord may incur by reason of any default of the
Tenant or failure on the Tenant's part to comply with the terms
of this Lease shall be deemed to be additional rent and in the
event of nonpayment by the Tenant, the Landlord shall have all
the rights and remedies with respect thereto as a Landlord for
the nonpayment of the Rent.
Landlord, at its election, shall have the right (but not the
obligation) to pay for or perform any act which requires the
expenditure of any sums of money by reason of the failure or
neglect of Tenant to perform any of the provisions of this Lease
within the grace period, if any, applicable thereto, and in the
event Landlord shall at its election pay such sums or perform
such acts requiring the expenditure of monies, Tenant agrees to
reimburse and pay Landlord, upon demand, all such sums, which
shall be deemed for the purpose of securing the collection
thereof to be additional rent hereunder and payable by Tenant as
such.
6. Past Due Rents Minimum Rent is due and payable on, the
first day of each and every month during the term of this Lease.
Provided Landlord has not exercised his right to evict Tenant as
a result of non-payment of the Minimum Rent as herein provided, a
late charge of five percent (5%) of the rent due shall be imposed
on each and every payment of the rent not received by the
Landlord prior to the fifth (5th) day of each month. The late
charge is not a penalty, but liquidated damages to defray
administrative and related expenses due to such late payment of
rent. The late charge shall be immediately due and payable to the
Landlord without further notice or demand. The provisions herein
for late charge shall not be construed to extend the date for
payment of any sums required to be paid by Tenant hereunder or to
relieve Tenant of its obligation to pay all such sums at the time
or times herein stipulated. Notwithstanding the imposition of
such late charge pursuant to this paragraph, Tenant shall be in
default under the Lease if any or all payments required to be
made by Tenant are not made at the time therein stipulated
(subject to any applicable cure or grace period) and neither the
demand nor collection by Landlord of such late charges shall be
construed as a cure for such default on the part of the Tenant.
7. Place of Payments or Statements. All payments required
to be paid by Tenant to Landlord shall be made payable to the
Landlord or its designee, and all such payments, statements and
reports required to be rendered by Tenant to Landlord shall be
delivered to the Landlord's mailing address, or at such other
place as Landlord may from time to time designate in writing,
without the necessity of any prior demand for same.
1.
8. Tenant's Work. Except as expressly provided on the
Schedule of Landlord's Work, attached hereto as Exhibits "B" and
"C", any additional work, repairs, improvements, fixtures and
equipment for the Demised Premises shall be performed and
installed by Tenant at its sole cost and expense. Tenant
acknowledges that Tenant, as an inducement to Landlord to enter
into this lease, has covenanted and agreed and does hereby
covenant and agree to adequately prepare the Demised Premises for
the operation of the Permitted Use, all in accordance with the
terms and provisions of this Lease, and in addition, Tenant shall
fully equip the Demised Premises with all trade equipment and any
other equipment necessary for the operation of Tenant's Business
at its sole cost and expense (any such work performed by or on
behalf of Tenant during the term of this Lease or any extension
thereof being herein referred to as "Tenant's Work"). Landlord
warrants that all of Landlord's work will be done in a good and
workmanlike manner, in accordance with all laws, rules, orders,
governmental regulations (including ADA) and free from material
defects.
9. Use of Premises. Tenant shall use the Demised Premises
solely for the purpose of conducting the Permitted Use as set
forth in Paragraph 1 (i) and strictly in accordance with all
laws, statutes and ordinances applicable thereto. Tenant shall
not use or permit or suffer the use of the Demised Premises for
any other business purpose without the Landlord's prior written
consent, which shall not be unreasonably withheld.
10. Laws. Permits, Licenses, Waste, Nuisance. Tenant
shall, at its own expense and cost: (a) comply with all
governmental laws, ordinances, orders and regulations affecting
the Demised Premises now in force or which hereafter may be in
force (including without limitation, all environmental laws and
regulations); (b) apply for, secure, maintain in good standing
and comply with all licenses, permits and franchise agreements
which are or maybe required for the conduct by the Tenant of the
Tenant's operations and/or business herein permitted to be
conducted in the Demised Premises and to pay if, as, and when
due, all license, permit and franchise fees and charges in
connection therewith; (c) comply with and execute all rules,
requirements and regulations of the Board of Fire Underwriters,
Landlord's insurance companies and other organizations
establishing insurance rates; (d) not suffer, permit or commit
any waste or nuisance; and (e) not conduct any auction, distress,
fire or bankruptcy sale in or upon the Demised Premises.
Anything to the contrary notwithstanding, none of the obligations
in this Section 10 shall be interpreted to impose upon Tenant the
obligation to repair or correct any defect in the Landlord's
Work.
11. Assignment and Subletting. Tenant shall not assign,
sublet, mortgage or encumber this Lease, in whole or in part, or
sublet all or any portion of the Demised Premises or assign this
Lease or any part thereof without the prior written consent of
the Landlord. The Landlord shall be entitled to consider all
factors which it deems relevant to any requested consent to
subletting or assignment, including, but not limited to, the
following: (a) the financial responsibility of the proposed sub-
Tenant or assignee; (b) the business reputation, experience and
acumen of the proposed sub-Tenant or assignee in the field of the
Permitted Use and (c) the need for alteration and/or repair of
the Demised Premises; however, in no event shall such sub-tenant
or assignee be an existing occupant or Affiliate of such occupant
(as hereinafter defined) of the Building or Complex (of which the
Premises is a part). If such consent be obtained then, such
subletting or assignment, as the case may be, shall be subject to
and conditioned upon the following: (i) at the time of any such
proposed subletting or assignment, Tenant shall not be in default
under any of the terms, provisions or conditions of this Lease;
(ii) the sub-Tenant or assignee shall occupy the Demised Premises
and conduct its business in accordance with the Permitted Use;
(iii) if the minimum rent, additional rents or other rents or
charges required to be paid by any such sub-Tenant or assignee
exceeds the rentals and/or charges reserved hereunder, then
Tenant shall pay to Landlord monthly such excess, which shall be
deemed additional rent; (iv) Tenant and its assignee or sub-
Tenant shall execute, acknowledge and deliver to Landlord a fully
executed counterpart of a written assignment of lease or
sublease, as the case may be, duly consented to by Tenant's
guarantor, if any, by the terms of which: (1) in case of an
assignment, Tenant will assign to such assignee Tenant's entire
interest in this Lease, together with all prepaid rents and
rights to the Security Deposit hereunder, and the assignee will
accept said assignment and assume and agree to perform, directly
for the benefit of Landlord, all of the terms, covenants and
conditions of this Lease on Tenant's part to be performed
hereunder; or (2) in case of a subletting, the sublease and the
sub-Tenant's interest therein will in all respects be subject and
subordinate to all of the terms, covenants and conditions of the
Lease and the sub-Tenant thereunder will agree to be bound by and
to perform all of the terms, covenants and conditions of this
Lease on Tenant's part to be performed hereunder, except the
payment of rent, additional rents and other charges reserved
hereunder, which Tenant shall continue to pay to Landlord; iv)
notwithstanding any such assignment of subletting under the terms
of this Paragraph, both Tenant and its guarantor, if any, will
acknowledge that, notwithstanding such assignment or sublease and
the consent of Landlord thereto, both Tenant, and its guarantor,
if any, will not be released or discharged from any liability
whatsoever under this Lease and will continue to be fully liable
thereon. The consent by Landlord to any assignment or subletting
shall not constitute a waiver of the necessity of such consent to
any subsequent assignment or subletting. This prohibition
against any assignment or subletting shall be construed to
include a prohibition against any assignment or subletting by
operation of law. If this Lease be assigned or if the Demised
Premises or any part thereof be occupied by anybody other than
Tenant, Landlord may collect rent from the assignee, or occupant
and apply the net amount collected to the rent herein reserved,
but no such assignment, underletting, occupancy or collection
shall be deemed waiver of the provisions of the acceptance of the
assignee, sub-Tenant or occupant as Tenant, or as a release of
Tenant from the further performance by Tenant of the provisions
on its part to be observed or performed herein. Notwithstanding
any assignment or sublease, Tenant shall remain fully liable and
shall not be released from performing any of the terms of this
Lease. If Tenant or Tenant's controlling shareholder or
controlling partner, if any and as the case may be, or Tenant's
guarantor, it' any, is a corporation or partnership, and if at
any time during the term of this Lease the person or persons who,
on the Date of Lease, own or owns fifty (50%) percent or more of
such corporation's voting shares or a general partner's interest
in such partnership, as the case may be, or if Tenant's
guarantor, if any, ceases to own fifty (50%) percent or more of
such corporation's voting shares or a general partner's interest
in such partnership or if same is dissolved, then upon such
occurrence there shall be deemed to be an assignment of this
Lease, which assignment shall require the prior written consent
of Landlord, as more particularly set forth above. This
subsection (c), shall not be applicable to any corporation, all
the outstanding voting stock of which is listed on a national
securities exchange (as defined in the Securities Exchange Act of
1934, as amended). For the purposes hereof, an Affiliate means a
corporation or other business entity that directly or indirectly
controls, is controlled by, or is under common control with such
occupant.
12. Security Deposit.
1. Tenant has deposited with Landlord the Security
Deposit of $30,000.00, the receipt whereof, if by check
subject to collection, is hereby acknowledged, and said
Security Deposit shall be held by Landlord, as security for
the full and faithful performance by Tenant of each and
every term, covenant and condition of this Lease on the part
of Tenant to be observed and performed. Such Security
Deposit shall not be mortgaged, assigned, transferred or
encumbered by Tenant without the prior written consent of
Landlord. Any such act on the part of Tenant shall be
without force and effect, shall not be binding upon
Landlord, and, at the option of Landlord, shall constitute
an Event of Default under Paragraph 22 hereof.
2. At any time during the pendency of an uncured
Event of Default by Tenant under this Lease, the Landlord
may, at its option, and without notice to Tenant or
prejudice to any other remedy which Landlord may have on
account thereof, appropriate and apply said entire Security
Deposit or so much thereof as may be necessary to compensate
Landlord toward the payment of such rents or other sums due
from Tenant, or towards any loss, damage or expense
(including without limitation, administrative costs and
attorneys' fees) sustained by Landlord resulting from such
default on the part of Tenant; and in such event Tenant
shall forthwith upon demand and without any setoffs or
deductions whatsoever restore said Security Deposit to the
original sum deposited. In the event Tenant shall fully and
faithfully comply with all of the terms, covenants and
conditions of this Lease and promptly pay all of the rentals
as they fall due and all other sums payable by Tenant to
Landlord, said Security Deposit shall be returned in full to
Tenant, within thirty (30) days following the date of the
expiration of the term hereof and the surrender of the
Demised Premises by Tenant in compliance with the provisions
of this Lease.
3. In the event any bankruptcy, insolvency,
reorganization or other creditor-debtor proceedings shall be
instituted by or against Tenant, or its successors or
assigns, or any guarantor of Tenant hereunder, such Security
Deposit shall be deemed to be applied first to the payment
of any rents and/or other charges due Landlord for all
periods prior to the institution of such proceedings and the
balance, if any, of such Security Deposit may be retained by
Landlord in partial satisfaction of Landlord's damages.
4. Landlord may deliver the Security Deposit to the
purchaser of Landlord's interest in the Demised Premises in
the event that such interest be sold or transferred and
thereupon Landlord shall be discharged and released from all
further liability with respect to such Security Deposit or
the return thereof to Tenant; Tenant agrees to look solely
to the new Landlord for the return of said Security Deposit,
and this provision shall also apply to any subsequent
transferees, provided that new Landlord or transferee
assumes, in writing, Landlord's obligation under this Lease.
No holder of a mortgage or deed of trust, or Landlord under
a ground or underlying lease, if any, to which this Lease is
or may be subordinate, shall be responsible in connection
with the Security Deposit hereunder, unless such mortgagee
or holder of such deed of trust or Landlord shall have
actually received same.
13. Repairs.
1. Except as expressly provided on the Schedule of
Landlord's Work attached hereto as Exhibit "B", "C", or
under "B." herein, Landlord shall not be required to make
any repairs or improvements of any kind or nature whatsoever
upon or to the Demised Premises or improvements therein.
2. Landlord's Repairs - Landlord, during the lease
term shall, at its expense, be obligated to repair and
maintain the following: the roof; all structural components
of the Demised Premises; pipes and plumbing; electrical;
sewage facilities; driveways; parking areas, paved areas and
sidewalks; foundations and subfloor; and exterior walls.
Tenant shall give Landlord written notice of any needed
repairs which are the obligation of the Landlord. Tenant's
Repairs - Tenant, during the lease term shall, at its
expense, maintain and repair all interior components of the
Demised Premises, the ventilation and air conditioning, and
bay doors. Tenant further agrees that all damages or injury
done to or on the Demised Premises by Tenant or by any
person, other than Landlord or Landlord's agents, servants,
employees, invitees, licensees, and contractors, shall be
repaired by Tenant at its expense. Tenant agrees at the
expiration of the lease term or upon the earlier termination
thereof, to surrender the Demised Premises in good condition
and repair, reasonable wear and casualty excepted. All
repairs shall be made within fifteen (15) days after notice
from the other party, unless such repair cannot reasonably
be completed within said fifteen (15) day period, in which
case the party obligated to make such repair shall commence
the repair within said fifteen (15) day period and
diligently continue steps to finish such repair in a timely
manner.
3. Tenant agrees to make no alterations, improvements
or additions in or to the Demised Premises, nor to install
any equipment therein (other than trade fixtures) without,
in each instance, obtaining Landlord's prior written
approval thereof, which consent Landlord shall not
unreasonably withhold. Any such alterations, improvements
or additions shall be made in accordance with the terms and
provisions of Paragraph 8 hereof. Notwithstanding the
foregoing, Tenant shall be permitted to make non-structural
interior alterations, improvements or repairs without the
Landlord's prior written approval, provided that the cost of
same will not exceed Ten Thousand ($10,000.00) Dollars in
the aggregate during any calendar year. At the time such
approval is sought, Tenant shall submit to Landlord plans
and specifications for such work and the name of the
contractor who Tenant proposes to engage to perform the
same. After having obtained Landlord's written approval, as
aforesaid, and prior to the commencement of any such work,
Tenant agrees to deliver to Landlord the approval of any and
all governmental authorities and departments having
jurisdiction thereof together with a policy or certificate
of worker's compensation insurance in statutory limits from
Tenant's contractor and, if the cost of the proposed work
shall exceed $25,000.00, evidence of the maintenance by
Tenant of all other insurance coverages to be maintained by
Tenant hereunder. Such work may thereupon be commenced and
shall be diligently prosecuted to completion in a first
class workmanlike manner in accordance with such approved
plans and specifications and in accordance with all
applicable laws and ordinances as well as rules and
requirements of Landlord's insurance carriers, subject,
however, to Tenant's obligation to insure such assumed
liability under Tenant's Comprehensive General Liability
Policy.
14. Failure to Repair. If Tenant (a) refuses to or
neglects to make repairs required of Tenant by this Lease, or (b)
if Landlord is required to make any repairs by reason of Tenant's
negligent acts or omissions, Landlord shall have the right, but
shall not be obligated, to make such repairs, on behalf of and
for the account of Tenant. In such event, such work shall be paid
for by Tenant as additional rent promptly upon receipt of a bill
therefor.
15. Covenant Against Liens. Notwithstanding any other
provisions of this Lease, Landlord and Tenant expressly
acknowledge and agree that the interest of Landlord in and to, or
any part, including without limitation, the Demised Premises,
shall not be subject to liens for any work, labor, services
performed or materials supplied, or claimed to have been
performed or supplied, or any other lien cognizable under Chapter
713, Florida Statutes (collectively herein "Liens"), by Tenant,
or Tenant's contractors, subcontractors (including sub-
contractors), laborers and material suppliers supplying labor
and/or material for the Demised Premises (collectively herein
"Contractors"). Upon the execution of this Lease, Tenant
acknowledges that Landlord, at Landlord's sole option and cost,
may then or thereafter record among the Public Records of Broward
County, Florida the Lease or short form thereof (to which Tenant
shall joint in the execution, at Landlord' s request), or such
other memorandum in form and substance satisfactory to Landlord,
in Landlord's sole discretion, setting forth the contents of this
Paragraph or any other matter for the purpose of insulating the
interest of Landlord from any and all such Contractor's Liens,
without mitigating or otherwise affecting any other provisions of
this Lease. Tenant hereby acknowledges that Landlord shall
further be permitted to do or perform any act necessary or
appropriate, in Landlord's sole discretion, to prevent the filing
of any Lien against the Demised Premises or any part thereof.
In addition to the foregoing and not in lieu thereof, Tenant
shall do all things necessary to prevent the filing of any Liens
against the Demised Premises or the interest of Landlord or the
interest of any mortgagees or holders of any deed of trust
covering the Demised Premises or any ground or underlying
Landlords therein, if any, by reasons of any work, labor,
services, or materials performed or supplied or claimed to have
been performed or supplied to Tenant, or anyone holding the
Demised Premises, or any part thereof, by, through or under
Tenant. If any such Lien shall at any time be filed, Tenant shall
cause the same to be vacated and canceled of record within thirty
(30) days after the date of the filing thereof. If any such Lien
shall be filed notwithstanding the provisions of this Paragraph,
then, in addition to any other right or remedy of Landlord
resulting from Tenant's said default, Landlord may, but shall not
be obligated to, contest such Lien or vacate or release the same
either by paying the amount claimed to be due or by procuring the
release of such Lien by giving security or in such other manner
as may be prescribed by law. Tenant shall repay to Landlord, as
additional rent hereunder on demand, all sums disbursed or
deposited by Landlord pursuant to the foregoing provisions of
this Paragraph, including Landlord's costs and expenses and
attorneys' fees incurred in connection therewith; however,
nothing contained herein shall imply any consent or agreement on
the part of Landlord or mortgagees or holder of deeds of trust or
any ground or underlying Landlords, if any, of the, Demised
Premises to subject their respective estates or interests to
liability under any mechanics' or other lien law, whether or not
the performance or the furnishing of such work, labor, services,
or materials to Tenant or anyone holding the Demised Premises, or
any part thereof, by, through or under Tenant, shall have been
consented to by Landlord and/or any of such parties.
16. Utility Charges. Landlord shall not be liable in the
event of any interruption in the supply of any utilities, unless
such interruption is caused by the gross negligence or
intentional misconduct of Landlord or its agents. In the event
that such interruption is caused by the gross negligence or
intentional misconduct of Landlord or its agents, Landlord's
liability shall be limited to the abatement of rent for the
period of such interruption. Tenant agrees that it will not
install any equipment which will exceed or overload the capacity
of any utility facilities, and if any equipment installed by
Tenant shall require additional utility facilities, the same
shall be installed at Tenant's sole cost and expense in
accordance with plans and specifications to be approved in
writing by Landlord. Tenant shall be solely responsible for and
shall promptly pay all charges for use or consumption for heat,
air conditioning, sewer, water, gas, electricity or any other
utility services, including trash removal.
17. Taxes. If at any time during the term of this Lease,
any additional sales tax or excise on rents or other tax on
Tenant's consideration for occupancy of the Demised Premises,
however described except any ad valorem, estate, inheritance,
real estate, capital stock, capital gains, income (or any new
taxes or amendments to existing taxes imposed in replacement
thereof) or excess profits taxes imposed upon Landlord is levied
or assessed against Landlord by any taxing authority on account
of Landlord's interest in this Lease or the rents and other
charges expressly reserved hereunder, as a substitute in whole or
in part, or in addition to, the Taxes herein before described,
Tenant agrees to pay Landlord, as additional rent hereunder, the
amount of such tax or excise on rents, and other charges, but
only to the extent of the amount thereof which is assessed or
imposed as a direct result of Landlord's ownership of this Lease
or the rentals reserved hereunder. In the event any such tax or
excise on rents and other charges, or other tax, however
described, is levied and assessed directly against Tenant by any
taxing authority on account of Tenant's interest in this Lease or
the leasehold estate hereby created or the rents and other
charges to be paid by Tenant hereunder, then Tenant shall be
responsible therefor and agrees to pay the same before
delinquency; or should any taxing authority require that any such
tax or excise on rents and other charges, or other tax, however
described, for which Tenant is responsible hereunder, be paid by
Tenant, but collected by Landlord, for and on behalf of such
taxing authority and from time to time forwarded by Landlord to
such taxing authority, then the same shall be paid by Tenant to
Landlord at such times as such taxing authority shall require and
be collectible by Landlord and the payment thereof enforced in
the same fashion as provided for the enforcement of payment of
rents and other charges hereunder and for the purpose of
enforcing payment thereof shall be deemed additional rent
hereunder. Tenant at all times shall be responsible for and shall
pay, before delinquency, all taxes assessed by any taxing
authority against any personal property of any kind owned,
installed or used by Tenant in or about the Demised Premises or
the rents and other charges paid by Tenant hereunder.
18. Indemnity.
1. Tenant shall indemnify, defend and protect
Landlord and save Landlord harmless from suits, actions,
damages, liability and expense in connection with loss of
life, bodily or personal injury or property damage arising
from or out of any occurrence in, upon or at or from the
Demised Premises or the occupancy or the use by Tenant of
the Demised Premises or any part thereof, or occasioned
wholly or in part by any act or omission of Tenant, its
agents, contractors, employees, servants, licensees,
suppliers or concessionaires; and
2. Tenant shall store its property in and shall
occupy the Demised Premises at its own risk, and releases
Landlord, to the full extent permitted by law, from all
claims of every kind resulting in loss of life, personal or
bodily injury or property damage; and
3. Landlord shall not be responsible or liable at any
time for any loss or damage of Tenant's merchandise or
equipment, fixtures or other personal property of Tenant or
to Tenant 's business; and
4. Landlord shall not be responsible or liable to
Tenant or to those claiming by, through or under Tenant for
any loss or damage to either the person or property of
Tenant that may be occasioned by or through the acts of
omissions of persons occupying adjacent, connecting or
adjoining premises unless Landlord shall occupy such
adjacent, connecting or adjoining premises; and
5. Landlord shall not be responsible or liable for
any injury, loss or damage to any person or to any property
of Tenant or other person caused by or resulting from
bursting, breakage, or by or from leakage, steam, running or
the overflow of water or sewage in any part of the Demised
Premises or for any injury or damages caused by or resulting
from acts of God or the elements, or for any injury or
damage caused by or resulting from any defect or negligence
in the occupancy, construction (other than latent
construction defects and only to the extent that Tenant is
not insured against any injuries, loss or damage incurred as
a result thereof), operation or use of any of the Demised
Premises, building, machinery, apparatus or equipment by any
person or by or from the acts of negligence of any occupant
of the Demised Premises.
6. Tenant shall give prompt written notice to
Landlord in case of damage, fire or accidents on the Demised
Premises or in the building thereon, or defects therein or
in any fixtures or equipment.
1.
7. In case Landlord shall, without fault on its part,
be made a party to any litigation commenced by or against
the Tenant, then the Tenant shall protect and hold the
Landlord harmless and shall pay all of said other parties'
costs, expenses and reasonable attorney's fees.
8. No toxic or hazardous waste, substances or
materials or other environmentally detrimental materials,
including, without limitation, asbestos and those toxic or
hazardous waste substances or materials now or hereafter
defined, listed or contemplated under Federal, State or
local environmental or hazardous waste laws (collectively
referred to hereinafter as "Hazardous or Toxic Substances")
shall be used, stored or generated upon the Demised Premises
or in connection with or arising out of the operation of
Tenant's business upon the Demised Premises, except as
permitted by applicable laws. Tenant shall immediately
advise Landlord in writing of the existence, use, storage or
disposition of any Hazardous or Toxic Substances in, upon,
or under the Demised Premises, or the adjoining lands.
Landlord shall have the right, but not the obligation, to
enter the Demised Premises at all times to inspect for the
presence of Hazardous or Toxic Substances. Tenant agrees
that in the event Hazardous or Toxic Substances are found to
exist in, upon or under the Demised Premises, as a result of
the actions or inactions of Tenant, its agents, employees or
invitees, Landlord may, in its sole discretion, require that
Tenant, at Tenant's sole cost and expense, take all steps
necessary to clean up, remove, decontaminate, detoxify,
resolve or otherwise treat the Hazardous or Toxic
Substances.
In addition to the foregoing, in the event Hazardous or
Toxic Substances are found in, upon or under the Demised
Premises, as a result of the actions or inactions of Tenant,
its agents, employees or invitees, Landlord or Landlord's
agents, designees or employees shall have the right, but not
the obligation, and without liability to Tenant for any loss
or damage that may accrue to Tenant's stock or business by
reason thereof, to take such actions as Landlord deems
necessary or advisable, in its sole judgment, to clean up,
remove, decontaminate, detoxify, resolve or otherwise treat,
any such Hazardous or Toxic Substances. All costs and
expenses incurred by Landlord in the exercise of any such
rights shall be payable by Tenant upon demand. Tenant
agrees to indemnify, defend and hold Landlord harmless from
and against any and all losses, damages, claims, orders,
decrees, judgments, expenses and costs (including attorneys'
fees), incurred by or imposed upon Landlord or its mortgagee
in connection with or arising out of (i) Tenant's breach of
the covenants and obligations under this Paragraph 18; or
(ii) Tenant's use, storage, disposition, treatment or
removal of any Hazardous or Toxic Substance in, upon or
under the Demised Premises, or the adjoining lands. In no
event shall the treatment or removal of Hazardous or Toxic
Substances within the Demised Premises, or the adjoining
lands constitute an eviction of Tenant, in whole or in part.
9. Each party shall also pay all costs, expenses and
reasonable attorney's fees that may be incurred or paid by
the other party in enforcing the terms of this Lease.
1.
Notwithstanding anything contained in this Paragraph
18, Landlord shall not be relieved of any liability for
occurrences resulting from the willful or negligent acts or
omissions of the Landlord or resulting from the Landlord's
failure to comply with its responsibilities under this
Lease.
The provisions of this Paragraph 18 shall survive the
termination of the Lease.
19. Insurance. Tenant agrees to secure and keep in full
force and effect from and after the date Landlord delivers
possession of the Demised Premises to Tenant and throughout the
term of this Lease at Tenant's sole cost and expense (with
coverage to commence at the time Tenant takes possession of the
Demised Premises, or at the commencement of the term of this
Lease, whichever occurs earlier),
1. Comprehensive general liability insurance on an
occurrence basis with minimum single limits of liability and
of bodily injury in an amount of Three Million and No/100
($3,000,000.00) Dollars, and Five Hundred Thousand
($500,000.00) Dollars with respect to damage to property;
and
2. In the event Tenant fails to obtain or maintain
the insurance required hereunder, Landlord may, at its
option, obtain same and any costs incurred by Landlord in
connection therewith shall be deemed additional rent to be
paid by Tenant and payable as such; and
3. If the Lease be canceled for the Tenant's default
at any time while there remains outstanding any obligation
from any insurance company to pay for damage or any part
thereof, then the claim against the insurance company shall,
upon the cancellation of the within Lease, be deemed
immediately to be and become the absolute and unconditional
property of the Landlord.
4. Certificate of Insurance is required naming
Landlord as an additionally insured to assure Landlord that
the Tenant has adequate liability and personal property
coverage. Any increase in cost of insurance premiums to
Landlord as a result of operations of Tenant will be borne
by Tenant, or Tenant may provide for the benefit of Landlord
an insurance policy on the same terms and conditions as the
original provided by Landlord.
20. Insured's Waiver, Notice. Any insurance procured by
Tenant as herein required shall be issued in the name of Tenant
by a reputable and responsible company satisfactory to Landlord
and licensed to do business in the State of Florida, shall name
Landlord as an additionally insured, and shall contain
endorsements that
1. such insurance may not be canceled or amended with
respect to Landlord without thirty (30) days written notice
by registered mail to Landlord by the insurance company;
2. Tenant shall be solely responsible for payment of
Premiums, and Landlord shall not be required to pay any
premiums for such insurance.
3. Any insurance herein required to be procured by
Tenant shall contain an express waiver of any right of
subrogation by the insurance company against Landlord within
ten (10) days of issuance of such policy by the insurance
company. The minimum limits of any insurance coverage
required herein shall not limit Tenant's liability under
this Lease, including, without limitation, Paragraph 18
hereof.
21. Bankruptcy, Assignment, Receivership and Insolvency.
1. Tenant agrees that the continued occupancy of the
Demised Premises in the manner and upon the terms set forth
in this Lease are of a special importance to the commercial
viability of the Demised Premises and, accordingly, agrees
that in the event this Lease is not canceled and terminated
as set forth in subparagraph lB) below following the
occurrence of any of the contingencies therein described,
then Tenant, and the trustee in bankruptcy or other
representative of Tenant, or, in the event of an assignment,
Tenant's assignee, shall, prior to the assumption of this
Lease by such representative or trustee or assignee, provide
adequate assurance to Landlord: (i) of the source of rents
and other consideration payable under this Lease; (ii) that
assumption or assignment of this Lease will not breach
substantially any provision in any other lease, financing
agreement, or master agreement relating to the Demised
Premises; (iii) of the continued use of the Demised Premises
in accordance with the Permitted Use only; (iv) that the
quality of goods to be sold in the Demised Premises will not
decline; (v) that Tenant's suppliers of merchandise or goods
for sale in the Demised Premises are willing to continue to
furnish such merchandise and goods as are of the same
quality and caliber as theretofore sold in the Demised
Premises; (vi) of the source of funds necessary to pay for
Tenant's merchandise and goods to be sold in the Demised
Premises, all on a current basis and (vii) of such other
matters as Landlord may reasonably require at the time of
such assumption or assignment. Tenant agrees that the
furnishing of assurances in accordance with the foregoing or
as may be directed by a court of competent jurisdiction
shall not be deemed to waive any of the covenants or
obligations of Tenant set forth in this Lease. In the event
that any person assuming this Lease or taking the same by
assignment shall desire to make alterations to the Demised
Premises, Landlord may further require adequate assurance,
by lien and completion bond, cash deposit or such other
means as Landlord may approve, of the source of payment for
the estimated cost of any work to be performed in connection
therewith, and Landlord may require the delivery prior to
the commencement thereof of waivers of lien from all
contractors, subcontractors, laborers or material suppliers
engaged to perform such alterations or to supply materials
therefor. Notwithstanding the foregoing, such alterations
shall be subject in all respects to the rights and
obligations of Landlord and Tenant hereunder relating to
such alterations.
2. If at any time after the Date of Lease (whether
prior to the commencement of or during the term of this
Lease) (i) any proceedings in bankruptcy, insolvency or
reorganization shall be instituted against Tenant pursuant
to any Federal or State law now or hereafter enacted, or any
receiver or trustee shall be appointed of all or any portion
of Tenant's business or property, or any execution or
attachment shall issue against Tenant or any of Tenant's
business or property or against the leasehold estate created
hereby, and any of such proceedings, process or appointment
be not discharged and dismissed within thirty (30) days from
the date of such filing, appointment or issuance; or (ii)
Tenant shall be adjudged as bankrupt or insolvent, or Tenant
shall make an assignment for the benefit of creditors, or
Tenant shall file a voluntary petition in bankruptcy or
petitions for (or enters into) an arrangement for
reorganization, composition or any other arrangement with
Tenant's creditors under any Federal or State law now or
hereafter enacted, or this Lease or the estate of Tenant
herein shall pass to or devolve upon, by operation of law or
otherwise, anyone other than Tenant (except as herein
provided), the occurrence of any one of such contingencies
shall be deemed to constitute and shall be construed as a
repudiation by Tenant of Tenant's obligations hereunder and
shall cause this Lease ipso facto to be canceled and
terminated effective as soon as permitted by then applicable
law without thereby releasing Tenant; and upon such
termination Landlord shall have the immediate right to re-
enter the Demised Premises and to remove all persons and
property therefrom; this Lease shall not be treated as an
asset of Tenant's estate, and neither Tenant nor anyone
claiming by, through or under Tenant by virtue of any law or
any order of any court shall be entitled to the possession
of the Demised Premises or to remain in the possession
thereof. Upon the termination of this Lease, as aforesaid,
Landlord shall have the right to retain as partial damages,
and not as a penalty, any prepaid rents and any Security
Deposit, and Landlord shall also be entitled to exercise
such rights and remedies to recover from Tenant as damages
such amounts as are specified in Paragraph 22 hereof, unless
any statute or rule of law governing the proceedings in
which such damages are to be proved shall lawfully limit the
amount of such claims capable of being so proved, in which
case Landlord shall be entitled to recover, as and for
liquidated damages, the maximum amount which may be allowed
under any such statute or rule of law.
22. Default.
1. If this Lease be assigned or the Demised Premises
be sublet, either voluntarily or by operation of law, except
as herein provided, or if Tenant shall fail (i) to pay,
within five (5) days, when due, any rental or other sum
payable hereunder; or (ii) to keep, observe or perform any
of the other terms, covenants and conditions herein to be
kept, observed and performed by Tenant for more than fifteen
(15) days after written notice shall have been sent to
Tenant specifying the nature of such default (or such
greater length of time as may be reasonably required to cure
such default provided that within such fifteen (15) day
period Tenant has commenced and thereafter diligently
continues steps to cure the default), then and in any one or
more of such events are not timely cured (herein sometimes
referred to as an "Event of Default"), Landlord shall have
the immediate right to re-enter the Demised Premises, either
by summary proceedings, by force or otherwise and to
dispossess Tenant and all other occupants therefrom and
remove and dispose of all property therein or, at Landlord's
election, to store such property in a public warehouse or
elsewhere at the cost and for the account of Tenant, all
without service of any further notice of intention to re-
enter and with or without resort to legal process (which
Tenant hereby expressly waives) and without Landlord being
deemed guilty of trespass or becoming liable for any loss or
damage which may be occasioned thereby. Upon the occurrence
of any such Event of Default, Landlord shall also have the
right, at its option, in addition to and not in limitation
of any other right or remedy, to terminate this Lease by
giving Tenant a written three (3) days' notice of
cancellation and upon the expiration of said three (3) days,
this Lease and the term hereof shall end and expire as fully
and completely as if the date of expiration of such three
(3) day period were the date herein definitely fixed for the
end and expiration of this Lease and the term hereof and
thereupon, unless Landlord shall have theretofore elected to
re-enter the Demised Premises, Landlord shall have the
immediate right of re-entry, in the manner aforesaid, and
Tenant and all other occupants shall quit and surrender the
Demised Premises to Landlord, but Tenant shall remain liable
as hereinafter provided; however, that if Tenant shall
default:
(1) In the timely payment of any rental or other
sum payable hereunder and any such default shall continue or be
repeated for three (3) consecutive months, or for a total of five
(5) months in any period of twelve (12) months, or
(2) In the performance of any other covenants of
this Lease more than six (6) times, in the aggregate, in any
period of twelve (12) months, then, notwithstanding that such
defaults shall have been cured within the period after notice as
above provided, any further default shall be deemed to be
deliberate, and Landlord thereafter may serve said written three
(3) day notice of cancellation without affording to Tenant an
opportunity to cure such further default, as long as Landlord
does so in accordance with Florida Statutes.
2. If by reason of the occurrence of any such Event
of Default, the term of this Lease shall end before the date
therefor originally fixed herein, or Landlord shall re-enter
the Demised Premises, or Tenant shall be ejected,
dispossessed, or removed therefrom by summary proceedings or
in any other manner, Landlord at any time thereafter may, in
Landlord's sole discretion, relet the Demised Premises, or
any part or parts thereof, either in the name of Landlord or
as agent for Tenant, for a term or terms which, at
Landlord's option, may be less than or exceed the period of
the remainder of the term hereof or which otherwise would
have constituted the balance of the term of this Lease and
grant market level concessions or free rent. Landlord shall
receive the rents from such reletting and shall apply the
same, first, to the payment of any indebtedness other than
rent due hereunder from Tenant to Landlord; second to the
payment of such reasonable expenses as Landlord may have
incurred in connection with re-entering, ejecting, removing,
dispossessing, reletting, altering, repairing, redecorating,
subdividing, or otherwise preparing the Demised Premises for
reletting, including reasonable brokerage and attorney's
fees; and the residue, if any, Landlord shall apply to the
fulfillment of the terms, covenants and conditions of Tenant
hereunder, and Tenant hereby waives all claims to the
surplus, if any. Tenant shall be and hereby agrees to be
liable for and to pay Landlord any deficiency between the
rent, additional rents and other charges reserved herein and
the net avails, as aforesaid, of reletting, if any, for each
month of the period which otherwise would have constituted
the balance of the term of this Lease. Tenant hereby agrees
to pay such deficiency on an accelerated basis or at
Landlord's sole option, in monthly installments on the rent
days specified in this Lease, and any suit or proceeding
brought to collect the deficiency for any month, either
during the term of this Lease or after any termination
thereof, shall not prejudice or preclude in any way the
rights of Landlord to collect the deficiency for any
subsequent month by a similar suit or proceeding. Landlord
shall in no event be liable in any way whatsoever for the
failure to relet the Demised Premises or, in the event of
such reletting, for failure to collect the rents reserved
thereunder. Landlord is hereby authorized and empowered to
make such repairs, alterations, decorations, subdivision or
other preparations for the reletting of the Demised premises
as Landlord shall deem fit, advisable and necessary, without
in any way releasing Tenant from any liability hereunder, as
aforesaid. Landlord shall have a valid and subsisting lien
for the payment of all rentals, charges and other sums to be
paid by Tenant and reserved hereunder (including all costs
and expenses incurred by Landlord in recovering possession
of the Demised Premises and the reletting thereof as
provided under this Paragraph, which shall be deemed to be
rent) upon Tenant's goods, merchandise, inventory, accounts,
wares, equipment, signs, fixtures, furniture and other
personal property situated in the Demised Premises ("Lien
Property"), and such property shall not be removed therefrom
without the prior written consent of Landlord until the
arrearages in rent as well as any and all other sums of
money then due to Landlord hereunder shall have first been
paid and discharged. Tenant agrees and acknowledges that
this Lease also serves as a security agreement under Article
9 (F.S. 679 et seq.) of the Uniform Commercial Code to
impose a lien upon the Lien Property to secure the payment
of all rentals charges and other sums to be paid by Tenant
and reserved hereunder and Tenant agrees to execute,
acknowledge and deliver to Landlord such financing
statements and other instruments as Landlord may request in
order to commemorate the foregoing within ten (10) days
after Landlord's request therefor. Tenant empowers Landlord
as Tenant's attorney-in-fact, coupled with an interest,
irrevocably and with power of substitution to execute and
file, to the extent permitted by law from time to time in
effect during the term of this lease, any financing
statement, any amendment thereto or any continuation
statement which Landlord may deem necessary to perfect,
protect or enforce the foregoing provisions. Landlord agrees
to subordinate its Landlords lien to the lien of a
commercial third party lender within ten (10) days of
written request from Tenant.
Upon the occurrence of an Event of Default by Tenant,
Landlord may, in addition to any other remedies provided
herein or by law, enter upon the Demised Premises and take
possession of any and all goods, merchandise, inventory
wares, equipment, signs, fixtures, furniture and other
personal property of Tenant situated in the Demised Premises
without liability for trespass or conversion, and sell the
same with or without notice at public or private sale, with
or without having such property at the sale, at which
Landlord or its assigns may purchase, and apply proceeds
thereof, less any and all reasonable expenses connected with
the taking of possession and the sale of the property, as a
credit against any sums due by Tenant to Landlord; Tenant
agrees to pay any deficiency forthwith, after demand.
Landlord, at its option, may foreclose said lien in the
manner provided by law. The lien herein granted to Landlord
shall be in addition to any Landlord's lien that may now or
at any time hereafter be provided by law.
3. No such re-entry or taking possession of the
Demised Premises by Landlord shall be construed as an
election on its part to terminate this Lease unless a
written notice of such intention be given to Tenant or
unless the termination thereof shall result as a matter of
law or be decreed by a court of competent jurisdiction.
Notwithstanding any such reletting without termination,
Landlord may at any time thereafter elect to terminate this
Lease for such previous breach or default
4. In the event this Lease is terminated pursuant to
the foregoing provisions of this Paragraph or terminates
pursuant to the provisions of this paragraph, Landlord may
recover from Tenant all damages it may sustain by reason of
Tenant's default, including the reasonable cost of
recovering the Demised Premises and reasonable attorney's
fees and upon so electing and in lieu of the damages that
may be recoverable under subdivision (B) above, Landlord
shall be entitled to recover from Tenant, as and for
Landlord's damages, an amount equal to the difference
between the Minimum Rent, additional rents (including taxes
and insurance) and other charges reserved hereunder for the
period which otherwise would have constituted the balance of
the term of this Lease and the then present rental value of
the Demised Premises for such period, both discounted at the
rate of eight (8%) percent per annum to present worth, all
of which shall immediately be due and payable by Tenant to
Landlord. In determining the rental value of the Demised
Premises the rental realized by any reletting, if such
reletting be accomplished by Landlord within a reasonable
time after the termination of this Lease, shall be deemed
prima facie to be the rental value, but if Landlord shall
not undertake to relet or having undertaken to relet, has
not accomplished reletting, then it will be conclusively
presumed that the rents reserved under this Lease represent
the rental value of the Demised Premises for the purposes
hereof (in which event Landlord may recover from the Tenant,
the full total of all rents and additional charges due
hereunder, discounted to present value as herein before
provided). Landlord shall be obliged, however to account to
Tenant for the Minimum Rent and additional rents received
from persons using or occupying the Demised Premises during
the period representing that which would have constituted
the balance of the term of this Lease, but only at the end
of said period and only if Tenant shall have paid to
Landlord its damages as provided herein, and, only to the
extent of sums recovered from Tenant as Landlord's damage,
the Tenant waiving any claim to any surplus. Nothing herein
contained, however, shall limit or prejudice the right of
Landlord to prove and obtain as damages by reason of such
termination, an amount equal to the maximum allowed by any
statute or rule of law in effect at the time when, and
governing the proceedings in which, such damages are to be
proved, whether or not such amount be greater, equal to, or
less than the amounts referred to in this Paragraph.
5. During the continuance of any uncured Event of
Default, Landlord shall have the right to injunctive relief
as if no other remedies were provided herein to such breach.
6. The rights and remedies herein reserved by or
granted to Landlord are distinct, separate and cumulative,
and the exercise of any one of them shall not be deemed to
preclude, waive or prejudice Landlord's right to exercise
any or all others.
7. If Tenant shall suffer any Event of Default
hereunder prior to the date fixed as the commencement of any
renewal or extension of this Lease, if any, whether by a
renewal option herein contained or by separate agreement,
Landlord may cancel such option or agreement for renewal or
extension of this Lease, upon two (2) days written notice to
Tenant, provided that such notice is given prior to Tenant
curing such Event of Default.
8. In the event that Landlord should bring suit for
the possession of the Demised Premises, for the recovery of
any sum due hereunder, or because of the breach of any
covenant of this Lease, or for any relief against Tenant,
declaratory or otherwise, or should Tenant bring any suit
for any relief against Landlord, declaratory or otherwise,
arising out of this Lease, the prevailing party shall
recover from the other party, costs, expenses and reasonable
attorney's fees that the prevailing party may have incurred
in connection therewith at all levels of proceedings.
9. Tenant agrees that the venue and/or jurisdiction
for any legal actions brought by Landlord pursuant to this
Paragraph shall be in Broward County, Florida.
10. THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY
AGAINST THE OTHER ON ANY MATTER WHATSOEVER ARISING OUT OF OR
IN ANY WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF
LANDLORD AND TENANT CREATED HEREBY, THE TENANT'S USE OR
OCCUPANCY OF THE DEMISED PREMISES, AND/OR ANY CLAIM FOR
INJURY OR DAMAGE.
11. In the event Landlord commences any action or
proceeding for non-payment of rent, additional rents or
other charges due hereunder, the Tenant shall pay into the
court registry the amount alleged in the complaint as
unpaid, or if such amount is contested, such amount as is
determined by the court, and any rent accruing during the
pendency of the action, when due. The Tenant must pay the
amount alleged in the complaint into the court registry on
or before the date on which his answer to the claim is due.
If the Landlord is in danger of loss of the Demised Premises
or other hardship resulting from the loss of rental income
from the Demised Premises, the Landlord may apply to the
court for disbursement of all or part of the funds so held
in the court registry. Failure of the Tenant to pay the rent
into the court registry pursuant to this section shall be
deemed an absolute waiver of the Tenant's defenses. In such
case, the Landlord is entitled to an immediate default
without further notice or hearing thereon.
23. Destruction. If the Demised Premises shall be damaged,
in whole or in part, by fire or other casualty insured under
Landlord's insurance policies, then upon Landlord's receipt of
the insurance proceeds, Landlord shall, if possible, render said
Demised Premises tenantable by repairs within one hundred eighty
(180) days from the date of the Damage. If said Demised Premises
are not or cannot be rendered tenantable within said time, it
shall be optional with either party hereto to cancel this Lease,
and in the event of such cancellation, or not, the rent shall be
paid only to the date of such fire or casualty. The cancellation
herein mentioned shall be evidenced in writing. In the event the
Lease is not canceled, Tenant shall when possible repair, restore
or replace Tenant's trade fixtures, personal property,
decorations, signs and contents in or upon the Demised Premises
in a manner and to at least a condition equal to that existing
prior to their damage or destruction.
Tenant shall not be entitled to and hereby waives all claims
against Landlord for any compensation or damage for loss of use
of the whole or any part of the Demised Premises and/or for any
inconvenience or annoyance occasioned by any such damage,
destruction, repair or restoration.
24. Condemnation.
1. Total: If the whole of the Demised Premises or
such part hereof as will render the remainder untenantable
shall be acquired or taken by eminent domain for any public
or quasi public use or purpose or by private purchase in
lieu thereof, then the Lease and the term thereof shall
automatically cease and terminate as of the date of title
vesting in such proceeding.
2. Partial: (i) If any part of the Demised Premises
shall be taken and such partial taking shall render that
portion not so taken unsuitable for the purposes for which
the Demised Premises were leased, or (ii) if more than one-
fourth (1/4th) of the existing parking spaces are so taken
and Landlord cannot re-assign the same number of alternate
spaces to Tenant, then Landlord and Tenant shall each have
the right to terminate the Lease by written notice given to
the other within sixty (60) days after the date of title
vesting in such proceeding. If any part of the Demised
Premises shall be so taken and the Lease shall not be
terminated, as aforesaid, then the Lease and all of the
terms and provisions thereof shall continue in full force
and effect except that the Minimum Rent shall be thereafter
reduced in the same proportion that the remaining leasable
area of the Building upon the Demised Premises bears to
original leasable area of the Building.
3. As used herein, the amount received by Landlord
shall mean that portion of the award in condemnation
received by Landlord from the condemning authority which is
free and clear of all prior claims or collections by the
holders of any mortgages or deeds of trust or any ground or
underlying Landlords
4. If the Lease is terminated as provided in this
paragraph, all rents shall be paid by Tenant up to the date
that possession is so taken by public authority, and
Landlord shall make an equitable refund of any rents paid by
Tenant in advance and not yet earned.
5. All damages or compensation awarded or paid for
any such taking, whether for the whole or a part of the
Demised Premises or any part of the buildings or
improvements thereon, shall belong to and be the property of
Landlord without any participation by Tenant, whether such
damages or compensation shall be awarded or paid for
diminution in value of the fee or in the leasehold estate
created hereby, and Tenant hereby expressly waives and
relinquishes all claims to such award or compensation or any
part thereof and of the right to participate in any such
condemnation proceedings against the Landlord; provided,
however, that nothing herein contained shall be construed to
preclude Tenant from prosecuting any claim directly against
the condemning authority, but not against Landlord, for the
value of or damages to and/or for the cost of removal of
Tenant's movable trade fixtures and other personal property
which under the terms of the Lease would remain Tenant's
property upon the expiration of the term of this Lease, as
may be recoverable by Tenant in Tenant's own right, or for
other such claims separately cognizable to Tenant, provided
further that no such claim shall diminish or otherwise
adversely affect Landlord's award. Each party agrees to
execute and deliver to the other all instruments that may be
required to effectuate the provisions of this Paragraph.
25. Access to Premises. Landlord shall have the right to
enter the Demised Premises during normal business hours to
inspect or to exhibit the same to prospective purchasers,
mortgagees, Tenants and tenants and to make such repairs,
additions, alterations or Improvements Landlord may deem
reasonably necessary. Landlord shall be allowed to take all
material into and upon said Demised Premises that may be required
theretofore without the same constituting an eviction of Tenant
in whole or in part, and the rents reserved shall not abate while
said work is in progress by reason of loss or interruption of
Tenant's business or otherwise; Tenant shall have no claim for
damages. If Tenant shall not be personally present to permit an
entry into said premises when for any reason an entry therein
shall be permissible, Landlord may enter the same by a master key
or by the use of force without rendering Landlord liable therefor
and without in any manner affecting the obligations of this
Lease. The provisions of this paragraph shall not be construed
to impose upon Landlord any obligation whatsoever for the
maintenance or repair of the building or any part thereof.
During the six (6) months prior to the expiration of this Lease
or any renewal term, Landlord may place upon the Demised Premises
signs indicating that -- the Demised Premises are available for
rent or sale, which Tenant shall permit to remain thereon, except
as otherwise provided for in this Lease.
26. Subordination. Subject to this Section 26, this Lease
is subject and subordinate to each and every mortgage, deed of
trust and/or ground lease which may now or hereafter affect the
Demised Premises (collectively referred to as a "Mortgage") and
to all renewals, extensions, supplements, amendments,
modifications, consolidations and replacements thereof or
thereto, substitutions therefor, and advances made under a
Mortgage. Tenant agrees to execute within fifteen (15) days
written request from Landlord a commercially reasonable
subordination, in favor of the holder of any such mortgage or
deed of trust (hereinafter a "Mortgagee") or the landlord
pursuant to any ground lease, provided said subordination
provides that said Mortgagee (as hereinafter defined) will agree
not to disturb Tenant's right to possession of the Demised
Premises, so long as Tenant is not in default (beyond any
applicable cure or grace period) under the terms of this Lease.
If Tenant shall fail to execute such subordination within said
fifteen (15) day period, the subordination shall be self-
operative upon delivery by the Mortgagee to the Tenant of a
statement whereby the Mortgagee agrees not to disturb Tenant's
right to possession of the Demised Premises, so long as Tenant is
not in default (beyond applicable cure or grace period)
hereunder.
If at any time prior to the expiration of the term hereof,
the Demised Premises are sold or a mortgagee receives possession
or control of the Landlord's interest hereunder, then Tenant
agrees, at the election and upon demand of Landlord, or any such
owner or mortgagee in possession, to attorn, from time to time,
to any such owner, Landlord or mortgagee, upon the then executory
terms and conditions of this Lease, for the remainder of the term
originally demised in this Lease, provided that such owner,
Landlord or mortgagee, as the case may be, or receiver caused to
be appointed by any of the foregoing, shall then be entitled to
possession of the Demised Premises. The provisions of this
subsection shall inure to the benefit of Landlord or a mortgagee,
and shall be self-operative upon any such demand, and no further
instrument shall be required to give effect to said provisions.
Tenant, however, upon demand of Landlord or a mortgagee, agrees
to execute, from time to time, instruments in confirmation of the
foregoing provisions of this subsection, satisfactory to Landlord
or mortgagee, acknowledging such attornment and setting forth the
terms and conditions of its tenancy. Tenant hereby irrevocably
constitutes and appoints Landlord as Tenant's attorney-in-fact to
execute any such certificates for and on behalf of Tenant.
Nothing contained in this subsection shall be construed to impair
any right otherwise exercisable by Landlord or a mortgagee.
Anything to the contrary notwithstanding, in the event that
Tenant and a Mortgage enter into a Subordination Non-Disturbance
and Attornment Agreement ("SNDA"), the terms of said SNDA shall
control over the terms of this section, with regards to the
rights and obligations of Tenant and said Mortgagee.
27. Quiet Enjoyment. Tenant, upon paying the rents and
performing all of the terms on its part to be performed, shall
peaceably and quietly enjoy the Demised Premises subject,
nevertheless, to the terms of this Lease and to any mortgage or
agreements to which this Lease is subordinated.
28. End of Term. At the expiration of this Lease, Tenant
shall surrender the Demised Premises broom clean and in the same
condition as it was in upon the completion of the Landlord's
Work, reasonable wear and tear and renovations as herein
contemplated excepted, and shall deliver all keys and
combinations to locks, safes and vaults to Landlord. Within
thirty (30) days of surrendering said premises, Tenant shall
remove all its personal property and equipment, and (except as
previously agreed to in writing by Landlord and Tenant) all trade
fixtures, alterations, additions and decorations, and shall
repair any damage caused thereby. Tenant's obligations to perform
this provision shall survive the end of the term of this Lease.
If Tenant fails to remove its property upon the expiration of
this Lease, the said property shall be deemed abandoned and shall
become the property of Landlord, and if Landlord elects to remove
same, Tenant shall be liable for all costs incurred in connection
therewith. If the Demised Premises be not surrendered as and when
aforesaid, Tenant shall indemnify Landlord against all loss or
liability resulting from the delay by Tenant in so surrendering
the same, including, without limitation, any claims made by any
succeeding occupant founded on such delay. Tenant's obligations
under this Paragraph shall survive the expiration or sooner
termination of the term of this lease
29. Holding Over. Any holding over after the expiration of
this term or any renewal term shall be construed to be a tenancy
from month to month at the rents herein specified (prorated on a
monthly basis) and shall otherwise be on terms herein specified
so far as applicable. In the event such holding over is without
the written consent of Landlord, Tenant shall be obligated to pay
double the monthly rent and charges set forth herein.
30. No Waiver. Failure of Landlord to insist upon the
strict performance of any provision or to exercise any option or
any rules and regulations shall not be construed as a waiver for
the future of any such provision, rule or option. The receipt by
Landlord of rent with knowledge of the breach of or default under
any provisions of this Lease shall not be deemed a waiver of such
breach or default. No provision of this Lease shall be deemed to
have been waived by Landlord unless such waiver is in writing
signed by Landlord. No payment by Tenant or receipt by Landlord
of a lesser amount than the monthly rent shall be deemed to be
other than on account of the earliest rent then unpaid nor shall
any endorsement or statement on any check or any letter
accompanying any check or payment as rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of
such rent or pursue any other remedy provided in this Lease or
under the laws of the State of Florida.
31. Relationship of Parties. Nothing contained in this
Lease shall be deemed to constitute or be construed to create the
relationship of principal and agent, partnership, joint venturers
or any other relationship between the parties hereto, other than
the relationship of Landlord and Tenant.
32. Notices. Any notice, demand, request or other
instrument which may be or are required to be given under this
Lease shall be delivered in person or sent by United States
Certified or Registered Mail, postage prepaid, or by overnight
courier such as Federal Express, and shall be addressed:
1. If to Landlord at the address herein above given;
and
2. if to Tenant, at the address set forth in 1 (c).
Either party may designate such other address as shall be
given by written notice. Any notice mailed in accordance herewith
shall be deemed received three (3) business days from the date of
mailing.
33. Recording. Tenant shall not record this Lease or a
memorandum thereof without the prior written consent of Landlord.
34. Partial Invalidity. If any provision of this Lease or
application thereof to any person or circumstance to any extent
be invalid, the remainder of this Lease or the application of
such provision to persons or circumstances other than those as to
which it is held invalid shall not be affected thereby and each
provision of this Lease shall be valid and enforced to the
fullest extent permitted by law.
35. Brokerage. Landlord and Tenant each represent and
warrant to the other that neither has had any dealings with any
person, firm, broker or finder in connection with the negotiation
of this Lease other than GODART PROPERTIES (the "Broker"), and no
other broker or person, firm or entity is entitled to any
commission or finder's fee in connection with this transaction
(except for the Broker). Landlord and Tenant do each hereby
indemnify, defend, protect and hold the other harmless from and
against any costs, expenses or liability for compensation,
commission or charges which may be claimed by any broker, finder
or other similar party by reason of any actions of the
indemnifying party. Landlord agrees to pay to the Broker the
commission for its services in accordance with a separate
agreement between the Landlord and the Broker.
36. Provisions Binding, Etc. Except as otherwise expressly
provided, all provisions herein shall be binding upon and shall
inure to the benefit of the parties, their legal representatives,
successors and assigns. Each provision to be performed by Tenant
shall be construed to be both a covenant and a condition, and if
there shall be more than one Tenant, they shall all be bound
jointly and severally, by these provisions. In the event of any
sale of the Demised Premises or this Lease, Landlord shall be
entirely relieved of all obligations hereunder, provided such
transferee assumes, in writing, all obligations of the Lease
hereunder.
37. Entire Agreement, Etc. This Lease and the Addenda,
Exhibits or Riders (if attached) set forth the entire agreement
between the parties; any prior conversations or writings are
merged herein and extinguished. No subsequent amendment to this
Lease shall be binding upon Landlord or Tenant unless reduced to
writing and signed by both parties. Submission of this Lease for
examination does not constitute an option for the Demised
Premises and becomes effective as a lease only upon execution and
delivery thereof by both Landlord and Tenant. If any provision
contained in an Addendum is inconsistent with the printed
provision of this Lease, the provision contained in said Addendum
shall supersede said printed provision. The captions, numbers and
index appearing herein are inserted only as a matter of
convenience and are not intended to define, limit, construe or
describe the scope or intent of any paragraph, nor in any way
affect this Lease.
38. Definitions. The term "Landlord" as used in this Lease
shall mean only the owner or the mortgagee in possession for the
time being of the land and building (or the owner of a lease of
the building) of which the Demised Premises forms a part, so that
in the event of any sale or sales of said land and building, or
of the underlying lease or ground lease thereof, or in the event
of a lease of said building, Landlord shall be and hereby is
entirely freed and relieved of all covenants and obligations on
its part to be performed hereunder, and it shall be deemed and
construed without further agreement between the parties or their
successors in interest or between the parties and the purchaser
at any such sale, or the said Tenant of the building, that the
purchaser or the Tenant of the building has assumed and agreed to
carry out any and all covenants and obligations of Landlord
hereunder.
39. Estoppel Certificate by Tenant/Financial Statements.
From time to time, within ten (10) days next following Landlord's
request, Tenant shall deliver to Landlord a written statement
(prepared by Landlord at Landlord's expense) executed and
acknowledged by Tenant in form satisfactory to Landlord (a)
stating that this Lease is then in full force and effect and has
not been modified (or if modified, setting forth all
modifications), (b) setting forth the date to which the Minimum
Rent, additional rent and other charges hereunder have been paid,
(c) stating whether or not, to the best knowledge of Tenant,
Landlord is in default under this Lease, and, if Landlord is in
default, setting forth the specific nature of all such defaults,
(d) certifying that Tenant has accepted possession of the Demised
Premises, and (e) as to any other reasonable matters requested by
Landlord.
40. Guaranty. This paragraph has been omitted in its
entirety
41. Limitation of Liability. Tenant shall look solely to
Landlord's interest in the Demised Premises for the satisfaction
of any judgment or decree requiring the payment of money by
Landlord, based upon any default under this Lease, and no other
property or asset of Landlord shall be subject to levy, execution
or other enforcement procedure for the satisfaction of such
judgment or decree.
42. Captions and Headings. Captions and Article headings
contained in this Lease are for convenience and reference only
and in no way define, describe, extend or limit the scope or
intent of this Lease nor the intent of any provision hereof.
43. Counterparts. This Lease may be executed in one or
more counterparts, each of which shall be deemed to be an
original but all of which shall constitute one and the same
agreement.
44. Gender. All terms and words used in this Lease,
regardless of the number and gender in which used, shall be
deemed to include any other gender or number as the context or
the use thereof may require.
45. Interpretation. This Lease shall not be construed more
strictly against one party than against the other merely by
virtue of the fact that it may have been prepared by counsel for
one of the parties, it being recognized that both Landlord and
Tenant have contributed substantially and materially to the
preparation of this Lease. Wherever used in this Lease, "any"
means "any and all"; "include" and "including" each are without
limitation; "indemnify" means that the indemnitor will defend,
indemnify and hold the indemnitee harmless against any claims,
demands, losses or liabilities asserted against or incurred by,
the indemnitee to any third party because of the subject matter
of the indemnity; "may not" other negative forms of the verb
"may" each are prohibitory; and "will", "must", "should" each are
mandatory. Unless this Lease expressly or necessarily requires
otherwise (ii) any time period measured in "days" means
consecutive calendar days, except that the expiration of any time
period measured in days that expires on a Saturday, Sunday or
legal holiday automatically will be extended to the next business
day; (ii) any action is at the sole expense of the party required
to take it; (iii) the scope of any indemnity includes any costs
and expenses, including reasonable attorneys' fees, incurred in
defending any indemnified claim, or in enforcing the indemnity,
or both.
46. Time of the Essence. Time is of the essence of this
Agreement.
47. Corporate Tenant. If Tenant is or will be a
corporation, the persons executing this Lease on behalf of Tenant
hereby covenant, represent and warrant that Tenant is a duly
incorporated or a duly qualified (if a foreign corporation)
corporation and authorized to do business in the State of
Florida; and that the person or persons executing this Lease on
behalf of Tenant is an officer or are officers of such Tenant,
and that he or they as such officers were duly authorized to sign
and execute this Lease. Upon request of Landlord to Tenant,
Tenant shall deliver to Landlord documentation satisfactory to
Landlord evidencing Tenant's compliance with the provisions of
this Paragraph.
48. Radon Gas. Radon is a naturally occurring radioactive
gas that, when it has accumulated in a building in sufficient
quantities, may present health risks to persons who are exposed
to it over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained
from your county public health unit.
49. Automatic Renewal Term(s). Provided there is not then
an uncured Event of Default at the time the renewal term is
scheduled to commence, Tenant is hereby granted two (2) five-year
options to renew this Lease (the "Option Lease Terms") under the
same terms and conditions as the initial five-year term with the
Minimum Rent due Landlord for the Demised Premises for the
initial lease year of the initial Option Lease Term equal to Two
Hundred Sixteen Thousand Ninety-Four Dollars and Forty-Four Cents
($216,094.44) per annum, consisting of $176,242.44 as "Base Rent"
and $39,852.00 as "Expenses," payable in advance, at a rate of
Eighteen Thousand Seven Dollars and Eighty-Seven Cents
($18,007.87) per month, plus any increased Expenses pursuant to
Paragraph 1 (h)(3), plus any applicable sales and/or rent taxes
thereon; the Base Rent due Landlord shall increase three percent
(3%) annually as per Paragraph 1, Section h, (2) above. Tenant
shall give Landlord written notice of Tenant's intention not to
exercise these options at least one hundred eighty (180) days
prior to the end of the initial term or the first Option Lease
Term, as the case may be (Certified mail, return receipt
requested). If such notice is not received by Landlord within
said time period, the Lease shall be automatically renewed as is
stated above, at Landlord's option.
50. Refuse Prevention. Tenant will not place or maintain
any garbage, trash, rubbish, debris, or any other refuse in any
vestibule or entry of the Demised Premises; on the pathways or
corridors adjacent thereto; or elsewhere on the exterior of the
Demised Premises, which shall include, without limitation,
sidewalks, alleyways and courtyards. Tenant also will not cause
or permit odors of any kind to emanate from the Premises.
51. Delayed Occupancy. If Landlord cannot deliver
possession of the Demised Premises to Tenant by the Lease
Commencement Date, the Lease shall not be void or voidable, nor
shall Landlord be liable to Tenant for any loss or damage
resulting therefrom; in that event the term of this Lease shall
be amended to commence on the date when Landlord can deliver
possession, and all corresponding dates of the Lease shall be
adjusted accordingly in conjunction with paragraph 1 (g) above.
If as a result of such postponement, the term would begin on
other than the first day of a month, the commencement date shall
be the first day of that month; however, the Tenant shall pay
rent pro-rated for such partial month's occupancy in conjunction
with paragraph 4. above. Anything to the contrary
notwithstanding, in the event that Landlord has not delivered
possession of the Demised Premises prior to May 15, 1997,
Landlord agrees to make available to Tenant, under the same terms
and conditions set forth herein, thirteen thousand (13,000)
square feet of warehouse space within the Port 95-3 building
which is owned by an affiliate of Landlord. Upon the commencement
of the Lease Term, all of Tenant's rights in and to the premises
in the Port 95-3 building shall terminate. In the event that
Landlord has not obtained a Certificate of Occupancy for the
warehouse portion of the Demised Premises with ninety (90) days
from the date of this Lease, (the "Anticipated Delivery Date")
Landlord shall give the Tenant a credit against Rent equal to
$85.93 for every day beyond the Anticipated Delivery Date until a
Certificate of Occupancy for the warehouse portion of the Demised
Premises has been obtained. In the event that Landlord has not
obtained a Certificate of Occupancy for the warehouse portion of
the Demised Premises prior to one hundred eighty (180) days from
the date of this Lease (the "Termination Date"), Tenant shall
have the option of either (i) terminating the Lease or (ii)
extending the Termination Date for an additional forty five (45)
days. Tenant shall notify Landlord in writing of its decision
within five (5) business days of the Termination Date. If Tenant
fails to notify Landlord of its decision within five (5) days of
the Termination Date, then Landlord shall have the option of
terminating the Lease or extending the Termination Date.
Landlord will obtain a Certificate of Occupancy for the office
portion of the Demised Premises and will deliver occupancy of
said portion to the Tenant within thirty (30) days after
commencement of the Lease Term (the "Office Completion Date"). In
the event the office portion is not completed by the Office
Completion Date, Tenant shall be entitled to a credit against
Rent of $25.00 for every day beyond the Office Completion Date
until delivery of possession of the office portion to the Tenant.
52. No Presumption Against Drafter. Landlord and Tenant
understand, agree, and acknowledge that i) this Lease has been
freely negotiated by both parties; and ii) that, in any
controversy, dispute, or contest over the meaning,
interpretation, validity, or enforceability of this Lease or any
of its terms or conditions, there shall be no interference,
presumption, or conclusion drawn whatsoever against either party
by virtue of that party having drafted this Lease or any portion
thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
instrument for the purpose herein expressed, this 26th day of
March, 1997.
Signed, sealed and delivered in PORT 95-4, LTD., a Florida
limited partnership
the presence of:
As to Landlord: By: KELSY PORT 95-4, LTD., a
Florida limited
partnership, General
Partner
_________________________________
By: KELSY PORT 95-4, INC.,
a Florida corporation,
General Partner
________________________________
By: /s/ Charles M. Kelsy, Jr.
Charles M. Kelsey,
Jr.,
President
As to Tenant: INTERNATIONAL AIRLINE SUPPORT
GROUP, INC., a Delaware
corporation
________________________________
By: /s/ A.A. Dyer
Alexius A. Dyer, CEO
________________________________
