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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(X)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1998
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( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-22760
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AIRPORT SYSTEMS INTERNATIONAL, INC.
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(Exact name of small business issuer as specified in its charter)
Kansas 48-1099142
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11300 West 89th Street
Overland Park, Kansas 66214
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(address of principal executive offices)
(913)492-0861
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(Issuer's telephone number)
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the previous 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 ( )
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State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common stock, $0.01 par value - 2,230,500 shares outstanding as of September 1,
1998
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AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
FORM 10-QSB
QUARTER ENDED JULY 31, 1998
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I - FINANCIAL INFORMATION
ITEM I - CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 8
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 12
Item 6 - Exhibits and Reports on Form 8-K
SIGNATURE PAGE 13
</TABLE>
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PART I. - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31, APRIL 30,
1998 1998
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(In thousands)
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash & cash equivalents $ 1,330 $ 2,449
Accounts receivable, net 6,394 6,156
Inventories, net 6,329 5,261
Other current assets 97 152
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Total current assets 14,150 14,018
Property and equipment, at cost 3,360 3,303
Accumulated depreciation and amortization 1,765 1,687
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1,595 1,616
Cost in excess of net assets acquired, net 1,172 1,190
Other assets 30 30
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Total assets $16,947 $16,854
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,571 $ 1,280
Accrued expenses 3,621 3,835
Current portion of long-term debt 19 19
Other current liabilities 87 80
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Total current liabilities 5,298 5,214
Long-term debt, less current portion 1,179 1,184
Deferred income taxes 15 15
Stockholders' equity:
Common stock 22 22
Additional paid-in capital 7,218 7,218
Retained earnings 3,215 3,201
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Total stockholders' equity 10,455 10,441
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Total liabilities and stockholders' equity $16,947 $16,854
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</TABLE>
NOTE: The balance sheet at April 30, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
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AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JULY 31,
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1998 1997
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<S> <C> <C>
Sales $ 4,727 $ 5,753
Cost of products sold 3,150 4,148
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Gross margin 1,577 1,605
Selling, general and administrative expenses 1,071 1,068
Research and development expenses 484 325
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Operating income 22 212
Other income (expense):
Interest expense (23) (33)
Other, net 23 52
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Income before income taxes 22 231
Provision for income taxes 8 71
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Net income $ 14 $ 160
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Income per share:
Basic $ 0.01 $ 0.07
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Diluted $ 0.01 $ 0.07
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</TABLE>
See notes to condensed consolidated financial statements.
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AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JULY 31,
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1998 1997
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(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 14 $ 160
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 96 104
Changes in operating assets and liabilities:
Accounts receivable, net (238) 721
Inventories, net (1,068) (35)
Accounts payable 291 (789)
Accrued expenses and customer deposits (214) (452)
Other, net 62 (398)
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Net cash used in operating activities (1,057) (689)
INVESTING ACTIVITIES:
Purchase of short-term investments -- (871)
Purchases of property and equipment (57) (31)
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Net cash used in investing activities (57) (902)
FINANCING ACTIVITIES:
Net repayments on note payable to bank -- (600)
Principal payments on long-term debt (5) (3)
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Net cash used in financing activities (5) (603)
Net decrease in cash and cash equivalents (1,119) (2,194)
Cash and cash equivalents at beginning of period 2,449 3,122
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Cash and cash equivalents at end of period $ 1,330 $ 928
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 24 $ 33
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Income taxes $ 25 $ 430
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</TABLE>
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AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JULY 31, 1998
1. Basis of presentation
The accompanying unaudited condensed consolidated financial statements of
Airport Systems International, Inc. (the Company) include the accounts of the
Company and its wholly owned subsidiary, ASII International, Inc., a foreign
sales corporation incorporated in Barbados. All intercompany balances and
transactions have been eliminated. The condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three months ended July 31, 1998 are not
necessarily indicative of the results that may be expected for the year ended
April 30, 1999. For further information, refer to the consolidated financial
statements and footnotes included in the Airport Systems International Inc. and
Subsidiary annual report on Form 10-KSB for the year ended April 30, 1998.
2. Notes Payable to Banks
The Company has a line of credit agreement with a bank which expires September
1, 1998. The agreement allows for borrowings up to a maximum of $6,000,000, at
an interest rate of prime (8.50% at July 31, 1998), secured by accounts
receivable, inventory, and equipment. There were no borrowings at July 31, 1998.
During September 1998, the Company amended its line of credit to provide for
borrowings at the Company's option at either an interest rate of LIBOR plus 250
basis points (8.20% at July 31, 1998) or at an interest rate of prime (8.50% at
July 31, 1998), with maturity at September 1, 2000. All other terms and
conditions outlined above remained the same.
4. Earnings Per Share
The Company adopted Financial Accounting Standards No. 128 (FAS 128), "Earnings
Per Share" in the third quarter of fiscal 1998. Share and per share amounts for
the quarter ended July 31, 1997, have been restated to comply with FAS 128.
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The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended
July 31, 1998 July 31, 1997
<S> <C> <C>
Numerator:
Net Income $ 14,000 $ 160,000
Denominator:
Denominator for basic
earnings per share - weighted
average shares 2,230,500 2,230,500
Effect of dilutive securities:
Employee stock options 189,324 166,634
Denominator for diluted
earnings per share -
adjusted weighted average
shares with assumed
conversions 2,419,824 2,397,134
Earnings per share - Basic $ 0.01 $ 0.07
Earnings per share - Dilutive $ 0.01 $ 0.07
</TABLE>
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The discussions set forth in this Form 10-QSB may contain forward-looking
comments based on current expectations that involve a number of risks and
uncertainties. Actual results could differ materially from those projected or
suggested in the forward-looking comments. The difference could be caused by a
number of factors, including, but not limited to the factors and conditions
which are described under the headings "Results of Operations," and "Backlog,"
as well as the competitive and pricing pressures related to all contracts,
either already in the Company's backlog, or which the Company is pursuing.
Further information on the factors that could affect the Company's financial
results are included in the Company's other SEC filings, including the Form
10-KSB for the year ended April 30, 1998. The reader is cautioned that the
Company does not have a policy of updating or revising forward-looking
statements and thus he or she should not assume that silence by management of
the Company over time means that actual events are bearing out as estimated in
such forward-looking statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Sales for the first quarter of fiscal 1999 decreased 17.8%, to $4.7 million from
$5.8 million for the first quarter of fiscal 1997. The decrease in sales is due
to a decrease in units shipped as a result of a lower beginning backlog compared
to the same period of fiscal 1998.
Gross margin remained primarily unchanged in the first quarter of fiscal 1999
compared to the first quarter of fiscal 1998. Gross margin as a percent of sales
increased to 33.4% in the first quarter of fiscal 1999 compared to 27.9% in the
first quarter of fiscal 1998. The increase in gross margin as a percentage of
sales reflects spares shipments during the first quarter of fiscal 1999 with
higher than normal gross margins. The Company expects gross margins to continue
to fluctuate due to the timing and mix of contract awards and delivery of
product and services.
Selling, general, and administrative expenses remained unchanged during the
first quarter of fiscal 1999 at $1.1 million compared to the first quarter of
fiscal 1998. As a percent of sales, selling, general, and administrative
expenses increased from 18.6% in the first quarter of fiscal 1998 to 22.7% in
the first quarter of fiscal 1999. The increase as a percent of sales is
attributable to expansion of the Company's marketing group and decreased
economies of scale associated with lower sales as certain costs are fixed in
nature.
Research and development expenses increased during the first quarter to $484,000
from $325,000 in the first quarter of fiscal 1998. The increase is a result of
increased labor and expenses related to programs designed to enhance the current
product line which includes the new Category II/III Instrument Landing System.
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Interest expense decreased $10,000 for the first quarter compared to the first
quarter of fiscal 1998 due to a decrease in the average debt obligations
outstanding compared to the prior year period. Other decreased $29,000 due to a
decrease in interest income resulting from average lower outstanding cash and
investment balances during the current year period compared to the prior year
period.
The Company's estimated provision for income taxes amounted to 36.4% or $8,000
during the first quarter of 1999 compared to 30.7% or $71,000 in fiscal 1998.
The decrease in dollar terms is a result of the decrease in pre-tax income for
the first quarter while the increase in the effective tax rate for the first
three months was due to unusually low effective tax rate in the first quarter of
fiscal 1998 resulting from the overaccrual of taxes in fiscal 1997.
Net income for the first quarter was $14,000, compared with a fiscal 1998 first
quarter net income of $160,000. The decrease in net income is primarily due to
decreased sales and increased research and development expenses as previously
mentioned.
BACKLOG
The Company's backlog was $7.9 million at July 31, 1998, compared to $17.6
million at July 31, 1997, and $10.6 million at April 30, 1998. Approximately 84%
of the backlog at July 31, 1998, was represented by three contracts. The
contracts call for providing navaid equipment and services to Indonesia (46% of
backlog), Taiwan (20% of backlog) and South America (18% of backlog). The
Company expects to ship approximately $6.5 million of the total backlog through
the end of fiscal 1999 with the remaining $1.4 million of backlog being
completed and shipped in fiscal 2000.
The decline in backlog, as compared to April 30, 1998, is the result of bookings
not keeping pace with shipments. In particular, the backlog at April 30, 1998,
included approximately $4.9 million related to a $17.7 million contract signed
with the Republic of Indonesia in the fourth quarter of 1997. At July 31, 1998,
the backlog related to this contract had decreased to $3.7 million. In addition,
the economic difficulties experienced in Southeast Asia continued to delay or
cancel several programs for which the Company was expecting to be awarded during
the quarter, thus significantly contributing to the lack of growth in orders
during the period. The Company continues to expand its marketing group through
the addition of domestic and international marketing personnel and the
allocation of these resources to other regions of the world. In addition, the
Company is nearing completion and certification of enhancements to its current
products (in particular its CAT II/III ILS) which is expected to increase
geographic penetration in the Company's markets as well as improve its
competitive position on future tenders. The Company expects the delays and
cancellation of orders, as discussed above, to negatively impact the Company's
revenue during the second and third quarters. This, combined with additional
expenditures related to the implementation of the airfield lighting product line
program, as discussed later in this Form 10-QSB, is expected by management to
result in
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operating losses and breakeven operating results in the second and third
quarters, respectively. The extent of the loss in the second quarter, as well as
the ability to achieve break-even operating results during the third quarter, is
difficult to ascertain due to uncertainties in the timing of the receipt of
orders. The Company expects backlog and bidding activities as well as contract
awards to continue to fluctuate due to the size and timing of contract programs.
LIQUIDITY AND CAPITAL RESOURCES
Net cash of $1.1 million was used by operations for the first three months of
fiscal 1999 compared to $689,000 used in the first three months of fiscal 1998.
The increase in cash used was primarily due to an increase in inventories during
the period. Inventories increased due to the delay in shipment of the Company's
new Category II/III Instrument Landing System of which inventory had been
purchased and production incurred as of quarter-end. In addition, installation
work in progress increased as a result of the Company's continued installation
work on its contract with the Republic of Indonesia.
Cash used in investing activities was $57,000 for the first three months of
fiscal 1999 compared to $902,000 used in the first three months of fiscal 1998.
The decrease in cash used is primarily the result of short-term investment
purchases in the prior year period.
Cash used in financing activities was $5,000 in the first three months of fiscal
1999 compared to cash used of $603,000 in the first three months of fiscal 1998.
The decrease in cash used was the result of repayments made on the Company's
short-term note payable in the prior year period.
The Company expects that it will meet its ongoing requirements for working
capital and capital expenditures from a combination of cash expected to be
generated from operations, existing cash and cash equivalents and available
borrowings under its existing revolving credit facility.
AIRFIELD LIGHTING DISTRIBUTION AGREEMENT
In July, 1998, the Company signed an agreement with the Airfield Lighting
Products Division of Idman Oy. Idman Oy is a lighting products subsidiary of
Philips Electronics, N.V. located in Finland. Under the agreement, the Company
obtained the exclusive right to distribute Idman's airfield lighting products in
North and South America. The Company also obtained distribution rights into all
other parts of the world except Europe and the former Commonwealth of
Independent States (CIS). The term of the agreement is for 10 years. As a result
of this agreement, the Company will have a complete line of airfield lighting
products, including inset centerline and edge lights for runway, taxiway, runway
end; elevated lights for runways, taxiways and runway ends; precision approach
path indicators; approach lighting systems; control equipment and lighting
accessories. In addition to distribution rights, the Company will perform final
assembly and test procedures on the products it sells. The Company will assist
Idman in certifying its products for sale in the United States. During fiscal
1999, the Company
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expects to focus it efforts on certifying the Idman products in the United
States as well as developing its airfield lighting marketing infrastructure.
Final certification of the airfield lighting products is expected to be
completed in the third quarter of fiscal 1999. The Company expects to spend
approximately $1 million during fiscal 1999 on certification and marketing
efforts, with all of these expenditures being expensed during the last three
quarters of the fiscal year. The Company will submit bids on international
lighting projects as the opportunities arise and its marketing infrastructure is
developed. The Company expects to be submitting bids on lighting projects in the
United States by the fourth quarter of fiscal 1999.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 10.1 - Employment Agreement dated June 12, 1998, by
and between the Company and Anthony G. Bommarito.
Exhibit 10.2 - Distribution Agreement between Idman
Oy and Airport Systems International, Inc. Portions
of this agreement are subject to a request for
confidential treatment, and such portions are not
included with this filing.
Exhibit 27 - Financial Data Schedule (SEC Use Only)
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant
during the three months ended July 31, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
September 14, 1998 /s/ Thomas C. Cargin
- -------------------------- --------------------------------------------
Date Thomas C. Cargin, Vice President of Finance
and Administration, Secretary, and Principal
Accounting Officer
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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of the
12th day of June 1998, by and between Airport Systems International, Inc. (the
"Company") and Anthony G. Bommarito, an individual ("Employee").
WHEREAS, the Company desires to employ Employee in the capacity
described herein and Employee desires to work for the Company in such capacity;
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and agreements herein contained, Employee and the Company agree
as follows:
1. Period of Employment. Subject to earlier termination as provided for
in Section 6 hereof, the Company hereby employs Employee, and Employee hereby
accepts such employment, for a period of two years, beginning on the date of
this Agreement and continuing until the close of business on the second
anniversary of the date of this Agreement.
2. Duties of Employee. Employee shall devote his full time and
attention to the business of the Company in the Company's Kansas office.
Employee shall be employed as the Vice President of Engineering; and he shall
perform such duties as shall be assigned to him by the President and Board of
Directors of the Company and as are normally incident to such office. Employee
shall comply with all policies and procedures of the Company and use his best
efforts on behalf of the Company.
3. Compensation. During the period of Employee's employment, the
Company shall pay Employee a salary at the rate of not less than $110,000 per
annum, payable in arrears in equal bi-weekly installments on every other Friday.
The Employee will receive an annual performance review. The Board of Directors
of the Company shall annually review such performance review and salary and,
based upon the performance of Employee and the financial results and condition
of the Company, in its sole discretion, may increase (but not decrease) such
salary. At the beginning of each fiscal year, a bonus plan shall be established
by the board of directors based on Company performance goals. At the end of each
fiscal year the Employee shall receive a bonus based upon performance against
the established plan. The bonus plan for the first year is attached to this
agreement.
4. Benefit Plans. During the term of Employee's employment, Employee
shall be entitled to participate in and receive the benefits of any retirement,
insurance, hospitalization, health or similar plan currently in effect or
hereafter adopted by the Company for the benefit of its key employees.
5. Reimbursements. The Company shall reimburse Employee for reasonable
travel and entertainment expenses incurred by him on behalf of the Company,
subject to the limitations,
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approval, and substantiation requirements and other procedures from time to time
established by the Company.
6. Termination.
(a) Definitions.
(i) "Cause". The term "Cause" shall mean:
(A) Material fraud or dishonesty of Employee
in the fulfillment of his duties as an employee of
the Company, including, without limitation,
embezzlement of Company funds; or
(B) Conviction of a felony under any
applicable criminal code or statute.
(ii) "Disability". The term "Disability" shall mean
the inability of Employee substantially to perform his duties
hereunder during any continuous period of more than six (6)
months or for an aggregate period of one hundred eighty (180)
days in any 365-day period, if after the expiration of such
period, a qualified physician selected by the Company
determines that Employee will be unable substantially to
perform his duties hereunder for an indefinite additional
period of time.
(b) Termination. At any time during the term of this
Agreement, the Company, at its option, may terminate Employee's
employment hereunder upon written notice (i) for Cause, (ii) if
Employee suffers a Disability, or (iii) if Employee dies. If Employee
is terminated pursuant to the preceding sentence, or if Employee quits
the employment of the Company, the Company shall be relieved of any
obligation hereunder except for the payment of any salary for periods
worked but for which salary has not been paid, the reimbursement of
reasonable expenses theretofore incurred in the course of employment
and accrued benefits.
(c) Termination Payment. If Employee is terminated by the
Company for any reason other than (i) for Cause, (ii) because Employee
suffers a Disability, (iii) because Employee dies; or (iv) because of a
transaction as identified in section 7, then the Company shall pay
Employee an amount equal to the product of his monthly base salary
multiplied by the number of months remaining in the two year period of
employment set forth in Section 1 hereof; payable in monthly
installments equal to his monthly base salary at the time of
termination, beginning on the first day of the month following such
termination and continuing until the full amount has been paid.
Payments will be reduced by the amount the Employee is paid from others
for services during the payment period. Employee agrees that such
payments shall be his sole remedy for termination of
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employment with the Company except for any payments made under section
7 of this agreement.
7. Significant Corporate Transaction
In the past the Company has discussed with your current (immediately
prior to joining the Company) employer (referred to herein as "Employer") the
possibility of a significant corporate transaction. Although these discussions
have not resulted in the execution of a definitive agreement, the parties may,
at some point in the future resume negotiations. Those negotiations could result
in a significant corporate transaction.
The Company agrees that if: (a) you become an employee of the Company, (b) the
Company and Employer subsequently consummate a significant corporate
transaction, and (c) your employment with the Company is terminated, or you are
demoted (i) less than three months before, or (ii) within one year after such
transaction, then the Company will pay you a severance payment ("the Severance
Payment") in addition to any other compensation that may be payable to you at
the time of termination of your employment with the Company.
The Severance Payment will be in an amount equal to the greater of (a) the
aggregate of all remaining salary payments that would be due to you had you
remained a Company employee for three years from the date you commenced work
with the Company or (b) two years worth of salary payments. The severance
payment shall be payable within thirty (30) days of the time of termination of
employment with the Company.
Further the Company agrees to indemnify you from litigation resulting from any
claim brought by Employer resulting from your employment with the Company. This
agreement is based upon your representation that you have no agreement with
Employer that would prohibit or restrict your employment with the Company.
8. Non-Disclosure and Covenant Not to Compete.
(a) Non-Disclosure. During the term of this Agreement and from
and after the termination of this Agreement, Employee shall not, except
as required by law or to perform his duties under this Agreement,
divulge, disclose or communicate to any person, firm or corporation,
any "confidential information". The term "confidential information"
includes without limitation, information and know-how about the
business of the Company (or any division, subsidiary, stockholder, or
affiliate of the Company) including but not limited to, methods of
operation, cost or pricing information, product development,
technology, processes, plans, research data, prospect files, customer
lists, marketing or bid information, or supplier lists, excluding such
information that was in the public domain at the time it was acquired
by Employee or which comes into the public domain otherwise than
through a disclosure by a person or entity owing a duty of
confidentiality to the
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Company or any stockholder, subsidiary, or other affiliate of the
Company. If confidential information is contained in any document or
writing or is fixed in any other tangible form, magnetically,
electronically or otherwise, and if such confidential information is in
Employee's possession or under his control, he shall return such
information and any copies thereof to the Company upon termination of
his employment. Employee shall not directly or indirectly, take, copy,
or transfer, in any manner whatsoever, any of the business records or
confidential information of the Company (or any division, subsidiary,
stockholder or affiliate of the Company). If Employee becomes aware of
the possession of confidential information by individuals other than
employees of the Company, he shall promptly bring such matter to the
attention of the board of directors of the Company.
(b) Non-Compete. While employed by the company and for a
period of up to one year, or until the date of the last termination
payment under 6(c) if termination payments are made, thereafter
Employee shall not, directly or indirectly:
(i) Engage (whether for compensation or without
compensation) as an individual proprietor, partner,
stockholder, officer, employee, director, consultant, joint
venturer, lender, or in any other capacity whatsoever
(otherwise than as the holder of no more than 1% of the total
outstanding stock of a publicly held company) in any business
activity or business activities that compete for customers for
the design, manufacture, or sale of ground based navigation
aids; or any other business at the time of termination engaged
in by the Company (or any division, subsidiary stockholder, or
affiliate of the Company).
(ii) Either for himself or for any other person, firm
or corporation, solicit, divert or take away or attempt to
solicit, divert or take away any person, firm or corporation
who was or is a customer, supplier, prospective customer, or
agent of the Company (or any division, subsidiary, stockholder
or affiliate of the Company); or
(iii) Recruit, attempt to induce, induce or in any
way influence any person who is engaged by the Company (or any
division, subsidiary, stockholder, or affiliate of the
Company) as an employee, agent, independent contractor, or
otherwise, to terminate his or her engagement or to engage or
otherwise participate in a business activity directly or
indirectly competitive with the Company (or any division,
subsidiary, stockholder, or affiliate of the Company).
(c) Scope of Restrictions. The restrictions set forth in this
Section 8 are considered by the parties to be reasonable. However, if
any such restriction is found to be unenforceable because it extends
for too long a period of time or over too great a range of activities
or in too broad a geographic area, it shall be interpreted to extend
only over the maximum period of time, range of activities or geographic
area as to what it may be enforceable.
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(d) Remedies. In the event of a breach or a threatened breach
of this Section 8, the Company shall be entitled to an injunction
restraining Employee from committing or continuing such breach, as well
as to any and all other legal and equitable remedies permitted by law.
8. Miscellaneous.
(a) Arbitration. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof, including but not
limited to any dispute regarding the determination of "Cause" under
Section 6 hereof, shall be settled by arbitration in Overland Park,
Kansas, in accordance with the rules of the American Arbitration
Association.
(b) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties, the successors and
assigns of the Company, and the heirs, executors, administrators,
successors and assigns of Employee. Employee shall have no right to
delegate his duties or to assign his rights under this Agreement.
(c) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Kansas.
(d) Notice. Any notice required to be sent hereunder shall be
deemed to be received on the date such notice is delivered in writing
by hand against receipt or mailed, postage prepaid, by United States
certified or registered mail, return receipt requested, to the address
of the company or Employee, respectively, as follows (or at such
change of address as one party notified the other in writing):
(1) Company:
Airport Systems International, Inc.
11300 West 89th Street
Overland Park, Kansas 66214
with a copy to:
Blackwell Sanders Matheny Weary
& Lombardi LLP
Two Pershing Square, Suite 1100
2300 Main Street
P.O. Box 419777
Kansas City, Missouri 64141-6777
Attention: Steven F. Carman
5
<PAGE> 6
(2) Employee:
Anthony G. Bommarito
(e) Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall constitute one and the same
agreement, and each of which shall be deemed an original.
(f) Exhibits. All exhibits attached hereto are hereby
incorporated into this Agreement.
(g) Waivers. No waiver of any breach of any provision hereof
shall operate as a waiver of any other breach of the same or any other
provision hereof.
(h) Severability. Invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(i) Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto concerning the employment of
Employee by the Company and supersedes and cancels any and all prior
understandings between Employee and the Company, if any, concerning the
employment of Employee. This Agreement may only be amended in writing
signed by both parties.
(j) Headings. The headings contained in this Agreement are for
convenience only and shall not be considered in construing or
interpreting any provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
THIS CONTRACT CONTAINS A
BINDING ARBITRATION
PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES
Airport Systems International, Inc.
By: /s/ Keith S. Cowan
--------------------------------------------
Name: Keith S. Cowan
--------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
6
<PAGE> 7
Date: June 12, 1998
-------------------
EMPLOYEE
By: /s/ Anthony G. Bommarito
--------------------------------------------
Anthony G. Bommarito
Date: June 12, 1998
------------------------------------------
7
<PAGE> 1
EXHIBIT 10.2
DISTRIBUTION AGREEMENT
BETWEEN
IDMAN OY
AND
AIRPORT SYSTEMS INTERNATIONAL, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
1. Appointment as Distributor........................................ 1
2. Certification of Products.......................................... 4
3. Manufacturing of Products.......................................... 4
4. Training........................................................... 5
5. Research & Development Cooperation................................. 5
6. Distributor's Obligations.......................................... 6
7. Sales of Components and Products to Distributor.................... 7
8. Insurance......................................................... 10
9. Warranty.......................................................... 10
10. Trademarks, Trade Names, Service Marks and Business Names......... 11
11. Force Majeure..................................................... 11
12. Termination of Agreement.......................................... 12
13. Obligations Upon Termination By Distributor Breach................ 12
14. Obligations Upon Termination By Company Breach.................... 13
15. Reacquisition of Products......................................... 13
16. Confidentiality................................................... 14
17. Advertising and Marketing......................................... 15
18. Miscellaneous..................................................... 15
SCHEDULES
1.1 Products Manufactured, Distributed and Price Lists for Components and
Products
1.2 Exclusive Territory
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
1.3 Excluded Territory
1.4 Company Warranty
</TABLE>
ii
<PAGE> 4
DISTRIBUTORSHIP AGREEMENT
THIS AGREEMENT is made and entered into this 10th day of July 1998 by
and between IDMAN OY ("Company"), a corporation organized and existing under the
laws of the country of Finland and AIRPORT SYSTEMS INTERNATIONAL, INC.
("Distributor") , a corporation organized and existing under the laws of the
State of Kansas.
WITNESSETH:
WHEREAS, the Company desires to promote the distribution, sale, and
use of the Products (defined in Section 1.2 hereof) and is willing to appoint
the Distributor to accomplish such objectives on the terms and conditions set
forth hereinafter; and
WHEREAS, the Distributor desires to be appointed as such distributor
on the terms and conditions set forth hereinafter.
NOW, THEREFORE, in consideration of the premises set forth above and
the mutual promises hereinafter contained, the parties hereto agree as follows:
1. APPOINTMENT
SECTION 1.1 APPOINTMENT AND ACCEPTANCE OF APPOINTMENT
(a) The Company hereby appoints the Distributor, and the Distributor
accepts such appointment, as a distributor to promote, distribute, and
sell the Products (as hereinafter defined) in the Territory (as
hereinafter defined) under the terms and conditions specified herein.
(b) Distributor's appointment as such shall be Exclusive (as hereinafter
defined) in the countries listed on Schedule 1.2 (the "Exclusive
Territory"). The term "Exclusive" means that the Company will not
appoint any other distributor or sales agent for the Exclusive
Territory or solicit, receive orders for or sell on its own behalf
(except as provided below) any Products for installation or use in any
country in the Exclusive Territory.
(c) Company grants no rights to sell and Distributor agrees not to solicit
or receive orders for or to sell, distribute, or install any Products
in the countries listed on Schedule 1.3 (The "Excluded Territory").
(d) The Company and the Distributor will cooperate on a case by case basis
to determine the party best positioned to pursue an opportunity in a
country not included within the Exclusive Territory or Excluded
Territory. Such countries shall
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<PAGE> 5
be hereinafter collectively referred to as the Non-Exclusive Territory.
The Company and the Distributor will review, at least quarterly,
marketing opportunities and prospects in the Non-Exclusive Territory
to determine the party best positioned to pursue the opportunity or
prospect. Opportunities or prospects brought to a party's attention
between meetings will be discussed on a case by case basis.
SECTION 1.2 PRODUCTS
The Distributor is authorized within the Territory, subject to the
terms and conditions specified herein, to promote, distribute and sell those
products specified in Schedule 1.1 attached hereto and incorporated herein, as
such Schedule may be amended in writing by the parties hereto from time to time
during the term hereof (all of such products hereinafter collectively being
referred to as the "Products"); within the territory, subject to the terms and
conditions specified herein.
SECTION 1.3 TERRITORY
Distributor is authorized to solicit orders from and sell Products to
customers on an Exclusive basis in the Exclusive Territory and on a
non-exclusive basis in the NonExclusive Territory (the Exclusive Territory and
the Non-Exclusive Territory are sometimes referred to herein together as the
"Territory"). If the Distributor receives any purchase inquiries or purchase
orders for the Products from outside the Territory, the Distributor shall
immediately forward them to the Company. The Company shall immediately forward
to the Distributor any purchase inquiries or purchase orders that the Company
receives for the placement of the Products within the Exclusive Territory.
SECTION 1.4 RESTRICTIONS ON AUTHORITY
For all purposes under this Agreement, the Distributor is an
independent contractor and shall not be deemed to be an employee, agent,
partner, franchisee or legal representative of the Company. This Agreement does
not grant, and the Distributor shall not have, any authority, express or
implied, to create or assume any obligation, enter into any agreement, make any
representation or warranty, file any document with any governmental body, or
serve or accept legal process on behalf of the Company, to settle any claim by
or against the Company, or to bind or otherwise render the Company liable in any
way in the Territory or anywhere else in the world, without the prior express
written consent of the Company.
SECTION 1.5 EMPLOYEES OF DISTRIBUTOR
The Distributor shall be responsible for the selection, and
supervision of, and the payment of remuneration and benefits to, its employees
who assist it in the performance of its obligations hereunder, and in no event
shall the Company have any obligation to, or
2
<PAGE> 6
authority over, such employees of the Distributor. Upon the expiration or
termination of this Agreement, and notwithstanding any breach by the Company of
its obligations hereunder, the Company shall not be liable to the Distributor
for any costs or damages incurred by Distributor arising out of or relating to
reassignment, retraining, or dismissal of any of the employees of the
Distributor attributable to such expiration or termination or otherwise. The
Distributor shall defend and hold the Company harmless from and indemnify it
against any and all claims, losses, liabilities, damages, and costs and expenses
(including, but not limited to, costs of investigation, court costs,
arbitrators' fees and attorneys' fees) that the Company may incur arising out of
or relating to any such reassignment, retraining, or dismissal of any of the
employees of the Distributor.
SECTION 1.6 NON-COMPETITION
The Distributor shall use reasonable business efforts to attain and
sustain sales of the Products in the Territory and shall refrain from
diminishing or otherwise weakening the Company's rights by engaging in any
activities whatsoever in the Territory that might reasonably be deemed as
injurious to the sales potential of the Products in the Territory.
The Distributor undertakes, during the course of this agreement and a
period of twelve (12) months after termination of this Agreement caused by the
Company, directly or indirectly, not to manufacture, sell, represent and market
products which are identical to or with regard to their trade mark, brand names,
looks or otherwise are similar to the products referred to in this Agreement.
The Distributor undertakes, directly or indirectly, not to compete with
the Company and not to assist any other activity competing with the Company. The
Distributor further agrees not to acquire shares or participations in a company
competing with the Company.
The Distributor shall submit to the Company a complete list of all the
products that it manufactures, sells and/or represents and to keep the Company
informed of the changes in this list. The representation of other products may
not reduce the possibilities of the Distributor to act efficiently in accordance
with the terms of this Agreement.
SECTION 1.7 APPOINTMENT OF AGENTS AND REPRESENTATIVES
The Distributor shall provide written notification to the Company of
its intent to engage sub-distributors, sub-agents or sub-representatives. The
Company has the right to reject such engagements within seven (7) days of
notification. The Company shall not unreasonably reject such engagement.
The Distributor shall be fully and solely liable for the strict
compliance by any of its sub-distributors, sub-agents and/or sub-representatives
with this Agreement and instructions and rules given by the Company to the
Distributor under this Agreement.
3
<PAGE> 7
Neither this Agreement nor any other circumstance shall, however, create a
contractual relationship between the Company and any sub-distributor, sub-agent
or sub-representative.
SECTION 1.8 FIRST REFUSAL RIGHT
With respect to products of Company which it now has or later develops
or acquires (through manufacturing license or otherwise) in the field of
airfield lighting products, but which are not included within the Products
("Other Products") , Company shall not grant, assign, or transfer to any third
party any right to distribute, market, sell, or represent the Company with
respect to the Other Products in the Exclusive Territory without first offering
such rights to Distributor upon the terms and conditions applicable to such
third party. Before granting, assigning, or transferring to any third party any
of such rights for the other Products in the Exclusive Territory, Company shall
notify Distributor in writing of its desire to grant, assign, or transfer such
rights, specifying in detail the terms and conditions of such grant, assignment,
or transfer and the name of the third party. If within thirty (30) days after
receipt of such notice, Distributor notifies Company that Distributor desires to
accept and receive such grant, assignment, or transfer, Company shall promptly
make such grant, assignment, or transfer to Distributor upon the terms and
conditions specified in the notice. If Distributor fails to notify Company of
its desire to accept and receive such grant, assignment, or transfer within such
time period or declines in writing to accept it, Company shall be free to grant,
assign or transfer such rights for the Other Products upon the terms and
conditions as specified in the notice; except that, if Company does not make
such grant, assignment, or transfer to such third party within one hundred
eighty (180) days after the receipt of such notice by Distributor, Company shall
not make such grant, assignment, or transfer to such third party or any other
party without first re-offering such rights to Distributor.
2. CERTIFICATION OF PRODUCTS
The Company and Distributor will cooperate to achieve certification of
the Products from the United States Federal Aviation Administration (FAA). The
activities, and respective parties responsibilities, in this process are:
- - Company will provide engineering support, product samples and test data
as required to attain certification. Company will bear all costs
associated with fulfilling these responsibilities.
- - Distributor will provide engineering support, test support and the
liaison support with the FAA's designated certification agency (ETL)
during certification. Distributor will bear all costs associated with
fulfilling these responsibilities.
4
<PAGE> 8
- - Distributor will pay all fees owing to ETL related to the approval
program.
- - Any costs related to modifying the Products to meet FAA certifications
will be the responsibility of the Company. To complete certification
after modifications have been made, if any, the Distributor will
provide engineering and test support and additional ETL liaison. The
Distributor will pay fees related to additional ETL approval
procedures.
- - The Company and Distributor shall mutually agree upon the products
which will be certified after studying the relevant certification
requirements.
3. MANUFACTURING OF PRODUCTS
The Company hereby grants the right to the Distributor to perform the
final assembly and test operations on those Products, as shown on Schedule 1.1,
sold by the Distributor under the terms of this Agreement. All of the components
used in the final assembly and test will be purchased by the Distributor from
the Company as outlined in Section 7 of this Agreement. The Company will provide
the drawings, assembly instructions, test procedures, quality standards
documentation, inspections procedures and other process documentation necessary
to allow Distributor to perform the necessary final assembly and test
procedures. This documentation will be provided at no cost to the Distributor.
All drawings and other documentation will be provided on paper and electronic
media in a format acceptable to the Distributor.
The Distributor undertakes to assemble and test the resulting Products
as listed in Schedule 1.1 according to the documentation.
4. TRAINING
The Company will provide the Distributor's marketing, installation,
technical and operations personnel training on the Products, at the Company's
facility and to the extent necessary the Distributor's facility at no cost. The
Distributor will bear all of the salary, travel and per diem costs of its
personnel being trained either at the Company's facility or the Distributor's
facility. The Company will bear all of the salary, travel and per diem costs of
its personnel to train Distributor's personnel, either at the Company's or the
Distributor's facility.
5. RESEARCH & DEVELOPMENT COOPERATION
The companies agree to cooperate on the research and development of new
and enhanced airport lighting products. When new products are introduced as a
result of this cooperation, the Company shall have the right to manufacture and
sell them in the Excluded and Non-Exclusive Territory, and the Distributor shall
have the right to
5
<PAGE> 9
manufacture and sell them in the Exclusive and Non-Exclusive Territory.
For each research and development cooperation project the Company and
Distributor will prepare a separate agreement.
6. DISTRIBUTOR'S OBLIGATIONS
In consideration of the foregoing appointment, Distributor hereby
agrees at its sole cost:
(a) In accordance with the terms hereof, to vigorously and aggressively
promote the sale of the Products in all areas of the Exclusive
Territory.
(b) To develop and maintain an adequate sales organization, to conduct
advertising and sales promotion activities, and to obtain a reasonable
share of sales in the Exclusive Territory.
(c) To employ and train competent personnel of good character to perform
sales and service functions so as to enable it to fulfill its
responsibilities under this Agreement.
(d) To comply in all respects with all statutes, laws, rules, orders,
regulations and ordinances applicable to the purchase and sale of the
Products and to the operation of its business including without
limitation, the provisions of any applicable health, safety,
environmental, export, import, tax, anti-boycott, corrupt practices and
other laws of the United States and any state or subdivision thereof.
(e) To at all times conduct its operations in such a manner as to develop
and maintain good customer relations; to provide prompt and courteous
service to customer inquiries and complaints relating to the Products;
and to at all times properly represent the Products and not make,
directly or indirectly, any false, misleading or disparaging
representations or statements to the Company or any customer or other
person in regard to the Products or the Company.
(f) To establish and maintain quality service operations as recommended by
the Company for all Products within the Exclusive Territory, which
operations shall include the thorough training of personnel, the
acquisition and maintenance of proper tools and equipment, and the
provision of adequate service facilities.
(g) To perform all warranty service, promptly and in a competent and
workmanlike manner, on all Products within the Exclusive Territory and
Products sold by the Distributor in the Non-Exclusive Territory in
accordance with warranty policies established by the Distributor. The
Distributor's obligation to perform warranty service under this
Agreement is conditional upon Company's acceptance of
6
<PAGE> 10
purchase orders as discussed in Section 7 (c).
(h) To promptly notify the Company in the event any warranty claim or
service requirement arises that Distributor is unable to settle or
perform. Such notice by Distributor shall provide the details of the
claim or requirement. The Company shall use reasonable efforts to
resolve such claims or provide such service.
7. SALES OF COMPONENTS AND PRODUCTS TO DISTRIBUTOR
The Company shall sell parts and sub-assemblies required for the final
assembly and test of the Products listed in Schedule 1.1 (the "Components") and
Products to Distributor and Distributor shall purchase Components and Products
from the Company, in accordance with the following terms and conditions:
(a) All Components and Products purchased from the Company shall be
purchased for the purpose of completing final assembly and testing as
discussed in Section 3 or to provide spares and warranty services. The
Company and Distributor shall establish mutually acceptable delivery
times and order shall be placed in accordance with those delivery
times. The Distributor shall establish prices and discounts for the
Products it sells in the Territory at its sole discretion.
(b) Distributor shall pay all sales, use, value added and personal property
taxes, duties, assessments and any other taxes or fees which may be
assessed or levied by any governmental authority with respect to any
Products which are sold to, shipped to, or are in the possession of,
Distributor.
(c) In making its purchases of Components and Products from the Company,
Distributor shall submit written purchase orders to the Company, which
the Company shall accept unless one of the following exists:
(i) the Company has experienced an event of force majeure (as such
term is defined in Section 11);
(ii) the Distributor is in material breach of this Agreement;
(iii) the Distributor has commenced a voluntary case or other
proceeding seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency
or similar law now or hereafter in effect, or has sought
appointment of a trustee, receiver, liquidator or other similar
official of it or any of its property; or has consented to have
any such relief, or has made a general appointment for the
benefit of its creditors, or has taken any corporate action in
furtherance of any of the foregoing;
7
<PAGE> 11
(iv) the order or orders contain terms or conditions that are
inconsistent with the terms of this Agreement or violative of
applicable United States law (or the laws of any country within
the Territory).
(v) the amount of Products ordered by such purchase order exceeds
the production capacity of the Company in which case the Company
shall immediately inform the Distributor of the lack of
production capacity. In such event the Company and Distributor
shall mutually extend their best efforts to meet production
requirements and negotiate a mutually acceptable schedule.
If the Company rejects a purchase order for any of such reasons the
Company shall provide the Distributor with a written notice stating the reasons
for such rejection. The Distributor shall cause only its authorized
representatives to issue purchase orders on its behalf. The Company shall accept
and act on telecopy purchase orders issued by an authorized representative of
the Distributor. The Distributor shall use reasonable efforts to place purchase
orders hereunder in a regular and even fashion in order to assist the Company in
efficiently scheduling production of the Products and Components.
(d) No purchase order shall constitute a commitment or an enforceable
obligation of the Company until the Company has accepted it, in
writing or by telecopy, or by execution of such purchase order.
Subject to Section 12 hereof, no purchase orders so accepted by the
Company may be canceled by either the Distributor or the Company,
unless the parties hereto agree otherwise in writing.
(e) All purchase orders hereunder shall be subject to, and shall be deemed
to incorporate, all provisions of this Agreement, and any term in any
purchase order inconsistent with this Agreement shall have no effect
whatsoever.
(f) Unless the parties hereto otherwise agree in writing or by telecopy
with respect to a given purchase order, the Company shall ship the
Products to the Distributor "ex works" its factory at the address
shown in this Agreement at Section 18 hereof. All terms of trade used
in this Agreement or in any purchase order hereunder, such as "ex
works", "fob" and "cif", shall have the meanings assigned to them in
the ICC Incoterms, ICC Publication No. 460 (July 1990).
(g) The Distributor shall submit all of its purchase orders hereunder to
the address of the Company set forth in Section 18 hereof, or to such
other address as to which the Company shall give notice to the
Distributor in accordance with Section 18 hereof.
(h) The Distributor shall within the period of * buy and take delivery of
the Products for at least * US Dollars (USD). The Distributor shall
within the period of * buy and take delivery of the Products for at
least * US Dollars (USD). The parties shall separately
8
<PAGE> 12
agree upon the minimum purchase obligation for each following calendar
year at least two (2) months prior to the end of the preceding
calendar year. Should the parties not reach an understanding on the
minimum purchase obligation, the Company may set the minimum purchase
obligation unilaterally so that it is, at the most, * higher than the
minimum purchase obligation of the preceding year.
Should the Distributor not reach its minimum purchase obligation
referred to above and in force from time to time, this shall be deemed
a material breach of contract and the Company shall have the right,
without prejudice to provisions of Section 12, to cancel this Agreement
with immediate effect or, at Company's option, to cancel the exclusive
right of the Distributor in the Exclusive Territory. The Company shall
be liable to exercise its right of cancellation defined in this Section
within two (2) months from the end of the calendar year in question.
(i) The purchase price for the Components and Products shall be as stated
in Schedule 1.1. The prices of Products and Components as stated on
Schedule 1.1 will be held firm for a period of one (1) year from the
date this Agreement is signed. At the end of one (1) year, prices may
be adjusted to reflect changes in manufacturing/purchasing costs of
the Company. The new prices shall be mutually negotiated and agreed
between the Company and the Distributor, however this increase shall
not exceed * percent. However, in case of considerable change of
macroeconomic situation, such actual effect to be based on documented
changes experienced by the Company in prices paid for major items such
as castings or other components, the Company shall be entitled to
adjust the prices of Products and Components according to the actual
effect of these changes.
(j) Payment will be made by the Distributor via wire transfer to the
Company's account, as designated by the Company, within thirty (30)
days of receipt of invoice. Payment will be made in US dollars.
(k) Should the exchange rate between US Dollar (USD) and Finnish Mark
(FIM) or ECU (EURO) change more than * from the current list prices,
the purchase prices for the Components and Products will be adjusted
accordingly. This adjustment will be made no more than once per
quarter, beginning on April 1 of each year. The Company will notify
the Distributor three months prior to switching currencies from FIM to
EURO for the purpose of this paragraph.
The interest on delayed payments shall be 18%. In case the
Company has matured claims from the Distributor, the Company
shall not be liable to deliver products to the Distributor. In
addition, the Company shall have the right to demand from the
Distributor a bank guarantee approved by the Company for any
delinquent amounts.
9
<PAGE> 13
Should the Distributor fail to comply with his duty of payment
in accordance with this Section and fails to correct its
negligence within thirty (30) days from a written notice thereof
from the Company, the Company may, without prejudice to the
other provisions of this Agreement, at its option, either
immediately terminate the exclusive right of the Distributor in
the Exclusive Territory or to cancel this Agreement with
immediate effect.
8. INSURANCE
Distributor shall at all times during the term of this Agreement
maintain general liability insurance providing coverage with respect to the
activities of Distributor contemplated by this Agreement in the amount of at
least $50,000,000 with such carrier or carriers as the Company may approve from
time to time. The insurance coverage maintained by Distributor shall name the
Company as an additional named insured. Certificates issued by the insurance
carrier evidencing such insurance coverage shall be delivered to the Company and
shall provide that the coverage therein outlined may not be amended or canceled
without thirty (30) days' prior written notice to the Company. Copies of such
insurance policies and all amendments thereto shall be delivered to the Company
upon request.
9. WARRANTY
The Distributor shall promptly upon delivery inspect the Products
and/or Components and shall notify the Company, in writing, promptly of any
defects or deficiencies. Any claims in respect of outwardly visible defects made
later than within thirty (30) days are to be regarded void. Claims made via
facsimile are considered valid.
In the event of any defects or deficiencies the Company's liability
shall be limited to replacement of the Products or Components in question or, at
the Company's option, repayment of the price paid. Under no circumstances shall
the Company be liable to the Distributor for any consequential loss or damage.
The Company represents and warrants that it has the full power and
authority to grant the rights granted Distributor under this Agreement with
respect to the Products, and neither the manufacture, sale or use of the
Products, as permitted under this Agreement, will in any way constitute an
infringement or other violation of any copyright, patent, trade secret,
trademark, nondisclosure, or any other intellectual property right, moral right,
or right of publicity of any third party.
Except as otherwise provided in this Section 9, and SCHEDULE 1.4, the
COMPANY MAKES NO OTHER REPRESENTATIONS OR WARRANTIES AND EXPRESSLY EXCLUDES THE
SAME WHETHER IMPLIED, STATUTORY OR OTHERWISE ESPECIALLY AS TO MERCHANTABILITY OR
QUALITY OR FITNESS OF THE
10
<PAGE> 14
PRODUCTS OR COMPONENTS FOR ANY PARTICULAR PURPOSE.
10. TRADEMARKS, TRADE NAMES, SERVICE MARKS AND BUSINESS NAMES
The trade names used in the Products distribution and ETL registration
shall incorporate both the Distributor's and the Company's names. ETL
registration shall identify the Company as the Products designer and the
Distributor as the Products manufacturer, if possible.
The Distributor hereby undertakes not to register any trade marks,
trade names or symbols of the Company in the Territory or elsewhere or to have
them registered.
With the exception of the provisions of paragraph 1 of this Section,
the Distributor shall have no rights to any trade marks, trade names or other
symbols used by the Company in connection with the Products or to the goodwill
relating to them. All such trade marks, trade names and symbols as well as the
goodwill relating to them and the Products as well as intangible rights shall
belong solely to the Company.
Upon termination of the Agreement, the Distributor shall immediately
stop using the trade marks, Trade names and/or other symbols of the Company or
other intangible rights belonging to the Company.
At the expense of the Company, the Distributor shall take all measures
which the Company may reasonably request to assist the Company to maintain the
intangible rights of the Company valid and enforceable during the term of this
Agreement.
If the Distributor notices an infringement of the intangible rights of
the Company or unfair competition measures towards the Company or other illegal
acts that are contrary to the interests of the Company, the Distributor shall
forthwith notify the Company thereof. The Distributor shall using its best
efforts and in compliance with the instructions issued to it by the Company,
assist the Company in protecting itself against such acts and infringements.
11. FORCE MAJEURE
The Company shall not in any manner be liable to Distributor should
performance by it hereunder or by it under any particular order by Distributor
for Products become impossible due to any contingency beyond the Company's
control, including, without limitation, acts of God, fires, floods, wars,
sabotage and civil unrest. The Distributor shall not in any manner be liable to
the Company should performance by it hereunder become impossible due to any
contingency beyond the Distributor's control, including without limitation, acts
of God, fires, floods, wars, sabotage and civil unrest.
11
<PAGE> 15
12. TERMINATION OF AGREEMENT
(a) Unless earlier terminated as provided herein, the initial term of this
Agreement shall commence on the date first signed by both parties and
shall remain valid until that same day in *. After such initial term,
the term of this Agreement shall be automatically renewed for
successive additional one-year terms unless terminated by either party
by written notice to the other party given at least ninety (90) days
prior to the expiration of such initial term or of any such additional
one-year term.
(b) Notwithstanding the provisions contained in section 12 (a), this
Agreement may for the following reasons set forth in this section 12
(b), be terminated forthwith and without prior notice:
(i) Any material misrepresentation by either Party in obtaining this
Agreement.
(ii) Either Party becoming insolvent or having a receiver appointed
of its assets or execution or distress levied upon its assets.
(iii) This agreement terminates with direct effect if and when control
over either party changes to a competitor of the other party. It
is at the sole reasonable discretion of the party without the
change in control whether a third party is a competitor or not.
(iv) Failure, irrespective of the reason, to observe any material
term of this Agreement and to correct the failure within a
period specified in a written notice calling for remedy given by
the aggrieved Party to the Party in default, being a period not
less than thirty (30) days; and
(v) As provided for in Sections 1.6 and 7 (h) (j)
The party not causing such valid reason may terminate this Agreement
effective on the date specified in the notice unless the breach
described therein has been cured within the applicable cure period.
Neither party shall be liable in damages to the other Party solely
because of terminating the Agreement when it, in accordance with this
Agreement, has been entitled to do so.
13. OBLIGATIONS UPON TERMINATION BY DISTRIBUTOR OR DISTRIBUTOR BREACH
Upon any termination of this agreement, under provisions specified in
Section 12 (a), or a Distributor breach as defined in Section 12 (b):
(a) Distributor shall cease to be an authorized distributor of the
Products.
12
<PAGE> 16
(b) Distributor shall promptly pay to the Company all sums it owes to the
Company, without deduction or set-off of any kind or nature, shall
cease representing itself to be a distributor of the Products and
shall cease to display, advertise or otherwise use any trademark,
trade name, service mark or business name claimed by the Company as
such may appear on any sign, stationery, form, telephone listing,
Product literature or other document or thing.
(c) Distributor shall promptly return to the Company or to such other
person as the Company may designate, all property furnished by the
Company or by other persons at the request of the Company to
Distributor or prepared by Distributor in the performance of his
duties hereunder, and all other documents or information as the
Company may reasonably request, including but not limited to technical
information, blueprints, specifications, sales catalogs, customer
lists, brochures, route books, daily analysis sheets, samples, sample
cases, sales aids, machinery and equipment or any property considered
by the Company to be a trade secret or confidential information,
except as needed to supply existing customers.
14. OBLIGATIONS UPON TERMINATION BY COMPANY BREACH
If this Agreement is terminated by the Distributor because of a
Company breach as defined in section 12 (b), the Company and Distributor shall
mutually agree on a way to continue production of the Products and Components in
order to allow the Distributor to fulfill its obligations existing at the moment
of termination.
15. REACQUISITION OF PRODUCTS
At any time within 90 days after the effective date of any termination
of this Agreement, the Company shall have, and is hereby granted, the right (but
not the obligation) to purchase, in which case Distributor shall sell to the
Company, all or any part of the Components and Products in Distributor's then
existing inventory of Components and Products at a price for each item of the
Products equal to the actual invoice cost of such item to Distributor. Within 30
days after the date of termination of this Agreement, Distributor shall deliver
or mail to the Company a detailed description of its existing inventory.
Distributor shall promptly deliver all Components and Products to be
purchased by the Company pursuant to this Section 15 F.O.B. to the Company's
shipping point unless the Company directs otherwise; shall warrant good title to
all such Products; and shall furnish to the Company evidence satisfactory to the
Company that such Products are free and clear of all claims, liens and
encumbrances of every kind and nature.
Under no circumstances, including any termination of this Agreement,
shall Distributor return Products without having first received the prior
written approval of the
13
<PAGE> 17
Company. Distributor shall not make any deductions or offsets for Products
returned without the prior written approval of the Company.
16. CONFIDENTIALITY
Distributor hereby recognizes that unpublished items of technical or
nontechnical information including, but not limited to, materials, equipment,
designs, specifications, know how, product uses, processes, blueprints,
formulae, costs, financial data, marketing plans and direct selling systems,
customer lists and technical and commercial information relating to customers or
business projections used by the Company in its business, and any other
documents, information or other things the Company considers to be trade secrets
or confidential information (referred to hereinafter collectively as "Trade
Secrets"), whether or not the subject of any patent or patent application,
constitute valuable trade secrets or confidential information and are the
exclusive property of Company. Consequently, during the term of this Agreement
or thereafter Distributor shall not disclose to any unauthorized person or use
in any unauthorized manner Trade Secrets, and specifically further agrees:
(a) Not to, directly or indirectly, disclose or make available to anyone
not employed or affiliated with Distributor, or use outside of
Distributor's organization, any Trade Secrets for any reason or
purpose whatsoever;
(b) To take any and all actions to safeguard all Trade Secrets at all
times so they are not exposed to, or taken by, unauthorized persons;
and
(c) In the event of termination of this Agreement for any reason, to
deliver to the Company and refrain from any further use thereafter in
any manner, all of the Company's property including personal notes and
reproductions, documents and other information relating to the
Company's business and Trade Secrets in his possession or control.
The Company shall grant the Distributor the right to provide
information to its agents, representatives and customers in order to sell and
support the Products and Components.
In the event of a breach or a threatened breach by Distributor of the
provisions of this Section 16, the Company shall be entitled to an injunction
restraining Distributor from disclosing any Trade Secrets. Nothing herein shall
be construed as prohibiting the Company from pursuing any other remedies
available to the Company for any such breach or threatened breach.
17. ADVERTISING AND MARKETING
The Company shall furnish Distributor from time to time with a
reasonable supply
14
<PAGE> 18
of such brochures, price lists and other materials concerning the Products as
may be available to the Company. All other advertising, marketing and sales
costs incurred by the Distributor shall be the sole responsibility of
Distributor and shall not be advanced or reimbursed by the Company.
18. MISCELLANEOUS
(a) Damages. Upon termination of this Agreement, either party shall have
all legal and equitable rights available to it under the law of
Switzerland.
(b) Entire Agreement; No Representation. This Agreement cancels and
supersedes all previous agreements concerning Distributor's status as
a distributor of Products and constitutes the entire agreement between
the parties with respect to the subject matter hereof. Each party
hereto acknowledges that, except as expressly set forth herein, no
representation, understanding or presumption of law or fact has been
made or relied upon (i) which has induced the execution of this
Agreement or would in any way modify any of its provisions or (ii)
with respect to the effectiveness or duration of this Agreement or the
sales or profit expectancy of Distributor's operations hereunder.
(c) Waiver. The waiver by either party, or the failure by either party to
claim a breach of any provision of this Agreement or give notice with
respect thereto, shall not be, or be held to be, a waiver of any
subsequent breach, or as affecting in any way the effectiveness, of
such provision or any other provision.
(d) Notice. Any notice, request, consent or communication under this
Agreement shall be effective only if it is in writing and personally
delivered, sent by certified mail return receipt requested, postage
prepaid, nationally recognized express delivery service with delivery
confirmed or telexed or telecopied with receipt confirmed, addressed
as follows:
If to Distributor:
Name:
Contracts Manager
Airport Systems International, Inc.
11300 West 89th Street
Overland Park, KS 66214
If to the Company:
Name:
15
<PAGE> 19
General Manager
Idman Oy
Munkinmaentie 9
FIN--02400, Kirkkonummi, Finland
or such other persons and/or addresses as shall be furnished in
writing by any such party, and shall be deemed to have been given as
of the date when properly sent in accordance with the terms hereof.
(e) Indemnity. Distributor hereby indemnifies and agrees to hold harmless,
the Company, its shareholders, directors, officers, agents, employees,
representatives, successors and assigns, from and against any and all
losses, claims, damages, expenses or liabilities of whatever form or
nature (including attorneys' fees and other costs and expenses
incurred in connection therewith) which they, or any of them, may
sustain or incur in any action, claim, suit or proceeding by any
person, organization or governmental entity or agency, or otherwise as
a direct or indirect result of breach or nonperformance by the
Distributor, its officers, agents, employees, successors and assigns,
of any of Distributor's obligations under this Agreement.
Company hereby indemnifies and agrees to hold harmless, the
Distributor, its shareholders, directors, officers, agents, employees,
representatives, successors and assigns, from and against any and all
losses, claims, damages, expenses or liabilities of whatever form or
nature (including attorneys' fees and other costs and expenses
incurred in connection therewith) which they, or any of them, may
sustain or incur in any action, claim, suit or proceeding by any
person, organization or governmental entity or agency, or otherwise as
a direct or indirect result of breach or nonperformance by Company,
its officers, agents, employees, successors and assigns, of any of
Company's obligations under this Agreement.
(f) Effect of Termination. Termination of this Agreement for any or no
reason shall not release either party from liability to the other
party which at the time of termination shall have already occurred or
which thereafter may occur in respect of any act or omission prior to
such termination; nor shall any such termination hereof affect in any
way the survival of any right, duty or obligation of either party
hereto which is to survive termination.
(g) Arbitration. Any dispute between any of the parties hereto or claim by
a party against another party arising out of or in relation to this
Agreement or in relation to any alleged breach thereof shall be
finally determined by arbitration in accordance with the rules then in
force of the International Chamber of Commerce. The arbitration
proceedings shall take place in Geneva, Switzerland or such other
16
<PAGE> 20
location as the parties in dispute hereafter may agree upon. Such
proceedings will be conducted in the English language. There shall be
one arbitrator, as shall be agreed upon by the parties in dispute, who
shall be an individual skilled in the legal and business aspects of
the subject matter of this Agreement and of the dispute. In the
absence of such agreement, each party in dispute shall select one
arbitrator and the arbitrators so selected shall select a third
arbitrator. In the event the arbitrators cannot agree upon the
selection of a third arbitrator, such third arbitrator shall be
appointed by the International Chamber of Commerce at the request of
any of the parties in dispute. The arbitrators shall be individuals
skilled in the legal and business aspects of the subject matter of
this Agreement and of the dispute. The decision rendered by the
arbitrator or arbitrators shall be accompanied by a written opinion in
support thereof , which opinion shall be in the English language. Such
decision shall be final and binding upon the parties in dispute
without right of appeal. Judgment upon any such decision may be
entered into in any court having jurisdiction thereof, or application
may be made to such court for a judicial acceptance of the decision
and an order of enforcement. Costs of the arbitration shall be
assessed by the arbitrator or arbitrators against any or all of the
parties in dispute, and shall be paid promptly by the party or parties
so assessed.
(h) Nondisclosure. Distributor shall not either during the term of this
Agreement or thereafter disclose to any unauthorized person (persons
not directly affiliated with Distributor in the sale of Products) or
use for the benefit of any person, firm, partnership or corporation
any trade secrets, price lists, customer lists, manuals, reports or
other confidential or proprietary data or information of any type or
description furnished by the Company to Distributor which has been
designated as confidential or otherwise specified as restricted to
Distributor's use. Distributor agrees to surrender all such written
confidential information to the Company either on request or on
termination of this Agreement, and following such request or
termination will not retain copies of memoranda of such information in
any form whatsoever.
(i) Enforceability. In the event any provision of this Agreement is held
to be illegal, invalid or unenforceable to any extent, the legality,
validity and enforceability of the remainder of this Agreement shall
not be affected thereby, said provision shall be modified by the court
to the extent necessary to render it not illegal, invalid or
unenforceable, and this Agreement shall continue in full force and
effect as modified and shall be enforced to the fullest extent
permitted by law.
(j) Assignment; Binding Agreement. Neither this Agreement, nor any of the
rights, duties or obligations of either party hereunder, may be
assigned (whether by operation or law or otherwise) or otherwise
delegated by such party without the prior written consent of the other
party hereto. This agreement shall be binding upon, and inure to the
benefit of and be enforceable by, the parties hereto and
17
<PAGE> 21
their respective successors and permitted assigns.
(k) Amendment; Headings. This Agreement may be amended only by written
instrument executed by all of the parties hereto. The section headings
in this Agreement are for convenience only and shall not be considered
in construing any of the provisions hereof.
(l) Governing Law. This agreement and all rights and obligations of the
parties hereunder and all rights and obligations of the parties shall
be governed by, and construed and interpreted in accordance with, the
laws of Switzerland.
(m) Construction of Terms. This Agreement and all of the words, terms and
provisions hereof shall be construed in accordance with their usual
and ordinary meanings, and not in favor of or against either party
hereto.
THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
IDMAN OY
By: /s/ Harri Hamalainen
-----------------------------------
Name: Harri Hamalainen
Title: Director
By: /s/ Asko Kallonen
-----------------------------------
Name: Asko Kallonen
Title: Managing Director
AIRPORT SYSTEMS INTERNATIONAL, INC.
By: /s/ Keith S. Cowan
-------------------------------------
18
<PAGE> 22
Name: Keith S. Cowan
Title: President and Chief Executive Officer
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AIRPORT
SYSTEMS INTERNATIONAL, INC. FORM 10-QSB FOR THE QUARTER ENDED JULY 31, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH AS EXHIBIT 27 OF THE AIRPORT
SYSTEMS INTERNATIONAL, INC. FORM 10-QSB.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-01-1998
<PERIOD-END> JUL-31-1998
<EXCHANGE-RATE> 1
<CASH> 1,330
<SECURITIES> 0
<RECEIVABLES> 6,446
<ALLOWANCES> 52
<INVENTORY> 6,329
<CURRENT-ASSETS> 14,150
<PP&E> 3,360
<DEPRECIATION> 1,765
<TOTAL-ASSETS> 16,947
<CURRENT-LIABILITIES> 5,298
<BONDS> 1,179
0
0
<COMMON> 22
<OTHER-SE> 10,433
<TOTAL-LIABILITY-AND-EQUITY> 16,947
<SALES> 4,727
<TOTAL-REVENUES> 4,727
<CGS> 3,150
<TOTAL-COSTS> 4,705
<OTHER-EXPENSES> (23)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23
<INCOME-PRETAX> 22
<INCOME-TAX> 8
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