Exhibit 10.65
WAIVER AND AMENDMENT AGREEMENT
------------------------------
THIS WAIVER AND AMENDMENT AGREEMENT ("Agreement") is made and entered into
as of November 2, 2000 by and among Aviation Group, Inc. ("AVG"), ▇▇▇▇▇▇▇▇▇▇.▇▇▇
ltd. ("TBU"), ▇▇ ▇▇▇▇▇▇ Fund, L. P. ("Pelham") and ▇▇▇▇▇▇ Holdings, Inc.
("CHI").
W I T N E S S E T H
WHEREAS, by a certain Promissory Note dated May 9, 2000 (the "Note"), AVG
promised to pay to Pelham the principal sum of US$3,000,000.00, with interest
payable thereon quarterly, commencing August 9, 2000 and each November,
February, May and August thereafter, all as provided in the Note;
WHEREAS, in connection with the transaction pursuant to which the Note was
issued, AVG issued to Pelham Warrants to purchase 225,000 shares of the Common
Stock of AVG (the "Warrants");
WHEREAS, the terms of the Warrant Agreement dated as of May 9, 2000
between AVG and Pelham (the "Warrant Agreement") provide that the Warrants may
not be exercised until the shareholders of AVG approve the Warrant Agreement;
WHEREAS, TBU guaranteed all of the obligations of AVG under the Note
pursuant to a Guaranty date as of May 9, 2000 from TBU in favor of Pelham (the
"Guaranty");
WHEREAS, the Company failed timely to make an interest payment due under
the Note in accordance with the terms thereof, resulting in an "Event of
Default" under Section 5(1) of the Note, which has been cured by payment
received by Pelham;
WHEREAS, a "Repayment Event" occurred under Section 4(ii) of the Note as a
result of the failure to consummate the Arrangement (as defined in the Note) on
or before September 30, 2000;
WHEREAS, AVG has requested that Pelham waive its right to accelerate the
entire outstanding amount of the Note as a result of the occurrence of the
aforementioned Event of Default and/or Repayment Event;
WHEREAS, CHI owns common shares of TBU, desires for the proposed
Arrangement between TBU and AVG to be completed without being jeopardized by any
acceleration of the Note by Pelham, has an owner who expects to share in a
significant fee payable upon completion of the Arrangement and is willing to
issue to Pelham an option to purchase 250,000
of its common shares of TBU exercisable upon exchange of the Warrants held by
Pelham, if Pelham so elects;
WHEREAS, Pelham is willing to grant such waiver only upon the terms and
conditions set forth herein, including, without limitation, the terms amending
the Note and the Warrants.
NOW THEREFORE, in consideration of the promises and mutual covenants and
conditions herein contained, AVG, TBU, CHI and Pelham agree as follows:
1. AVG and TBU acknowledge and agree that an Event of Default and a
Repayment Event under the Note have occurred and further acknowledge that
because of the Event of Default and/or Repayment Event, Pelham has the right, if
it so elects, to continue to enforce its rights and remedies under the Note,
including accelerating the payment of all outstanding obligations thereunder.
2. Subject to the terms and conditions set forth below, Pelham agrees to
waive the cured Event of Default and the Repayment Event and agrees to forbear
from enforcing its rights and remedies under the Note and the Guaranty until
another Event of Default or Repayment Event under the Note, as amended hereby,
occurs or until five (5) days after delivery of written notice from Pelham to
AVG that AVG, TBU or CHI has failed to comply with any one of the terms of this
Agreement.
3. The Note shall be amended as follows, with the provisions hereof
constituting an allonge to the Note, but with all other provisions of the Note
continuing in full force and effect:
(a) Section 4 of the Note is hereby deleted in its entirety and
replaced with the following:
4. Repayment Events. The occurrence of any one or more of the
following events shall constitute a repayment event (each a
"Repayment Event"): (i) the proposed arrangement between a wholly-
owned subsidiary of AVG and TBU, on substantially the terms and
conditions set forth in the Arrangement Agreement dated as of May 3,
2000, a copy of which has been provided to Lender and to counsel to
Lender (the "Arrangement") is not consummated by December 31, 2000;
or (ii) ▇▇▇▇ ▇▇▇▇▇ ceases to be the Chief Executive Officer of AVG
and its subsidiaries and actively involved in the management and
operation thereof.
4. The Warrant Agreement shall be restated in its entirety and
reexecuted and shall reflect the following amendments:
(a) The provisions requiring the shareholders of AVG to approve the
Warrants as a condition to the exercisability of the Warrants shall be deleted;
-2-
(b) The number of shares purchasable under the Warrants subject to
the Warrant Agreement shall be increased from 225,000 shares to 250,000 shares;
(c) The initial exercise price of the Warrants shall be reduced from
U.S.$2.125 per share to U.S.$1.50 per share.
5. Pelham shall surrender to AVG the existing Warrant Certificate
representing the right to purchase 225,000 shares of Common Stock of AVG, and
AVG will issue a new Warrant Certificate representing Warrants to purchase
250,000 shares of Common Stock of AVG in accordance with the terms of the
amended and restated Warrant Agreement.
6. AVG hereby represents and warrants that no approval of AVG's
shareholders is required in connection with the issuance of the Warrants or the
Common Stock issuable upon exercise thereof pursuant to the rules of the Nasdaq
Stock Market, Inc. because of the listing of the Common Stock on the Nasdaq
SmallCap Market or otherwise.
7. AVG or TBU shall pay to Pelham a waiver fee of US$20,000 on or before
December 31, 2000.
8. AVG or TBU shall pay the fees and expenses of Pelham's legal counsel
related to this Agreement (whether invoiced at the time of the execution of this
Agreement or subsequently), subject to a maximum of US$5,000.
9. TBU acknowledges that this Agreement and the transactions
contemplated hereby will not negate the Guaranty, which TBU acknowledges remains
in full force and effect.
10. In connection herewith, CHI and Pelham shall execute a warrant
exchange agreement containing terms similar to the Warrant Agreement whereby
Pelham has the right to elect, in its sole discretion, to transfer the Warrants
to CHI to permit exercise of options to purchase from CHI up to 250,000 of
common shares of TBU (as adjusted) at an exercise price of US$1.50.
11. Except as otherwise expressly provided for in this Agreement, nothing
in this Agreement shall extend to or affect in any way any of Pelham's rights
and remedies arising under the Note or the Guaranty.
12. This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Connecticut, without regard to
principles of conflict of laws.
13. This Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed to constitute one and the same Agreement.
-3-
14. AVG, TBU and CHI shall provide Pelham with a certified copy of
corporate resolutions approving this Agreement and the transactions contemplated
hereby.
[Remainder of page intentionally left blank. Next page is signature page.]
-4-
IN WITNESS WHEREOF, the parties have caused this Waiver and Amendment
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first written above.
▇▇ ▇▇▇▇▇▇ FUND, L.P.
By: Pelham Capital Management, LLC,
its General Partner
By: ▇▇▇▇▇ ▇▇▇▇▇▇ Investment Management, Inc.,
its Manager
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Managing Director
AVIATION GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: CEO and Executive Vice President
▇▇▇▇▇▇▇▇▇▇.▇▇▇ LTD.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
---------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: CEO
▇▇▇▇▇▇ HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President