EXHIBIT 10.40
PURCHASE AGREEMENT
(▇▇ ▇▇▇▇▇▇ Fund, L.P. Offer to Purchase Promissory Note of Aviation Group,
Inc., guaranteed by ▇▇▇▇▇▇▇▇▇▇.▇▇▇ Ltd., and Series D Warrants of Aviation
Group, Inc.)
A completed and originally executed copy of this Purchase Agreement is being
delivered to Aviation Group, Inc. ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇.
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Note Issuers: Aviation Group, Inc.
Guarantor: ▇▇▇▇▇▇▇▇▇▇.▇▇▇ Ltd.
Warrant Issuer: Aviation Group, Inc.
Issue: One Unit consisting of (i) a promissory note in the original
principal amount of $3,000,000 from Aviation Group, Inc. (the "Note"), and (ii)
Series D Warrants to purchase shares of Common Stock of Aviation Group, Inc. at
U.S. $2.125 per share (the "Warrants"). The "Unit" consists of the Note and
225,000 Warrants. The obligations of the issuer of the Unit shall be
unconditionally guaranteed by ▇▇▇▇▇▇▇▇▇▇.▇▇▇ Ltd.
Number of Units: 1
Total Subscription Price: U.S. $3,000,000
Name and Address of Purchaser: ▇▇ ▇▇▇▇▇▇ Fund, L.P.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
PURCHASE AGREEMENT
As of May 4, 2000
Aviation Group, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs/Madame:
Re: Sale of Promissory Note of Aviation Group, Inc., guaranteed by
▇▇▇▇▇▇▇▇▇▇.▇▇▇ Ltd., and Warrants of Aviation Group, Inc.
The undersigned (the "Purchaser") hereby confirms its irrevocable offer
(the "Offering") to purchase, subject to the terms and conditions set forth
herein, one unit (the "Unit") consisting of (i) a promissory note in the
original principal amount of U.S. $3,000,000 from Aviation Group, Inc. (the
"Note"), and (ii) 225,000 Series D Warrants to purchase shares of Common Stock
at $2.125 per share (the "Warrants") of Aviation Group, Inc., a Texas
corporation (the "Corporation"). The obligations of the Corporation under the
Note shall be unconditionally guaranteed by ▇▇▇▇▇▇▇▇▇▇.▇▇▇ Ltd. ("TBU"). The
purchase price is U.S.$3,000,000 for one Unit. The Note and the 225,000 Warrants
may not be transferred other than as a Unit unless and until the arrangement of
a subsidiary of the Corporation with TBU is consummated substantially on the
terms and conditions set forth in the Arrangement Agreement dated May 3, 2000, a
copy of which have been provided to the Purchaser (the "Arrangement"), and,
after consummation of the Arrangement, the Warrants will be detachable and
separately transferable from the Note. Each of the Corporation and TBU
acknowledges and agrees that the prospect of the consummation of the Arrangement
is a material inducement to the Purchaser and the Purchaser would not purchase
the Unit if the Arrangement were not to take place. In consideration of the
foregoing, as an inducement for the Purchaser to purchase the Unit hereunder and
standing to materially benefit from the Purchaser's purchase of the Unit, TBU
has agreed to guaranty the Corporation's obligations pursuant to a guaranty of
even date herewith substantially in the form of Exhibit I hereto (the
"Guaranty"). Without TBU's delivery of the Guaranty each of the Corporation and
TBU acknowledges that the Purchaser would not purchase the Unit hereunder.
1. Purchase of the Unit
The Purchaser hereby agrees to purchase the Unit at an aggregate
purchase price of U.S.$3,000,000.
2. Acceptance of Offer to Purchase
The offer to purchase a Unit on the terms herein set forth is evidenced
by the execution of this purchase agreement (this "Agreement") by the Purchaser
and is subject to acceptance or rejection by the Corporation and TBU in whole,
but not in part. Confirmation of acceptance or rejection of the offer herein
contained will be forwarded to the Purchaser by the Corporation promptly after
the acceptance or rejection of such offer.
3. Conditions of Closing
The sale and delivery of the Unit to the Purchaser is conditional upon:
(a) such sale being exempt from the registration and qualification
requirements under all applicable securities laws and regulations;
(b) the representations and warranties made by the Corporation and
TBU in paragraph 7 hereof being true and correct in all respect at the time of
Closing (as defined below);
(c) the receipt by the Purchaser of evidence of the corporate
authorization by the Corporation of the transactions contemplated hereby;
(d) the execution and delivery by each of the Purchaser and the
Corporation of a registration rights agreement in mutually acceptable form
embodying those certain registration rights described in the Summary of Terms
attached hereto as Schedule A (the "Summary of Terms");
(e) execution of a counterpart signature page to this Agreement by
the Purchaser, the Corporation and execution and delivery by TBU of the Guaranty
to the Purchaser;
(f) payment by the Corporation to the Purchaser of a closing fee in
the amount of U.S. $60,000; and
(g) payment by the Purchaser to the Corporation of the aggregate
purchase price of U.S. $3,000,000 and delivery by the Corporation to the
Purchaser of a duly and fully executed Note and the Warrants comprising the
Unit.
4. Closing
Delivery of and payment for the Unit (the "Closing") will be completed
at the offices of the Corporation: Aviation Group, Inc., ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ on such date (the "Closing Date") as may be
agreed upon by the Corporation, TBU and the Purchaser, but in any event no later
than May 8, 2000, unless otherwise agreed in writing by each of the parties
hereto.
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Certificates representing the Warrants and an original Note in the
principal amount of U.S. $3,000,000 and a fully executed Guaranty will be
available for delivery at Closing upon payment of the aggregate purchase price
therefor. It is a condition of Closing that all documents required to be
delivered and signed in accordance with this Agreement be received, and all of
the conditions set forth in paragraph 3 be satisfied or waived in writing, on or
prior to the Closing Date.
5. Registration Exemptions
The Purchaser acknowledges and agrees that the sale and delivery of the
Unit is conditional upon such sale being exempt from the requirement to file a
registration statement or upon the issuance of such orders, consents or
approvals as may be required to permit such sale without the requirement of
filing a registration statement. The Purchaser acknowledges and agrees that the
Corporation may be required to provide applicable securities regulatory
authorities with a list setting forth the identity of the beneficial purchaser
of the Unit and to certify as to the Purchaser's status as an accredited
investor as defined in Regulation D.
6. Representations and Warranties of the Purchaser
The Purchaser hereby represents, warrants and covenants on its own
behalf to the Corporation and TBU (which representations, warranties and
covenants shall survive the Closing) that:
(a) the Purchaser is authorized to consummate the purchase
of the Unit;
(b) the Purchaser understands that the Unit has not been
and will not be registered under the U.S. Securities Act of
1933, as amended (the "Securities Act") or any applicable state
securities laws, and that the offering contemplated hereby is
being made in reliance on an exemption from registration
provided by Regulation D under the Securities Act;
(c) the Purchaser has had access to such information, if
any, concerning the Corporation as it has considered necessary
in connection with its investment decision to invest in the
Unit;
(d) the Purchaser is a partnership created in or
organized under the laws of any state of the United States;
(e) the Purchaser confirms that it is an "accredited
investor" as defined in Rule 501(a) of Regulation D ("Accredited
Investor") and the Purchaser will hold the Unit for its own
account or for the account of an Accredited Investor as to which
it exercises sole investment discretion, and not with a view to
any resale, distribution or other disposition of the Unit in
violation of the United States securities laws and that the
Purchaser has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and
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risks of its investment in the Unit and it is able to bear the
economic risks of such investment;
(f) the Purchaser acknowledges that it has not purchased
the Unit as a result of any general solicitation or general
advertising (as those terms are used in Regulation D under the
Securities Act), including advertisement, articles, notices or
other communications published in any newspaper, magazine or
similar media or broadcast over radio or television, or any
seminar or meeting whose attendees have been invited by general
solicitation or general advertising;
(g) the Purchaser agrees that if it decides to offer,
sell or otherwise transfer the Unit, or the Note or Warrants
constituting the Unit, it will not offer, sell or otherwise
transfer any of such securities, directly or indirectly, unless:
(i) the sale is to the Corporation;
(ii) a purchaser's letter containing representations,
warranties and agreements substantially similar
to those contained in this Agreement and
satisfactory to the Corporation, is executed by
the purchaser and delivered to the Corporation
prior to the sale;
(iii) the sale has been properly registered under the
Securities Act and applicable state laws; or
(iv) the sale is made pursuant to an exemption from
registration under the Securities Act and
applicable state laws;
(h) the Purchaser understands and acknowledges that upon
the original issuance of the Unit and until such time as is no
longer required under applicable requirements of the Securities
Act or applicable state laws, all certificates representing the
Warrants, and all certificates issued in exchange therefor or in
substitution thereof, shall bear, on the face of such
certificates, the following legend (or a substantially similar
legend):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF
ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND
SUCH LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
OR EXEMPTION THREFROM."
(i) the Purchaser understands and acknowledges that the
Note and the Warrants comprising the Unit are not separately
transferable from one another
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unless and until the consummation of the Arrangement and
thereafter the Warrants and the Note shall be separately
transferable by it, subject to any other restrictions on
transfer;
(j) the Purchaser consents to the Corporation making a
notation on its records or giving instructions to any transfer
agent of the Note or Warrants in order to implement the
restrictions on transfer set forth and described herein; and
(k) the Purchaser acknowledges that it has been
represented by legal counsel and has received and carefully read
the Summary of Terms attached hereto and understands and
acknowledges that an investment in the Unit is highly
speculative and involves a high degree of risk, that no federal
or state agency has passed upon the Unit or the Summary of Terms
or made any finding or determination as to the fairness of this
investment, and that the Purchaser is not entitled to cancel,
terminate or revoke this Agreement or any of the powers
conferred herein accept as otherwise permitted under applicable
law.
7. Representations and Warranties of the Corporation and TBU
Each of the Corporation and TBU jointly and severally represents and
warrants to the Purchaser as of that date first above listed and the Closing
Date as follows:
(a) Each of the Corporation, TBU and their respective
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation with the requisite
corporate power and authority to carry on its business as currently being
conducted and to own, lease and operate the properties currently owned, leased
and operated by it. Each of the Corporation and TBU has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby, and the execution, delivery and performance of
this Agreement, the Note, the Warrants and the Guaranty have been duly
authorized and approved by each of the Corporation and TBU; provided, that, the
issuance of the Warrants is subject to further approval by the stockholders of
the Corporation. The authorized and issued share capital of each of the
Corporation and TBU is, as of the dates indicated thereon, as set forth in the
capitalization charts provided to the Purchaser. Such charts also set forth the
authorized and issued shares of each of such party's subsidiaries.
(b) The Corporation has filed all forms, reports and documents
(including prospectuses, offering memoranda and filing statements) with the
United States Securities and Exchange Commission (the "SEC") and The Nasdaq
Stock Market, Inc. ("Nasdaq") required to be filed by it pursuant to all
applicable laws (collectively, the "Corporation Securities Reports"). As of
their respective dates, the Corporation Securities Reports complied in all
material respects with all applicable laws and regulations and did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or
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necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements (including any
related notes) of the Corporation included in the Corporation Securities Reports
complied in all material respects with applicable accounting requirements and
with all applicable laws, were prepared in conformity with United States
generally accepted accounting principles applied on a consistent basis (except
as otherwise stated in the financial statements) and present fairly the
consolidated financial position, results of operations, shareholders' equity,
liabilities (contingent or otherwise) and cash flows, as the case may be, of the
Corporation and its consolidated subsidiaries as of the dates and for the
periods indicated, subject, in the case of unaudited interim financial
statements to: (i) the absence of certain notes thereto; and (ii) normal
year-end audit adjustments. Each of the representations and warranties made by
the Corporation and AVGP SUB, Inc., its wholly-owned subsidiary, in that certain
Agreement and Plan of Merger dated as of March 17, 2000 by and among the
Corporation, AVGP SUB, Inc., Global Leisure Travel, Inc. and the other parties
identified on Schedules I and II thereto (the "Global Merger Agreement")
relating to the Corporation or AVGP SUB, Inc. was accurate and complete in all
material respects as of the date thereof and does not contain a
misrepresentation (as defined in the Securities Act (Ontario)) as of such date.
Each of the representations and warranties made by the Corporation and Aviation
Group Canada Ltd., its wholly-owned subsidiary, in that certain Arrangement
Agreement dated May 3, 2000 by and among the Corporation, TBU and Aviation Group
Canada Ltd. in connection with the Arrangement (the "TBU Arrangement Agreement")
relating to the Corporation or Aviation Group Canada Ltd. is accurate and
complete in all material respects as of the date thereof and does not contain a
misrepresentation (as defined in the Securities Act (Ontario)) as of such date.
(c) TBU has timely filed all forms, reports and documents (including
prospectuses, offering memoranda and filing statements) with The Toronto Stock
Exchange and the Ontario Securities Commission and each other applicable
Canadian provincial securities regulators required to be filed by it pursuant to
all applicable laws (collectively, the "TBU Securities Reports"). As of their
respective dates, the TBU Securities Reports complied in all material respects
with all applicable laws and regulations and did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements (including any related notes) of TBU included in the TBU Securities
Reports complied in all material respects with applicable accounting
requirements and with all applicable laws, were prepared in conformity with
Canadian generally accepted accounting principles applied on a consistent basis
(except as otherwise stated in the financial statements) and present fairly the
consolidated financial position, results of operations, shareholders' equity,
liabilities (contingent or otherwise) and cash flows, as the case may be, of TBU
and its consolidated subsidiaries as of the dates and for the periods indicated,
subject, in the case of unaudited interim financial statements to: (i) the
absence of certain notes thereto; and (ii) normal year-end audit adjustments.
Each of the representations and warranties made by TBU in the TBU Arrangement
Agreement relating to TBU and its subsidiaries will be accurate and complete in
all material respects as of the date thereof and will not contain a
misrepresentation (as defined in the Securities Act (Ontario)) as of such date.
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(d) All information, reports and other documents and data with
respect to the Corporation, TBU and their respective subsidiaries furnished to
the Purchaser were complete and accurate in all material respects at the time
they were furnished, and have been appropriately supplemented by further reports
and other information to provide the Purchaser with true and accurate knowledge
of all the material information which in the reasonable opinion of the
Corporation and TBU is required to evaluate the merits and risks of an
investment in the Units, the Corporation and TBU. Neither this Agreement nor any
other document furnished to the Purchaser in connection herewith contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein and therein not false or misleading.
8. Covenants of the Corporation and TBU
(a) Each of the Corporation and TBU will use its best efforts to
consummate the Arrangement and will operate the business of the Corporation
after the Arrangement generally in accordance with the business plan described
in TBU's 1999 Annual Report.
(b) Each of the Corporation and TBU will use its best efforts to
obtain all necessary approvals required to give effect to the transactions
contemplated hereby.
(c) The Corporation will use the net proceeds from the sale of the
Unit under this Agreement solely to partially finance one or more of the five
acquisitions by TBU or the Corporation described in a certain letter dated as of
April 12, 2000 from ▇▇▇▇ ▇▇▇▇▇, an officer of the Corporation and TBU, to ▇▇▇▇▇▇
▇▇▇▇▇▇, an officer of the Purchaser, on substantially the terms described in
said letter, or for such other purposes as the Purchaser may agree to in
writing. The net proceeds will be loaned by the Corporation to TBU, if TBU makes
any of the Acquisitions, to the extent necessary to fund such Acquisition. The
loan will be on the same terms as set forth in the Note and secured by a pledge
and grant of a security interest in the assets, stock, equity interests or other
securities acquired by TBU in such business. TBU will execute a note, security
agreement and necessary financing statements in mutually agreeable form and
substance in consideration for the Corporation's advance of the net proceeds for
any Acquisitions.
(d) Within ten (10) days of the Closing, TBU will provided evidence
satisfactory to the Purchaser of the corporate authorization by TBU of the
transactions contemplated hereby and by the Guaranty.
(e) Within ten (10) days after receipt thereof, the Corporation will
provided the Purchaser with a true, correct and complete copy of the fairness
opinion to be issued CIBC World Markets Corp. in connection with the
Arrangement.
9. Guaranty of Obligations of the Corporation by TBU
The obligations of the Corporation hereunder and pursuant to the Note
are subject to the unconditional guaranty of TBU as provided and set forth in
the Guaranty.
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10. Parties Reliance Upon Representations, Warranties and Covenants
(a) The Purchaser acknowledges and agrees that the representations,
warranties, covenants, acknowledgments and agreements made by it herein are made
with the intention that they may be relied upon by the Corporation and TBU in
determining the Purchaser's eligibility to purchase the Unit under relevant
securities laws and regulations. The Purchaser further agrees that by accepting
the Unit it shall be representing and warranting that the foregoing
representations, warranties, covenants, acknowledgments and agreements apply
with the same force and effect as if they had been made by the Purchaser at the
time of Closing. The Purchaser hereby undertakes to notify the Corporation and
TBU at the address set forth on the cover page of this Agreement immediately of
any change in any representation, warranty, covenant or other information
relating to it set forth herein which takes place prior to the Closing. The
representations, warranties and covenants of the Purchaser contained herein
shall survive the Closing of the transactions contemplated hereby and will
continue in full force and effect notwithstanding any subsequent disposition by
the Purchaser or any such beneficial purchaser of the Units. The Purchaser shall
indemnify and hold harmless the Corporation and TBU and their counsel for any
loss, costs or damages any of them may suffer as a result of any
misrepresentation made by it.
(b) Each of the Corporation and TBU acknowledges and agrees that the
representations, warranties, covenants, acknowledgments and agreements made by
it herein and by TBU in the Guaranty are made with the intention that they may
be relied upon by the Purchaser. Each of the Corporation and TBU further agrees
that by accepting the purchase of the Unit hereunder that it shall be
representing and warranting that the foregoing representations, warranties,
covenants, acknowledgments and agreements apply with the same force and effect
as if they had been made by at the time of Closing and without regard to any
investigation made by the Purchaser. Each of the Corporation and TBU hereby
undertake to notify the Purchaser at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ of any change in any representation, warranty, covenant or
other information relating to such party set forth herein which takes place
prior to the Closing. The representations, warranties and covenants of the
Corporation and TBU contained herein and in the Guaranty, as applicable, shall
survive the Closing of the transactions contemplated hereby and will continue in
full force and effect thereafter. Each of the Corporation and TBU shall jointly
and severally indemnify and hold harmless the Purchaser, each director, officer,
employee, agent and affiliate of the Purchaser and Purchaser's counsel for any
loss, costs or damages any of them may suffer as a result of any
misrepresentation made by the Corporation or TBU or as a result of the breach of
any covenant or warranty made by the Corporation or TBU for the benefit of the
Purchaser.
11. Purchaser Acknowledgments
The Purchaser hereby acknowledges and agrees (which acknowledgement and
agreement shall survive the Closing) on its own behalf that:
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(a) the Purchaser's ability to transfer the Unit may be limited,
among other things, by applicable securities laws. The Purchaser
hereby further agrees that it will comply with all relevant
securities laws concerning any resale of the Unit, or the Note,
the Guaranty and Warrants comprising the Unit, and will consult
with its own legal advisers with respect to complying with all
applicable restrictions and requirements applying to any such
resale.
(b) the Purchaser is responsible for obtaining such legal advice as
it considers appropriate in connection with the execution,
delivery and performance by it of this Agreement and the
transactions contemplated under this Agreement; and
(c) the Purchaser irrevocably authorizes the Corporation and TBU to
produce this Agreement or a copy hereof to any interested party
in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
12. Facsimile and Counterpart Subscription
Each of the parties hereto shall be entitled to rely on delivery by
facsimile or an executed copy of this Agreement and acceptance by the
Corporation and TBU of that delivery (as evidenced by the signature of each such
party on a counterpart signature page hereto delivered to Purchaser or
Purchaser's counsel) shall be legally effective to create a valid and binding
agreement between the Purchaser, the Corporation and TBU in accordance with the
terms of this Agreement. In addition, this Agreement may be executed in
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same document.
13. Payment of Expenses
The Corporation agrees to pay all out-of-pocket expenses incurred by the
Purchaser (including any fees and disbursements of any special counsel retained
by the Purchaser) not to exceed U.S. $30,000 relating to the purchase of the
Unit by the Purchaser.
14. Governing Law
This Agreement is governed by the laws of the State of Connecticut and
the federal laws of the United States applicable therein, without regard to
principles of conflicts of law. Each of the parties hereto, in their respective
personal capacity, hereby irrevocably submit to the non-exclusive jurisdiction
of the federal courts located in the State of Connecticut and each Connecticut
State Court with respect to any matters arising out of this Agreement.
15. Assignment
The terms and provisions of this Agreement shall be binding upon and
ensure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors
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and assigns; Provided that this Agreement shall not be assignable by any party
hereto without the prior written consent of the other parties hereto.
16. Time of the Essence
Time shall be of the essence hereof.
17. Currency
All references herein to monetary amounts are references to lawful money
of the United States.
18. Headings
The headings contained herein are for convenience only and shall not
affect the meaning or interpretation hereof.
19. Survival
This Agreement, including, without limitation, the representations,
warranties and covenants contained herein, shall survive the Closing and
continue in full force and effect and be binding upon each of the parties hereto
notwithstanding the completion of the purchase of the Unit by the Purchaser
pursuant hereto, the completion of the Offering, any subsequent disposition by
the Purchaser of the Unit, the Note or Warrants comprising the Unit, the
Guaranty or any investigation made by the Purchaser.
20. Entire Agreement
This Agreement (including any schedules and exhibits hereto and the
agreements contemplated hereby) constitutes the only agreement between the
parties with respect to the subject matter hereof and shall supersede any and
all prior negotiations and understandings and there are no representations,
covenants or other agreements relating to the subject matter hereof except as
stated or referred to herein or therein. This Agreement may only be amended or
modified in any respect by written instrument executed by each of the parties
hereto.
* * * * *
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If the foregoing is acceptable to the Corporation and TBU, each
shall so indicate by executing a counterpart signature page hereto where
indicated below and delivering a signed copy thereof to the Purchaser.
Yours very truly,
▇▇ ▇▇▇▇▇▇ FUND, L.P.
By: Pelham Capital Management, LLC,
its General Partner
By: ▇▇▇▇▇ ▇▇▇▇▇▇ Investment Management, Inc., its
Manager
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
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Each of the undersigned accepts the foregoing and agrees to be
bound by the terms and conditions herein set out and, without limitation, agrees
that the Purchaser may rely upon the covenants, acknowledgments, agreements,
representations and warranties contained herein.
Accepted and Agreed:
AVIATION GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President
Date: As of May 4, 2000
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ LTD.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: CEO
Date: As of May 4, 2000
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SCHEDULE A
AVIATION GROUP, INC.
PROMISSORY NOTE AND
SERIES D WARRANTS
GUARANTEED BY
▇▇▇▇▇▇▇▇▇▇.▇▇▇ LTD.
SUMMARY OF TERMS
Note Issuer: Aviation Group, Inc., a Texas corporation (the
"Corporation")
Guarantor: ▇▇▇▇▇▇▇▇▇▇.▇▇▇ Ltd., an Ontario corporation ("TBU")
Warrant Issuer: The Corporation
Purchaser: ▇▇ ▇▇▇▇▇▇ Fund, L. P. or its transferees (the "Purchaser")
Securities: One Unit, consisting of one $3,000,000 promissory note
from the Corporation (the "Note") with a detachable
warrant to purchase 225,000 shares of Common Stock of the
Corporation (a "Warrant"). The Note and Warrants are
referred to collectively herein as the "Securities."
Principal Amount: U.S. $3,000,000
Ownership: See the Pro Forma Capitalization Schedule attached hereto
as Exhibit A.
Use of Proceeds: To finance a portion of the acquisition price of the five
proposed acquisitions by TBU or the Corporation described
in the letter dated April 12, 2000 from ▇▇▇▇ ▇▇▇▇▇ to
▇▇▇▇▇▇ ▇▇▇▇▇▇ and such other uses as the Purchaser may
approve from time to time in writing (the "Acquisitions").
Closing: As soon as practicable, but no later than May 8, 2000 (the
"Closing").
Closing Fee: 2.0% of the committed amount, payable at Closing.
Note:
Interest Payments: Each holder will be entitled to receive quarterly interest
payments at an annual rate equal to 12% of the outstanding
principal amount of the Note.
Maturity: The Note shall be repayable at the option of the holder
if: (i) a registration statement on Form S-4 has not been
filed with the U.S. Securities and Exchange Commission
("SEC") on or before June 1, 2000, with respect to the
proposed arrangement between the Corporation, Aviation
Group Canada Ltd., a wholly-owned subsidiary of the
Corporation and TBU, on substantially the terms and
conditions in the Arrangement Agreement dated May 3, 2000
among such parties, a copy of which has been furnished to
counsel to the Purchaser (the "Arrangement"); (ii) the
closing of the Arrangement and one or more of the
Acquisitions and the approval by the Corporation's
shareholders of the issuance of the Warrants in accordance
with the rules and regulations of The Nasdaq Stock Market
have not all taken place on or before September 30, 2000;
or (iii) ▇▇▇▇ ▇▇▇▇▇ ceases to be the Chief Executive
Officer of the Corporation and its subsidiaries and
actively involved in the management and operation thereof.
The Note shall be payable in full on February 28, 2001.
Warrants:
Shares: 225,000 shares of the Corporation's Common Stock.
Exercise price: $2.125 a share, with cashless exercise permitted in the
event that the shares issuable upon the exercise of the
Warrants are not registered by September 30, 2000.
Exercise Period: The Warrants will be exercisable from the date of issuance
until the earlier of (i) May 8, 2005, and (ii) the second
anniversary of the effective date of the registration
statement under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), with respect to the resale
of the underlying Common Stock, subject to receipt of
approval of the Corporation's shareholders to the issuance
of the Warrants as required by the rules and regulations
of The Nasdaq Stock Market.
Redemption: None.
Registration: The Corporation will agree to use its best efforts to
cause the underlying shares of Common Stock to be
registered for resale by the holders under the Securities
Act promptly following the registration of the securities
to be issued in connection with the Arrangement, but in no
event later than September 30, 2000, and to cause such
resale registration statement to remain effective and
current until the earlier of the date that (i) all of such
underlying shares of Common Stock have been sold pursuant
to the registration statement, or (ii) the second
anniversary of the effective date of such registration
statement.
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Form: The Warrants shall be in the form attached hereto as
Exhibit B.
Guaranty: The obligations of the Corporation shall be
unconditionally guaranteed by TBU pursuant to a guaranty
agreement in form satisfactory to the Purchaser.
Miscellaneous:
Expenses: The Corporation will pay all out-of pocket expenses
incurred by the Purchaser in connection with the purchase
of the Securities by the Purchaser, including legal fees
and expenses, not to exceed U.S. $30,000.
Closing Conditions: Funding is conditioned upon the following: (i) receipt and
satisfactory review of the arrangement documents between
the Corporation and TBU; (ii) review of the materials
presented to the Corporation in connection with the
fairness opinion of CIBC World Markets Corp.; and (iii)
completion of the Purchaser's due diligence investigation.
Registration
Rights: The Purchaser and the Corporation shall enter into an
agreement providing for the registration of shares of
Common Stock issuable upon exercise of the Warrant Shares
upon the following terms:
Immediate Registration: The shares issuable upon
exercise of the Warrants will be registered
promptly following the registration of the
securities to be issued in connection with the
Arrangement and in any event no later than
September 30, 2000, unless the Purchaser agrees
in writing to a later date.
Piggyback Registration: All registrations of the
Issuer subject to the right of the Issuer and
its underwriters in good faith to reduce the
number of shares proposed to be registered
pro-rata among all participating shareholders in
view of market conditions.
The Corporation shall bear registration expenses
(exclusive of underwriting discounts and commissions) of
all such registrations (including the expense of a single
counsel to the selling shareholders).
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EXHIBIT I
FORM OF GUARANTY