EXHIBIT 10.16
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AIRCRAFT LEASE
THIS AIRCRAFT LEASE is made and entered into as of the 19th day of
February, 1998, by and between SD Holdings, Inc. a Georgia corporation
("LESSOR"), and Innotrac Corporation, a Georgia corporation ("LESSEE").
W I T N E S S E T H
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WHEREAS, Lessor owns that certain Piper aircraft, aircraft serial
number 4608030, registration number N213JP, together with one (1) engine, model
number TSIO S50 C, and all propellers, radar, equipment, electronics equipment
and attachments (collectively, the "AIRCRAFT"); and
WHEREAS, Lessee desires to lease the Aircraft from Lessor for proper
business use by Lessee and its affiliates, and Lessor is willing to lease from
the Aircraft from Lessor subject to the terms and conditions contained herein;
NOW, THEREFORE, for and in consideration of the mutual premises,
covenants and agreements contained herein, the parties hereto agree as follows:
1. TERM: The initial term of this Lease shall commence on the date
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the Aircraft is delivered to Lessee and will continue thereafter for a period of
three (3) years until February 19, 2001, unless earlier terminated as
hereinafter provided, and shall continue for successive one (1) year periods
under the terms and conditions provided herein, unless written notice to the
contrary is given by either party hereto to the other party at least thirty (30)
days prior to the expiration of any such one-year period, unless sooner
terminated as hereinafter provided.
2. RENT: The annual rent payable hereunder by Lessee to Lessor shall
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be $72,000.00, payable in equal monthly installments of $6,000.00 on or before
the first day of each calendar month during the term of this Lease. The monthly
rental payments shall be paid to Lessor at Lessor's address, as provided in
SECTION 15 below, or at such other address as Lessor may designate in writing to
Lessee from time to time.
3. RECORDS AND HOME AIRPORT: Lessee shall maintain accurate aircraft
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and engine log books and such other records, logs and books as the Federal
Aviation Administration ("FAA") may from time to time require, showing the full
flight time of the Aircraft and shall keep such logs in the Aircraft and
available for inspection by Lessor or its representatives at all reasonable
times. During the term hereof, the Aircraft shall be permanently
based at Peachtree-DeKalb Airport (the "HOME AIRPORT"), the cost of which shall
be paid by Lessee.
4. MAINTENANCE AND RETURN: (a) Except as set forth in SECTION 4(B)
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below, Lessee shall at all times at Lessee's expense keep the Aircraft in a
fully operative condition and completely airworthy in accordance with the
manufacturer's standards, as announced from time to time, and requirements of
the FAA or any other governmental or similar body having jurisdiction over the
ownership, maintenance or operation of the Aircraft. Lessee shall permit the
performance of all maintenance and repair work thereon only by or under the
supervision of properly qualified and rated personnel and in compliance with FAA
and other applicable governmental requirements. Any replacements or
substitutions of parts or improvements to the Aircraft made by Lessee or Lessor
shall become and remain the property of Lessor. Upon the expiration of the term
hereof, Lessee shall return the Aircraft to Lessor at such reasonable place as
may be designated by Lessor in the same condition as it was when received by
Lessee, normal wear and tear excepted. Lessor shall have no obligation, but
shall have the right, to perform any maintenance or repair work required by
reason of Lessee's failure to perform such work, and all costs and expenses
incurred by Lessor in connection therewith shall be immediately payable by
Lessee to Lessor upon demand by Lessor.
(b) Lessor shall be responsible for the scheduled maintenance,
as determined in accordance with applicable FAA requirements, of the engines and
props and shall cause all such portions of the Aircraft to be maintained,
rebuilt, repaired and/or replaced, in accordance with applicable requirements of
the FAA.
5. WARRANTY: Lessee hereby acknowledges receipt of the Aircraft and
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represents that the Aircraft has been examined and tested by Lessee. Lessor
hereby assigns to Lessee all applicable manufacturer's and mechanics warranties
with respect to the Aircraft to the extent that the same shall be assignable.
LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO
THE AIRCRAFT, AND EXPRESSLY EXCLUDES, AND LESSEE ACKNOWLEDGES THE EXCLUSION OF,
ANY AND ALL WARRANTIES OR REPRESENTATIONS, WHETHER OF MERCHANTABILITY, FITNESS
FOR USE OR OTHERWISE.
6. INSURANCE: (a) Lessee, at its sole cost and expense, shall
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procure and maintain in effect during the term hereof a satisfactory policy or
policies of insurance with insurers satisfactory to Lessor providing full hull
coverage of the Aircraft for the benefit of Lessor including all risk and
foreign object damage, both in flight and not in flight, whether in possession
of Lessee or Lessor, in an amount equal to at least the replacement value of the
Aircraft, but in no event less than $375,000. The proceeds of such coverage
shall be payable to Lessor.
(b) Lessee, at its sole cost and expense, shall procure and maintain
in effect during the term hereof a satisfactory policy or policies of insurance
with insurers satisfactory to
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Lessor providing passenger liability, public liability, and property damage
liability in a single amount not less than $1,000,000, insuring Lessor and
Lessee against claims for death or for injury to persons or loss of or damage to
property in connection with the possession, use or operation of the Aircraft.
The proceeds of such coverage shall be payable to Lessor and Lessee as their
interests shall appear.
(c) Lessee shall deliver to Lessor a copy or copies of the policy or
policies by which the foregoing coverage shall have been procured or a
certificate of the carrier or other evidence satisfactory to Lessor that such
insurance coverage is in effect; provided, however, that Lessor shall be under
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no duty either to ascertain the existence of, or to examine, such insurance, or
to advise Lessee in the event such insurance shall not comply with the
requirements hereof. Lessor shall have the right to approve the policy or
policies effecting such insurance, but shall have no duty to do so. In the event
of failure on the part of Lessee to provide insurance as aforesaid, Lessor may,
at its option, procure such insurance and the cost thereof shall be payable to
Lessor by Lessee upon demand.
(d) The policy or policies effecting the coverage required by this
SECTION 6 shall expressly provide that the interests of Lessor thereunder shall
not be affected by any breach by Lessee of any policy provision, and that such
policy or policies shall be cancelable only upon at least thirty (30) days'
prior written notice to Lessor. Every such policy shall contain a mortgagee
endorsement in usual form in favor of any party having a security interest in
the Aircraft.
7. LOSS OR DAMAGE TO OR TAKING OF AIRCRAFT: Lessee shall bear all
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risks of loss or damage to the Aircraft and of the taking, confiscation or
requisition (of use or title) thereof by any governmental authority during the
term hereof, provided, however, that if loss or damage is caused by the gross
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negligence of Lessor while Lessor is in possession of the Aircraft under SECTION
9 herein, then Lessor shall bear such loss or damage. In the event of loss or
damage to the Aircraft while not in Lessor's possession, or the taking of the
Aircraft, Lessee shall immediately report such loss or damage or taking to
Lessor, to the carrier or carriers of all insurance thereon, and, as required by
law, to governmental agencies, and shall furnish such information, execute such
documents and do any and all other acts and things necessary to facilitate the
collection of the proceeds of any insurance policy or policies thereon, or
awards for such taking. In the event of such loss, damage or taking, the rights,
liabilities and obligations of the parties hereto shall be as follows:
(a) In the event that the Aircraft is lost or taken or is damaged
beyond repair and the proceeds of any applicable insurance policy or policies
payable as a result thereof, or awards for such taking, shall be less than
$100,000, then Lessee shall pay to Lessor an additional sum equal to the
remainder after subtracting the amount of such proceeds or awards so payable
from $100,000. Upon the receipt by Lessor of all monies due under this
subsection (a) in the event of such loss, damage or taking, this Lease shall
terminate.
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(b) In the event that the Aircraft is partially damaged, then this
Lease shall remain in full force and effect, and Lessee shall, at its cost and
expense, and in a timely manner, fully repair and restore the Aircraft to its
condition prior to the occurrence of such damage, and this Lease shall thereupon
continue in full force and effect. Such repair and restoration shall be effected
only in accordance with plans and specifications approved in advance in writing
by Lessor. Upon the completion of such repair and restoration, Lessor shall
reimburse Lessee for the costs thereof to the extent of any proceeds of
insurance received by Lessor and covering such damage, such reimbursement to be
contingent upon the execution by Lessee of all documents and the doing by Lessee
of any and all other acts and things required for the recovering of such
insurance proceeds.
8. USAGE, FEES AND LIENS: Lessee shall use the Aircraft solely for
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its own use or the use of its Affiliates (as defined below) in the ordinary
course of business; provided, that Lessee may allow Scott Dorfman to make
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personal use of the Aircraft. Lessee shall not, without prior written consent of
Lessor, (i) sublease the Aircraft, (ii) enter into "time sharing agreements" or
"interchange agreements" (as respectively defined in Sections 91.501(c)(1) and
(2) of the FAA Regulations, 14 C.F.R. (S) 91.501(c)(1) and (2)), (iii) use the
Aircraft for the purpose of "commuter" or "on-demand" operations (as
respectively defined in Sections 119.3 of the FAA Regulations, 14 C.F.R. (S)
119.3), nor (iv) use the Aircraft to provide transportation of cargo and/or
passengers for compensation or hire. Lessee shall not use the Aircraft in any
manner which shall violate any provision of any policy of insurance thereon, or
any law or regulation of any governmental authority, including but not limited
to, the FAA, and any fine, penalty or forfeiture, whether resulting from any
such violation or otherwise, shall be the sole responsibility of Lessee. Lessee
shall pay when due all license fees and other fees and assessments necessary for
the securing of all licenses, certificates of title and other permits required
for the operation of the Aircraft. Lessee shall have no right to consent to any
lien or liens on the Aircraft. Any liens (other than liens expressly permitted
hereby or liens incurred by Lessor) shall be discharged at the sole cost and
expense of Lessee, who shall indemnify and save Lessor harmless against any such
lien or liens. "AFFILIATES" shall mean Scott Dorfman and any natural person or
entity directly or indirectly controlling Lessor, or controlled by or under
common control with Lessor, whether through ownership of voting securities, by
contract, or otherwise.
9. DEFAULT: Time is of the essence of this Lease. Default in the
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payment of any rent hereunder or default in the making of any other payment or
in the performance of any other obligation or covenant of Lessee under this
Lease; the making of a general assignment for the benefit of creditors by
Lessee; the suspension of business or the commission by Lessee of any act
amounting to a business failure; any change in, or termination of, Lessee's
corporate existence (except a merger, consolidation or reorganization in which
the obligations of Lessee are assumed by the surviving corporation); the filing
of a lien against Lessee, any of Lessee's property, or Lessee's interest in the
Aircraft; or the institution of bankruptcy, reorganization, liquidation,
receivership or similar proceedings by or against Lessee and, if instituted
against Lessee, its consent thereto or the failure to cause such proceedings to
be discharged or stayed
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within thirty (30) days thereafter, shall constitute an event of default
hereunder and shall give rise to the rights on the part of Lessor described in
SECTION 10 hereof.
10. RIGHTS OF LESSOR UPON DEFAULT OF LESSEE: Upon the occurrence of
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any of the events of default described in SECTION 9 hereof Lessor may, in its
discretion, do any one or more of the following:
(a) Terminate this Lease upon ten (10) days' written notice to
Lessee.
(b) Whether or not the term of this Lease is terminated, take
immediate possession of the Aircraft, wherever situated, and for such purpose
enter upon any premises without liability for so doing. Lessor shall hold the
Aircraft so repossessed free and clear of this Lease and of any of the rights of
Lessee hereunder.
(c) Whether or not action has been taken under subsection (a) or (b)
next above, sell, dispose of, hold, use or lease the Aircraft as Lessor, in its
sole discretion, may decide, without any duty to account to Lessee with respect
to such action or any proceeds thereof.
After default, Lessee shall be liable for, and Lessor may recover from Lessee,
(i) all unpaid rent to the date of such delivery or repossession, (ii) all other
sums payable by Lessee pursuant to the provisions of this Lease, (iii) all other
losses and damages sustained by Lessor by reason of such default, and (iv) all
costs and expenses incurred by Lessor by reason of such default.
11. PREVENTION OF DEFAULT: Any provision of this Lease to the
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contrary notwithstanding, Lessor shall exercise no right upon default by Lessee
of other than a monetary default until ten (10) days after the giving of notice
by Lessor to Lessee of such default and the failure of Lessee to cure such
default prior to the expiration of such 10-day period.
12. INDEMNITY: Lessee shall indemnify and hold Lessor harmless from
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and against any and all claims, demands, liabilities, losses, damages or
injuries of whatever kind and nature (including attorneys' fees), however
caused, resulting directly or indirectly from or pertaining to Lessee's
possession, use, operation, maintenance or condition of the Aircraft. The
foregoing indemnity shall not be affected by any termination of this Lease.
13. TAXES: Lessee agrees to pay, and to indemnify and hold Lessor
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harmless from, all license and registration fees and all taxes, including
without limitation, income, withholding, franchise, sales, use, ad valorem,
value added, personal property, stamp or other taxes, levies, imposts, duties,
charges or withholdings of any nature (together with any penalties, fines or
interest thereon) imposed against any such party or the Aircraft by any federal,
state or local government or taxing authority in the United States or by any
foreign government or any subdivision thereof upon or with respect to the
Aircraft (excluding, however, federal, state and local taxes on, or measured by,
the net income of Lessor) unless, and to the extent only, that any such tax,
levy, impost, duty, charge or withholding is being contested by Lessee in good
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faith and by appropriate proceedings so long as such proceedings do not involve
any danger of the sale, forfeiture or loss of the Aircraft or any interest
therein. In case any report or return is required to be made with respect to any
obligation under this SECTION 13, Lessee will either (after notice to Lessor)
make such report or return in such manner as will show the ownership of the
Aircraft in Lessor and send a copy of such report or return to Lessor or will
notify Lessor of such requirement and make such report or return in such manner
as shall be satisfactory to Lessor. All amounts payable to Lessor by Lessee
pursuant to this SECTION 13 shall be payable on written demand by Lessor. All of
the indemnities contained in this SECTION 13 shall continue in full force and
effect notwithstanding the expiration or other termination of this Lease and are
expressly made for the benefit of, and shall be enforceable by, Lessor, its
successors and assigns.
14. MISCELLANEOUS:
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(a) Inspection. Lessor shall have the right to inspect the Aircraft
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at any time upon 24 hours prior notice.
(b) Late Payments. Lessee shall pay to Lessor interest at the rate of
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fifteen percent (15%) per annum, or the maximum amount permitted by applicable
law, whichever is lesser, on all sums not paid by Lessee to Lessor when due and
owing under any provision of this Lease from the date of delinquency until paid.
(c) Rights and Remedies. Lessor's rights and remedies in respect of
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any of the terms and conditions of this Lease shall be cumulative and not
exclusive, and shall be in addition to all other rights and remedies in its
favor.
(d) Non-waiver. No party hereto shall, by act, delay, omission or
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otherwise, be deemed to have waived any of its rights or remedies hereunder
unless such waiver is in writing and signed by the waiving party. A waiver by
either party of any of its rights or remedies hereunder shall not be construed
as a waiver of any succeeding breach or default in the same or any other term or
condition hereof.
(e) Modifications In Writing. Any change or modification to this
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Lease must be in writing and must be executed by the party against whom such
amendment is sought to be enforced.
(f) Entire Agreement. This Lease supersedes all prior agreements,
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oral or written, and all other communications regarding the subject matter
hereof.
(g) Headings. The headings used herein are for reference and
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convenience only and shall not enter into the interpretation hereof.
(h) Governing Law. The validity, construction and performance of this
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Lease shall be governed by the laws of the State of Georgia, exclusive of choice
of law provisions.
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(i) Severability. If any provision of this Lease is held by a court
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of competent jurisdiction to be unenforceable, the remaining provisions of this
Lease will remain in full force and effect.
(j) Survival. All amounts due hereunder, together with SECTIONS 5,
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10, 11 AND 13 shall survive the expiration or termination of this Lease for any
reason.
(k) Accession. All equipment, engines, radios, accessories,
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instruments and parts now or hereafter used in connection with the Aircraft
shall become part of the Aircraft by accession.
15. NOTICE: If, under this Lease, one party is required to give
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notice to the other, such notice shall be deemed given if sent by certified or
registered mail, national overnight courier, or telecopy, provided it is
properly addressed or directed, to the intended recipient at recipient's address
or telecopy number set forth below:
TO LESSOR: Scott Dorfman TO LESSEE: Innotrac Corporation
c/o Innotrac Corporation 1828 Meca Way
1828 Meca Way Norcross, Georgia 30093
Norcross, Georgia 30093 Attn:Chief Financial Officer
telecopy: (770) 717-2111 telecopy: (770) 717-2111
Any such notice or communication will be deemed to have been duly given
immediately if given or made in person or by telecopy (confirmed by the
recipient), or one day after delivery by national courier, or three days after
mailing (if given or made by mail), and in proving same it will be sufficient to
show that the envelope containing the same was delivered to the delivery or
postal service and duly addressed, or that receipt of a facsimile was confirmed
by the recipient as provided above. Any party entitled to notice may change the
address or telecopy number to which notices or other communications to such
party will be delivered, mailed or transmitted by giving notice thereof to the
parties hereto in the manner provided in this section.
16. COMPLIANCE WITH FAA REGULATIONS SECTION 91.25: Lessee covenants
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that, in compliance with Section 91.25 of the FAA Regulations (14 C.F.R. (S)
91.25), Lessee shall:
(a) mail a copy of this Lease to:
Aircraft Registration Branch
P.O. Box 25724
Oklahoma City, OK 73125
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within 24 hours of the execution of this Lease; and
(b) carry a copy of the Lease in the Aircraft, and the copy shall be
available to the Federal Aviation Administrator or any person to whom he has
delegated his authority in the matter concerned; and
(c) at least 48 hours prior to the first flight of the Aircraft under
this Lease, notify (by telephone or in person) the FAA Flight Standards Office
nearest the airport where such flight will originate to inform the FAA of (i)
the location of the airport of departure, (ii) the departure time, and (iii) the
registration number of the Aircraft.
17. TRUTH IN LEASING STATEMENT: In compliance with Section 91.54 of
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the FAA Regulations (14 C.F.R. (S) 91.54) the parties hereby acknowledge and
agree as follows:
(a) THE AIRCRAFT HAS BEEN MAINTAINED AND INSPECTED UNDER CHAPTER I OF
THE FEDERAL AVIATION ADMINISTRATION'S REGULATIONS (14 C.F.R. (S) 1.1 ET SEQ.)
WITHIN THE 12-MONTH PERIOD IMMEDIATELY PRECEDING THE DATE OF THE EXECUTION OF
THIS LEASE. LESSEE CERTIFIES THAT OPERATIONS OF THE AIRCRAFT UNDER THIS LEASE
WILL COMPLY WITH THE APPLICABLE MAINTENANCE AND INSPECTION REQUIREMENTS OF PART
91 OF THE FEDERAL AVIATION ADMINISTRATION'S REGULATIONS.
(b) LESSEE SHALL BE RESPONSIBLE FOR THE OPERATIONAL CONTROL OF THE
AIRCRAFT UNDER THIS LEASE AND ANY EXTENSION HEREOF EXCEPT AS PROVIDED IN SECTION
9 HEREOF FOR USE OF THE AIRCRAFT BY LESSOR. LESSEE CERTIFIES THAT IT UNDERSTANDS
ITS RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION
REGULATIONS.
SIGNATURE: /s/ John H. Nichols, III
NAME: Innotrac Corporation
ADDRESS: 1828 Meca Way, Norcross, Georgia 30093
LESSOR CERTIFIES THAT IT UNDERSTANDS ITS RESPONSIBILITIES FOR
COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS.
SIGNATURE: /s/ Scott Dorfman
NAME: SD Holdings, Inc.
ADDRESS: c/o 1828 Meca Way, Norcross, Georgia 30093
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(c) AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND
PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA
FLIGHT STANDARDS DISTRICT OFFICE.
18. TERMINATION OF PRIOR LEASE: That certain Airplane Lease
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Agreement, effective March 1, 1996, by and between Innotrac Corporation and
Scott Dorfman, is hereby terminated in its entirety and shall be of no further
force and effect from and after the date hereto.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Lease under
seal as of the day and year first above written.
SD HOLDINGS, INC.
By: /s/ Scott Dorfman
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Scott Dorfman, President
INNOTRAC CORPORATION
By: /s/ John H. Nichols, III
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John H. Nichols, III
Chief Financial Officer
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