-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OSAVCZqgJhBeJIoXzRKUTz7i2ee2LvaTh4Hj2hTmovtJ4wH3dsKgW7YytOqRBDFC 6eoqvLOS+uy6DNOof9s+yg== 0000785037-96-000003.txt : 19960111 0000785037-96-000003.hdr.sgml : 19960111 ACCESSION NUMBER: 0000785037-96-000003 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951221 ITEM INFORMATION: Changes in control of registrant FILED AS OF DATE: 19960105 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: REFLECTONE INC /FL/ CENTRAL INDEX KEY: 0000785037 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 060663546 STATE OF INCORPORATION: FL FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14059 FILM NUMBER: 96501422 BUSINESS ADDRESS: STREET 1: P.O. BOX 15000 CITY: TAMPA STATE: FL ZIP: 33684-5000 BUSINESS PHONE: 8138871451 MAIL ADDRESS: STREET 1: P.O. BOX 15000 CITY: TAMPA STATE: FL ZIP: 33684-5000 FORMER COMPANY: FORMER CONFORMED NAME: REFLECTONE MERGER SUBSIDIARY INC/FL DATE OF NAME CHANGE: 19880828 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) December 21, 1995 REFLECTONE, INC. (Exact name of registrant as specified in its charter) Florida 0-14059 06-0663546 (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 4908 Tampa West Boulevard, Tampa, Florida 33634-2481 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (813) 885-7481 Not Applicable. (Former name or former address, if changed since last report.) Page 1 of 21 The Exhibit Index is on Page 4 PAGE Item 2. Other Events On December 21, 1995, Reflectone, Inc. (the "Company") sold to British Aerospace Holdings, Inc. ("BAHI") a Company-manufactured Jetstream 41 Full Flight Simulator (the "Simulator") which Reflectone Training Systems, Inc. ("RTS"), a wholly owned subsidiary of the Company, had previously operated as part of the management of the Reflectone Training Center located in Sterling, Virginia near the Dulles International Airport ("RTC-Dulles"). The sale price for the Simulator and related courseware was Eight Million Six Hundred Twenty Thousand Two Hundred Forty-One Dollars (U.S.$8,620,241), which was paid in cash. No significant gain or loss resulted from the sale. The sale of the Simulator was made concurrently with the Company's revision, effective January 1, 1996, of its management agreement with BAHI relating to RTC-Dulles. Under the terms of the revised management agreement with BAHI, RTS will receive a fixed fee of Five Hundred Thousand Dollars annually for the management of RTC-Dulles and will be reimbursed by BAHI for RTS's out-of-pocket costs associated with its management of RTC-Dulles. Prior to this revision, the terms of the Company's management agreement for RTC-Dulles provided for a revenue sharing arrangement between the parties. RTC-Dulles is a division of the Company's Training Services Segment. For the nine months ended September 29, 1995, RTC-Dulles generated revenues of $5,249,000 and operating income of $238,000. As a result of the above described transaction, the Company anticipates a reduction in future revenues of approximately $2,900,000 per annum, and operating income generated by RTC-Dulles will be equal to the fixed fee of $500,000. The Company has various relationships, contracts and agreements with BAHI and its parent British Aerospace, Plc ("BAe") and BAe's other subsidiaries and affiliates. British Aerospace, Inc., a wholly owned subsidiary of BAe, owns approximately 52.6% of the Company's issued and outstanding common stock and 100% of the Company's issued and outstanding preferred stock. Syd Gillibrand, a director of the Company, was Vice Chairman of the Board of Directors of BAe, a position from which he retired in June 1995. David R. Fish, another director of the Company, currently serves as Finance Director of the Systems and Services Division of British Aerospace Defence Ltd., a wholly owned subsidiary of BAe. Item 7. Financial Statements and Exhibits (A) Exhibits Exhibit 10.1 Purchase Agreement between British Aerospace Holdings, Inc. and Reflectone, Inc., dated December 21, 1995. Exhibit 10.2 Flight Training Center Management Agreement between British Aerospace Holdings, Inc. and Reflectone Training Systems, Inc., dated January 1, 1996. PAGE 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 hereunto duly authorized. REFLECTONE, INC. (Registrant) Date: January 5, 1996 By: /s/Richard W. Welshhans Richard W. Welshhans Vice President and Chief Financial Officer PAGE REFLECTONE, INC. Form 8-K December 21, 1995 EXHIBIT INDEX Exhibit Page Number Number 10.1 Purchase Agreement between British Aerospace Holdings, Inc. 5 and Reflectone, Inc., dated December 21, 1995. 10.2 Flight Training Center Management Agreement between British 12 Aerospace Holdings, Inc. and Reflectone Training Systems, Inc., dated January 1, 1996. PAGE EX-10 2 PURCHASE AGREEMENT BETWEEN BRITISH AEROSPACE HOLDINGS, INC. AND REFLECTONE, INC. PURCHASE AGREEMENT THIS PURCHASE AGREEMENT ("Agreement"), made and executed as of this 21st day of December, 1995, is by and between BRITISH AEROSPACE HOLDINGS, INC., a Virginia corporation ("Buyer"), and REFLECTONE, INC., a Florida corporation ("Seller"). RECITALS A. Seller is the owner of that certain Reflectone, Inc. - manufactured Jetstream 41 Full Flight Simulator featuring an IVEX Visual System as more particularly described in Exhibit A attached hereto (the "J-41 Simulator"), and related spare parts as more particularly described in Exhibit B attached hereto (the "Spare Parts"). (The J-41 Simulator and the Spare Parts are hereinafter collectively referred to as the ("Equipment"). B. Seller is the owner of certain computer software programs and source code information prepared by Seller and used in the operation of the J-41 Simulator, including but not limited to the software and source code information described on Exhibit C attached hereto (the "Software"). C. Seller, through its subsidiary Reflectone Training Systems, Inc. ("RTS"), is the developer and owner of certain training courseware related to the J-41 Simulator, as more particularly described on Exhibit D attached hereto (the "Courseware"). D. Seller desires to sell the Equipment to Buyer and Buyer is willing to purchase the Equipment pursuant to the terms and conditions of this Agreement. E. Seller desires to grant to the Buyer and the Buyer desires to receive from the Seller a perpetual, royalty-free license to use the Software, pursuant to the terms of the Software License Agreement attached hereto as Exhibit E. F. Seller desires to sell the Courseware to Buyer and Buyer is willing to purchase the Courseware pursuant to the terms and conditions of this Agreement. G. All Exhibits hereto are incorporated into and form a part of this Agreement. 1. SUBJECT MATTER OF SALE (a) Pursuant to the terms and conditions of this Agreement, Seller does hereby sell the Equipment and the Courseware to Buyer and Buyer hereby purchases the Equipment and the Courseware from Seller. Notwithstanding the foregoing, Buyer acknowledges and agrees that the sale of the Courseware by Seller to Buyer pursuant to this Agreement shall not preclude Seller from developing and selling other simulator or training courseware (including courseware that contains proprietary information, techniques, or methods similar to or derived from those contained in the Courseware). (b) In addition, Seller shall assign to Buyer certain of Seller's right, title and interest under the purchase agreement for the visual system for the J-41 Simulator between Seller and IVEX Corporation ("IVEX"). 2. PURCHASE PRICE The purchase price for the Equipment and the Courseware (the "Purchase Price") shall be Eight Million Six Hundred Twenty Thousand Two Hundred Forty-One Dollars (U.S. $8,620,241.00). 3. PAYMENT (a) The Purchase Price shall be paid to Seller by Buyer on the date hereof (the "Closing Date"). (b) The Purchase Price shall be paid in United States currency, in immediately available funds, by Buyer remitting the entirety of the Purchase Price to Seller by wire transfer to a depository in the United States to be designated in writing by Seller. 4. DELIVERY Delivery of the Equipment and the Courseware shall be made on the Closing Date at the current location of the Equipment at the Reflectone Training Center - Dulles at 22070 Broderick Drive, Sterling, Virginia. Title to the Equipment and the Courseware shall pass from Seller to Buyer by Seller delivering to Buyer on the Closing Date a duly executed Bill of Sale in substantially the form attached hereto as Exhibit F (the "Bill of Sale"). 5. LICENSES (a) On the Closing Date and as a condition to the obligations of the Buyer under this Agreement, Seller and Buyer shall execute and deliver a Software License Agreement in substantially the form attached hereto as Exhibit E (the "Software License Agreement"), pursuant to which Seller will grant to Buyer a perpetual nonexclusive license to use the Software solely in connection with the operation, calibration, maintenance, overhaul, upgrade and repair of the J-41 Simulator, subject to the terms and conditions set forth therein. (b) On or prior to the Closing Date and as a condition to the obligations of the Buyer under this Agreement, IVEX and Buyer shall execute and deliver a Software License Agreement in substantially the form attached hereto as Exhibit G (the "IVEX License Agreement"), pursuant to which IVEX will grant to Buyer a perpetual nonexclusive license to use certain software related to the visual system of the J-41 Simulator solely in connection with the operation, calibration, maintenance, overhaul, upgrade and repair of the J-41 Simulator, subject to the terms and conditions set forth therein. 6. TAXES The Buyer agrees to pay all taxes, duties and similar obligations that result from the sale of the Equipment and the Courseware hereunder including, but not limited to, sales, use, value added, gross receipt and excise taxes imposed upon Buyer or Seller or asserted as a lien or encumbrance against the Equipment or the Courseware as a result of the sale of the Equipment and the Courseware, and Buyer agrees to indemnify, defend and hold Seller harmless from and against any such taxes, duties or similar obligations. 7. WARRANTIES. Upon delivery of the Equipment, Seller shall provide and shall cause IVEX and other J41 Simulator vendors and suppliers to provide to Buyer, limited warranties for the Equipment as set forth on Exhibit H hereof. 8. REPRESENTATIONS AND WARRANTIES Seller represents and warrants to Buyer that, at the time of delivery of the Equipment and the Courseware under this Agreement: (a) Seller shall have the lawful right to sell the Equipment and the Courseware in accordance with the terms hereof (b) Seller shall have good and marketable legal title to the Equipment and the Courseware free and clear of any and all liens, claims, charges or encumbrances. (c) As of the date of the Closing, the J-41 Simulator has been maintained in accordance with the manufacturer's recommended maintenance procedures and has been certified to Level C by the United States Federal Aviation Administration. (d) Seller is a duly organized and validly existing corporation in good standing under the laws of its state of incorporation. (e) Seller has the power and authority to enter into, execute, deliver and perform under this Agreement, the Bill of Sale, and the Software License Agreement (collectively the "Sale Documents"), and the Sale Documents will constitute, when executed and delivered by Seller, the valid and binding obligations of Seller, enforceable in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally or by general principles of equity. (f) The execution and delivery by Seller of the Sale Documents and the performance by Seller of its obligations thereunder have been duly authorized by all necessary action on the part of Seller and do not violate, conflict with, constitute a breach of or result in any default under or require any consent or approval by any third party under (i) any provision of Seller's Articles of Incorporation or By-Laws, or (ii) any law or any order, writ, injunction, restriction, decree, rule or regulation of any court, administrative agency or any other governmental authority applicable to Seller or (iii) any material agreement to which Seller is a party or by which Seller is bound. (g) No consent, approval, authorization, order, registration or qualification of or with any court or regulatory authority or other governmental body having jurisdiction over Seller or any other person or entity, the absence of which would adversely affect the legal and valid execution, delivery and performance by Seller of this Agreement, is required. (h) There is no litigation, investigation or proceeding of or before any arbitrator or governmental authority pending or threatened by or against Seller or against any of its properties or revenues which, if adversely determined, would have a material adverse effect on the ability of Seller to perform its obligations hereunder. (i) EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH HEREIN, SELLER MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WARRANTIES AS TO MERCHANTABILITY OR AS TO THE FITNESS OF THE EQUIPMENT OR THE COURSEWARE FOR ANY PARTICULAR USE OR PURPOSE, AND SHALL NOT BE LIABLE FOR ANY LOSS OR DAMAGE, DIRECTLY OR INDIRECTLY, ARISING FROM THE USE OF SUCH EQUIPMENT OR COURSEWARE OR FOR CONSEQUENTIAL DAMAGES. 9. INDEMNIFICATION (a) Seller shall indemnify, protect, defend and hold Buyer and its directors, officers, agents and employees harmless from and against any and all loss, liability, damage, claim, suit, cost or expense (including, without limitation, court costs and reasonable attorney's fees) which may arise out of, or result from any breach by Seller of any of its representations and warranties set forth in Section 8(a) above. (b) In the event any claim for indemnification hereunder arises on account of a claim or action made or instituted by a third person against an indemnified party, the indemnified party shall notify the indemnifying party promptly after receipt of notice that such a claim or action is being made or was instituted. The indemnifying party shall be entitled to control the defense of any such claim or action by counsel of its own choosing. If the indemnifying party shall control the defense of such claim or action, the same shall not be settled without prior written consent of the indemnified party. 10. APPLICABLE LAW This Agreement shall in all respect be governed by and construed in accordance with the laws of the Commonwealth of Virginia without regard to its conflicts laws. 11. NOTICES All notices and requests required or authorized shall be given in writing and submitted by personal delivery or by registered or certified mail, return receipt requested, or by overnight delivery service (i.e., Federal Express) or telecopier. The date upon which any such notice or request is received by the addressee shall be deemed to be the effective date of such notice or request. Notices and requests addressed by Buyer shall be as follows: British Aerospace Holdings, Inc. 22070 Broderick Drive Sterling, Virginia 20166 Attention: General Counsel Telecopier: (703) 406-1250 Notices and requests addressed by Seller shall be as follows: Reflectone, Inc. 4908 Tampa West Blvd. Tampa, Florida 33684 Attention: Chief Financial Officer Telecopier: (813) 887-3964 12. FEES AND EXPENSES With respect to the transaction contemplated by this Agreement, each party shall be responsible for its own fees and costs, including but not limited to, the fees and costs of its own respective legal counsel. In any action or proceeding between the parties, or any of them, to enforce any of the provisions of this Agreement, to prevent the breach hereof, to seek damages on account of a breach, to seek a declaration of the rights and obligations of the parties hereunder or in which the provisions of this Agreement are asserted as a defense, regardless of whether the action or proceeding is prosecuted to judgment and in addition to any other remedy, the unsuccessful party shall pay the successful party all costs and expenses, including reasonable attorneys' fees, incurred therein by the successful party. 13. MISCELLANEOUS (a) Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. (b) CounterParts. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. (c) Assignment: Successors and Assigns. Neither this Agreement nor any of the rights and obligations hereunder may be assigned by either party without the prior written consent of the other. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, and no other person shall have any right, benefit or obligations hereunder. (d) Waiver: Amendment. No term or provision of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or other person against whom enforcement of the change, waiver, discharge or termination is sought; and any waiver of the terms thereof shall be effective only in the specific instance and for the specific purpose given. This Agreement may be amended only by written agreement executed by the parties hereto. (e) Headings. The headings of the various Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof (f) Entire Agreement. This Agreement embodies the entire agreement and understanding of the parties with respect to the subject matter hereof and, as of its effective date, terminates and supersedes all prior and independent agreement or understandings between the parties covering the same subject matter. (g) Survival. The representations, warranties, indemnities, covenants and disclaimers made herein and the rights and obligations of the parties set forth herein, shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. (h) Further Assurances. Each party hereto shall execute and deliver all such further instruments and documents as may reasonably be requested by the other party in order to fully carry out the intent and accomplish the purposes of the Sale Documents and the transactions contemplated thereby, including without limitation, any reasonable instruments or documents required by the Buyer. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written by their officers or agents thereunto duly authorized. BRITISH AEROSPACE HOLDINGS, INC. By: Paul L. Harris ____________________________ Its: Senior Vice President and General Manager REFLECTONE, INC. By: Richard W. Welshhans ____________________________ Its: Vice President & Chief Financial Officer EX-10 3 FLIGHT TRAINING CENTER MANAGEMENT AGREEMENT FLIGHT TRAINING CENTER MANAGEMENT AGREEMENT ("Agreement"), dated January 1, 1996, by and between BRITISH AEROSPACE HOLDINGS, INC., a Delaware corporation ("BAHI"), and REFLECTONE TRAINING SYSTEMS, INC., a Delaware corporation ("RTS"). WITNESSETH: WHEREAS, BAHI is the owner of a flight training center located at 22070 Broderick Drive, Sterling, Virginia 20166; and WHEREAS, BAHI wishes to engage RTS to manage the Center and RTS wishes to accept such engagement upon the terms of this Agreement. WHEREAS, British Aerospace, Inc., a predecessor of BAHI, and RTS entered into a Flight Training Center Management Agreement, dated as of April 1, 1993, which agreement, the parties hereto agree, is superseded by this Agreement and terminated by the execution of this Agreement. NOW THEREFORE, in consideration of the foregoing, of the mutual covenants herein contained, and of other good and valuable consideration, the receipt, adequacy, and sufficiency of which is hereby acknowledged, the parties, intending legally to be bound hereby, agree as follows: 1. DEFINITIONS. For the purposes of this Agreement, the following definitions shall apply: (a) "Center", shall mean the business known as "Reflectone Training Center-Dulles" currently operated by RTS at the Center Facility utilizing the Center Assets. (b) "Center Assets" shall mean all of the machinery, equipment (including, but not limited to FTD's and mock-up training equipment), furniture, fixtures, courseware, training materials, data, and other documentation used by RTS in the operation of the Center immediately prior to the effective date of this Agreement, including, but not limited to the Existing Simulators. (c) "Center Facility" shall mean the real property and improvements thereto (and common areas associated, directly or indirectly therewith, including, but not limited to, hallways, walkways, lobbies, elevators, parking lots and similar areas) located at 22070 Broderick Drive, Sterling, Virginia 20166, used for the Center (including both the training center and the office and classroom facilities located in the BAHI corporate office building) and more fully described on Exhibit A hereto. (d) "Direct Operating Expenses" shall mean direct operating expenses of RTS incurred in the operation of the Center by RTS employees located at the Center Facility. In no event shall Direct Operating Expenses include the general and administration or overhead expenses incurred by RTS or any of its affiliates supporting the operation of the Center. (e) "Existing Simulators" shall mean the aircraft flight simulators described on Exhibit B hereto. (f) "New Simulators" shall mean any and all aircraft flight simulators utilized in the Center at any time during the term of this Agreement other than the Existing Simulators. 2. ENGAGEMENT OF RTS. BAHI hereby engages RTS to operate and manage the Center, and RTS hereby accepts such engagement, upon the terms and conditions set forth below. 3. DUTIES AND OBLIGATIONS OF BAHI. (a) Except as otherwise provided in Section 8(b) hereof, at all times during the term of this Agreement, BAHI, at BAHI's cost and expense (except as otherwise stated in this Agreement), shall make the Center Facility and the Center Assets exclusively available to RTS for the conduct of the business operations of the Center. Anything to the contrary herein notwithstanding, nothing herein shall be construed as a sublease or other assignment of any lease relating to any Existing Simulator. (b) BAHI, in its sole discretion may require RTS to occupy alterative office and/or classroom facilities during the Term. In the event BAHI requires RTS to occupy alterative facilities such alternative facilities shall then constitute a part of the "Center Facility". (c) BAHI shall cooperate with RTS, if necessary, in the maintenance of all licenses and permits necessary or required to operate the Center in compliance with applicable laws, including without limitation, all licenses and permits required by the FAA. 4. DUTIES AND OBLIGATIONS OF RTS. During the term of this Agreement: (a) RTS shall operate and manage the Center. (b) RTS shall provide, at its expense, all of the employees deemed necessary by RTS for the operation of the Center. (c) RTS shall, during the term of this Agreement, maintain the same casualty and liability insurance (including but not limited to using its best efforts to maintain the same type of coverage, limits and deductibles) covering the operations of the Center as were carried by RTS immediately prior to the date of this Agreement. Such insurance shall name BAHI as an additional insured. (d) RTS shall maintain all licenses and permits necessary or required to operate the Center in compliance with applicable laws, including, without limitation, all licenses and permits required by the FAA. (e) RTS shall invoice and collect payments from the Center's customers for services performed by the Center. Such payments shall be solely for the account of BAHI and remitted monthly by RTS as instructed by BAHI from time to time. Amounts not collected within twelve (12) months of providing services shall be turned over to BAHI for collection or other disposition. 5. CENTER OPERATIONS. During the term of this Agreement, RTS may make such additions, deletions and alterations to the operations of the Center as RTS shall, in its sole discretion, deem necessary; provided, however, except as otherwise agreed in writing by BAHI, RTS shall, continue to utilize the Existing Simulators at the Center throughout the current term of any lease through which the device is being provided to the Center and shall not alter the overall general nature of the business of the Center. 6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BAHI. BAHI hereby represents, warrants and covenants to RTS as follows: (a) Authority. BAHI has full power, right, and authority to execute and perform this Agreement in accordance with the terms hereof (b) Validity. This Agreement has been duly and validly executed by BAHI and, upon delivery thereof by BAHI, will constitute a legal, valid, and binding obligation of BAHI enforceable against BAHI in accordance with its terms. (c) Compliance With Laws and Contracts. The execution, delivery, and performance of this Agreement by BAHI in compliance with the terms and provisions hereto does not conflict with, or result in a breach of, any of the terms, conditions, or provisions of any mortgage, lien, or other security arrangement or any agreement, instrument, order, judgment, decree, or any other restriction of similar kind or character to which BAHI is a party or is otherwise bound which will result in any material adverse effect upon the Center Facility or the Center Assets. (d) No Violation. BAHI is not in violation of, or, to the knowledge of BAHI, under investigation with respect to or threatened to be charged or given notice with respect to, any statute, rule, regulation, order, judgment, injunction, decree, or other law, of any court or governmental authority relating directly or indirectly to the business of the Center which would have a material adverse effect on the business of the Center. (e) Legal Proceedings. There are no claims, actions, suits, inquiries, investigations, or other proceedings, pending or, to the best knowledge of BAHI, threatened or imminent, relating to the Center before any court or governmental body; nor is there any reasonable basis for any such proceedings. BAHI is not subject to any judgment, order, decree, or any governmental restriction which is likely to result in any change in or effect on the Center that is materially adverse to the business, properties, earnings, prospects, or condition (financial or otherwise) of the Center. 7. REPRESENTATIONS AND WARRANTIES OF RTS. RTS hereby represents and warrants to BAHI as follows: (a) Authority. RTS has full power, right and authority to execute and perform this Agreement in accordance with the terms hereof (b) Validity. This Agreement has been duly and validly executed by RTS and, upon delivery thereof by RTS, will constitute a legal, valid, and binding obligation of RTS enforceable against in accordance with its terms. (c) Compliance with Law and Contracts. The execution, delivery, and performance of this Agreement by RTS in compliance with the terms and provisions hereof does not conflict with, or result in a breach of, any of the terms, conditions, or provisions of any mortgage, lien, or other security arrangement or any agreement, instrument, order, judgment, decree, or any other restriction of similar kind or character to which RTS is a party or is otherwise bound and will not result in the declaration of imposition of any lien, charge, or other encumbrance of any nature whatsoever upon the Center Facility or the Center Assets. (d) No Violation. RTS is not in violation of or to the best in knowledge of RTS, under investigation with respect to or threatened to be charged or given notice with respect to, any statute, rule, regulation, order, judgment, injunction, decree, or other law, of any court or governmental authority which would have a material adverse effect upon the business of the center. (e) Legal Proceedings. There are no claims, actions, suits, inquiries, investigations or other proceedings, pending or, to the best knowledge of RTS, threatened or imminent relating to the Center before any court or government body, nor is there any reasonable basis for any such proceedings. RTS is not subject to any judgment, order, decree, or any governmental restriction which is likely to result in any change in or effect on the Center that is materially adverse to the business, properties, earnings, prospects, or condition (financial or otherwise) of the Center. 8. TERM; EVENTS OF Termination. (a) Term. The term of this Agreement shall commence on the date of this Agreement and, subject to early termination pursuant to the terms of this Agreement, terminate on the three (3) year anniversary of such date. (b) Events of Termination. The obligations of the parties under this Agreement shall terminate upon the earliest to occur of the following: (i) the delivery of a written termination notice by either party six (6) months prior to the effective date thereof; (ii) either party's delivery of notice to the other to the effect that an Event of Cause (as hereinafter defined) has occurred; (iii)either party's delivery of notice to the other to the effect that a Force Majeure Event (as hereinafter defined) has occurred; or (iv) the mutual written agreement of the parties. (c) For purposes of this Section 8, the following terms shall have the following meanings: (i) "Event of Cause" shall mean the commission by either party hereto of a material breach of any representation, warranty, agreement, covenant, provision, term, condition, or undertaking set forth in this Agreement and such material breach is not cured within sixty (60) days after receipt of written notice from the non-breaching party. (ii) "Force Majeure Event" shall mean any event not within either party's reasonable control which has the effect of rendering the performance by the affected party of its obligations under this Agreement impossible, impracticable or which substantially frustrates the purpose of this Agreement, including, without limitation, accident, fire, casualty, riot, war, medical epidemic, civil disturbance, strike, lockout or other labor dispute, act of God, order, rule, regulation, or other act of any governmental body or authority or absence of power or essential utility or other essential services, in each case in respect of the Center or operation or management hereof 9. COMPENSATION. (a) Direct Operating Expenses. RTS's budget for Direct Operating Expenses for the first twelve (12) months of the Term of this Agreement has been approved by BAHI and is listed in Exhibit C. During the term of this Agreement, revisions to the operating budget may be made for unbudgeted scope changes with the prior approval of BAHI. Thereafter during the Term of this Agreement, RTS shall submit a budget for RTS's Direct Operating Expenses and a business plan for the Center for the upcoming year by November 1 of the current year. Such budget for Direct Operating Expenses and business plan for the Center must be approved in writing by BAHI prior to December 30 of such current year. No RTS Direct Operating Expenses shall be reimbursed by BAHI to RTS until such budget and business plan are approved, in writing by BAHI. BAHI shall reimburse RTS for the Direct Operating Expenses that have been budgeted, incurred and approved by BAHI, monthly, in arrears, after submission of such Direct Operating Expenses to BAHI by RTS. RTS shall, upon the request of BAHI, supply BAHI with all information requested by BAHI concerning the Direct Operating Expenses. (b) Annual Fee. In addition to payment referred to in Section 9(a), BAHI shall pay to RTS an annual fee of five hundred thousand dollars ($500,000), payable in advance, in equal quarterly installments. (c) Revenues. All revenues earned by the operation of the Center shall be for the account of BAHI and the resulting cash collections from customers shall be remitted monthly by RTS as instructed by BAHI from time to time. RTS shall use its best efforts to collect such amounts from customers. Accounts which are over ninety (90) days overdue will be reviewed jointly by BAHI and RTS with BAHI ultimately determining the disposition of accounts. 10. CENTER FACILITY. (a) Use. RTS shall use and occupy the Center Facility for the operation of the Center and for no other purpose. BAHI represents that the premises may lawfully be used for such purpose. (b) Care of Premises. RTS shall commit no act of waste and shall take good care of the Center Facility and the fixtures and appurtenances therein, and shall, in the use and occupancy of the Center Facility, conform to all laws, orders, and regulations of the federal, state, and municipal governments or any of their departments. Except where the repair has been made necessary by misuse or neglect by RTS or RTS's agents, employees, visitors, or licensees, BAHI shall maintain and repair the Center Facility at BAHI's sole expense. All improvements made by RTS to the Center Facility which are so attached to the Center Facility such that they cannot be removed without material injury to the Center Facility, shall become the property of BAHI upon installation. The above notwithstanding, all training equipment, including any simulators owned by RTS shall at all times remain the property of RTS, absent specific written title transfer to BAHI, whether or not attached to the Center Facility. Not later than ninety (90) days after the last day of this Agreement, RTS shall, a RTS's expense, remove all of RTS's personal property and those improvements made by RTS which have not become the property of BAHI, including trade fixtures, cabinetwork, movable paneling, partitions, and the like; repair all injury done by or in connection with the installation or removal of such property and improvements; and surrender the Center Facility in as good condition as it was at the beginning of the term, reasonable wear and tear excepted. All property of RTS remaining on the premises after ninety (90) days following the last day of the term of this Agreement shall be conclusively deemed abandoned and may be used or removed by BAHI, and RTS shall reimburse BAHI for the cost of such removal. (c) Alterations. RTS shall not, without first obtaining the written consent of BAHI, make any material alterations, additions, or improvements in, to, or on and about the Center Facility. 11. CENTER ASSETS. Assets Necessary to the Business. BAHI owns or leases all of the properties, assets, and rights which are currently used or which are reasonably necessary to carry on its business and operations as currently conducted and all such properties, assets, and rights will be made available by BAHI to RTS for the management and operation of the Center as described herein. 12. INDEMNIFICATION. (a) Indemnification. (i) BAHI shall indemnify, defend, and hold harmless RTS from and against any and all losses, liabilities, damages, obligations, payments, costs, and expenses (including, without limitation, the costs and expense of any and all actions, suits, proceedings, judgments, settlements, and compromises relating thereto, and reasonable attorneys' fees in connection therewith) (collectively, "Indemnifiable Losses" and each an "Indemnifiable Loss") of RTS arising, directly or indirectly, not of or due to a breach of any of the representations, warranties, covenants, agreements, or undertakings of BAHI contained in this Agreement. (ii) RTS shall indemnify, defend, and hold harmless BAHI from and against any and all Indemnifiable Losses of BAHI arising, directly or indirectly, out of or due to a breach of any of the representations, warranties, covenants, agreements, or undertakings, of RTS contained in this Agreement. (b) Procedure for Indemnification. If a party entitled to indemnification pursuant to Section 12(a)(i) or Section 12(a)(ii) (the "Indemnitee") receives notice of the assertion by a person who is not a party to this Agreement of any claim or of the commencement by any such person of any action or proceeding (a "Third Party Claim") with respect to which another party to this Agreement (the "Indemnifying Party") is obligated to provide indemnification, the Indemnitee shall give the Indemnifying Party notice thereof after becoming aware of such Third Party Claim. Such notice shall describe the Third Party Claim in reasonable detail, and shall indicate the amount (estimated if necessary) of the Indemnifiable Loss that has been or may be sustained by the Indemnitee. The Indemnifying Party may elect to compromise or defend, at such Indemnifying Party,s own expense and by such Indemnifying Party's own counsel, any Third Party Claim. If the Indemnifying Party elects to compromise or defend such Third Party Claim, it shall within thirty (30) days (or sooner if the nature of the Third Party Claim so requires) notify the Indemnitee of its intent to do so, and the Indemnitee shall cooperate, at the expense of the Indemnifying Party, in the compromise of, or defenses against, such Third Party Claim. If the Indemnifying Party elects not to compromise or defend against the Third Party Claim, or fails to notify the Indemnitee of its election as herein provided, the Indemnitee may pay, compromise, or defend such Third Party Claim without waiving its claim for indemnification hereunder. Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnitee shall settle or compromise any claim over the objection of the other; provided, however, that consent to settlement or compromise shall not be unreasonably withheld. In any event, the Indemnitee and the Indemnifying Party may each participate, at its own expense, in the defense of such Third Party Claim. If the Indemnifying Party chooses to defend any claim, the Indemnitee shall make available, on a reasonable basis to the Indemnifying Party, any personnel or any books, records, or other documents within its control that are necessary for such defense. Any claim on account of an Indemnifiable Loss which does not result in a Third Party Claim shall be asserted by written notice given by the Indemnitee to the Indemnifying Party. The Indemnifying Party shall have a period of thirty (30) days within which to respond thereto. If the Indemnifying Party does not respond within such thirty (30) day period, the Indemnifying Party shall be deemed to have accepted responsibility to make payment, and shall have no further right to contest the validity of such claim. If the Indemnifying Party does respond within such thirty (30) day period and rejects such claim in whole or in part, the Indemnitee shall be free to pursue such remedies as may be available to such party by applicable law. (c) Remedies Cumulative. The remedies provided in Section 12 shall be cumulative and shall not preclude assertion by an Indemnitee of any other rights or the seeking of any and all other remedies against an Indemnifying Party. 13. MISCELLANEOUS PROVISIONS. (a) Relationship of the Parties. The parties hereby understand and agree that the relationship between BAHI and RTS created by this Agreement shall be that of an independent contractor or an independent subcontractor and that nothing contained herein shall create a partnership, joint venture, or relationship of principal and agent between BAHI and RTS. (b) Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if hand delivered, transmitted by telegram, telex or telecopy or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: (i) If to BAHI to: 22070 Broderick Drive Sterling, Virginia 20166 Attention: Paul L. Harris Senior Vice President and General Manager (ii) If to RTS to: 4908 Tampa West Boulevard Tampa, Florida 33634 Attention: Anthony S. Brancato Executive Vice President or to such other address as the person to whom notice is given may have previously furnished to the other parties in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. (c) Successors. This Agreement and all terms and provisions hereof shall be binding upon and shall inure to the benefit of all of the parties hereto, and their legal representative, heirs, successors, and assigns, except as expressly herein otherwise provided. (d) Governing Law. This Agreement shall be governed by and construed in accordance with the laws, but not the rules relating to choice of laws, of the Commonwealth of Virginia. (e) Assignability. Either party may assign this Agreement and its right and obligations hereunder, to an affiliate thereof (including Aero International (Regional)) without the prior consent of, but upon notice to, the other party, but neither party may otherwise assign this Agreement without the prior written consent of the order. (f) Counterparts. This Agreement may be executed in counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. (g) Entire Understanding. This Agreement constitutes the entire understanding between the parties hereto and supersedes any prior understandings and agreements, written or oral, between them respecting the subject matter hereof. (h) Severability. If any provision of this Agreement, or the application of such provision to any person or circumstance, shall be held invalid by a court of competent jurisdiction, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those to which it is held invalid by such court, shall not be affected thereby. (i) Amendments. This Agreement may only be amended upon the prior written agreement of BAHI and RTS. (j) Further Assurances. Each of the parties shall hereafter execute and deliver such further instruments and do such further acts and things as may be required or useful to carry out the intent and purpose of this Agreement and as are not inconsistent with the terms hereof (k) Attorneys' Fees. In the event of litigation between the parties arising directly or indirectly pursuant to this Agreement, the prevailing party shall be entitled to the reimbursement of all costs (including reasonable attorneys' fees at the trial and appellate court levels) from the non-prevailing party. (l) Headings and Captions. The titles or captions of section and subsections contained in this Agreement are provided for convenience of reference only, and shall not be considered a part hereof for purposes of interpreting or applying this Agreement, and, therefore, such titles or captions do not define, limit, extend, explain, or describe the scope or extent of this Agreement or any of its terms, provisions, representations, warranties, conditions, etc., in any manner or way whatsoever. (m) Gender and Number. All pronouns and variations thereof shall be deemed to refer to the masculine, feminine or neuter, and to the singular or plural, as the identity of the person or entity or person or entities may required. IN WITNESS WHEREOF, the parties hereto have executed this Agreement or caused this Agreement to be executed as of the date and year first above written. BRITISH AEROSPACE HOLDINGS, INC. By: Paul L. Harris ----------------------------- Name: Paul L. Harris Title: Senior Vice President and General Manager Date: 21 December 1995 REFLECTONE TRAINING SYSTEMS, INC. By: Anthony S. Brancato ------------------------------ Name: Anthony S. Brancato Title: Executive Vice President Date: 21 December 1995 -----END PRIVACY-ENHANCED MESSAGE-----