FBO

I told Eric Williams that we agreed to his price of $380,000.  I faxed a signed copy of the agreement to Eric Williams and e-mailed a copy to him as well.  He asked to speak to me on Sunday, and I told him that I would call him then.  But I also told him to call me any time if he has any questions. 

 

I received a copy of the original VI Port Authority (VIPA) lease, an amendment to the lease and a consent to the assignment of the lease.

 

The lease was originally between the VIPA and Eric Williams d/b/a Hairoun Aviation Services.  It was signed by Eric and the executive director of the VIPA, then approved for legal sufficiency by VIPA legal counsel on October 23, 2002, approved by the VIPA Governing Board Chairman on November 8, 2002 and Approved by then Governor Turnbull, the last of the signatories, on November 20, 2002.

 

The term of the lease was initially from November 20, 2002 to October 31, 2007, with an option to renew for an additional five years (until October 31, 2012) by giving notice of renewal between 90 and 180 days before October 31, 2007.  Eric has advised me that the lease has been renewed but did not provide me with a copy of any notice of renewal or any evidence that VIPA renewed the lease.  I sent Eric an e-mail requesting a copy of the renewal notice and any evidence of the renewal along with other requests and questions.  If no renewal was actually granted, then according to the lease, Eric's Corporation has nothing more than a revocable permit from VIPA to use the premises on a month to month basis which could be terminated on 30 days' notice. 

 

Eric apparently assigned the lease to his VI Corporation, Hairoun Aviation Services, Inc. on May 4, 2006, which is the date of the notarization of his signature on the copy of the Consent to Assignment of Lease which Eric sent to me.  This consent is unusual because the Original Lease allowed Eric to assign to an Affiliate without consent of the VIPA.  As a shareholder and executive officer of the VI Corporation, he is clearly affiliated with the VI Corporation.  I have asked in the e-mail I sent to Eric that he explain the reason for the consent.

 

As I explained, Eric is only going to provide me with financial statements for the 2006 and 2007 fiscal years, which would coincide with the two years in which the Corporation owned the lease.  Eric was supposed to provide me with those financials today, but did not.  I have called him a three times and left messages for him.  I also sent him an e-mail requesting an update on when I can expect to receive the financials.

 

The leased premises consist of 1650 square feet leased under the original lease to be used solely for the purposes of placing trailers to "provide servicing and maintenance of aircraft, fueling, ground handling and related services."  Hangarage is not explicitly an authorized usage of that space.  Another unusual fact is that Eric told me that his trailer covered 1800 square feet, which is the same square footage indicated in the copy of the Spill Prevention Control and Countermeasure Plan ("SPCC") that Eric provided to me.  If that is accurate, then it is in excess of the demised space leased to him.  The description of the 1650 square feet of demised space in the original lease and the description in the amendment, which covers "approximately 2160 square feet" of additional space to be used solely for "stationing aviation refueling vehicles," is inexact.  I have asked Eric to provide me with a site survey if he has one.

 

The lease amendment (Amendment No. 1) is dated June 1, 2006, and is signed by Eric's Corporation, the Exec Director of VIPA, approved for legal sufficiency by VIPA legal counsel, approved by the VIPA Governing Board Chairman and Approved by the then Governor.  Curiously, the Consent to Assignment is signed only by Eric and Eric's Corporation, and the Exec Director of VIPA and approved for legal sufficiency by VIPA Legal counsel.  Neither the Chairman of the VIPA Governing Board, nor the Governor signed the consent.

 

According to Amendment No. 1 Rent is $7,200 per year, payable in monthly payments of $600 and an $1,800 security deposit or security bond (I have asked Eric to advise which security method was utilized) is required.

 

Assignment under the original lease is permissible with the consent of the VIPA, which consent, under the original lease, is not to be unreasonably withheld.  However, the terms of the Consent to Assignment specifically state that VIPA consent to assignment is required, and there is no limitation in that provision from the Consent to Assignment that VIPA Consent may not be unreasonably withheld.  This may have the effect of eliminating the limitation of "not unreasonably withholding consent" from the lease as currently in effect.  Which means that VIPA has discretion to withhold consent to an assignment.

 

There is no change of control provision in the original lease, the consent or Amendment No. 1, so the purchase of the stock would not appear technically to require VIPA approval of that stock purchase by you.  However, given that the Company whose stock you bought would have to ask for an amendment to increase the square footage of the demised premises and expansion of the purposes (to include Hangarage) for which the expanded space could be used, and given that I do not imagine that your purchase of the stock would likely remain undisclosed to VIPA, the point regarding there being no need for approval of the sale is probably moot.  VIPA will know that you are the new owner and could grant or withhold approval of increased space and expanded uses of that space.  The grant of an amendment to provide you with what you desire would apparently require approval by VIPA's executive director, the VIPA legal counsel, the Chairman of the VIPA Governing Board and the Governor.

 

Insurance requirements are nominal under the lease.  E.g., $1,000,000 limit per occurrence for liability insurance and hazard insurance covering 90% of the value of the improvements on the premises.. Eric claims that he has a $5,000,000 liability policy, and I am awaiting copies of insurance documentation as part of my due diligence request.

 

The fuel farm equipment is apparently old and does not look from the pictures to be in the best of shape.  As part of the due diligence request, I have requested service records and inspections of all of the equipment.

 

I am awaiting transmission of a variety of due diligence documents, including material regulatory docs (licenses, permits, approvals, clearances, etc.), loan documents, insurance docs, stock issuance docs, contract docs, financial records, employment docs and information, tax returns, fuel supply contract and account docs, customer information and docs, and a variety of other documents relating to the company and the business, so I currently have a very incomplete picture. 

 

Just wanted you to have an update on what I know so far.