Exhibit 10.3
 
EXECUTION COPY
 
 
 
 
 
 
 
 
 
 
 
 

 
Amalgamation Agreement
   
Between
   
Longtail Aviation International
Limited
         
And
         
Longtail Aviation Ltd. And Its
Shareholders
             

 
 
 
 

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Table of Contents
 
EXECUTION COPY
 
 
 

Amalgamation agreement - Table of Contents

 
 
1.
 
Defined terms & interpretation
3
 
1.1
 
Defined terms
3
 
1.2
 
Interpretation
4
2.
 
Amalgamation
4
3.
 
Constitutional documents
5
 
3.1
 
Memorandum of association
5
 
3.2
 
Bye-laws
5
 
3.3
 
Registered Office
5
4.
 
Directors
5
5.
 
Shares
5
 
5.1
 
Share capital of the Amalgamated Company
5
 
5.2
 
Amalgamation Consideration
5
 
5.3
 
Indemnity
6
6.
 
Specific Conditions
6
7.
 
Termination
7
8.
 
Warranties
7
 
8.1
 
Incorporation and Existence
7
 
8.2
 
Right, power, authority and action
7
 
8.3
 
Accounts
7
 
8.4
 
Debts and Liabilities
7
 
8.5
 
Accounting records
8
 
8.6
 
Changes Since July 31st, 2007
8
 
8.7
 
Assets
8
 
8.8
 
Insurance of Assets
9
 
8.9
 
Other Insurance
9
 
8.10
 
Licence
9
 
8.11
 
Validity of Agreements
10
 
8.12
 
Winding up and Administration
10
 
8.13
 
Receivership
10
 
8.14
 
Litigation
10
 
8.15
 
Constitution
10
 
8.16
 
Registers etc.
10
 
8.17
 
Returns etc.
11
 
8.18
 
Powers of attorney and authorities
11
9.
 
General provisions
11
 
9.1
 
Consent and waivers
11
 
9.2
 
Severability
11
 
9.3
 
Variation
11
 
9.4
 
Governing law, jurisdiction and disputes
11
 
9.5
 
Counterparts
11

 
 
 
 
 

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Table of Contents
 

Amalgamation agreement

 
 
Dated 29th August 2007
 
Between
 
Longtail Aviation International Limited, an exempted company incorporated in
Bermuda, of Crawford House, 23 Church Street, Hamilton HM 11, Bermuda (“Longtail
International”); and
 
Longtail Aviation Ltd., a local company incorporated in Bermuda, of Crawford
House, 23 Church Street, Hamilton HM 11, Bermuda (“Longtail”).
 
Longtail International and Longtail are sometimes collectively referred to
herein as the “Companies” or a “Company”.
 
Background
 
Longtail International and Longtail have agreed to amalgamate, subject to the
approval of the Registrar of Companies, and continue as one exempted company
pursuant to Section 104 of the Companies Act on the terms of this agreement.
 
It is agreed as follows
 
1.  
Defined terms & interpretation

 
1.1  
Defined terms

 
In this agreement:
 
Accounts means each Company’s individual financial statements.
 
Amalgamated Company has the meaning given to it by clause 2.
 
Amalgamation Consideration means the consideration (if any) that a holder of
shares of an amalgamating company is entitled to receive pursuant to this
agreement on the amalgamation of the amalgamating companies.
 
Balance Sheet means the balance sheet of Longtail as of July 31st, 2007 attached
hereto as Exhibit A.
 
Companies Act or Act means the Companies Act, 1981.
 
 
 
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Debt means any and all short or long term debt as of (including any accrued
interest) provided for on the Balance Sheet of Longtail and due to an entity
owned or controlled by Mark Byrne (a “Byrne Entity”) net of amounts due from a
Byrne entity.
 
Dollars or $ means the lawful currency of the United States of America.
 
Effective Date means the effective date of the amalgamation of Longtail
international and Longtail, being the date shown in the certificate of
amalgamation issued by the Registrar of Companies pursuant to Section 108 of the
Companies Act.
 
Encumbrance means a mortgage, charge, pledge, lien option, restrictions, right
of first refusal, right of pre-emption, third-party right or interest, other
encumbrance or security interest of any kind, or another type of preferential
arrangement (including, without limitation, a title transfer or retention
arrangement) having similar effect.
 
Insurance Policies means all insurance policies of which Longtail is a named
beneficiary, a copy of which have been provided to Longtail International.
 
Licence means that licence agreement made the 17th day of January 2004 between
the Department of Airport Operations on behalf of the Bermuda Government and
Longtail, and any Annexes to that License in effect from time to time.
 
Premises means those premises described in the Licence pursuant to which
Longtail rents hanger and office space.
Shareholder means the shareholders of Longtail.
 
Warranty means a statement contained in clause 8 and “Warranties” means all
those statements.
 
1.2  
Interpretation

 
In this agreement:
 
(a)  
headings are for reference only and do not affect interpretation;

 
(b)  
the singular includes the plural and vice versa, a gender includes other genders
and different grammatical forms of defined expressions have corresponding
meanings;

 
(c)  
examples and use of the word including and similar expressions do not limit what
else may be included; and

 
(d)  
unless the context requires otherwise, a reference in this agreement to:

 
(i)  
a document or agreement includes that document or agreement as novated, altered,
amended, supplemented or replaced from time to time;

 
 
 
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(ii)  
clauses, schedules and annexures are to those in this agreement, and a reference
to this agreement includes any schedule and annexure;

 
(iii)  
a person includes a natural person, partnership, body corporate, incorporated
and unincorporated association, governmental or local authority or agency or
other entity;

 
(iv)  
legislation or other law or a provision of them includes regulations and other
instruments under them, and any consolidation, amendment, re-enactment or
replacement.

 
2.  
Amalgamation

 
Longtail International and Longtail agree to amalgamate and continue as one
exempted company under the name of Longtail International (“Amalgamated
Company”) pursuant to Section 104 of the Companies Act on the terms of this
agreement,
 
3.  
Constitutional documents

 
3.1  
Memorandum of association

 
The memorandum of association of the Amalgamated Company shall be, when approved
by the Registrar of Companies, that of Longtail International.
 
3.2  
Bye-laws

 
The bye-laws of the Amalgamated Company shall be those, when approved by the
Registrar of Companies, of Longtail International.
 
3.3  
Registered Office

 
The Registered Office of the Amalgamated Company shall be Crawford House, 23
Church Street, Hamilton HM 11, Bermuda.
 
4.  
Directors

 
The directors of the Amalgamated Company shall be as follows:
 
 

 
Name
Address
 
 
Mark Byrne
Crawford House, 23 Church Street,
Hamilton HM 11, Bermuda
 
David A. Brown
Crawford House, 23 Church Street,
Hamilton HM 11, Bermuda

 
 
 
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James O’Shaughnessy
Crawford House, 23 Church Street,
Hamilton HM 11,  Bermuda
 
Donald A. Emeigh
Crawford House, 23 Church Street,
Hamilton HM 11, Bermuda

 

 
5.  
Shares

 
5.1  
Share capital of the Amalgamated Company

 
The authorised share capital of the Amalgamated Company shall be $100 comprised
of 100 common shares, having a par value of $1.00 each.
 
Longtail International and Longtail will not combine their respective authorised
share capitals.
 
5.2  
Amalgamation Consideration

 
With effect on the Effective Date, the shares of Longtail comprised of 12,000
common shares, having a par value of $1.00 each, shall be cancelled without any
repayment of capital in respect of those shares to Longtail.
 
Provided however, Mark Byrne, as consideration for payments made under this
agreement, for and on behalf of all Byrne Entities hereby agrees to forgive,
discharge, and extinguish any and all Debt, as defined herein.
 
In consideration of the forgiveness of the Debt, Longtail International shall
pay Mark Byrne an amount equal to the assets listed on Exhibit B and any
additional funds advanced by a Byrne Entity to run the day to day operations of
Longtail after 7/31/07. No other shareholder of Longtail shall have any right in
or to the consideration paid to Mr. Byrne.
 
Longtail International shall pay the consideration as follows:
 
1.  
80% of the consideration shall be paid within two business clays of the approval
of the amalgamation by the Registrar of Companies.

2.  
The remaining 20% (the retained amount) shall be paid on or before September
30th, 2007 after the final review of the Balance Sheet has been completed by the
Flagstone CFO. The intention of the retained amount is to allow Flagstone
additional time to complete its review of the Balance Sheet. In the event that
the CFO of Flagstone determines in his reasonable discretion, after consultation
with Mark Byrne, that any financial asset included on the Balance Sheet is not
collectable, such amount shall be deducted from the retained amount and to the
extent that such amount is insufficient to repay Longtail International, Mr.
Byrne shall pay Longtail. International an amount no greater than the full
consideration paid pursuant to this paragraph 5.2. Provided however, in the
event of a disagreement, above, Longtail International shall, in the event the
parties cannot agree, assign any and all of its rights to collect such amounts
to Mark Byrne.

 
 
 
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The Shareholders are parties to this agreement solely with respect to the
acknowledgement of an agreement to thc payment obligations to Mr. Byrne and
neither Shareholder, except as provided herein, makes any representations or
warranties in this agreement except that they collectively own 100% or the
authorized and outstanding share capital of Longtail.
 
5.3  
Indemnity

 
For a period of one year beginning on August 1st, 2007, Mark Byrne hereby agrees
to indemnify Longtail International for: (i) any breach of any warranty provided
for in Section 8 of this agreement, net of any collectable amounts under any
insurance policies, and (ii) any amounts due to the Land Tax office for any
period prior to August 1st, 2007 as a result of any final assessment of a Land
Tax on the Premises (“Land Tax Claim”). The indemnity provided for herein shall
be limited to the amount paid to Mr. Byrne in accordance with Section 5.2, net
of the retained amount payments, if applicable.
 
Mr. Byrne’s obligation under this Indemnity is null and void, if the Amalgamated
Company chooses not to pursue the strategy and tactics recommended by Mr. Byrne
for the defence against this Land Tax Claim.
 
6.  
Specific Conditions

 
Each party agrees that the Amalgamation will not be effective unless and until
the Amalgamation has been approved by the Registrar of Companies.
 
7.  
Termination

 
The directors of an amalgamating company may, at any time before the Effective
Date, cause the amalgamating company to terminate this agreement by notice to
the other amalgamating company despite approval of this agreement by the
shareholders of the amalgamating companies.
 
8.  
Warranties

 
Each Warranty is to be construed independently and (except where this agreement
provides otherwise) is not limited by a provision of this agreement or another
Warranty.
 
Each of Longtail International and Longtail warrants to each other that each
Warranty as follows is materially true, materially accurate and not misleading
at the date of this agreement.
 
Unless specifically provided otherwise herein, each of Longtail International
and Longtail warrants to each other that:
 
 
 
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8.1  
Incorporation and Existence

 
It is a limited company incorporated under Bermuda law and have been in
continuous existence since incorporation.
 
8.2  
Right, power, authority and action

 
It has the right, power and authority, and has taken all action necessary, to
execute, deliver and exercise its rights, and perform its obligations, under
this agreement and each document to be executed at or before the Effective Date.
 
It has the right, power and authority to conduct its business as conducted at
the date of this agreement.
 
8.3  
Accounts

 
Its respective Accounts have been prepared on a proper and consistent basis in
accordance with the law and applicable standards, principles and practices in
accordance with GAAP.
 
In respect of Longtail, no change in accounting policies has been made in
preparing its accounts as at the Balance Sheet for each of the three financial
years of it ended on the Balance Sheet, except as stated sheets and profit and
loss accounts for those years.
 
Its respective Accounts show a true and fair view of the assets, liabilities and
state of affairs.
 
8.4  
Debts and Liabilities

 
The Balance Sheet fully discloses and provides adequately for all bad and
doubtful debts, liabilities (actual, contingent or otherwise) and all financial
commitments.
 
8.5  
Accounting records

 
Its accounting records are up-to-date, in its possession or under its control
and arc properly completed in accordance with the law and applicable standards,
principles and practices generally accepted in Bermuda.
 
8.6  
Changes Since July 31st, 2007

 
(i)  
There has been no material adverse change in its financial condition;

 
(ii)  
No material change has occurred in the assets and liabilities shown in its
respective Accounts other than financial losses sustained in the ordinary course
of business. Longtail has disclosed to the Longtail International that Longtail
has made financial losses almost continuously since commencement of operations.

 
 
 
 
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(iii)  
It has not, other than in the usual course of business:

 
(i)  
acquired or disposed of, or agreed to acquire or dispose of, an asset; or

 
(ii)  
assumed or incurred, or agreed to assume or incur, a liability, obligation or
expense (actual or contingent);

 
(iv)  
It has not factored, sold or agreed to sell a debt (other than in the usual
course of business);

 
(v)  
Its business has not been materially and adversely affected by the termination
of, or a change in the terms of, an agreement or by the loss of a customer or
supplier or by an abnormal factor not affecting similar businesses and to the
best of its knowledge, information and belief, no fact or circumstance exists
which might have a material and adverse effect on its business;

 
(vi)  
It has not declared, paid or made a dividend or distribution except as provided
in its respective Accounts;

 
(vii)  
It has not changed its financial year-end; and

 
(viii)  
It has not created, allotted, issued, acquired, repaid or redeemed share or loan
capital or made an agreement or arrangement or undertaken an obligation to do
any of those things.

 
 
8.7  
Assets

 
Each asset included in its respective Accounts or acquired by it since the
Balance Sheet (other than inventory disposed of in the usual course of business)
and each asset used by it or which is in its reputed ownership is:
 
(i)  
Legally and beneficially owned solely by it free from any Encumbrance except for
letters of credit issued in the ordinary course of business; and

 
(ii)  
Where capable of possession, in the possession or under its control.

 
It owns or has the right to use each asset necessary for the effective operation
of its business.
 
 
 
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All machinery, vehicles and equipment (but not aircraft) owned, or possessed by
it is in good condition and working order and have been regularly and properly
maintained. None is in need of immediate renewal or replacement or is surplus to
its requirements.
 
Its assets registered comprise a materially complete and accurate record of all
the machinery, equipment, vehicles and other assets owned, possessed or used by
it.
 
8.8  
Insurance of Assets

 
Each of its insurable assets has at all material times been and is at the date
of this agreement insured against each risk normally insured against by a person
operating the types of business operated by it.
 
8.9  
Other Insurance

 
It has at all material times been and is at the date of this agreement
adequately insured against accident, damage, injury, and third party loss by the
Insurance Policies, a copy of which have been provided to Longtail
International.
 
8.10  
Licence

 
Longtail uses the Premises under the Licence and:
 
(i)  
No person (including, without limitation, the landlord or licensor) may bring
the term to an end before the expiry of the Licence by effluxion of time (except
by forfeiture or default or by the provisions of the License);

 
(ii)  
There is no fact or circumstance (and, to the best of each of Longtail’s
knowledge, information and belief, no fact or circumstance will within 6 months
starting on the date of this agreement occur or arise) which:

 
(a)  
Could entitle or require a person (including, without limitation, the landlord
or licensor) to forfeit or enter on, or take possession of, or occupy, the
Premises, other than in accordance with the provisions of the License; or

 
(b)  
Could restrict or terminate Longtail’s continued and uninterrupted occupation of
the Premises.

 
(iii)  
A rent or fee payable in respect of the Premises is not at the date of this
agreement being reviewed and cannot be reviewed before the Effective Date.

 
(iv)  
In addition to the Premises, Longtail occupies additional space on a similar
basis but without benefit of a contract (the “Month to Month” space). Longtail
has no reason to expect that this space will be rescinded, or that the terms
will change, but can make no representations in this regard.

 
 
 
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8.11  
Validity of Agreements

 
To the best of its knowledge, information and belief, no fact or circumstance
exists which invalidate or give rise to a ground for termination, avoidance or
repudiation of an agreement, arrangement or obligation to which it is a party.
No party with whom it has entered into an agreement, arrangement or obligation
has given notice of its termination to terminate, or has sought to repudiate or
disclaim, the agreement, arrangement or obligation.
 
Neither it nor any party with whom it has entered into an agreement, arrangement
or obligation is in material breach of the agreement, arrangement or obligation.
To the best of each of its knowledge, information and belief, no fact or
circumstance exists which might give rise to a breach of this type.
 
8.12  
Winding up and Administration

 
No order has been made, petition presented or resolution passed for the winding
up of it or for the appointment of a provisional liquidator to it and no
administration order has been made in respect of it.
 
8.13  
Receivership

 
No receiver or receiver and manager has been appointed of the whole or part of
its business or assets.
 
8.14  
Litigation

 
Except as disclosed in writing by a Party to the other prior to this date,
neither it nor a person for whose acts or defaults it may be vicariously liable
is involved, in a civil, criminal, arbitration, administrative or other
proceeding.
 
Except as disclosed in writing by a Party to the other prior to this date, to
the best of its knowledge, information and belief, no fact or circumstance
exists which might give rise to a civil, criminal, arbitration, administration
or other proceeding involving it or a person for whose acts or defaults it may
be vicariously liable.
 
Except as disclosed in writing by a Party to the other prior to this date, there
is no outstanding judgment, order, decree, arbitral award or decision of a
court, tribunal, arbitrator or governmental agency against it or a person for
whose acts or defaults it may be vicariously liable.
 
8.15  
Constitution

 
It is operating and has always operated its business in all respects in
accordance with its memorandum of association and bye-laws at the relevant time.
 
 
 
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8.16  
Registers etc.

 
Each register, minute book and other book which the Act requires it to keep has
been properly kept and contains a complete and accurate record of the matters
which it is required by the Act to record. No notice has been received or
allegation made that a register or book is incorrect or should be rectified.
 
8.17  
Returns etc.

 
All returns, particulars, resolutions and other documents required to be
delivered by it to the Registrar of Companies of Bermuda or another governmental
or other authority or agency have been properly prepared and delivered.
 
8.18  
Powers of attorney and authorities

 
It has not given a power of attorney or other authority by which a person may
enter into an agreement or obligation on its behalf (other than an authority for
a director, other officer or employee to enter into an agreement in the usual
course of that person’s duties).
 
9.  
General provisions

 
9.1  
Consent and waivers

 
A consent or waiver by either party in relation to this agreement is effective
only if in writing. A party does not waive a right, power or remedy if it fails
to exercise or delays in exercising the right, power or remedy. A single or
partial exercise of a right, power or remedy does not prevent another or further
exercise of that or another right, power or remedy.
 
9.2  
Severability

 
A provision of this agreement that is illegal, invalid or unenforceable in a
jurisdiction is ineffective in that jurisdiction to the extent of the
illegality, invalidity or unenforceability. This does not affect the validity or
enforceability of that provision in any other jurisdiction, nor the remainder of
this agreement in any jurisdiction.
 
9.3  
Variation

 
A variation of this agreement must be in writing and signed by or on behalf of
each party to it.
 
9.4  
Governing law, jurisdiction and disputes

 
This agreement is governed by the laws of Bermuda. Each party irrevocably and
unconditionally submits to the exclusive jurisdiction of the courts of Bermuda
and waives any right to object to an action being brought in those courts,
including on the basis of an inconvenient forum or those courts not having
jurisdiction. Any controversy or claim arising out of or relating to this
agreement, or any breach thereof, shall be settled by arbitration in Bermuda in
accordance with the American Arbitration Association, and judgment on the award
rendered by the arbitrator(s) may be entered in Bermuda court.
 
 
 
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9.5  
Counterparts

 
This agreement may be executed in any number of counterparts, all of which taken
together, constitute the one instrument.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Signature Page Follows
 
 
 
 
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EXECUTED as an agreement on the date first written above.
 

SIGNED for and on behalf of
Longtail Aviation International Limited
  /s/ Donald D. Emeigh  
Signature
  Donald D. Emeigh Director  
Print name and position
 

SIGNED for and on behalf of
Longtail Aviation Ltd.
  /s/ Mark Byrne  
Signature
     
Mark Byrne, Longtail Shareholder
 

Signature
  /s/ Mark Byrne  
Mark Byrne, for and on behalf of all Byrne Entities
 

Signature
  /s/ Anthony Philip  
Anthony Philip, Longtail Shareholder