Free Post Trial Brief - District Court of Federal Claims - federal

Case 1:96-cv-00408-LAS

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"BASLER TURBO CONVERSION$~ INCo -~

ApEil 25, 1991

Mr. Bryan Carmichael r_,!dent Innovair Avlation Limited C/O U S Holdings 4225 W Glendale Avenue Suite 11~ Phoenix, AZ 85051
Dcar Bryan,

This is in response to your letters of April 15 and April 22 regarding the participation of Warren Basler and myself in the sales effor~ with international customers. ~.rst0 as you know, I have not made commitments on behalf ot -novair s~ce August, 1990 although I have brought contracts ~ proposals to you ~or your approval, which you have provided The same is true in Warren's case. ~econd, we have publishe~ prices ~nd made price proposals to In~ernatlonal customer- However, ~o discounts from llst prices have been proposed ~ granted a~d ~here has been no adverse impact on Innovair fro.. @rice dlscoun~ing Third, will tell you that a number of international custom~'~ are pre ,fly approaching the decision stage in the purchase BT-~7 alrcra~. ~n addiSion, as I ndvlsed you on Aprll 16, have agreed to ~ request from UTC to support them in development of their option package and wi:h the demonstra~ of N96BF in Talwan to customers and ~vestors.

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~,~ you hav~ now prohlbJ~ed us from any negotlat~on with ~Lt~rnational customers I will need you to tell me specifically how you wall satisfy the following needs and requests from international custo~8rs Air Atlantlque has requested us to operate an a~rcraft under the Basler Airllns I~i certificate as a means of introducing the BT-67 into Europe All customers need both ground school and flight training on ~he BT-67

United will need continued demonstration assistance in Talwan along with ~echnlcal support An ~he =onverslon process. A series of options are installed on all aircraft which are supplied by BFS. I assume you have a separate source for these options i must advise you, that should the constraints which you are imposing result in a loss of s~les due ~o your inability ~o support your customers adequately, I will consider it a serlo~s act of non compliance to the spirit of the grant under yDur l£cense agreement. -~sse call me ~o discuss the information yuu need on the .u~rent/sta~us of the international sales prospects.

/

T W/aJw
Warren L. Basler

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BASLER FLIGHT SERVICE, INC.
WlTT A~'~I REO~ ONAL A~PPQR" ~ 0 ~CX

TO

Bryan Carmlchae! C/O Barry W11son

DATE

5/7/91

FAX. FROM RE

1-60g-734-901B Tom Welgt

TOTAL PAGES

4

Copy of letter and conflrmation 4/25/91

coo~
Please ~all =f you do not receive complete messa~_e 41 4,2.~- 7Bzo

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BASLEh :LIGHT SE IVICE, INC.

TO.

Mr. Bryan Carmlchael UO U S Holdings
Confldentlal

DAT~

4/g5/~1

FAX -- 1-602-~41-2279.. FROM" Tom ~eiot

TOTAL PAGES

Date Douu,.e~t HG,JP

~pr Z5,£. 11 45 ,33 page : ~'1 '56 ' qFM 0~

Please call mf you do not rece=ve complete message

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DAKOTA AIRCRAFT INTERNATIONAL, INC
200 North Mare Street, State 200 Salt Lake C~ty, Utah 84103 Umted States of America Innovalr Avlatlon, Ltd. 45 Duncan Lane Sklllman, New Jersey 08558 Coples also provxded to: Innovalr Avlatlon, Ltd. 265 West 35th Avenue P O.Box 2305 Oshkosh, W~scons~n 54903 and Innovalr Avlatlon, Ltd. c/o U.S Holdlngs Transmltted by FAX (602) 841-2279 and by seperate Letter May I, 1991 Gentlemen. In reliance upon our long standing relatlonshlp wlth your companles and based upon your repeated assurances and encouragement, John Bates, the underslgned, and all of our colleagues, Jolnt Venture partners, associates, and employees, both wlth!n the Unlted States and throughout the trade terrltory whlch was orlglnally asslgned to us, have contlnued at substantlal expense to all of us, to aggresslvely and consclentlously pursue the commerclallzatlon of the BT-67 Pro3ect. As you are all keenly aware we were all the vlct~ms of both the dupllclty of L. Mzchael Sorensen, and of certain dlshonest key personnel wlthln the government of Poland. These interferences resulted in substantlally delaylng our gettlng fully Into operatlons We, of course, acknowledge recelpt of the Innova~r letter dated February 4, 1991, szgned by Brlan R. Carmlchael and ~addressed to Internatlonal Alrcraft Corporatlon, termznatlng the prlor Agreement whlch your organlzatlons had wlth that entlty We accepted and agreed wlth that actlon slnce Internatlonal Alrcraft Corporatlon was to have been co-owned by L Mlchael Sorensen and various Pol~sh partles who were the root causes of the referenced delays.

Telephone (801) 328-1501 Telefax (801) 534-0912 Telex 62921819

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Nevertheless, in splte of those delays and that termlnatlon, wlth your encouragement and concurrence we have contanued to work dlllgently and we are now ready to execute a new Dlstrzbuter Agreement which formalzzes our verbal understandlngs and clearly deflnes our respectlve rlghts and responslbzlltles. We belleve that nelther a detailed relteratlon, nor a repeated recltal of our respective past dzfferenoes and our respectlve alleged defaults, would serve any useful purpose. However, we should at least note that the prellmlnary tralnzng of all supervasory Polash personnel has been completed; the facalltzes to complete the work on an expanded basls are fully equlpped and in place; all of the necessary manufacturlng, ~nfrastructure, polltlcal contacts and regulatory interfaces have been establlshed, arrangements have been made to pursue the necessary FAA certl~acatlons, both for the completed alrcraft and for the underlylng facllltles, all Interfaces are in place with the relevant U.S Government Agencles; and a contract has been negotiated wlth Basler Fllght Servlce to purchase the BT-45 Prototype as the inlt~al Alrcraft ~n the fleet of new alrcraft belng acqulred by Polzsh Aar Servlces, Inc , a slster organlzatlon to Pollsh Aerospace Inc , whlch wlll be our key BT-67 manufacturlng organization For your ~nformatlon, Polzsh A~r Servaces represents not only an independent buslness venture, but also constltutes a "captlve buyer" for many of the Inltlal BT-67 Alrcraft to be built by us on-slte zn Poland Prellmznaryagreements have also now been reached wlth our new flnancial partners to complete the down payment on the flrst BT-67 klt requzred to complete the converslon of the alrframe already onslte at our facal~tzes in Poland In addztaon, these arrangements include the full payment to Warren for hls DO-3 Alrframe whlch Is already on slte and dlsassembled in Poland, and also for the payment of all amounts rema~nlng due for the trazn~ng costs Incurred some t~me ago. We have also arranged wlth our Pol~sh partners to provlde the balance of the fundlng requlred to complete the payment for the balance of the zn~tlal klt and to purchase the other needed optzonal equzpment and components Furthermore, th~s inltlal BT-67 to be completed on-slte ~n Poland, is already sold to Pollsh Air Servlces whlch has earmarked thls Aircraft for use as a demonstratlon Alrcraft, as well as for use as a day to day worklng Aircraft in connectlon wzth ~ts ongoing operations ~n Central Europe and elsewhere
All of uhls leads us to the prlme reason for wrltlng uhls letter at thls tame.

We belleve that we would all agree that we have all traed to be patlent not only wlth each other, but also wlth those who have

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interfered wlth our orderly progress and who have repeatedly embarrassed us However, we now need our new, updated wrltten Dzstrlbutor's Agreement executed, ccverlng the entlre Trade Terrltory to ~nclude at least all of the former COMICON Countrles (including al! of the former Warsaw Pact Countrles) Thls document should also clarify our zntentaon to allow our customers wlthan that territory to continue their long standlng and expanding operatlons in geographic terrltorles beyond our exclusive manufacturing and sales territory. The new Agreement should be s~gned between your organlzatlons and Dakota Aircraft rnternatloDal,.~Dc. ~DAI), which Is the legal entlty which we have establ~shed for the sole purpose of entering Into th~s contract and ~n turn to pursue the zmplementatlon of the Sub3ect Agreement. For your in~ormatzon we antend to delegate the Sub3ect Authorlty to our wholly owned Polish Affzllated Company known as Polish Aerospace, Inc., for the purpose of condu~tlng the on-slte manufacturing actrvltles in Poland. We reiterate the fact whlch we have repeatedly conveyed to you that our d~llgent efforts have already identrfled speclfzc promising customers ~n most of the countries w~thzn our exclusive territory and we Intend to pursue closure wlth as many of these as possible In the very near future Our relatlonsh~ps with the current government of Poland are particularly strong and include personal contacts and relatlonshlps with president Walesa and key ministry people a~ross the full spectrum wlthan the various affected agencies. We bel~eve we have also developed close working relatlonshlps at all levels of the ourrent government. We do not want any delays zn the executlon of the necessary documentatlon to ]eopardlze those relat~onshlps which are ultimately so advantageous to all of us. In conclusion we must note that our f~nanc~al partners, our banks, and our Polish counterparts all znslst that the Subject D~strzbut~on Agreement be slgned by BaslerTurbo Converslons Inc., (BTC) ~hlch owns the key STC, and by Basler Flight Services, Inc , (BFS) whlch owns many of the optlonal STC's. If, for your own ¯ nternal purposes, you desire that Innova~r Aviation also be involved an the transaction, we certainly have no ob3ectlon. We are aware of the differences whlch you currently have among and between your various entities and the Ind~vlduals Involved. However, we do not want to get caught in the middle ~n any such d~sputes. We also do not desire to compl~cate any of your llves or deallngs, but we are now ready to move ahead aggresslvely and need to ~mmed~ately reduce our long ex~stlng mutual understandlngs to wrltlng and be about our respectr~e businesses The consummation of thls transaction can do nothlng but enhance the opportunlt~es for all of your affal~ated companies, as well as serve our own buslness purposes

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Please advlse us Immedlately wlth whom these flnal details should be worked out. We await your early response and guldance. We slncerely look forward to a long and mutually profltable and personally rewardlng relatzonshlp. Please advise. Very truly yours,

Don A. Str~ngh~m Chalrman and Chlef Ex

dl lve Of Zlcer

co:

Basler Turbo Converslons, Inc Basler Fl~ght Service, Inc. John F. Bates Colonel "Red" Davls Pollsh Aerospace Inc. Pollsh Alr Servlces Inc. RADWAR CENSIN Sentry Financlal PZL/Okecle

d \L\Basler

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HANQAR 5 COVENTRY AIRPORT COVENTRY CV6 3AZ UK

ATLANTIC AIR TRANSPORT LTD

(0203) 307586 TEL FAX (0203) 307703 TELEX 311260AAXCVTG

2 Hay 1991

Basler Turbo Conversions 255 W 35th Avenue Oshkosh WI

USA
Dear Tomt

Further to our discusslons on the posslble lease of N-96BF I have now been able to establish car~aln facts:The only practical short term way forward is a wet lease via a ~.S. oper.tor. 2. It is probable that the FAA would agree to the aircraft bexng maxntazned by Air A~lantique despzte our lack of repair station approval~ provmded that the azrcraft was =er~ifled by a suitably qualified A and P whom we already employ.
3. After consultations with other operatzons it is our belzef

that your despatch requzre~en~s can be mar satisfactorily vza fax or telex from the US and that no physical presence zn the UK is required.
4. We could arrange to FAA iicence and type rate our own pilots as r~qu~red and~ subject to your requirements, would only anticipate a need for one Captain to be based in the UK.
Provided ~hat you feel there is a realisric possibzlity of a satisfactory arrangemen~ being co.cluded M~ke fiollett and I would be pleased to come to Oshkosh zn the next couple of weeks ¯ n order ~o thrash ou~ the detazls and and discuss the further xmpl~cations of Br~Ish Certlf~cat~on.

W James Foden Group Managing Director

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MEMORANDUM DATE FROM TO : : : June 13, 1991 Thomas A. Fraker Bryan Carmichael INNOVAIR UPDATE

SU~JE CT:

The following is a summary of the people we have contacted, the Memorandums and summaries we have sent number of Confidential out: Results TvDe Contact Primes Venture capital Services Strategic Investment Venture Fund Venture Fund Fund will return book--no interest. Is evaluating. Good . see with

Venture Fund~/i~PU~a kage is being sent to Calif. (Simon Group) prospect. ~ ~ I'~ ..~.~~Tb ~ ~A~agreement ~ __
Private Group

Kelso Holding

Conquest - U.K.

since No contact Saturday - working with. two groups. Likes project - No $ available now for. new products. Received _brochure on Tuesday ~ no response yet. To be next discuss. in Phoenix to week

Avacelle - OKC

Private Group

Paradise Investments Private Group

David Deeds

Private Group

BTC Int'l.

Private Group

Too risky even p though great package and plan no hard assets to backup new

$2.0H.

1108
IAL 06643

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Fraker/Carmich~el June 13, I~91

Page 2

Group H.

Private Group

Likes project - got brochure on Monday discussing with partners. Have not been able to arrange meeting-involved in another large deal ~ now--is checking on ~ Tu[key. ~ Stage

Capital & Security Management

Avacelle CFO/IDA Financing

Private / ~D t6~Beglnning

~

Financing & IDA

The following is a list of those who have received, summaries and are filling out the Confidentiality Agreement:
Contact -Lucas Air Space ~ Results

Industry Player Waiting for C/A. Contact to Argentina Group waiting for C/A.

Judy Victor

I have'sent out letters to approximately 39 venture funds. I am awaiting the response of approximately 9 of these venture funds. The rest have declined for reasons such as too small, wrong location and not type of project they are presently looking for. I have also sent out approximately 43 letters to selective industry potential partners. That letter went out seven days ago and I will start on Thursday and Friday to follow-up with these people. As you know from Harry per my discussion with him, I feel that very, very preliminarily the Simon Group in California will have an interest. Also, John Berry has an expression of interest from Kelso in Portland as well as a group in Oklahoma to work with funding the marketing budget and to have the rest through an IDB financing. He is still awaiting a response from Conquest. Please call with any questions you might have.

cc: File

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Young Brothers Development Co., Ltd.
Hr Herb Hayes United Macific Adrospace (co Mr Fred Johnson, please farward) R¢I" : Dato : Fax No: From: Mr Lorin Young

Telephone: (852) 574 7217 Telex; 83518 YBDCL HX Fax No.: (852) 834 5601

FA~/1117/LY 8 Oct 1991 203-565-289g

No of Pages: One (This cover includcd)

Dear .Herb ,

I apologize for th~ delay in the Zollow up of my fax.dated 24 Septe.mber, Afte~ di~=ussin~ with TAt.and per~ormlng ottr own internal annlysls ~e wish to advlse you YBD will no~ be abl~ ~o invest in th~ Basler Turbo Program. There is no interest in Taiwan for this aircraft (bo~h military and commercial) nor have we beef-~I~-5~ identify any potential investors.
'Regarding ,the possib~llty o~

Bnslar T~Irbo 67; we on any job which we have no confidence of suoces=ing, we Zeel ~hat our prgsent level of covsrag@ would not b~ suitable to provlde the kind o~ marketing ~upport ~or the Basler Turbo 67 ~herefor¢ we would not be the best marketing consultant. I understand you will be in Taiwan from 21 0c5, till 27 oct,, I amnot schsduled to be in Taipsi durin~ your visit but if you wish to discuss' anything I wou~d be glad to fly back to meet.with you( or you can contact Daniel Hsieh to help you w~th anythang you need.
Bat regards,

pFo~o~ng the 9a1£.of ~hg__

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UNITED STATES DISTRICT COURT 'EASTERN DISTRICT OF WISCONSIN
ELSA I. CARMICHAEL, BARRY W. WILSON, GEOFFREY WILSON, BRYAN R. CARMICHAEL, INNOVAIR AVIATION LIMITED, a Hong Kong corporation,

Plaintiffs,
Case No.

BASLER TURBO CONVERSIONS, INC., a Wisconsin corporation, BASLER FLIGHT SERVICES, INC., a Wisconsin corporaiton, WARREN BASLER, and PATRICIA BASLER, Defendants.

COMPLAINT

Plaintiffs Elsa I. Carmichael, Barry W. Wilson, Geoffrey Wilson, Bryan R. Carmichael, and Innovair Aviation Limited, by their attorneys, for their Complaint in the above matter allege as follows:
PARTIES

I.

Innovair Aviation Limited ("Innovair") is a

corporation organized and existing under the laws of Hong Kong located at 918 China Hong Kong City, Tower III, Tsimshatsui, Kowloon, Hong Kong. 2. Basler Turbo Conversions, Inc. ("BTC") is a

Wisconsin corporation with its principal place of business at 255. West 35th Avenue, Oshkosh, Wisconsin.

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3.

Basler Flight Services, Inc. ("BFS") is a Wisconsin

corporation with its principal place of business at Wittman Field, Oshkosh, Wisconsin. 4. Bryan R. Carmichael is a citizen of Australia

residing at Tweebrena, Sneath's Road, Alstonville, New South Wales, Australia. He owns approximately one-third of the shares of

Innovair. He is an officer and director of Innovair, and until April 27, 1991, was an officer of BTC. He has made loans to

Innovair having a December 31, 1990, principal balance of about $125,000. 5. Elsa I. Carmichael is a citizen of California temporarily residing at Tweebrena, Sheath's Road, Alstonville, New South Wales, Australia. She owns approximately 33% of the stock of BTC and has made loans to BTC with a December 31, 1990, principal balance of about $520,000. She is the wife of Bryan R. Carmichael. 6. BarryW. Wilson is a citizen of the United Kingdom

currently residing at 45 Duncan Lane, Skillman, New Jersey 08558. He owns approximately 16% of the stock of BTC. He has made loans to BTC with a December 31, 1990, principal balance of about $377,000. 7. Geoffrey Wilson is aCitizen of the United Kingdom residing at 222 Hills Road, Cambridge,.Cambs., England. He owns approximately 16% of the shares of Innovair and has made loans to Innovair with a balance at December 31, 1990, of about $62,000. He is the brother of Barry Wilson.

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Bryan R. Carmichael, Elsa I. Carmichael, Barry W. Wilson, and Geoffrey Wilson will hereafter be called "the Carmichael/Wilson group." 9. Warren Basler is a resident of the state of

Wisconsin residing at 56 West Ripple Avenue, Oshkosh, Wisconsin. He is a 49% shareholder in Innovair and was a director of Innovair until April 27, 1991. He owns 25.5% of the stock of'BTC, Inc. and is an officer a~d director of BTC. I0. Patricia Basler is a resident of the state of Wisconsin residing at 56 West Ripple Avenue, Oshkosh, Wisconsin. She owns 25.5% of the stock of BTC and is an officer and director of BTC. ii. Warren Basler, Patricia Basler, and BFS (hereafter "the Basler group") at all relevant times have actedin cooperation with each other and with a common purpose. JURISDICTION AND VENUE 12. This Court has original jurisdiction of this matter pursuant to 28 U.S.C § 1332(a) because the matter in controversy exceeds the sum or value of $50,000 exclusive of interest and costs and the matter is between citizens of different states and between citizens of a State and citizens of a foreign state. Venue in the Court is appropriate under 28 U.S.C. § 1391(a) since all of the defendants reside in this district and most of the acts a11~ged in the Complaint and giving rise to the claim occurred here.

-3-

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FAcTs

13. In approximately 1988 Innovair and BTC were created by the named individuals above with the purpose of obtaining FAA certification and engaging in the business of converting old DC-3's into modern turbo-prop airplanes. BTC, with the financial support and close cooperation of Innovair, spent substantial money and efforts in building a prototype aircraft and obtaining an STC (Supplemental Type Certificate) from the Federal Aviation Administration, which is necessary before a newly~designed or converted aircraft may be manufactured and flown. 14. BTC manufactures a kit for the conversion of DC-3 airframes. The kit consists of Pratt & Whitney turbo-prop engines, state-of-the-art electronic equipment, plans and materials for stretching the DC-3 fuselage, and a variety of other equipment. 15. BTC has an agreement with Innovair under which Innovair has received a license to use the STC and turbo-prop technology developed byBTC/Innovair and to sell products based on the technology within a territory consisting of the entire world outside the United States. Innovair has the right to purchase kits from BTC or to assemble such kits on its own. 16. BTC also has a license agreement with BFS, a company 100% owned by the Baslers, under which BFS has exclusive distribution rights in the United States and for certain foreign military sales negotiated through the United States government. BTC is located in Oshkosh on premises owned by the Baslers and which it shares with-BFS.
--4--

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17. The parties initially created two jointly-owned corporations (Innovair and BTC) rather thanone in order to secure tax advantages for the benefit of both parties on international sales and to comply with certain rules relating to domicile of corporations. For the same reason they provided for majority ownership of BTC by the Baslers and of Innovair by the Carmichael/Wilson group instead of 50/50 control of each corporation. 18. By virtue of its 51% control of BTC, the Basler group has effective control over all aspects of the BTC business. Furthermore, based on certain arrangements" established by the parties and Valley Bank of Oshkosh, the Basler group has partial control over the finances of Innovair and has had a significant day-to-day involvement in the other operations of Innovair. 19. Nevertheless, it was understood from the outset that the Carmichael/Wilson group and the Baslers each would own 50% of. the enterprise as a whole, and it was their intent that Innovair and BTC would be operated cooperatively.' Thus, certain management functions of BTC were performed by Innovair employees and vice versa. Also, Innovair contributed substantially to the obtaining of the STC, the key asset of BTC, without any strict accounting for the value of its servicesl Furthermore, Innovair agreed to

guarantee the debt of both BTC.and BFS and to assign its accounts receivable to the Basler group's bank for the benefit of BTC and the Basler group without any consideration to Innovair itself as distinct from the consideration flowing to the shareholders as a

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group"from mutual cooperation. As long as both groups used their best efforts for the success of the venture as a whole, the formal control of BTC and Innovair was not important. 20. However, the Basler group systematically used its control of BTC and partial control of Innovair to wro~gfully benefit BFS, which is 100% owned by the Baslers, at the expense of the jointly-owned BTC and Innovair, as described in the following pnr~gr~ph~. 21. The Basler group, in breach of their fiduciary duties, caused BTC to accept an on-going relationship with BFS under which BFS paid intercompany accounts much later than normal business and accounting practice would permit, frequently only after BFS had been paid bythe ultimate purchaser. Furthermore, on certain airframes-owned by BFS which BFS was converting for its inventory, BTC kits were supplied to BFS without any payment or even accounting entries. As a result of these practices, BTC was, effectively, financingBFS inventory and providing working capital for BFS. BTC was compelled to make millions of dollars of

borrowings and pay hundreds of thousandsof dollars in interest which properly should have been paid by BFS. 22. The effective transfer of loan obligations from BFS to BTC also has exposed Bryan R. Carmichael and Barry W. Wilson to substantial risk on their personal guarantees, which are supposed to apply to loans to- BTC, but not to BFS. Under the current circumstances, Carmichael-and Wilson are involuntarily assisting the financing of the Basler group's personal business interests." -6-

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23. On January i0, 1991, the Baslers caused a check to be issued from BTC to BFS in the amount of $473,000, even though at the time, because invoices from BTC to BFS were improperly not recorded on the books of the companies, there was no basis for the issuance of such a check. In fact, BFS owed substantial amounts at that time on intercompany accounts to BTC. Furthermore, proper procedures were not followed in issuing the check and efforts were made by officers of BTC and BFS to conceal the transaction. 24. The Basler group also has caused BTC to make intercompany sales to BFS at an unreasonably low profit margin with the result that BFS has diverted to itself much of the profit the jointly-owned company should have made on sales. 25. BFS, as a distributor for BTC, used BTC to purchase an aircraft engine, which, in fact, had been ordered from the supplierbyBTC,.at a special original equipment manufacturer (OEM} price available only to BTC. BFS then resold the engine for its own a~count, ~ithout any record of the transaction appearing on the BTC books at that time and without any payment being made to BTC.26. BFS has attempted to appropriate to itself contracts properly belonging to BTC. 27. To facilitate theimproper intercorporate transfers and unfair intercorporate dealing, the Basler group caused BTC to keep inadequate accounting records. BTC accounting was put under the control Of the BFS accounting department. Many transactions were not documented at all, or there was inadequate documentation,

-7-

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or the documentation was created at the end of the transactional process consistent with BFS's desires at the time. 28. The Carmichael-Wilson group have made numerous and detailed comp1~ints to BTC management about each of these problems, to very little avail. This has included numerous letters to and conversations with Warren Basler, Tom Weigt, the president of BTC, Tim Dempsey, the attorney for BTC, and Price W~terhouse', the accountants for BTC. The Carmichael/Wilson group have employed its own accountants whose detailed report was sent to Price Waterhouse and was the subject of substantial correspondence and discussion. Any further efforts to secure remedial action from BTC's management or Board would be fruitless since the management is controlled by the Basler group, the Board is currently deadlocked, and the Baslers have indicated their intent to hold a shareholder meeting for the purpose of appointing additional board members controlled by the Basler group. 29. An accounting is necessary to determine the full extent of the improper activities and to provide a basis for correcting improper corporate transfers. 30. In addition to improper intercorporate dealings, BFS and the Baslers may have engaged in other conduct detrimental to the best interests of the corporations. A grand jury investigation into the acts of BTC and BFS is currently pending. BFS also appears to have violated a United States statute in another transaction. Despite repeated requests, BTC and the Basler group have refused to provide adequate information concerning these -8-

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situations to the Carmichael-Wilson group even though these situations threaten their interests as shareholders of Innovair and BTC.
FIRST CAUSR OF ACTION SHAREHOLDER DERIVATIVE CLAIM

31. Repeats the allegations of paragraphs 1-30 above. 32. .BTC, by virtue of the acts of the Basler group, has not been operated in the best interests of its shareholders. An accounting is necessary to determine the full extent of improper corporate transfers and other dealings inconsistent with the best interests of the corporation. Control must be vested "in the

Carmichael-Wilson group or an independent trustee or receiver to prevent future wrongful acts by the Basler group, to recover amounts wrongfully diverted, and to terminate all dealings with BFS. This is not a collusive action intended to confer

jurisdiction upon this Court which it would not otherwise have. SECOND CAUSE OF ACTION BREACH OF FIDUCIARY DUTY BY WARREN AND PATRICIA BASLER 33. 34. Repeats the allegations of paragraphs 1-30 above. Warren L. Basler, as an officer and director of BTC

and as a director of Innovair, and Patricia Basler, as an officer" and director of BTC, had a fiduciary duty to act in the best interests of the corporations and not to use their positions to obtain a personal benefit at the expense of the corporations. The foregoing acts constitute breaches of those fiduciary obligations.
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35. Warren and Patricia Basler acted intentionally in violation of their fiduciary obligations. They acted either with a specific intent to injure the Carmichael-Wilson group, BTC, and Innovair, or with reckless disregard of their rights. THIRD CAUSE OF ACTION BREACH OF CONTRACT AND RESTITUTION AGAINST EFS 36. 37. Repeats the allegations of paragraphs 1-30 above. As a result of the conduct alleged above, BFS

received money or other things of value from BTC and Innovair which was either beyond the benefits provided for in the contracts between the companies or to which BFS had no right at al~. BFS should return to Innovair and BTC any money or benefits rightfully belonging to them and pay the damages incurred byBTC and Innovair arising from thawrongful diversion of payments or other benefits. FOURTH CAUSE OF ACTION CONSPIRACY ENTER COMMON LAW ~ ~ 134.01, WIS. 38. 39.

STATS.

Repeats the allegations of paragraphs 1-30 above. Warren Basler, Patricia Basler, BFS, and others

acting with a common plan intentionally breached their fiduciary obligations, defrauded the plaintiffs, andconverted assets of the plaintiffs by means of the actions described above. They acted for the purpose of willfully and maliciously injuring the Carmichael/Wilsongroup in their business. 40. Repeats the allegations of paragraph 35 above.

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FIFTH CAUSE OF ACTION CORPORATE DISSOLUTION UNDER CHAPTER lS0w RIS. STATS.
41. 42. Repeats the allegations of paragraphs 1-30 above. The Basler group are in control of BTC and are

acting in.a manner which is illegal, oppressive of the minority shareholders, and fraudulent, and the corporate assets are being misapplied and wasted.

SIXTH CAUSE OF ACTION VIOLATION OP S 946.89, Wis. Stats. 43. 44.

Repeats the allegations of paragraphs 1-30 above. Warren Basler, Patricia Basler, and BFS are persons

in associated with BTC and BFS who conducted or participated
conducting the business of BTC and BPS through a pattern of fraudulent conduct as described above in paragraphs 20-27. 45. The defendants regularly used the U.S. mails in conjunction with committing those acts. WHEREFORE, the plaintiffs respectfully pray for judgment: i.
BTC;

Ordering a complete accounting of the affairs of

2. Divesting the Basler group of controlling power in BTC or, alternatively, dissolving BTC. on an equitable basis or, alternatively, appointing a permanent trustee or receiver for BTC; 3. the future; Enjoining the defendants from wrongful conduct in

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Appointing a trustee or receiver for BTC pendente
lite; 5. Awarding compensatory,double and punitive damages against Warren Basler, Patricia Basler, and BFS; and 6. Awarding plaintiffs their actual costs and

attorneys' fees incurred in this matter.
Dated this 13th day of May, 1991. FOLEY & LARDNER Robert L. Binder Julie Genovese

AttOrneys for Pl~i~tiffs Address: 777 East Wisconsin Avenue Milwaukee, wisconsin 53202 (414) 271-2400 JURY TRIAL DEMAND Pursuant to Rule 38, Federal Rules of Civil Procedurg, the plaintiffs, Elsa I. Carmichael, Barry W. Wilson, Geoffrey Wilson, Bryan R. Carmlchael, and Innovair Aviation Limited, hereby request at trial byjury of those issues raised by the pleadings for which a right to jury trial exists. Dated this 13th day of May, 1991. FOLEY & LARDNER Robert L. Binder Julie Genovese

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Copy mailed to attorneys for parties by the Court pursuant

FILED LI.S. DISTRICT COURT EAST. DIb~,

to Rule 77 (d} Federal Rules of
I~'..:: PI,t~+*~,~ ur ~, ~:"

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN

SEP 2 4 1993

ELSA I. CARMICHAEL, BARRY W. WILSON, GEOFFREY WILSON, BRYAN R. CARMICHAEL,. and INNOVAIR. AVIATION LIMITED,

Plaintiffs,
Case.No. 91-C~496 BASLER TURBO CONVERSIONS, INC., BASLER FLIGHT SERVICE, WARREN BASLER and PATRICIA BASLER, Defendants..

DX 249

Pursuant to the 1stipulation of the parties, and-based upon all o9 ~'~e other pleadings and proceedings herein; IT IS HEREBY ORDERED AND ADJUDGED as follows: Defendants Basler. T~rbo Conversi6ns, Inc. and .Basler Flight Service, Inc. are "~ointly and severally liable to pay

damages to "~he plaintiffs in the amount of $2,500,000.00. This Judgment shall be paid, or plaintiffs may execute upon it, in
accordance with the parties' Settlement Agreement of September 23, 1993. The parties shall bear their own costs and att0rneys'.fees of this action. All claims against defendants, Warren Basler and Patricia Basler are dismissed with prejudice. The Court retains jurisdiction of. this action pending

further notice from the parties, since .~ere is a possibility that plaintiffs" may be entitled to a Supplemental Judgment should
'defendants Basler Turbo Cohversions, Inc. and Basler Flight

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Service, Inc. default in their payment obligations under the parties ' Settlement Agreement.

BY THE COURT.:

Di

ct

Judge

1993
Deputy Clerk

2

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¯ ~" ~

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Fl.i. RD

Copy mailed to attorneys for parties by the Court p,=rsuant to Rulu 77 (d) Federal Rules Civil P'ncP.rjures.

EASTERN DISTRICT OF WISCONS

BASLER TURBO" CONVERSIONS, INC. Plaintiff, ELSA CARMICHAEL and BARRY W. WILSON0 Defendants. Case No. 91-C-480

ELSA I. CARMICHAEL, BARRY W. WILSON, GEOFFREY WILSON, BRYAN

R. CARMICHAEL, and INNOVAIR
AVIATION LIMITED,

Plaint'ills,
;.C~s.~ :.NO.,

BASLER TURBO CONVERSIONS, INC., BASLER FLIGHT SFmRVICE, INC, WARREN BASLER and PATRICIA BASLER, Defendants. BTI~ULATION

The parties, .~y their attorneys, hereby stipulate. as follows: The attached Order dismissing Case No; 91-C-480 with prejudice and without costs or fees may be entered by the Cou~r.

without further notice.
2. The attached Judgment in case No. 91-C-496 may be

entered by the Court without further notice. . 3. Th~ parties to casa No. 91-c-496 have entered into

a Settlement Agreement dated September 23, 1993 providing for certain payments to be made to satisfy the Judgment being entered

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in that case.

"Should there be a default in these payment

obligations, as specif~ed in the Settlement Agreement, then the court, may,-upon receipt of an affidavit from plaintiffs' counsel further notice, enter a ~onfirming such default and without¯ Supplemental Judgment awarding additional damages .to plaintiffs in the amount of $1,250,000.00, less'the total of any payments made in partial satisfaction of the previous Judgment for $2,500',000.00. Dated t~is ~ J day ~f September, 1993. ROBERT L. BINDER (WBN 1017296) PETER J. STONE (WBN 1017006)

Robert L. Binder" Attorneys for Else "I. Carmichael, Barry W. Wilson, Geoffrey Wilson, Bryan. R. Carmichael and. Innovair Aviation Limited FOLEY .& LARDNER 777 East Wisconsin Avenue Milwaukee, WI 53202-5367

(4 4) 2 - .-2400

(414) 289-3791. (fax) STEPHEN T. JACOBS (WBN 1015410) CHRISTINE L.THIERFELDER (WBN I000500)

S ephen T.
Attorneys for Basler Turbo Conversions, Inc., Basler Flight Service, Inc., Warren Basler and Patricia Basler REINHART, BOERNER, VAN DEUREN, NORRIS & RIESELBACH, S.Co .iOOO North Water Street Suite 2100 Milwaukee,. WI 53202 (414) 298-1000

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Gopy mailed to attorneys for p~rties by the Court pursuant to Rule. 77 (d) Federal Ru|es of Civil Procedures.

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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN

BASLER TURBO CONVERSIONS, INC.

Plaintiff,
Case No. 91-C-480 . ELSA CARMICHAEL and BARR~ W. WILSON, Defendants.

ORDEr;OR DISMISSAL

Upon the stipulation of the parties," IT IS HEREBY O~n~ED that the above-captioned, action is dismissed with prejudice and without costs or fees to any of the pa~ties. ¯

.,

Dated this ~~day of Septgmber, 1993.

BY THE COURT

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