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

Case 1:96-cv-00408-LAS

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LTD.

Tne=e are a nu~be.r of e~cellent oI~o~tur~t-es to markat th~ Basler Turbo - 67 ,n As%a

Other cou~tz~es w~th strong opportunzt~es awe The Fni~IV~lues, Malaysia, Thailand, Bu~na, Laos, tha ~ s~f) Pa~s~, ~ ~ In~ ~f t~
~ountrle~ bhat may Imve le~s opportunity x~l~e ~r~, J~, B~ei ~ ~h In a ~ of these ~ies t~re ~e co~tlons Also ~ ~ ~ a ~sit%~ to g~te a grit d~l of d~c~s~ ~ ~t~=le ~ t~ axr~t ~th t~ Hara~ ~i~

The ~nvolv~m~nt of Pratt & W'nltney w~h th%s axr~aft %s helpful

C000682

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T 7SR93 ASSOCIATES

P 3 ~

INDO~WI~S
906 ~ ~, 20 ~ ~ ~ ~ ~

LTD.

eli!rough it may ~aka Pratt a great deal of t~e to got a production hne ~stabL~shed at A~r Asia (my estimate 18 to 24 ~mth, otha~s ~imate u~ to four years)
As Pratt gem m~re deeply involved there may be soma problems t~ ~n mxt, bur- ~u the end analys~s r!mir partlc~patzo~ zs of great benefit to the a~ecraft and to showir~ Asia t~t ~t o~ly do wa feel ~t is ~ exaellen~ azrcraft but so do~s Draft, ~ to get ~ ~lue f~ ~ ~ d~ ai~raft ~ ~i as to

old, ~t Z ~l~e ~ ~s a~ra~ ~ you do, ~ ~ pr~ p~ t~ ~lity of ~e Basler ~ 67 ~u ~ or ex~

I propose that my cca~any Indoswzss Av~zon ra~resent Basler as a ~n~ral Sales A~ent lu Asia, w~th a 2Z ~verrids c~mzssion on any a~.-craft that is sold with sc~ t)~e of in ~cantlve that zs bu£]~ £nto ~ cd~ssz~ 16vel or a bonus £f a cerra~n mmber of aLrcraft are sold. I would do all p~sszble w~th thzs type of cam~sszon impel to m~rkat and co-o=di~sta markat~n_~ a~tlv~tlas throt~t Asia l~=t~culerly ~ork~ ~th ageats ~n each .country The a~ent ma~ be se1~ctsd by you~ co=~W o= ~rec~ne=L-~ to you by me, ~ the fzrst ob3ec~zve ~uld be to get a network estab]isl~l as q~LcY.ly as poss, ble I tmuld be prepared to ~ r~ular trips to the States o d,~cuss marl~tRr~ ob3ectzves w~th aL~ d you

However to und~mke this ~ype of work, w~th~ut a~y ~rt, I ~ ne~ ~t~ive ~sis~ fr~ ~i~ ~ ai~t, t~l ~ to ~ to ~szs, a ~y ~s~ ~n r~e ~ offz~ ~ ~u~

D~cr~ptz~ ~ ex~si~ sales ht~a, t~ ~z~b~hty of

a

~k~ are a~ ~u~r~ ~ ~t an ~t of c~titors of ~I~ ~e ~Ii fzn~ ~ ~~a v~ fi~ job of ~=~t~ ~ sort ~nt i~, ~ ~I ~ of ~t
I would zecoumend that you add Y or 10% to y~ur price l~s~ ~ ~ r~dy to off~ a ~fac¢~ d~t or re~, if s~ ~raft ~e ~ at the s~ t~e Ev~o~ ~s to 8~t a ~sco~t ~ a~ t~ ~Jor ~ufac~s, as ~ ~ ~e ~ ~f~t~s ~ it Ve~ f~ air~ ~y stic~ ~ce for a B~xnz ~=raft, ~ ~i r~u~t a ~sco~t ~ zt ~ ~

CO006S3

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INI)O~INI~$
~L~I'L.¯ (B~2) 8",06702

LTD.

~LEI~N~ (8~2) 8101083

806 ~ R0~, 20 ~ ~0~, ~, BONG ~hC

helpful ~ mar~t in Asma ~£ y~u offem~ s~me sort of a dmscount off you= ixst price
In clos~lng I do o~u=zon ~ a~m:raft are not sold ovemn~ht ~d ~ ~e ~n ~ ~ ioo~ at ~sle~ to see ~ dete~ you~ea~ tosee~t st~s you ~ ~ s~ ~t y~ ~e zu t~t fo~ Io~ ~ give tba~ £~1 o~ io~ ~

~ a n~r of ~ple ~ this
to ~ ~ for ~y y~s look faz~-d ta hemc~.n~ fro~ you and ~ worhmg ~uth you
Best Re~ards,

C000684

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Madison l~al.atzon
TP

Aprll I0, 1991

Joseph E McCreery President Valley Bank 50 Pearl Ave Oshkosh, WI 54902 Dear Mr McCreery: In accordance wlth a request that Michael Hlntze has made, enclosed please flnd the analysis and valuatzon of Basler DC3 Turbo BUslness Enterprlses. If you have any questlons, please contact my offlce. Sincerely, MADISON VALUATION /~SSOCIATES, INC Theodore F. Gunkel President cc. Mlchael Hzntze Enclosures

s4101et2 913

F~rstWmcons~n Plaza Suite 331 I South P~nckney Street Mad~son, Wisconsm 53703 Phons 608 257 2757 Fax 608 257 7741

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BASLER DC3 TURBO BUSINESS ENTERPRISES ANALYSIS AND VALUATION ~ANUARY I, 1991

DX 105 1 2

Madison Valuation A~oc~ate~ T F Gunk~l& Co

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Mad~on Valuation Assoc, ate~
T F ~gngel & Co

March 6, 1991

Attorney T:mothy M Dempsey Dempsey, Magnusen, Wllllamson & Lampe P.O Box 886
Oshkosh, WI 54902

Dear Mr. Dempsey Thls letter is in response to our engagement letter of November 27, 1990 Based on Informatlon made available to us from varzous sources, we are provld/ng the follow~ng mater~al as prellm~nary computatzons, sub3ect to modzflcatlon based on the readers correctlon and or ampllfzcatlon. The understood purpose of the report enclosed herewlth is to provlde the stockholder-managers of Basler Fllght Servlce, Inc. (BFS) and Basler Turbo Converslons, Inc. (BTC) wlthwell organlzed Informatlon and structural analysls, wlth which to base further dlscusslons of value, ownershlp, buszness merger and future operatlng plans. The enclosed materlal includes the followang: i. 2 3. Tentatzve Basler DC3 Turbo Enterprase Memorandum D~scuss~on of Exh~blts Memorandum Exh~b:ts I -III and Exh:bats A - HI Assumptlons

Our preliminary concluszons as to the values of the varzous buslness interests llsted in o~r November 27, 1990 engagement letter are as follows. The values assigned to each of the bus~ness ~nterests llsted below presume that the current contractual and functlonal busrness relatlonsh~ps between BFS, BTC, and Innovalr Avlatlon Ltd (Innovalr) wlll be malntalned and that the current stockholders and managers of each ofthe entitles w~ll work together for the overall success of the venture. Further, we have assumed that thls commonal~ty of purpose wlth a prlmary buslness focus on DC3 Turbo converslons wall contlnue for the next flve years. Famlure of the current stockholders and managers to contlnue to work together would, In our opLn~on, lead to slgnlflcantly reduced values for each of the bus~ness

F~r~t Wisconsin Plaza - Su,te 33l 1 South Pmckney Street Madson, WL~onsln 53703 Phone 608 257 2757 l~x 608 257-7741

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Attorney Tamothy M Dempsey March 6, 1991 Page 2

entatles, wath the greatest negatlve ampact upon those entztles wath the least establlshed market posltlon and the least developed structure of traaned employees, production facalatles, and management staff and systems. Our oplnlons are presented in the same format as our engagement letter and follow dlrectly after each question. Basler Flight Service, Inc - Converslon Divlszon on__~lI a.
o

100% ownershlp of all equzty interests

$5,473,000

Basler Turbo Conversions, Inc I a. b. c. d. 100% ownershlp of all equity interests 51% ownershlp of all equlty interests 33.4% ownership of all equaty interests $1,850,000 1,132,000 489,000 229,000

15 6% ownership of all equaty Interests Innovalr Aviation Limlted~ a. b. 100% ownership of all equity interests 49% ownershap of all equity interests 34% ownership of all equity ant.rests d. 17% ownershlp of all equity interests

$1,911,000 741,000 780,000 390,000

Warren Basler's personal agreement to provide reasonable noncompete assurances and transitional servlces subsequent to any sale of the corporate equities referred to above.

Impact on the value of each of the equltylnterests llsted above (#i, #2 and #3) if Warren Basler termlnated has exlstlng agreement or refused to provlde the Corporatlon or the buyer wlth such an agreement.

IValues are based upon the assumption that the c~rporate entlty issuang the equlty securlty holds non-compete and transltlonal servlce agreements of reasonable scope and duration wzth key personnel

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Attorney Timothy M. Dempsey March 6, !991 Page 3

It is our oplnlon that each of the entltles would be worth only the net value of its tanglble assets. The equlty of all three companles would not have a marketable value slnce llabllltles would exceed tangzble asset values. Mr. and Mrs. Warren Basler's personal guarantees and the pledge of Basler Fllght Servlce, Inc. assets to secure exzstang bank borrowang by each of the three corporatlons lasted above (#i, #2, and #3). Impact on the value o£ each of the equltylnterests llsted above (#i, #2 and #3) if Mr and Mrs Warren Basler refused to contlnue to provlde the lendlng banks wlthsuch guarantees and Basler Flaght Servace, Inc. refused to contlnue such collateral support It ls our oplnlon that each buslness would fall wlthout the ongolng support of the Basler's collateral Although another source of collateral could be substltuted for that now provlded by the Basler's, we belleve that the walllngness of an outslde party to provzde such collateralzzatlon Is greatly hlnderedbythe current turmoll among the stockholder-manager group an~ related buslness rlsks Mr. and Mrs. Warren Basler's agreement to contlnued long-term use of Oshkosh hanger faczlztles now under lease to one or more of the three corporatlons llsted above'(#1, #2 and #3).
a

Impact on value of each of the equaty interests lasted above (#I, #2 and #3) if Mr. and Mrs Warren Basler refused to contlnue the hanger lease wlth these three entatles beyond the current lease term.

We have not establlshed a speclflc value reductlon due to the lack of access to these facllltles. However, it as our oplnlon that the tlme and cost assoclated wlth relocatlon could be very S~gnzfzcant and damaglng to all concerned.
7

A hypothetlcal corporate entlty resultlng from a merger of the Converslon Dlvlslon of Basler Fllght Servlce, Inc., Basler Turbo Converslons, Inc., and Innovalr Avlatlon Lam~ted, includlng reasonable employment, non-compete and transztlonal servzce agreements wlth key personnel, contlnuat~on of exastlng flnancaalguarantees from Mr. and Mrs. Warren Basler, contanuatzon of exzstzng collateral pledges by Basler Fllght Servlce, Inc., and reasonable hanger lease arrangements wlth Mr and Mrs. Warren Basler

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Attorney Tzmothy M Dempsey March 6, 1991 Page 4

a. i00% ownershlp of all equlty interests.
b

$9,234,000

Allocatzon of equity ownershlp In the hypothetlcal corporate entzty to each of the current stockholders of the three merging buslness unlts (#1, #2 and #3 above) and to Mr. and Mrs Warren Basler and Basler Fllght Service, Inc. for thelr promlses, guarantees, collateral pledges and leasehold rlghts (#4, #5 and #6 above) based upon our prel~mlnary oplnlon as to the values contrlbuted by each party to the hypothetlcal merger transaction

For valuatlon of 7(b), see Exhlblt III, Allocation Method I, II and III In thls pro3ect, we Intend to employ three dzfferent amplifying deflnztlons to the term "willing buyers and sellers." Each of the three dlfferentgroups of "willing buyers and sellers" brlng dlfferent capabilltles to explolt opportunltles or control risks and, therefore, may cause us to draw wldely dlvergent value concluslons for each of the three groups These three groups are: i. Strategically posltloned, "best flt", operatlonal investors from outsldethe current owner/manager group of the Basler business enterprises

Our investigation concluded that such a "best flt" operatlonal investor does not exist at thls tzme.
2. Investors who are currently owners and managers of the Basler business enterprises See entzty cash values enumerated earlier in thls letter.

3.

Hypothetical passzve Investors seeklng only to invest funds and to rely upon exlstlng management and buszness plans.

Due the current turmoll among the stockholder-manager group, we belleve it hlghly unllkely that the DC3 Turbo converslon enterprlse could attract a passive investor wlllIng to rely on the currently exlstlng management team and buslness plans.

We both know and understood that the varlous stockholdermanagers dzsagree on many zssues that are relevant to our valuatlon and that, zn fact, our engagement arose out of thls disagreement and the search for solutions We also recognlzethat the spec~flc company-related information used in our analysis was provided by

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Attorney Tlmothy M Dempsey March 6, 1991 Page 5

partzes wlth dlfferent posltlons and personal Interests Also, not all Informatlon requested as a part of our valuatlon was avallable or provided. As a result, our valuatzon was performed wlthout a complete understandlng and or inslght into the DC3 Converslon enterprlse Nevertheless, we belleve that the input from management was helpful and relevant to the task and that the valuatlon results should be important to and productive In resolvzng existing mlsunderstandlngs and dlsagreements If the Involved partles are wllllng to devote the tlme necessary to gazn an understandang o£ the conclusaons and therebyasslst in the reflnement of Information and resulting valuatlons. We strongly encourage the involved parties to meet wlth us to further dlscuss the assembled ~nformatlon. We wall be available, on reasonable notice, to meet and discuss thas matter further

Sincerely, MADISON VALUATION ASSOCIATES, INC.

Theodore F Gunkel Presldent Enclosures cc: Machael G. H1ntze

rbhltr.913

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TENTATIVE BASLER DC3 TURBO ENTERPRISE ASSUMPTIONS January I, 1991

The followlng assumptlons relatlng to the Basler buslness enterprlses were developed during our discussions wlth management and from our revlew of Informatlon requested of management. These assumptions are very slgnlflcant to our January l, 1991 prellmlnary valuation oplnzons and are sub3eot to further revlewbymanagement. Final opinions would require further analysls of the topics of each assumptlon and Independent conflrmatlon of thelr reasonableness.
The overall buslness purpose of the enterprlse being valued

was and contlnues to be the research, development, and £lnan~lal exploitation of efflc~ent conversion ofDC3 transport aircraft to modern turbo power systems. The research and development phase of thls venture was completed in February 1990, .as evidenced by the issuance of a Federal Aviation Administration STC certzflcate Currently, the enterprise Is in the process of plannlng and preparlng the organlzatzon to exploit the f~nanclal opportunity they percelve from their turbo conversion klts and process.
Stock ownership in each of the separate entlt~es organized for thls venture is disclosed on Exhlblt I.

The underlying Informal understanding among the original organizers of thls venture was that Warren and Pat Basler, as one group of owners, and W11son and Carmlchael, as another group of owners, would share equally (50/50) all of the ventures demands for capital, all risks related to the venture, ~nd all fln~nclal benefits from the venture The new Oshkosh hanger facllity was, however, an exceptlon to the 50/50 policy of sharing in cost and benefit referred to above. Wllson and Carmlchael dlscouragedthe Baslers from developing and owning the Oshkosh land and building associated wlth the new facility. It was agreed that W11son and carmlchael would not share in the cost or beneflts of such a real estate venture should the Baslers decide to become developers and owners of such property.
The rather complex corporate strdcture of ownership of valuable rlghts relating to the STC and turbo converslon process exists only to accommodate the different citizenship and related flnanczal constraints Imposed on two separate groups of indlvldual organlzers Serious disagreements currently exlst between the two groups of individual organizers arising out of the process of seeking solutlons to exlstlng flnanc~al pressures, adcptlnganoverall coordlnated business plan to explolt the percelved financial opportunltyr delegation of managerlal responslbzlity and

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Basler Assumptlons - January I, 1991 Page 2

authorlty, and fundlng the capatal requarements assocaated wath the selected busaness plan Fananclal straans under whach the venture has been operatang has resulted an Unlted Technologaes Corp. (UTC) beoomang a l~censed owner of some slgnlfacant raghts to exploat the STC an foreagn markets. These cratacal stresses have also resulted an one stockholder group, Warren and Pat Basler, belng exposed to far more than S0% of the flnanclal task of the venture through pledge of valuable separate property and grantlng of domestlcally enforceable guarantees to banks wlthout equlvalent and equalizing indemn~fzcat~ons or collateral pledges from the Wllson/Carmachael group.
Q

UTC, as the suppller of the Pratt and Whltney turbo englnes and as a l~censeeunderthe STC, is an essentlal and desarable party to the process of exploltlng the fananczal beneflt of the STC. UTC has become involved in the dzspute between the two groups of owners and has mandated the operataonal and ownershlp merger of BTC, Inc. and Innovaar Avaatlon L~mated by January 31, 1991. The four exlsting cratlcal components of a contanuang entlty to exploat the turbo conversaon concept are:
a

d

The STC. The knowledge, reputation and skllls of Warren Basler and hls staff. The local bank credlt lanes whlch are dependent on contlnuataon of Warren and Pat Basler's collateralazatzon of the debt wlth thelr separate assets. Avallabllltycf Pratt and Whltney turbo enganes from UTC.

Nezther Warren Basler nor any of the key englneers or managers are currently under employment contracts or noncompete agreements.
10.

Whlle the enterprise has developed s~gnzflcant ~nterest among potentlal customers, it has not establzshed a sagnlfacant backlog of enforceable orders to support the 1991 lower range pro]ectlons of sales. As a result, management has not proven its aballty to accurately forecast the percelved demand for converted DC3 alrcraft anto farm orders. BTC was forced to lay off a slgn~flcant number of trazned personnel an 1990 due to thelr Inablllty to generate the pro~ected conversion workload.

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Basler Assumptlons - Januar~ I, 199.1 Page 3

ii.

The exlstlng buslness structure of the enterprise zs ~ncomplete, lacking certain production equipment for converslon klts, marketang staff, productzon staff, managerzal and admzn~stratlve systems and staff The exzstlng corporate separatlon of capltal, functlonal responslbzlitles and authorlty, and the allocatlon of flnanclal rewards creates dlslncentives for key Ind~vlduals and entlt~es rather thanproduct~ve ~ncentlves to mot~vatethe maximum flnanclal exploltatlon of the developed concept. Flnanclal statements prepared internally at the Oshkosh, W~sconsln offices o£ the enterprzseare currently available on an unaudlted basls for BTC and BFS through October 31, 1990. The records and fananclal statements for Innovalr are prepared and malntazned independently In Callforn~a and are not avallable to the enterprlse's Oshkosh offices. All of the f~nanc~al Informatlon made available to us on Innova~r has been prepared by accountants located in Callfornla, whlle all other flnanclal anformatzon came from the Oshkosh, WIsconsln offzces and personnel. Innovalr flnanc~al statements were made available through July 31, 1990, while other entlty statements went through October 31, 1990. We have not had any dzrect communlcat~on wlth Innovalr's California accountants and only limlted phone dlscusslon wlth Mr. Carmlchael.

12

13

14.

l>ro3ectaons of revenues, costs, expenses, and capital req~11rements requested byus of Oshkosh-based management have been discussed and reviewed by us but remain excluslvely the oplnlons of management. We accept the ob3ectlvzty of management zn preparzng these pro3ectlons as unchallenged by others and reasonable for our ~se zn establIshang our prellmlnary valuation concluslons.

j3-12assu. 913

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DISCUSSION OF EXHIBITS

Exhzbat I presents the number of shares owned, cost basas and percentage ownershlp posataon of each of the indlvldual stockholders an BFS, BTC and IAL. Exhlblt II presents an Analysis of the Dasposltaon of Rlghts to Profat from DC-3 the Turbo Conversaon K1t SIC. As we dascussed at our meetang, BTC has retalned only its raght to manufacture turbo klts and parts for domestlc sales The remalnlng rlghts have been dzsbursed to IAL, BFS and Unlted Technologles Corporatlon (UTC) as shown on the exhlbat.

Exhzbat III presents a serzes o£ "Alternatzve Baszs for Allocatlon of Equlty of Basler Turbo Converszon Enterprase among Stockholders." Chart I (followzng) summarazes the resultzng assagnment of values to each stockholder group under each of the selected alternatlve approaches to allocataon.

See Chart I on followang page.

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Dlscusszon of Exhlbzts Page 2

CHART I

4J~ om

H

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Dlscusszon of Exhlblts Page 3

Goang buslness concerns are usually worth more than book value of equaty. There should exast a dastlnct value related to the expectataon of future earnangs of the busaness and Its tangable and intangable assets, market nlche, proprietary knowledge or expertase. Thls value zs the present worth of the expected future ancome and or cash flows The future earnlngs pro3ectaons we have employed establlshlngthe value of future earnzngs do not consader debt nor interest expense of the enterprlse; the pro3ected amounts represent earnzngs before znterest and taxes (EBIT) The anterest bearlng debt of each buslness is therefore deducted from ~ts determaned value, wlthout conslderlng or allocatlng to each entztyany part of the burden of credlt enhancement (collateral for debt) provldedby BFS. Yet, the value today of each entlty is dependent on thzs add~tlonal collateral, and some recognltlon of thzs "support" must be factored in since the collateral supportsthe busaness as whole. Exhlbat III employs certaan value allocataon methods whlch acknowledge the rlsk and benefzt assoolated wath credzt enhanoang guarantees and collateral an the valuatlon of each shareholder group's equaty posltlon Supportang our valuataon work are the followlng exhablts whlch have been developed from anformataon provlded by you and your staff:

A

Reconstructed Balance Sheet as of October 31, 1990 presentang assets, llabllltles and stockholders equaty in the DC-3 Turbo Converszon sales and kat sales buslnesses - as a combzned group - plus the other BFS assets thatcollaterallzethe Turbo Conversaon bus~ness. IAL's Balance Sheet ~s as of July 31, 1990. Estlmates, for each partlclpatlng company, of the expected revenue, intercompany co~ISSlOn and gross proflt from an Indavldual DO-3 turbo converslon or klt sale. Thls breakdown reflects, for converslons, both Kelner and Zzmex confzgurat~ons. Pro3ectlons of the hagh, low and average volume of DC-3 turbo converszons and conversion kzts (U.P A.C.) ordered and shzpped durang the perlod 1991 - 1995 Although calculatlons uslng the hlgh, low and average estlmates were made and the results are ancluded wzth thls report, for valuatzon purposes only the low estlmates were consldered an our concluslons as to total enterprlse or entlty values.

B

C

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Dlscusslon of Exhlblts Page 4

Usang the informataon an exhabats A - C, the va!uatlon progressed as presented an the following exhlblts
D

Pro3ectlon of 1991 - 1995 estlmated gross profits, deductions therefrom and resulting net earnangs before interest and taxes (EBIT) for IAL, BTC and BFS Three separate pro3ectlons are given based on the hlgh, low and the average of hagh and low aircraft conversions and kat sales shapped in each year. It was also assumed that all IAL sales would be Zlmex contracts, all BFS commercaal sales would be Kelner contracts and BFS mzlItary sales would be slxty percent Zlmex contracts and forty percent Kelner contracts In addltlon, we were provided wath sellang and general admlnlstratlve expenses whlch were assumed to be seven and one-half percent of sales for both BFS and BTC, and Research and Development expenses of flve percent of sales. For IAL, we were provlded wlth seven and three quarters percentfor these szm~lar expenses Summary of exhibit D net earnlngs before interest and taxes (EBIT): (i) by company and, (2) by allocation to each Individual shareholder

F

Estlmated net present value, on January l, 1991, of the 1991 1995 EBIT Thls exhibit F shows the net present values broken out In detaal and an total by company as well as the allocataon to shareholders. However, when computing the results presented an exhlbat F, only the projected buszness activity -through 199S was considered. For purposes of computlng these net present value results, the followlng annual dascount rate percentages were used:
Functlon: IAL generated sales/converslons. U.P.A.C. kat sales: BFS generated sales/conversaons. Corporate Entity Discount Rate

IAL BFS BTC IAL BFS BTC BFS BTC

3S% 35% 35% 30% N/A 30% 2S% 25%

The dafferent dlscount rates used In our calculatlons reflect our oplnaon as to the inherent rasks speclfac to each company. Factors such as: the new untested nature of the venture, lack of a busaness plan and lack, therefore, of a hlstoracal "track record" of accomplashlng converslon sales goals, managang a much larger more complex operataon, working together as a

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Dzscusszon of Exhlbzts Page 5

team, age of the key partlclpants and provzng the marketlng pro3ect&ons, are some of the important rlsks to value. All new ventures have these and other s&m~lar tasks whach an anvestor must - and wlll - conslder when evaluatlng a buslness In addltlon to the above exhlblts, whlch are integral to our valuatlon work, other calculations were made based on dafferent assumptzons The follow~ng exhlblts present for your flles these other calculatlons

G

A bulldlng bloGk pyramzd presentatzon of the components of buslness value, wzth some of our zdeas as to the amportant "blooks" assoczated wlthand specaflc to BFS. It as Important to note that the blocks at or nearest the bottom of the pyramld represent foundatzon values, must zmportant and crzt~cal to the buslness and usually the hardest to replace or repllcate As a result, these crltzcal "key blocks" have the greatest inherent value When consaderang the value of BTC and Innova~r, I would urge that you develop for each its own specafac value pyramzd.

Cl Same as exhabat C except that at reflects the "worst-case" est&mates of conversaons shlpped. D1 Same as exhlbat D, except that it reflects results of the "worst-case" estlmates of converszons shapped as presented in exhabzt CI. E1 Same as exhlbat E, except that zt reflects results of the "worst-case" estimates of converslons shapped as presented exhlbat CI. F1 Same as exhab~t F, except that zt reflects results of the "worst-case" estlmates of converslons shapped as presented exhlblt Cl. Using the est:mates of converslons shzpped as presented in exhzblt C, thzs exh~blt presents the estzmated net present value, on January i, 1991, of the 1991 - 1995 EBIT presented zn exhlblts C and D plus the projected EBIT for the years 1996 - 2000 (for a total of ten years). The results presented 1n thzs exhzblt H were based on the assumptlon that the EBIT an the year 1995 wlll contlnue to be achleved in each of the followlng flve years Thas exhabat H agaln shows the resultlng net present values broken out In detaal and an total by company and the allocatlon to shareholders. For purposes

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Dlscusslon of Exhlblts Page 6

of computlng the net present value results, the followlng annual dzscount rate percentages were applled: Years 1991..-.1995 , Dlscounted at the same rates used on exhlblt F and descrlbed above Years_f996 - 2000 Years 1996 - 2000 were flrst dlscounted to January I, 1996. Functlon: Corporate Entlty Discount Rate

IAL generated sales/converslons.
U.P.A.C klt sales: BFS generated sales/converslons"

IAL
BFS BTC IAL BTC BFS BTC

50%

N/A
45% 35% 35%

50% 50% 45%

Years 1996 - 2000, after being discounted to January I, 1996, as above, were then discounted from January l, 1996 back to January I, 1991 at the same rates used on exhibit F.
HI Same as exhlblt H, except that it reflects results of the "worst-case" estlmates of conversions shipped as presented exhlblt Cl. 33-12dls. 913

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EXHIBIT I

STOCKHOLDERS CHART BASIS STOCK PLUS SURPLUS

SHARES Basler Fllqht Servlce Inc. W. Basler Basler Turbo Converslons' Ync I00.0

$26,500

W. P. E. B.

Basler Basler Carmlchael Wilson

255 255
334 156 1,000

25.5 25.5 33.4 15.6 i00.0

$ 9,563 9,562 12,499 5,876 $37,500

W. Basler B. Carm~chael G. Wzlson

49 34 i00

49 34 I00

$18,375 3,901 15.224 $37,500

Summary of Cost Basls W. P. B. E. B. G. Basler Basler Carmlchael Carmlchael W~Ison Wilson $ 54,438 9,562 3,901 12,499 5,876 15,224 $101,500

31-23cht.913

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EXHIBIT II
Analys~s of D~spos~t~on of Rights to Profit From Var±ou. Eccnomlc Function. Relating To DO-3 Turbo Conversion K~t STC As of 9~30~90

Retained By BTC Right to profit from manufacture and a~semb~y of turbo k~ts and parts Exclusive rzght to manufacture for foreign sales (10 years)
Exclusive rzght to manufacture for all domestic .ale.

Sold To IAL

Resold Partly To UTC

Sold To BFS

Rlght to profit from sale of turbo k~ts (including parts and UTC engines}

a b

Exclusive r~ght to sell to forelgn buyers (10 year.} Exoluslve rLght to sell to domestic buyers (18.5 years}

X(1)

Right to proflt from ~nstallat~on of turbo k~ts

a.

Excluelve rzght to install all k~ts sold to foreign buyers (10 years)
ExclusLve rLght to Lnstall all kits sold to domest;c buyers {18.5 years}

X(1} X(3}

4

R~ght to service Installed turbos a. Publla domain r~ght of any appropriately lzcensed operator

(1)Technology Lacense Agreement dated June 24, 1988 between BTC and IAL. (2)A~rcraft D~str~butorsh~p Agreement dated March 1989 between BTC and BFS. (3)Purchase Agreement dated July 13, 1990 between BTC," BFS, IAL, UTC, and Turbo Power and Marine Systems, Inc. 31-22sch 913

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Page 22 of 56 EXHIBIT III Page 1

ALTERNATIVE BASIS FOR ALLOCATION OF EQUITY OF THE BASLER TURBO CONVERSION ENTERPRISE AMONG STOCKHOLDER GROUP OPERATING IN A COOPERATIVE ENVIRONMENT BFS TOTAL BFS TOTAL CONVERSION CONVERSION COLLATERAL ENTERPRISE BTC BUSINESS BUSINESS SUPPORT VALUE (10131/90) (10131/90) (1013'1/90) (10131/90) (1,385,954) 14,425 (1,786,681) 8.549.909 1,763,228

Adjusted Book Value o! Eclu=ty Value Determined Under D~scounted Cash Row Valuahon Melhod o Value of Net Assets o Outstand=ng Interest Bearing Debt "" Total Equity Value

INNOVAIR (7/31190) (415.152)

2,313,572 (402.834) 1,911,238

5,865,217 (4,015.301) 1,849,916

5,473 406 0 5,473,406

18,652,195 (4,417,635) 9,234,560

13,652,195 (4,417,6,35) 9,234,560

For purposes of the valuation employed in this Illustrahon, VALUE is defined as the benef=clal interest el current stockholders, based on managements projected earnings o! the comblned enterprise for the period 1991-1996 Present Value of 1991-1996 projected eamtngs before Interest and tax (EBn") Less Interest beanng debt Banks Stockholders Basler Investors Group (BIVG) Carmtchael/Wlison Investors Group (CWWG) Present Value of 100o/~ Equity Ownership in Basler Turbo Conversion Enterprise as of 111/91
13,652,195 2,145,816 1,271,631 1 000 188 2 271 819

9,234,560

ALLOCATION METHOD I

Based on adjusted book value of Stockholders Equity as o! 10131/90

1,763.228

CONCLUSION 100% fo the present value of Basler Turbo Conversmn Enterprise Is allocable to BIVG

9,234,560

¯ " Interest bearing debt as of 10131/90 For Innovalr, Interest bearing debt as of 7/31190 was $400.320 versus the $402,&14 above D=Iference o1' $2,014 not cons=dared materlaJ

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EXHIBIT IIl Page 2

ALLOCATION METHOD II

Based on actual contributions of capttal from stockholders as follows

(A) Lira=ted to Bank Loan Balances for collaterallzed assets and exclud=ng all personal guarantees Present Value of 1991-1996 projected earnings before Interest and tax (EBIT), but net of combined enterprise debt Actual Cash for Shares held Actual Cash for Notes Actual Total Cash Contributed Actual Collateral Asset Assignment (Urn[ted Io Bank loan balances) Actual Total Capital Comm[tled CONCLU8 (1)Cap=tal Comm=ttment Percentages (2) Valuation AIIocatton On Above o/0
BIVG 37,499 1 271,631 1,309,130 55 78% 2 145,816 3,417,447 77 36% 7 143,782 CWlVG 37,500 1,000,188 1,037,688 44 22% 0 1,0O0,1B8 2?-..64°/o 2,090,778 TOTAL 74,999 2,271,819 2,346,818 100 00% 2 145,816 4,417 635 100 00% 9,234,560 9,234 560

(3) Collateral asszgnment requ=red of CWIVG to restore to 44 22% (2,145,816 x 44 22o/0)

948,811

(B) Including all collater~lized assets included but excludtng all personal guarantees Present Value of 1991-1996 projected earnings before Interest and tax (E~rr), but net of combined enterprise debt BIVG CW1VG Actual Cash for Shares held 37,499 37,500 Actual Cash for Notes 1.271,631 1,000,188 Actual Total Cash Contnbuted 1,309,180 1,037.688 55 78o/0 44 22% Actual Collateral Asset Ass/gnments CONCLUS (1) Capital Commlttment Percentages (2) Valuation Allocation on Above % 3"549,909 4,859,039 82 40°/0 7.609.400 0 1 037,688 17 60°/0 1,625,070

9,234,560
TOTAL 74,999 2,271,819 2,346,818 100 00% 3,549,909 5.896,727 100 00°/0 9 234 560

(3) Collateral assignment required of CWIVG to restore to 44 22% (3,549,909 x 44 22%)

1,569,656 ¯

¯ Accompanied by approprmte release of Basler collateral

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EXHIBIT III Page 3

ALLOCATION METHOD III

Based on presumed 50/50 agreement between stockholder groups

(A) IJmlted to Bank Loan Balances for collaterahzed assets and Including all Joint and Several Guarantees and full Indemnlfacatlon of co[latorahz=ng stockholders on a 50/50 bas=s Present Value of 1991-1996 projected earnings before =nterest and tax 0EBIT), but net of combmed enterprise debt Actual Cash for Shares held Actual Cash for Notes Actual Total Cash Contributed Requ=red Collateral Asset Ass=gnment For 50150 (L=rn=ted to Bank loan balances) Required Cash Loans For 50150 Total Capttal Required For 50150 CONCLUS (1) Capital Comm=ttment Percentages
(2) Valuation AllocatIon On Above % BIVG 37,499 1.271,631 1,309,130 55 78% 1 072.908 0 2,382,038 50 00% 4,617/279 CWlVG 37,500 1.000,18"8 1,037,688 44 220/~ 1 072 908 271,443 2,382,039 50 00% 4,617,281 TOTAL 74,999 2,271,819 2,346,818 100 00% 2 145 816 271,443 4,764o077 100 00°/o 9,234,560 9,234,560

(3) Collateral'and cash ass=gnment required of CWlVG to equahze at 50/50 Collateral ( Cash (

2,145,816 271,443

x 50 00% ) x 100 00% )

1,072,908 271,443

1,344,351

(B) All coll;ztemllzed assets and Including Jo=nt and Several Guarantees and full =ndemmftcatlon of collateral=lng stockholders on a 50/50 bas=s Present Value of 1991-1996 projected e~rnlngs betore inlerest ~z~d tax (EBI'I'), but net of combined enterprise debt BIVG CWIVG Actual Cash for Shares held 87.499 37,500 Actual Cash for Notes 1,000,188 1,271,631 Actual Total Cash Contributed 1,~309,130 1,037,688 44 22% 55 78% Reqmred Collateral Asset Assignment For 50/50 Reqmred Cash Loans For 50/50 Total Capital Requ=red For 50/50 CONCLUS (1) Valuation Allocation Percentages (2) Valuation AIIocat,on On Above (3) Collateral and cash ass=gnment requ=red of CWIVG to equahze at 50/50 Collateral C~sh 1,774,955 0 3,046,586 50 00% 4,617,280 1,774,955 271 44~ 3,046.586 50 00% 4,617,280 9,2.34 560 TOTAL 74,999 2 271,819 2,346,818 100 00% 3,549,909 271,443 6 093,171 100 00% 9,234 560

3,549,909 271,443

X 50 00% ) X 100 00°/0 )

1,774,955 271,443

2,046.398 "

¯ Accompanied by approprmte release of Basler collateral and cash

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EXHIBIT A Page I

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December 6, 1930

EXHIBIT A Page 2

Collater~l Position, B~Sler Fl)ght Seryice, Xnc, l} Accoun%s Receivable (total A[R 12/5/90 5lB,SSl) Inventory Includes~ Avionics equipment propellers M|sc. parts four planes under construct{on lOOZ 145ZA 387T g6BF 3, Test Equipment 1,249,362 x .~0 499,745

60 days)

65,?-,73 x
39,104

250,000 X .50

IgS,O00

AircrAft-~an~facturer Beech, F35 Beech~ A3G Beech 58 Beech 18 Beech 1B Douglas DC-3 Foug~ ~agfster O0uglas OC-3 Douglas OC-6 U~ Reg. ~o.,. HBBBSM R3657A .... HIIEC RBIIBF ~gllBF ~68gBD ti3~IFH RglBF N7OBF Coml Coml 9rnd c~r9o grnd cargo grnd 185,000 250,000 I00~000 Z50,O00 ZS0=000 500~000 500~000
~75t000

Use Brnd

Value $ 35,000 75,000 lg5~000

Convair 440
Convair 440
Douglas DC-3

~gD~
ff29KE
EEgR

~rnd
c~rgo
grnd

Dou91as D~-3

R4B6F

grnd

150~000

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EXHIBIT A Page 3 Basler Flight Service, Inc,, (continu~d~ Hanufacturer Doug1~s DC-3 Douglas DC-3 Douglas C-47 Douglas DC-~ 9s R~g /(5|3GL R925 R3OOBF H5454Z
Use

Value $ 150,000 150,000 1.700,000 150~oo0 4~BlO,O00 x .60 TOTAL

grnd grnd cargo grnd

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EXHIBIT B Page i

INNOVAIR AVIATION LIMITED BASLER TURBO CONVERSIONS, INC BASLER FUGHT SERVICE, INC PROFIT ANALYSIS OF'P{PICAL CONTRACT NEW PRICING

Internabonal Comm Sale (1) Innovalr Avlatlon Limited Revenue Kit Revenue Opt=on and Converston Revenue Comrntsslon Revenue (Optmns and Conversion) Net Revenue Cost of Sales I~t Purchases Convers=on Purchase Opt=on Purch~e Cost of Goods Sold Gross Prof=t Gross Profit Percentage Basler Turbo Conversions, Revenue Kit Revenue Net Revenue Cost of Sales Cost of two Turbo engines Raw MaterlaJ & Purchased Components 1 950,000 1,329,050 117,905 3,396,955 1,640,68B 1,;329,050 0 2,969,738 427,217 13 66%

Internat=onal Comm Sale (2)

1,950,000 1,697,?.50 154,725 3,801,975 1,640 688 1,697,250 0 3,337,938 464,037 12 21%

1,640,688 1,640,688 768,000 295,100 1,063,100 50,920 178,220 1,292.240 848,448 0 ~H8,448 21 24%

1,640,688 1,640,688 768.000 295,100 1,063,100 50,920 178,220 1,292,240 348,448 0 848,448 21 24%

Direct Labor - Fabrication Overhead Cost of Goods Sold Gross Profit Commission Payments on KIts Prof,t after Commission Payments Profit % after Commission Payments

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INNOVAIR AVIATION UMITED BASLER TURBO CONVERSIONS, INC BASLER FUGHT SERVICE, INC PROFIT ANALYSIS OF TYPICAL CONTRACT NEW' PRICING easier Flight Services, Revenue Option Revenue Conversmn Revenue

EXHIBIT B Page 2

604 050 725 000 1 329 050

972,250 725.000 1 697,250

Net Revenue Cost o! Sales Material Labor & Overhead - Options Material L~bor & Overhoad - Conversions Transportation Costs Cost of Goods Sold Gross Profit Commission Payments Profit after Commission Payments Prof/t % aRer Commission Payments Combined Data Comb=ned Retell Sales Price Combined Profit After Commission P~yment Combined Pmht % Alter Commlsslon Payment GROSS PROFIT ALLOCATION TO SHAREHOLDERS P BASLER W BASLER 7 2% 61 2% 68 4% 6 9% 5 9% 12 8% 6 9% 11 8% 18 7% 100 0% (1) Kelner contract, w/o nonstandard equip, using customer airframe (2) Zlmex contract, w/o nonstandard equ=p, using customer airframe

362 407 ,387.500 6 000 755 907 573.143 117,905 455 238 41 94o,~

591.613 387,500 6,000 985,11,3 712,137 154,725 557,412 32 84%

3,279 050 1,230,903 37 54%

R,647,250 1,369,897 37 56%

88 854 753.429 842,283 85,370 72,627 157.997 85,370 145.254 230,624

6 5% 63 8% 70 3% 6 2% 5 8% 12.0% 6 2% 11 5% 17 7%

88,854 873,644 962,499 85,370 78,886 164,256 85,370 157.773 243,142 1,369,897

B WILSON G WILSON
E CARMICHAEL B CARMICHAEL

1,230,903 100 0%

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EXHIBIT B Page 3

INNOVAIR AVIATION LIMITED BASLER TURBO CONVERSIONS, INC BASLER FLIGHT SERVICE, INC PROFIT ANALYSIS OF TYPICAL CONTRACT NEW PRICING UPAC Kits 1-6 991 000

lnnova=rAwatlon Llmlted Kit Revenue Cost of Sales Kit Purchases Cost of Goods Sold Gross Profit Gross Profit Percentage Basler Turbo Conversions, Inc Kit Revenue Net Revenue Cost of Sales Cost of two Turbo engmos Raw Matedal & Pumhased Components D=rect Labor - Fabrlc=ztlon Overhead Cost of Goods Sold Gross Prolzt Commission Payments on Kits Profit after Commission Payments Profit =/= after Cammlsslon Payments Combined Data Combined Retail Sales Prlce Combined Profit After Commission Payment Combined Profit =/= After Commission Payment GROSS PROFIT ALLOCATION TO SHAREHOLDERS
P BASLER W BASLER

719,088 719 088 271,912 27 44%

719,088 719,088

0 295,100 295,100 50,920 178,220 524,240 194 848 0 194,848 27 10%

991,000 466,760 47 10%

10 6°/= 39 2% 49 8%
10 2% 9 9% 20 1% 10 2% 19 8% 30 0% 100 0%

49,686 182,923 232,609
47,738 46,225 93,963 47,738 92 450 140,188 466 760

B WILSON G WILSON E CARMICHAEL B CAFff~ICHAEL

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INNOVAIR AVIATION LIMITED BASLER TURBO CONVERSIONS. INC BASLER FLIGHT SERVICE. INC PROFIT ANALYSIS OF TYPICAL CONTRACT NEW PRICING UPAC Kits 7-18 945.000

EXHIBIT B Page 4

InnovatrAviation Limited Kit Revenue Cost of Sales Kit Purchases Cost of Goods Sold Gross Prof,t Gross Profit Percentage B~sler Turbo Conversions, Inc Kit Revenue Net Revenue Cost of Sales Cost of two Turbo engines Raw Maten=~l & Purchased Components Direct Labor - Fabflcation Overhead Cost of Goods Sold Gross Profit Commission Payments on Kits Pro{=t atter Commission Payments Pro{=t % after Commission Payments Combined Data Combined Retail Sales Pdce Combined Profit After Comm~sslon Payment Combined Proht % After Commlss=on Payment GROSS PROFIT ALLOCATION TO SHAREHOLDERS P BASLER W BASLER B WILSON G WILSON
E CARMICHAEL B CARMICHAEL 11 8% :38 1% 49 9% 11 3% 9 1% 20 5% 11 3% 18 3% 29 6% 100 0%

719 088 719.088 225,912 2391%

719,088 719.088

0 295.100 295,100 50,920 178.220 524,240 194.848 0 194,848 27 10%

945,000 420,760 44 52%
49.686 160,383 210,069 47.738 38.405 86,143 47.738 76.810 124.548 420.760

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INNOVAIR AVIATION LIMITED BASLER TURBO CONVERSIONS, INC BASLER FLIGHT SERVICE. INC PROFIT ANALYSIS OF "tYPICAL CONTRACT NEW PRICING Innova~r Aviation Limited Kit Revenue Cost of Sales I~t Purchases Cost of Goods Sold Gross Prof=t Gross Proflt Percentage Basler Turbo Conversions, Inc I~t Revenue Net Revenue Cost of Sales Cost of two Turbo engines Raw Material & Purchased Components Direct L~bor - Fabr=catlon Overhead Cost of Goods Sold Gross Prof=t Commission Payments on I~ts Profit after Comm=ss=on Payments Prof=t % ;zfter Commlss=on Payments Combined Data Combined Retail Sales Pdce Combined Pmfd After Commission Payment Combined Prollt "IO Alter Commission Payment GROSS PROFIT ALLOCATION TO SHAREHOLDERS P BASLER W BASLER B WILSON G WILSON E CARMICHAEL B CARMICHAEL
12.9% 37 1% 50 0% UPAC Kits 19-30 909,000

719,088 719 088 189 912 20 89% 719,088 719 088 0 295,100 295,100 50 920 178.220 524,240 194,848 0 194,848 27 10o/O

909,000 384,760 42 33%
49,686 142,743 192,429

12.4% 8 4% 20 8% 12.4% 16 8% 29 2"/= 100 0%

47,7,38 82,285 80,023 47,738 64,570 112,308 364,760

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INNOVAIR AVIATION LIMITED BASLER TURBO CONVERSIONS, INC BASLER FLIGHT SERVICE, INC PROFIT ANALYSIS OF TYPICAL CONTRACT NEW PRICING Innovalr Avlatl0n Lira=ted Kit Revenue Cost oi' Sales Kit Purchases Cost ol Goods Sold Gross Profit Gross Profit Pementage Basler Turbo Convers=ons, Inc Kit Revenue Net Revenue Cost of Sales Cost of twoTurbo engines Raw Material & Purchased Components D=rect Labor - Fabrication Overhead Cost of Goods Sold Gross Profit Commission Payments on KIts Profit after Comm,sslon Payments Profit °h alter Commission Payments Combined Data Comblnod Retail Sales Price Combined Profit After Commission Payment Combined ProfIt % After Commlsslon Payment GROSS PROFIT ALLOCATION TO SHAREHOLDERS P BASLER W BASLER B WILSON G WILSON E CARMICHAEL B CAP, MICHAEL
11 4% 38 5% 49 9%

EXHIBIT B Page 6

UPAC Kits 31 + 962,000 719 088 719,088 242,912 25 25% 719,088 719,0118 0 295,100
2~,100

50,920 178,220 524,240 194,848 0 194,848 27 10% 962,000 437,760 45 51%
49,686 168,713 218,399

10 9% 9 4% 20 3% 10 9% 18 9% 29 6% 100 0%

47°738 41,295 89,033 47,738 82.590 130,328 437°760

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BASLER TURBO CONVERSION, INC BASLER FLIGHT SERVICE INC PROFIT ANALYSIS OF'Pt'PICAL CONTRACT NEW PRICING

Basler Turbo Convers=ons Inc Kit Revenue Net Revenue Cost of Sales Cost of two Turbo engines Raw Mater,el & Pumhased Components D=rect Labor - Fabrication Overhead Cost o! Goods Solcl Gross Profit Commlss=on Payments on Kits Profit after Commlss=on Payments Profit % after Comm=ss=on Payments Right Serv=ces, Inc Revenue Kit Revenue Option Revenue Conversion Revenue Commission Revenue (Kit) Net Revenue Cost of Sales Material Labor & Overhead - Options Material Labor & Overhead - Conversions Transportation Costs I~t Purchase Cost Cost of Goods Sold Gross Profit Commlssmn Payments Profit =tfter Commission Payments Profit % after Commission Payments

Domestic Comm S~le (1) 1,950 000 1,950,000 768,000 295,100 1,063,100 50,920 178,220 1,292,240 657 760 195,000 462,760 23 78%

Domestic Comm Sale (2) 1,950,000 1,950,000
768,000 295,100 1,063,100 50,920 178,220 1,292,240 65"7 760 195,000 462,760 23 73%

1,950,000 604,050 725,000 195,000 3.474,050

1,950,000 972,250 725,000 195,000 3,842"250
591,613 387°500 6,000 1,950,000

362,407 387,500 6,000 1,950,000 2,705,907 768,143 0 768,143 22.11%

2.935,113 907,137 0 907,137 23 61%

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Page 35 of 56 EXHIBIT B Page 8

BASLER TURBO CONVERSION, INC BASLER FLIGHT SERVICE, INC PROFIT ANALYSIS OF TYPICAL CONTRACT NEW PRICING CombIned Data Combined Retail Sales Price Comb=ned Proht Alter Commlss,on Payment Combined Profit % After Commission Payment GROSS PROFIT ALLOCATION TO SHAREHOLDERS P BASLER W BASLER B WILSON G WILSON E CARMICHAEL B CARMICHAEL
9 60/o 72 0% 81 6°/0 9 2% 0 0% 9 2% 9 2% 0 0% 9 2% 100 0% 3,279,050 1,230,903 37 54% 3,647,250 1,369,897 37 56%

118.004 886,147 1,004,151 113,376 0 11~3,376 113 376 0 113,376

8 6% 74 8°/0 83 4% 8 3% 0 0% 8 3% 8 80/0 0 0% 8 ~3°/0

118,004 1,025,141 1,143,145 118,376 0 113,376 113,376 0 113,376 1,369.897

1,230,903 100 0%

(1) Kelner contract, wlo nonstandard equip, using customer airframe (2) Z=mex contract, w/o nonstandard equ=p, using customer aidrame

I !

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BASLER TURBO CONVERSIONS, INC BASLER FLIGHT SERVICE INC PROFIT ANALYSIS OF TYPICAL CONTRACT NEW PRICING

EXHIBIT B Page 9

B~ster Turbo Conversions. Inc Kit Revenue Net Revenue Cost o! Sales Cost of two Turbo engines Raw Material & Purchased Components D=rect Labor - Fabrication Overhead Cost of Goods Sold Gross Profit Cornm=sslon Payments on I~ts ProAt after Cornrnlsslon Payments Prof=t % after Commlsston Payments Basler Right Services. Inc Revenue I~t Revenue Option Revenue Conversion Revenue Comrn=eslon Revenue (Kit) Net Revenue Cost of gales Matedal Labor & Overhead - Options Matedal Labor & Overhead - Conversions Transportation Costs Kit Purchase Cost Cost of Goods Sold Gross Profit Commission Payments Proflt after Cornrnlsslon Payments Profit % after Commlsmon Payments

Government M=I'y Sate (1) 1,950,000 1 950 000

Govermrnent Sate (2) .950.000 950.000 768.000 295.100 1.063,100 50.920 178,220 1 292 240 657,760 195 000 462,760 23 73o/=

766 000 295,100 1,063,100 50,920 178,220 1.292 240 657,760 195 000 462,760 23 78°/o

1,809,278 421,282 672,680 195 000 8,098,240

,809,278 762,912 672,680 195,000 .439,870

287 407 387,500 6,000 1,950,000 2,630,907 467,333 0 467,333 15 08o/=

516.613 387.500 6.000 1,950,000 2.860.113 579,757 0 579,757 16 85%

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EXHIBIT B Page 10
BASLER TURBO CONVERSIONS, INC BASLER FLIGHT SERVICE, INC PROFIT ANALYSIS OFTYPICAL CONTRACT NEW' PRICING

Combined Data Combined Retad Sales Price Comb=ned Profit After Commlssmn Payment Comblned Prof, t % After Commlss=on Payment GROSS PROFIT ALLOCATION TO SHAREHOLDERS P BASLER W BASLER
B WILSON G WILSON 12 7°/O 62 9% 75 6% 122% 0 0% 122% 12.2% 0 0o/o 12.2% 100 0% 2,903,240 930 093 32 04% 3,244,870 1,042 517 32 13%

'~18 004 585 337 703 341 113,~]76 0 11~],376 113,376 0 113,376

11 3% 66 9% 78 2% 109% 0 0% 109% 109°/o 0 0°/o 10 9°/o

118,004 697,761 815,765 11;3,376 0 11;3,a76 113,376 0 113,376 1,042o517

E CARMICHAEL B CARMICHAEL

930,093 100 0%

(1) Kelner contract, w/o nonstandard equ=p, using customer =drfr~me (2) 7,mex contract, wlo nonstandard equip, using customer a=rfr~rne

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EXHIBIT C
PROJECTION OF DC3 TURBO CONVERSION SALES 1991 - 1995 INNOVAIR AIRCRAFT U P A C KIT ORDERS REC'D ORDERS REC'D LOW HIGH LOW MID HIGH MID 5 2 3 5 2 4 5 6 8 4 8 4 6 10 4 10 5 7 12 5 10 5 7 12 5 AIRCRAFT ORDERS SHIPPED HIG.._~H 8 6 7 8 8 0 4 8 8 8 LOW 0 2 4 4 5 UPAC KIT ORDERS SHIPPED LOW 2 4 4 5 5 MID 3 6 7 8 8

1991 1992 1993 1994 1995

M I..__.~D HIGH 0 5 3 8 6 10 6 12 12 6

MIUTY AIRCRAFT ORDERS REC D 1991 1992 1993 1994 1995 HIGH 7 8 9 10 12 LOW 5 5 5 5 5 MID 6 6 7 7 8

BASLER FLIGHT SERVICE COMMR AIRCRAFT MIL'TY AIRCRAFT ORDERS REC'D HIGH LOW MID 2 2 8 4 9 4 10 5 12 5 ORDERS SHIPPED HIGH 2 6 7 7 8 5 8 8 9 11 LO._..~WMID 4 5 5 5 5 4 6 6 7 8

COMMR ,AIRCRAFT ORDERS SHIPPED HIGH LOW MID 0 0 0 2 4 3 4 6 9 10 4 7 8 11 5

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Estimated Gross Profit by Company Innovalr Awallon Limited Innovalr International Sales U P A C Kit Sales Basler Turbo Conversmn$o Ino Innovalr Internatlona! Sales U P A C Kit Sales Dorcestlc Commerc,al Sale MII,tary Sale Basler Flight Sewlce, Inc Innovair International Sales U P A C Kit Sales Dorcestic Commercial Sale Mlhtary Sale

HI~ 0 1,359,533 0 974,221 0 2,313,337 0 0 0 2,673,402 7,320,493

1991 Lo..._~w Mlddle 0 543,824 0 389,696 0 1,8E,1 040 0 0 0 2,139,150 4,923,710 0 815,736 0 584,544 0 1,851,040

~ 1,855,684 1,853,296 1,393,444 1,558,784 1,851,040 3o701,617

1992 Lo._..~w 928,074 1,087,648 696,896 779,:]92 925,520 2,313,800 1 114,824 0 1,536,286 2,673,937 12,056,877

M=ddle 1 392,111 1o493o472 1,045,344 1,169,088 1,388,280 2,776,560 1,672,236 0 2,304,429 3,208,724 16,450,244

0 2,229,091 0 0 0 3,072,572 2,139,150 4,277,764 5,390,470 21,793 292

Estzmated Selling, Research & Development and G & A Expenses by Innovalr Av=atlon Limited Innovair !nternational Sales UPAC Kit Sales Basler Turbo Conversions, Inc Innovair Intercat,onal Sales U P A C Kit Sales Domestic Commercial Sale Md=tary' Sale B~sler Right Service, Inc Innovalr Intercatlonal Sales UPAC KIt Sales Domest!c Cornmerclal Sale Military Sale

1991 Lo.._~w

Middle

1992 ~

Lo..._~w

Mlddl...__..~e

0 384,065
0 449,421 0 1,218 506 0 0 0 2,069,716 4,121,648

0 153,605
0 179,772 0 975,000 0 0 0 1 656,104 2,964,481

0 230,408
0 269,65B 0 975,000

1,178,318 615,120
820,139 719,088 975,000 1,949,756

589,306 360,997
410,172 359,544 487,500 1,218,750 424,313 0 868,513 2,070,130 6,789,223

883,959 495,692
615,258 539,316 731,250 1,462,500 636,469 0 1,302,769 2,494,156 9,151,368

0 848,413 0 0 0 1,737,025 1,656,104 3,311,793 3,131,169 12,154,652

Estimated F.BIT by Company Innovalr Aviation Umlted Innovalr International Sales U P A C Kit Sales Basler Turbo Conversions, Inc lnnovalr International Sales U P A.C Kit Sales Domestic Commemlal Sale M=lltan/Sale Basler Flight Serv!ce, Inc Innovalr International Sales U P A C Kit Sales Domestic Comrcerclal Sale Mlhtary Sale

1991 Low
0 975,528 0 390,219

1992 Mlddl.__._..~e ~
0 585,329 677,366 1,238,176

Lo._.~.w Mlddl_~e
338,768 726,651 508,152 997,780

0 524,800 0 1,094 831 0 0 0 603,687 3,198,845

0 209,924 0 876,040 0 0 0 483,046 1,959 229

0 314,886 0 876,040 0 0 0 463,946 2,259,300

573,305 839,696 876,940 1,751,861 1,3B0,678 0 1,635,547 965,971 9,638,640

286,724 419,848 438,020 1,095,050 690,512 0 667,774 603,807 5,267,154

430,086 629,772 657,030 1,314,060 1.035,767 0 1.001,660 724,569 7,298 876

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EXHIBIT D Page 2

Estimated Gross Profit by Company Innova~r Av~atlon Limited Innovalr International Sales U P A C K=t Sales Basler Turbo Conversions Inc tnnovmr International Sales U P A C K=t Sales Domesbc Commercial Sale M,htary Sale Baster Flight Serv=ce, Innova=r Intemabonal Sales U P A C Kit Sales Demest,c Commercial Sale M=htary Sale

1993 Lo.......~w Middle 3,711,832 2,079,120 2,767,236 1,948,480 4,164,377 3,701,617 4,458,739 0 6,912,519 4,277 764 34,041,604

1994 ~

Lo_.__~w Middle

1,856 148 903,648

2,784,22.2 1,581,384

3,712 296 2,543,925
2,787,584 2,338,157 4,627 600 4o164,840 4,459,296 0 7,681,430 4,813,087 37 128,214

1,856,148 1,129,560
1,393,792 974,240 1,851,340 2,313,800 2,229,648 0 3,072,572 2,673,937 17,494,737

2,784,222 1'591,296
2,090,668 1,558,784 3,239,320 3,239,320 3,344,472 0 5,377,001 3,743,512 26,968,615

1 393,792 2,090,688 779,392 1,363,936 1,851,040 I 2,776"560 2,776,560 2,313 800 2,229,648 0 3,072,672 2,673,937 17,073,977 3,344,472 0 4,608,858 3.208,724 24,535,404

Esbmated Selling, Research & Development and G &A Expenses by tnnovalr Aviation LJmded Innova=r Internalmnal Sates U P A C Kit Sales Basler Turbo Convers=ons Inc Innovalr International Sales U P A C Kit Sales Domestlc Commercial Sale MIIRary Sale Basler Right Service, Inc Innova=r Intemat,onal Sales U P A C Kit Sales Domestic Commercial Sale Md=tary Sale

HLqh

1993 Lo.._.~w M~ddl~e

1994 ~

Lo..__.~w Mlddl~

2,356,930 690,072 1,640,483 898,860 2,193,506 1,949,756
1,697,038 0 3,907,872 3,311,793 18,646,310

1,178,612 299,926 820,344 359,644 975,000 1,218,750
848,625 0 1,737,025 2.070,130 9,507,956

1,767,918 524,870 1,230,516 629,202 1,462,500 1,462,500
1,272,938 0 2,605"538 2,434,156 13,440,137

2,357,225 844,343 1,340,688 1,078,623 2,437,600 2,193,750
1,697,250 0 4,342,563 3,726,233 20,318,175

1,178,612 374,907 820,344 449,430 975,000 1,218,750
848,625 0 1,737,025 2070,130 9,672,823

1,767,918 528,160 1,230,516 719,088 1,706,250 1,706,250
1,272,938 0 3,039,794 2,898,181 14,869,095

Estimated EBIT by Comp~my Innovalr Aviation Umtted Innovalr International Sales U P A C Kit Sales Basler Turbo Conversions, Inc lnnovalr International Sales U PAC Kit Sales Domestic Commercml Sale M=tltary Sale easier Right Serv,ce, Inc innova=r Intemahonal Sales U P A C Kit Sales Domesbc Commermal Sale Milllary Sale

1993 Low 1,354,902 1,369.048 1,146,753 1,049,620 1,970,871 1,751,661 2,761 ~01 0 3,004,647 965,971 15,895,373 677,536 603,722 573,448 419,848 876,040 1,095,050

1994 Mlddl.._.~_~a ~ 1,016,304 1,056,514 860,172 734,734 1,314,060 1,314,060 1,355,072 1,699,582 1,146,896 1,259,534 2,190,100 1,971.090

Lo__w 677 536 754,653 573,448 524,810 876,040 1,095.050

Mlddl..__...~e 1,016,304 1,063,136 860,172 839,696 1,533,070 1.533 070

1,381,023 2,071 "535 2,762046 0 0 0 1,335,547 2,003,321 3,338,868 603,807 724,569 1,066,853 7,566,021 11,095,267 16,810,039

1,381,023 2071,535 0 0 1,3:35,547 2,337,207 603,807 845,330 7,821,914 12,099,519

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EXHIBIT Page 3
Estimated GrossProfltbyCempany Innovalr Av=alton Urnded Innovalr Inlernatlonal Sales U P A C Kit Sales Besler Turbo Convers=ons, Inc Innovalr International Sa~es U P A C Kit Sales Domestic Commercial Sale M=lltary Sale Basler F1=ght Serv=ce, Inc Innovalr International Sales U P A C Kit Sales Domestic Commercial Sale Md=tary Sale ~ H~ah 3,711,832 2,914,920 2,787,236 2,338,157 5,090,360 5,090 360
1995 Lo__w 2,320,185 1,057,560 1,742,240 974,240 2,313,800 2,313 800 Middle 2,784,222 1,625,296 2,090,688 1,558.784 3,702,080 3,702 080 Hmh 12,991,644 10,750,794 9,755,499 9,157,798 15,733,377 18,971,772 TOTALS Lo__.~w 6,960"555 4,722,240 5,226,720 3.896.960 6,941,400 11,106,240 Mzddl___._~e 9,744,777 7,107,184 7.317,408 6,235.136 11,106,240 14 345.560

4,458,739 2 787,060 3.344,472 15,605,864 8,361,180 11,705,652 0 0 0 0 0 0 8,449,573 3 840,715 6,145,144 26,116,094 11"522,145 18,435,432 5,882 661 2,673,937 4,278,299 21,924,679 12,834,898 16,578 409 40,723,837 20 023,537 29 231,065 141,007,519 71,572,338 102,575,798

Estimated Selling, Research & Development and G & A Expenses by Innovalr Av=atlon Urn,ted Innovalr Intornatmnal Sales U P A C Kit Sales B~ler Turbo Convers=ons, Inc Innovalr Intemat,onal Sales U P A C Kit Sales Domestic Commermal Sale Military Sale Basler Fhght Serv=ce, Inc Innov=r International Sales U P A C Kit Sales Domestic Commorc=al Sale Military Sale

1995 Low
2,356,930 967,479 1 640.483 1 078,623 2,681,250 2,681,250 1,697,038 0 4,776,819 4"554,235 22434,156 1,473,265 351,010 1,025,430 449,430 1,218,750 1,218,750

M=ddl~e
1,757,918 5:~9,445 1,230 516 719,088 1,950,000 1,950,000

~
8,249,402 3,501,019 5,741,793 4,224,615 8,287,256 9,993,019 5,939,739 0 14,754,278 16.973,821 77,674,941

TOTALS Low
4,419,796 1,540,445 3,076,290 1,797,720 3,656,250 5,850,000 3,182,344 0 6,513,944 9,936,622" 39,973,311

Middle
6,187,714 2,318,575 4,306,606 2,876,352 5,850 000 7,556,250 4,455,281 0 10,422,150 12,834,804 56.807,933

1,060,781 1,272,938 0 0 2,171,281 3,474,050 2,070,130 :3,312,207 11,038,828 16,216,162

Estimated F.BIT by Company Innovalr Av=atton Llmlted Innovalr International Sales UPAC Kit Sales Basler Turbo Conversions, Inc Innovair International Sales U P A C Kit Sales Domestic Commercial Sale Military Sale BasIer Rzght Service, Inc Innovalr International Sales U P A C Kit Sales Domestic Commercial Sale M,htary Sale

1995 Low 1,354,902 1,947,441 1,146 753 1,259,534 2,409.110 2,409,110 2,761,701 0 3,672,754 1 ,:328 376 18,289 681 846,920 706,550 716,810 524,810 1,095,050 1.095,050 1,726,279 0 1,669,434 603,807 8,984,709

M=ddle 1,016,~04 1.065,651 860,172 839,696 1,752,080 1,752,080 2,671,535 0 2.571,094 966,092 13,014,903

HI_Oh 4,742,242 7,249,775 4,013,706 4,933,183 7,446,121 8.978,753

TOTALS Low 2,540,759 3,181,795 2,150,430 2,099,240 :3,285,150 5,256,240

Middle 3,557,063 4.788.609 3,010,602 3,:~58,784 5,256,240 6,789.310 7,250.371 0 8,013,282 3,743,606 45,767,866

9,666,125 5,178,836 0 0 11,351,816 5 008,301 4,950,858 2,898,275 63,~]32,579 31,599,027

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Page 42 of 56 EXHIBIT E Page 1

EsbmaledEB~ ~locat=ontoShareholdem P BASLER W BASLER B WILSON G WILSON E. CARMICHAEL B CAFLMICHAEL

413,006 1,494 701 1,907,707 396,809 165,840 562,649 396,809 331,680 728,489 3,198,845

1991 LO._.~w Middle 276,921 303,686 951,174 1,073 543 1,228,095 1 377 229 266 061 291,777 66,337 99 506 332 398 391 283 266,061 291,777 132,674 199 012 398,736 490,789 1,959,229 2 259 300

1,030,430 5,651,242 6 681,672 990,021 325 642 1,315,663 990,021 651,285 1,641,305 9,638,640

1992 Lo._..~w 571,109 3,055,257 3,626,365 548,712 1810121 729 834 548,712 362,243 910,955 5,2670154

Middle. 772 892 4 272,795 5,045,686 742,582 256,008 998,591 742,582 512,017 1 254,599 7,298,876

Estimated EBIT by Combined Company Innovalr Avmtlon LIm=ted Basler Turbo Conversions, Inc Basler Fl=ght Service, Inc

975,528 1,619,630 603,687 3,198,645

1991 Lo__~w Middle 390,219 565,329 1 085 964 1,190,926 483,046 483 046 1 959 229 2,259 300

1 915,543 4,040,902 3,682,196 9,638,640

1992 Lo.._~.w 1,065,419 2,2,39,642 1,962,092 5,257,154

Mlddl~e 1,505,932 3,030,948 2,761,996 7,298,876

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EXHIBIT E Page 2

Estlmated EBIT Allocation to Sh;zreholders P BASTER W BASLER B WILSON G WILSON E CARMICHAEL B CARMICHAEL

1 509,372 9,686,226 11,095,598 1,450,181 466,472 1,916,652 1,450,181 932,943 2,383,124 15,395,373

1993 Lo.....~w Middle 755,918 1,076 872 1,674,743 4,704,112 6,891,976 10,359,290 7,968°848 12 034,033 5,460 031 726,275 1,034,641 1,609,067 217 814 352,379 519,291 944,088 1,387,020 ?.,128,358 1 034,641 1,609,067 726,275 704,758 1,038,582 435,628 1o739,399 2,647,649 1,161,902 7,566,021 11,095,267 16,810,039

1994 Lo._.~.w 782,684 4,604,833 5,587,517 751,990 243,472 995,462 751,990 486,944 1,238,934 7,821,914

Middle 7,488,329 8,703";661

35~,s,, o5
1,521"~T7 707,009 1,874,681 12,099,519

Estimated EBIT by Combined Company Innovalr Aviation Limlted Baslar Turbo Conversions, Inc Baslor Flight Service Inc

2,743,950 5,919,105 6,732,319 15,395,373

1993 Lo....~w M=ddf.._.._.~e 1,281,25B 2,072,817 3,054,653 2,964,386 4,223,026 6,567,620 3,320,377 4,799,424 7,187,767 7,566,021 11,095,267 16,810,039

1994 Low Middle 1,432,188 2,07~9 3,069,348 4,76~,(.~08 3,:320,377 5,254[072 7,821,914 12,099:'/5~19

u

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NET PRESENT VALUES

EXHIBIT F

Present Value of 1991 - 1995 Estimated EBIT Innova=t Av=atlon Umded innova~r International Sales U P A C Kit Sales B~sler Turbo Converslonso Inc Innovalr International Sales U P A C Kit Sales Domestic Commem=al Sale Military Sale B~sler Flight Service, Inc Innovalr International Sales U P A C Kit Sales Domestlc Commercial Sale Mllltary Sale

---Jan 1 1991 Present Value .... Lo...~w M~ddle
1,632"489 3,234,876 1,381,694 2"158,532 3,256,234 4,490,784 854,119 1,459,453 722"903 926,109 1,446,517 2,769,688 1,224 516 2,186,229 1 036 397 1 469,448 2,295,365 3,416,596

3,327,506 1,740,953 2,495,934 0 0 0 4,964,218 2"205,255 3,499,347 2,476,205 1 527,198 1,883,956 26,922,537 13,652,195 19 507,889

Present Value of 1991 - 1995 Estimated EBIT Innovalr Aviation Llm=ted Besler Turbo Convers{ons, Inc Basler Right Servlce, Inc

---Jan 1, 1991 Present Value .... Low M{ddle ~ 4,867,364 2,313,572 3,410,745 11,287,244 5,865,217 8,217,906 10 767,929 5 473 406 7,879 238 26,922"537 13,652,195 19,507.889

Present Value of 1991 - 1995 Estimated EBIT Allocated to Shareholders P BASLER W BASLER B WILSON G WILSON E. CAP, MICHAEL B CARMICHAEL

-.--Jan 1, 1991 Present Value~ Lo._._~w Mlddl.._.._.~e ~ 2,878,247 1,495,630 2,095,566 16 031,184 8,102 687 11,646,069 18,909,432 9 598,317 13o741,635 2,765,375 1,436,978 2,013,387 827,452 393,307 579 827 3,592"827 1.830,265 2 593,214 2,765,375 1,436,978 2,013.387 1.654,904 786.614 1,159 653 4 420.279 2 223,593 3 173.040 26,922,537 13,652"195 19.507,889

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EXHIBIT G

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PROJECTION OF DC'JTURBO CONVERSION SALES 1991 -1995 INNOVAIR AIRCRAFT ORDERS REC'D MID HIGH LOW 5 2 3 6 4 5 4 6 8 5 7 10 10 5 7 U P A C KIT ORDERS REC D HIGH LOW MID ,5 2 8 4 10 4 12 5 12 5 AIRCRAFT ORDERS SHIPPED HIGH 0 4 8 8 8 LOW 0 2 2 2 2 MI._~D 0 3 5 S ,5 U P A C KIT ORDERS SHIPPED HIGH 5 8 10 12 12

EXHIBIT C1

1991 1992 1993 1994 1995

LOW MID 23 2 5 3 6 4 8 5 8

MIL'TY AIRCRAFT ORDI~i::L~ FIEC'D 1991 1992 1993 1994 1995 HIGH 7 8 9 10 12 LOW 5 5 5 5 5

BASLER FLIGHT SERVICE COMMR AIRCRAFT MILTY AIRCRAFT ORDL=F:I9 RPC'D MID 2 6 7 7 8 ORDI::R~ ,~HIPPI~D HIGH 5 8 8 9 11 LOW 4 5 5 5 5 MID 4 6 6 7 8

COMMR AIRCRAFT ORDF:R~ SHIPPED HIGH 0 4. 9 10 11 LOW 0 1 1 1 1 MID 0 2 5 5 6

MID HIGH LOW 6 2 2 6 8 4 7 9 4 7 10 5 8 12 5

DX 105 1 43
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Page 47 of 56 EXHIBIT D1 Page 1

Estimated Gro.~ Prol=t by Company Innov~lr Aviation Limited Innovalr International Sales U P A C Kit Sales Basler Turbo Conversions, Inc lnnova~r International Sales U P A C Kit Sales Domestic Commercial Sale Mzlltary Sale Basler Fl=ght Service, Innowlr International Sales UPAC Kit Sales Domestic C~mmerclal Sale M~lztary Sale

~ 0 1,359,533 0 974,221 0 2,313,337 0 0 0 2.673.402 7.320,493

1991 Lo.~.w 0 543 824 0 389,696 0 1,651,040 0 0 0 2,139.150 4,923,710

M=ddle 0 815,736 0 584,544 0 1 851,040 0 0 0 2.139.150 5,390,470

1992 ~ 1,855,684 1,853,296 1,393,444 1,558,784 1,851,040 3,701,617 2.229,091 0 3.072 572 4,277,764 21,793,292

Lo.._.~w 928,074 54,3,824 696,896 389~696 462,714 2,313.800 1.114 824 0 768.066 2.673.937 9,891,831

Middle 1,392,111 1,221,560 1,0450344 974,240 925,520 2.776,560 1.672.236 1,536,286 3.208 724 14,752'581

Estimated Selling Research & Development and G & A Expenses by Innovzr Aviation Umlted Innovair International Sales U P A C Kit Sales B~sler Turbo Converszons, Inc Innovair InternatlonaJ Sales U P A C