AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 26, 1996
REGISTRATION STATEMENT NO. 333-3650
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
AVIATION SALES COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 5088 65-0665658
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
<TABLE>
<S> <C>
DALE S. BAKER, PRESIDENT
AVIATION SALES COMPANY
6905 N.W. 25TH STREET 6905 N.W. 25TH STREET
MIAMI, FLORIDA 33122 MIAMI, FLORIDA 33122
(305) 592-4055 (305) 592-4055
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
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COPIES OF ALL COMMUNICATIONS TO:
STEPHEN K. RODDENBERRY, ESQ.
PHILIP B. SCHWARTZ, ESQ. BETH R. NECKMAN, ESQ.
AKERMAN, SENTERFITT & EIDSON, P.A. LATHAM & WATKINS
ONE S.E. 3RD AVENUE, 28TH FLOOR 885 THIRD AVENUE
MIAMI, FLORIDA 33131-1704 NEW YORK, NEW YORK 10022
(305) 374-5600 (212) 906-1200
----------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933 check the following box [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
par value $.001 per share 3,737,500 shares $20.00 $74,750,000 $25,775.86
=============================================================================================================================
<FN>
- --------
(1) Includes shares of Common Stock issuable in connection with the exercise
of the Underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee.
</FN>
</TABLE>
----------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
===============================================================================
<PAGE>
<TABLE>
<CAPTION>
AVIATION SALES COMPANY
Cross-Reference Sheet Pursuant to Item 501 of Regulation S-K
Showing location in the Prospectus of the Information Required by items of Form S-1
FORM S-1 ITEM NUMBER AND CAPTION LOCATION OR CAPTION IN PROSPECTUS
- ------------------------------------------------------------------------------------------------------
<S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus ................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus .................................... Inside Front Cover Page; Outside Back Cover Page
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges ........................ Prospectus Summary; Selected Financial Data;
Risk Factors
4. Use of Proceeds ................................... Use of Proceeds
5. Determination of Offering Price ................... Outside Front Cover Page; Underwriting
6. Dilution .......................................... Dilution
7. Selling Security Holders .......................... Not applicable
8. Plan of Distribution .............................. Outside Front Cover Page; Underwriting
Outside Front Cover Page; Description of
9. Description of Securities to be Registered ........ Capital Stock
10. Interests of Named Experts and Counsel ............ Legal Matters; Experts
11. Information with Respect to the Registrant ........ Outside Front Cover Page; Prospectus Summary;
Risk Factors; History of the Company; Use of
Proceeds; Dividend Policy; Capitalization;
Dilution; Selected Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of Operations;
Business; Management; Certain Transactions;
Principal Stockholders; Description of Capital
Stock; Shares Eligible For Future Sale;
Additional Information; Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities .. Not applicable
</TABLE>
<PAGE>
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE
TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 26, 1996
P R O S P E C T U S
3,250,000 Shares
AVIATION SALES
[LOGO] COMPANY
Common Stock
----------
All of the shares of Common Stock offered hereby are being sold by
Aviation Sales Company (the "Company"). Prior to this offering (the
"Offering"), there has not been a public market for the Common Stock of the
Company. It is currently estimated that the initial public offering price
will be between $18.00 and $20.00 per share. See "Underwriting" for
information relating to the factors considered in determining the initial
public offering price. The Company's Common Stock has been approved for
listing on The New York Stock Exchange under the symbol "AVS," subject to
official notice of issuance.
- -----------------------------------------------------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.
- -----------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
=============================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- -----------------------------------------------------------------------------
Per Share $ $ $
- -----------------------------------------------------------------------------
Total(3) $ $ $
=============================================================================
(1) For information regarding indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting expenses of the Offering, estimated at $600,000.
(3) The Company has granted the several Underwriters a 30-day option to
purchase up to 487,500 additional shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised
in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ , and
$ , respectively. See "Use of Proceeds" and "Certain Transactions."
----------
The shares of Common Stock are offered by the several Underwriters named
herein, subject to prior sale, when, as and if accepted by them and subject
to certain conditions. It is expected that certificates for the shares of
Common Stock offered hereby will be available for delivery on or about
, 1996, at the office of Smith Barney Inc., 333 West 34th Street, New
York, New York 10001.
----------
Smith Barney Inc.
Alex. Brown & Sons
INCORPORATED
Sanders Morris Mundy
, 1996
<PAGE>
[PHOTOS]
[Picture of warehouse facility and computer terminal]
Aviation Sales Company is one of the recognized worldwide leaders in the
aircraft spare parts redistribution market, selling spare parts for Boeing,
McDonnell Douglas, Lockheed and Airbus aircraft, and Pratt & Whitney, General
Electric and Rolls Royce jet engines.
With over 35 million individual parts in inventory and a worldwide network of
sales personnel and independent representatives, the Company sells to over 1,000
customers, including commercial passenger airlines, air cargo carriers,
maintenance and repair facilities and other redistributors.
Offering inventory management services including purchasing services, repair
management, warehouse management, aircraft dissassembly services and consignment
and leasing of aircraft spare parts, Aviation Sales Company is a leader in
"TOTAL INVENTORY SOLUTIONS" designed to meet the diverse needs of its customers.
AVIATION SALES COMPANY
A LEADER IN "TOTAL INVENTORY SOLUTIONS"
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL
INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE
OVER-ALLOTMENT OPTION.
THE COMPANY IS A NEWLY FORMED DELAWARE CORPORATION. THE OPERATIONS OF THE
BUSINESS DESCRIBED IN THIS PROSPECTUS ARE PRESENTLY BEING CONDUCTED BY ASC
ACQUISITION PARTNERS, L.P. D/B/A AVIATION SALES COMPANY (THE "PARTNERSHIP") AND
WILL, AFTER THE OFFERING, BE CONDUCTED BY THE COMPANY. UNLESS THE CONTEXT
OTHERWISE REQUIRES, REFERENCES TO THE "COMPANY" THROUGHOUT THIS PROSPECTUS,
INCLUDING THE FINANCIAL INFORMATION CONTAINED HEREIN, REFER TO THE OPERATIONS
OF THE PARTNERSHIP (AND ITS PREDECESSOR, AJT CAPITAL PARTNERS) PRIOR TO THE
COMPLETION OF THE OFFERING AND THE OPERATIONS OF THE COMPANY AND ITS
SUBSIDIARIES THEREAFTER. SEE "HISTORY OF THE COMPANY," "Use of Proceeds" and
"Certain Transactions."
THE COMPANY
The Company is a recognized worldwide leader in the aircraft spare parts
redistribution market and provides a wide range of value-added inventory
management services to its customers. The Company sells aircraft spare parts
to major commercial passenger airlines, air cargo carriers, maintenance and
repair facilities and other redistributors throughout the world. Parts sold
by the Company include rotable and expendable airframe and engine components
for commercial airplanes, including Boeing, McDonnell Douglas, Lockheed and
Airbus aircraft and Pratt & Whitney, General Electric and Rolls Royce jet
engines. The inventory management services offered by the Company include
purchasing services, repair management, warehouse management, aircraft
disassembly services and the consignment and leasing of aircraft spare parts.
During 1995, the Company generated operating revenues of $113.8 million,
operating income of $18.6 million and, after giving pro forma effect to
income taxes, net income of $6.3 million ($9.7 million as adjusted). Of such
revenues, approximately 60% were derived from sales to domestic customers and
approximately 40% were derived from sales to international customers.
The Company believes that the annual worldwide market for aircraft spare
parts is approximately $10.0 billion, of which approximately $1.3 billion
reflects sales of aircraft spare parts in the redistribution market, and that
the redistribution market will continue to grow in the future. Factors
causing the expansion of the redistribution market include the increasing
size and age of the worldwide airline fleet and the increasing pressures on
airlines and maintenance and repair facilities to control their costs.
The redistribution market is highly fragmented, with a limited number of
large, well-capitalized companies selling a broad range of aircraft spare
parts, and numerous smaller competitors servicing specialized niches. The
Company believes that it is one of the largest redistributors of aircraft
spare parts in the world and one of a select number of redistributors well
positioned to fully service the aircraft spare parts requirements of its
customers. The size of the Company's owned inventory (with over 485,000 line
items and over 35 million individual parts currently in stock), the strength
of its management information systems (which currently contain data on more
than 3.6 million line items), its ability to provide comprehensive service to
its customers and its available capital base provide competitive advantages
to the Company.
3
<PAGE>
BUSINESS STRATEGY
/bullet/ INTERNAL GROWTH. The Company's strategy is to increase revenues
and operating income through continued customer penetration in
its existing markets and expansion into new markets. The Company
intends to achieve this by continuing to increase the size and
breadth of its inventory and by continuing to expand its
marketing efforts to its worldwide customer base. The Company
will also continue to offer its customers a broad array of
inventory management services, allowing its customers to reduce
their costs of operations by outsourcing some or all of their
inventory management functions and to take advantage of
opportunities to maximize the value of their spare parts
inventory.
/bullet/ CAPITALIZE ON LARGE BULK PURCHASE OPPORTUNITIES. The Company
believes that opportunities will arise on a regular basis to make
large "bulk" purchases of inventory at favorable prices. Bulk
inventory purchases allow the Company to obtain large inventories
of aircraft spare parts at a lower cost than can ordinarily be
obtained by purchasing such parts on an individual basis,
resulting in higher gross margins on sales of such parts. Since
1992, the Company has evaluated a number of bulk purchase
opportunities and successfully completed two large bulk inventory
acquisitions. The Company believes that its market presence,
experience in evaluating bulk inventory acquisitions,
sophisticated management information systems and capital strength
enable it to quickly analyze and complete large bulk purchase
opportunities to the extent that the economics of such purchases
are considered favorable.
/bullet/ PURSUE ACQUISITIONS OF COMPLEMENTARY BUSINESSES. A key element of
the Company's strategy involves growth through acquisitions of other
companies, assets or product lines that would complement or expand
the Company's existing aircraft spare parts redistribution and
inventory management services business. The Company believes that
acquisitions will enable it to leverage its fixed costs of
operations and further expand the products and services which it can
offer to its customers. The Company is currently evaluating a number
of acquisition opportunities and is at varying stages of negotiation
with respect to such acquisitions. No commitments or binding
agreements have been entered into to date and accordingly no
assurance can be given that any of the acquisitions currently being
considered will be consummated. None of such acquisitions, if
consummated, would constitute a material acquisition for the
Company under applicable accounting rules.
INDUSTRY TRENDS
/bullet/ REDUCTION IN NUMBER OF APPROVED VENDORS. In order to reduce
purchasing costs and streamline purchasing decisions, airline
purchasing departments have been reducing the number of their
"approved" suppliers. During the last few years, several major
airlines have reduced their supplier lists from as many as 50 to
a core group of five to ten suppliers. In each such case, the
Company was one of the suppliers selected. The Company believes
that this trend will continue in the future and that, due to its
market presence and reputation for quality, the Company will
continue to be selected as an approved supplier.
/bullet/ CONSOLIDATION OF THE REDISTRIBUTION MARKET. As a result of
reductions in the supplier base by airline purchasing
departments, there has been and the Company believes there will
continue to be a consolidation in the redistribution market. The
Company further believes that only those redistributors such as
the Company, with extensive inventories, adequate capital and the
ability to provide the documentation of traceability necessary to
comply with applicable regulatory and customer requirements, will
survive the consolidation of the redistribution market.
/bullet/ INCREASED OUTSOURCING OF INVENTORY MANAGEMENT FUNCTIONS. Airlines
incur substantial expenditures in connection with fuel, labor and
aircraft ownership. Further, airlines have come under increasing
pressure during the last decade to reduce the costs associated
with providing air transportation services. While several of the
expenditures required to operate an airline are beyond the direct
control of airline operators (e.g., the price of fuel and labor
costs), the
4
<PAGE>
Company believes that obtaining replacement parts from the
redistribution market and outsourcing inventory management functions
are areas in which airline operators can reduce their operating
costs. Outsourcing inventory management functions allows these
activities to be handled more inexpensively and efficiently by a
redistributor like the Company that can achieve economies of scale
unavailable to individual airlines. The Company believes that its
offering of a broad array of inventory management services to its
customers, in conjunction with the sale of aircraft spare parts,
will give the Company a significant competitive advantage in serving
its customers.
In addition to the inventory management services described above,
customers are increasingly seeking to consign inventories or to
lease aircraft spare parts. By consigning inventories to a
redistributor such as the Company, customers are able to distribute
their aircraft spare parts to a larger number of prospective
inventory buyers, allowing the customer to maximize the value of its
inventory. Consignment also enables the Company to offer for sale
significant parts inventory at minimal capital cost to the Company.
Additionally, over the last few years, several airlines have chosen
to lease inventories of aircraft spare parts in order to preserve
capital while maintaining adequate spare parts support. The Company
believes that this trend to lease aircraft spare parts will continue
in the future and that it has a competitive advantage in providing
this leasing service due to its ability to maximize the residual
value of the leased parts after termination of the lease through
sales of the parts in the ordinary course of its business.
COMPANY HISTORY AND ORGANIZATION
The Company commenced operations in February 1992 through the acquisition
by AJT Capital Partners, a Delaware general partnership d/b/a Aerospace
International Services ("AIS") of the aircraft spare parts inventory and
certain other assets owned by the Estate of Eastern Air Lines, Inc. ("the
Eastern Inventory"). Between February 1992 and December 1994, the Company's
primary business was the marketing and sale of the Eastern Inventory. In
December 1994, the Company acquired the assets and business of the Aviation
Sales Company business unit ("ASC") from Aviall Services, Inc. The Company
believed that the combination of AIS, with its extensive Eastern Inventory,
and ASC, with its industry leading market position, reputation for quality,
experienced sales and marketing staff and superior management information
systems, would create a more formidable competitor in the aircraft spare parts
redistribution market. Since acquiring ASC, the Company has significantly
increased revenues by increasing its sales and marketing efforts and by
offering its customers a wide array of inventory management services.
Immediately prior to the effectiveness of the Registration Statement of which
this Prospectus forms a part, all but one of the parties holding interests in
the Partnership will contribute their interests in the Partnership to the
Company in exchange for shares of Common Stock. Simultaneously, one of the
parties holding an interest in the Partnership will contribute its interest in
the Partnership to the Company in exchange for shares of Common Stock and an
amount equal to the proceeds to be received by the Company from the Underwriters
for 500,000 shares of Common Stock to be sold in the Offering, plus up to 75,000
additional shares of Common Stock (and/or the proceeds in respect of the sale of
such shares to the extent the over-allotment option is exercised). See "Use of
Proceeds" and "Certain Transactions." After the Offering, the operations of the
business will be conducted by the Company.
The Company's principal executive offices are located at 6905 N.W. 25th
Street, Miami, Florida 33122. The Company's telephone number is (305)
592-4055.
<TABLE>
<CAPTION>
THE OFFERING
<S> <C>
Common Stock offered .............. 3,250,000 shares (1)
Common Stock to be outstanding
after the Offering ............... 7,750,000 shares (1)(2)
Use of Proceeds ................... To repay indebtedness, to pay an obligation to one of
the Company's principal stockholders incurred in
connection with the formation of the Company and for working
capital and general corporate purposes. See "Use of
Proceeds."
New York Stock Exchange symbol ... "AVS"
- --------
<FN>
(1) Does not include up to 487,500 shares of Common Stock that may be sold by
the Company pursuant to the Underwriters' over-allotment option. See
"Underwriting."
(2) Excludes 800,000 shares of Common Stock reserved for issuance pursuant to
the Company's Stock Option Plans. See "Management--Stock Option Plans."
</FN>
</TABLE>
5
<PAGE>
SUMMARY FINANCIAL DATA
THE SUMMARY FINANCIAL DATA SET FORTH BELOW IS DERIVED FROM AND SHOULD BE
READ IN CONJUNCTION WITH THE "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND THE COMPANY'S CONSOLIDATED
FINANCIAL STATEMENTS AND THE NOTES THERETO CONTAINED ELSEWHERE IN THIS
PROSPECTUS. THE PRO FORMA FINANCIAL DATA INCLUDED HEREIN IS PRESENTED FOR
INFORMATIONAL PURPOSES ONLY AND MAY NOT REFLECT THE COMPANY'S FUTURE RESULTS
OF OPERATIONS AND FINANCIAL POSITION OR WHAT THE RESULTS OF OPERATIONS AND
FINANCIAL POSITION OF THE COMPANY WOULD HAVE BEEN HAD SUCH TRANSACTIONS
ACTUALLY OCCURRED AS OF THE DATES INDICATED. AMOUNTS PRESENTED ARE IN
THOUSANDS, EXCEPT SHARE AND PER SHARE DATA.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------------------------------------------- --------------------------------------
1994 1995 1996
-------------------------- -------------------------- --------------------------
1993 ACTUAL COMBINED(1) ACTUAL AS ADJUSTED(2) 1995 ACTUAL AS ADJUSTED(2)
----------- -------------- ----------- ---------- -------------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Operating revenues ... $23,429 $28,191 $89,335 $113,803 $113,803 $28,451 $32,898 $32,898
Gross profit .......... 12,267 16,174 29,396 42,489 42,489 11,797 11,710 11,710
Income from operations 2,885 5,649 1,611 18,573 18,573 6,034 4,992 4,992
Interest and other
expenses, net ....... 6,041 4,458 8,348 8,287 2,617 2,083 1,923 525
----------- -------------- ----------- ---------- -------------- --------- ---------- --------------
Net income (loss)
before taxes ........ (3,156) 1,191 (6,737) 10,286 15,956 3,951 3,069 4,467
Income taxes(3) ....... -- -- -- 4,012 6,223(4) 1,541 1,197 1,742(4)
----------- -------------- ----------- ---------- -------------- --------- ---------- --------------
Net income (loss) ..... $(3,156) $ 1,191 $(6,737) $ 6,274 $ 9,733(5) $ 2,410 $ 1,872 $ 2,725(5)
=========== ============== =========== ========== ============== ========= ========== ==============
Net income per
share(6) ............ $ 1.25 $ 1.26(5) $ .48 $ .37 $ .35(5)
========== ============== ========= ========== ==============
</TABLE>
MARCH 31, 1996
---------------------------
AS
BALANCE SHEET DATA: ACTUAL ADJUSTED(2)
------------ -------------
Accounts receivable ........................... $ 26,211 $ 26,211
Inventories .................................... 53,347 53,347
Working capital .................................... 47,444 64,635
Total assets .......................................100,255 102,155(7)
Total debt ..................................... 67,122 20,431
Stockholders' equity .............................. 17,127 65,718(7)(8)
- ----------
(1) Reflects the pro forma combined historic results of the Company assuming
the acquisition of ASC had occurred on January 1, 1994. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and Note 3 to Notes to the Company's Consolidated Financial Statements.
(2) Adjusted for the sale of 3,250,000 shares by the Company (at an assumed
offering price of $19.00 per share) in the Offering and the application
of the net proceeds therefrom as if the closing of the Offering and the
consummation of the Amended Credit Facility had occurred at the beginning
of the applicable period for Statement of Income Data and on March 31,
1996 for Balance Sheet Data. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
(3) Pro forma adjustments as if the Company had been taxed as a C-corporation
since the beginning of the applicable period for the 1995 and 1996
financial data presented. See "History of the Company."
(4) Excludes $3,000 representing the deferred tax benefit to be realized by
the Company as a result of the contribution of partnership interests
described in "Certain Transactions" and Note 15 to Notes to the Company's
Consolidated Financial Statements. This benefit will be recorded in the
quarter in which the contribution of partnership interests occurs.
(5) Excludes extraordinary expenses arising from the write-off of deferred
financing costs incurred in connection with borrowings to finance the
acquisition of ASC, which will be repaid with the proceeds of the Offering.
This expense will be recorded in the quarter in which the Offering is
completed and would have been approximately $1,600 for the year ended
December 31, 1995 and approximately $1,300 for the three months ended March
31, 1996. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--The Acquisition Loans" and
"--Liquidity and Capital Resources."
(6) Weighted average shares outstanding are 5,000,000 for 1995 and first
quarter 1996 and 7,750,000 for 1995 and first quarter 1996 as adjusted.
See Notes 14 and 15 to Notes to the Company's Consolidated Financial
Statements.
(7) Includes $3,000 representing the deferred tax benefit to be realized by
the Company as a result of the contribution of partnership interests
described in Note 4 above and $1,100 for the write-off of deferred
financing costs as of March 31, 1996 described in Note 5 above.
(8) Gives effect to a $1,044 distribution to the partners of the Partnership
representing 34% of the income before provision for income taxes of the
Company for the three months ended March 31, 1996 and a $350 facility fee
payable to certain parties related to several of the partners of the
Partnership. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--The Acquisition Loans," "--Liquidity
and Capital Resources" and "Certain Transactions."
6
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK
FACTORS, TOGETHER WITH THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, IN
EVALUATING AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY.
EFFECTS OF THE ECONOMY ON THE OPERATIONS OF THE COMPANY
Since the Company's customers consist of airlines, maintenance and repair
facilities that service airlines and other aircraft spare parts
redistributors, the Company's business is impacted by the economic factors
which affect the airline industry. When such factors adversely affect the
airline industry, they tend to reduce the overall demand for aircraft spare
parts, causing downward pressure on pricing and increasing the credit risk
associated with doing business with airlines. Additionally, factors such as
the price of fuel affect the aircraft spare parts market, since older
aircraft (into which aircraft spare parts are most often placed) become less
viable as the price of fuel increases. There can be no assurance that
economic and other factors which might affect the airline industry will not
have an adverse impact on the Company's results of operations.
RISKS REGARDING THE COMPANY'S INVENTORY
The Company's inventory consists principally of new, overhauled,
serviceable and repairable aircraft parts that are purchased from many
sources. Before parts may be installed in an aircraft, they must meet certain
standards of condition established by the Federal Aviation Administration
("FAA") and/or the equivalent regulatory agencies in other countries.
Specific regulations vary from country to country, although regulatory
requirements in other countries generally coincide with FAA requirements.
Parts must also be traceable to sources deemed acceptable by such agencies.
See "Business--Government Regulation and Traceability." Parts owned or
acquired by the Company may not meet applicable standards or standards may
change in the future, causing parts which are already contained in the
Company's inventory to be scrapped or modified. Aircraft manufacturers may
also develop new parts to be used in lieu of parts already contained in the
Company's inventory. In all such cases, to the extent that the Company has
such parts in its inventory, their value may be reduced.
GOVERNMENT REGULATION
The aviation industry is highly regulated in the United States by the FAA
and in other countries by similar agencies. While the Company's business is
not regulated, the aircraft spare parts which it sells to its customers must
be accompanied by documentation which enables the customer to comply with
applicable regulatory requirements. There can be no assurance that new and
more stringent government regulations will not be adopted in the future or
that any such new regulations, if enacted, would not have an adverse impact
on the Company. See "Business--Government Regulation and Traceability."
FLUCTUATIONS IN OPERATING RESULTS
The Company's operating results are affected by many factors, including
the timing of orders from large customers, the timing of expenditures to
purchase inventory in anticipation of future sales, the timing of bulk
inventory purchases, and the mix of available aircraft spare parts contained,
at any time, in the Company's inventory. A large portion of the Company's
operating expenses are relatively fixed. Since the Company typically does not
obtain long-term purchase orders or commitments from its customers, it must
anticipate the future volume of orders based upon the historic purchasing
patterns of its customers and upon its discussions with its customers as to
their future requirements. Cancellations, reductions or delays in orders by a
customer or group of customers could have a material adverse effect on the
Company's business, financial condition and results of operations. For a
discussion of the impact of the timing of bulk inventory purchases on operating
results between the first six months of 1995 and the first six months of 1996,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Industry Overview and Trends."
7
<PAGE>
GROWTH STRATEGY AND RISKS RELATING TO FUTURE ACQUISITIONS
A key element of the Company's strategy involves growth through the
acquisition of additional inventories of aircraft spare parts and the
acquisition of other companies, assets or product lines that would complement
or expand the Company's existing aircraft spare parts redistribution and
inventory management services business. The Company's ability to grow by
acquisition is dependent upon, and may be limited by, the availability of
suitable aircraft parts inventories, acquisition candidates and capital, and
by restrictions contained in the Company's credit agreements. In addition,
acquisitions involve risks that could adversely affect the Company's
operating results, including the assimilation of the operations and personnel
of acquired companies, the potential amortization of acquired intangible
assets and the potential loss of key employees of acquired companies. There
can be no assurance that the Company will be able to consummate acquisitions
on satisfactory terms. The Company is currently evaluating a number of
acquisition opportunities and is at varying stages of negotiation with respect
to such acquisitions. No commitments or binding agreements have been entered
into to date and accordingly no assurance can be given that any of the
acquisitions currently being considered will be consummated. None of such
acquisitions, if consummated, would constitute a material acquisition for the
Company under applicable accounting rules. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business--
Company Strategy."
RELIANCE ON EXECUTIVE OFFICERS AND KEY EMPLOYEES
The continued success of the Company is dependent to a significant degree
upon the services of its executive officers and upon the Company's ability to
attract and retain qualified personnel experienced in the various phases of
the Company's business. The Company has employment agreements with all of its
executive officers. The ability of the Company to operate successfully could
be jeopardized if one or more of its executive officers were unavailable and
capable successors were not found. The employment agreements between the
Company and its executive officers are individually terminable by each
executive officer upon a change of control of the Company. See "Management."
COMPETITION
There are numerous suppliers of aircraft spare parts in the aviation
market worldwide and, through inventory listing services, customers have
access to a broad array of suppliers. These include major aircraft
manufacturers, airline and aircraft service companies, and aircraft spare
parts redistributors. Certain of the Company's competitors have substantially
greater financial and other resources than the Company. There can be no
assurance that competitive pressures will not materially and adversely affect
the Company's business, financial condition or results of operations. See
"Business--Competition."
PRODUCT LIABILITY
The Company's business exposes it to possible claims for personal injury
or death which may result from the failure of an aircraft spare part sold by
it. While the Company maintains what it believes to be adequate liability
insurance to protect it from such claims, and while no material claims have,
to date, been made against the Company, no assurance can be given that claims
will not arise in the future or that such insurance coverage will be
adequate. Additionally, there can be no assurance that insurance coverages
can be maintained in the future at an acceptable cost. Any such liability not
covered by insurance could have a material adverse effect on the financial
condition of the Company. See "Business--Product Liability and Legal
Proceedings."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
7,750,000 shares of Common Stock. Of these shares, the Common Stock sold in
the Offering will be freely tradable without restriction or limitation under
the Securities Act of 1933, as amended (the "Securities Act"), unless
purchased by "affiliates" of the Company, as that term is defined in Rule 144
under the Securities Act.
8
<PAGE>
The Company, its executive officers, directors and stockholders, have agreed
that, for a period of 180 days from the date of this Prospectus, they will not,
without the prior written consent of Smith Barney Inc., sell, offer to sell,
solicit an offer to buy, contract to sell, grant any option to purchase or
otherwise transfer or dispose of, any shares of Common Stock or any securities
convertible into, or exercisable or exchangeable for, shares of Common Stock,
subject to certain exceptions. The sale of a substantial number of shares of
Common Stock in the public market following the Offering, or the perception that
such sales could occur, could adversely affect the market price of the Common
Stock and/or impair the Company's ability in the future to raise additional
capital through the sale of its equity securities. See "Shares Eligible for
Future Sale."
DILUTION
Investors in the Offering will experience immediate and substantial
dilution in the net tangible book value of the shares of Common Stock
purchased in the Offering. See "Dilution."
ABSENCE OF PUBLIC MARKET; DIVIDEND POLICY
Prior to the Offering, there has been no public market for the shares of
Common Stock offered hereby and there can be no assurance that an active
trading market will develop or be sustained subsequent to the Offering. The
initial public offering price of the Common Stock will be determined in
negotiations among the Company and the representatives of the Underwriters
(the "Representatives") and may not be indicative of the prices that may
prevail in the public market. See "Underwriting" for a discussion of the
factors considered in determining the initial public offering price. There
can be no assurance that the market price of the Common Stock will not
decline below the initial public offering price. Additionally, the Company
does not anticipate paying dividends on its Common Stock in the foreseeable
future. See "Dividend Policy."
PRICE VOLATILITY
The market price of the Common Stock could be subject to significant
fluctuations in response to variations in quarterly operating results and
other factors. From time to time in recent years, the securities markets have
experienced significant price and volume fluctuations that have often been
unrelated or disproportionate to the operating performance of particular
companies. These broad fluctuations may adversely affect the market price of
the Common Stock.
POTENTIAL INFLUENCE BY CERTAIN STOCKHOLDERS
Upon completion of the Offering, two of the Company's stockholders will
own 29.0% and 20.3%, respectively, of the outstanding Common Stock and the
Company's executive officers will own an aggregate of 8.7% of the outstanding
Common Stock. While each of these stockholders is an independent party, if
these parties were to act together as a group, they would have the ability to
control the election of all of the members of the Company's Board of
Directors and, therefore, to control the business, policies and affairs of
the Company. See "Principal Stockholders."
ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation and Bylaws contain provisions
that may have the effect of discouraging certain transactions involving an
actual or threatened change of control of the Company. See "Description of
Capital Stock--Certain Provisions of the Certificate and Bylaws" for a
description of these provisions. In addition, the Board of Directors of the
Company has the authority to issue up to 1,000,000 shares of preferred stock
in one or more series and to fix the preferences, rights and limitations of
any such series without stockholder approval. See "Description of Capital
Stock--Preferred Stock." The ability to issue preferred stock could have the
effect of discouraging unsolicited acquisition proposals or making it more
difficult for a third party to gain control of the Company, or otherwise
could adversely affect the market price of the Common Stock.
9
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the 3,250,000 shares of Common Stock (at
an assumed offering price of $19.00 per share) offered hereby are estimated
(after deducting underwriting discounts and commissions and offering
expenses) to be approximately $56.8 million ($65.4 million if the
over-allotment option is exercised in full).
The Company intends to use the net proceeds to repay (i) all subordinated
debt due to certain of its stockholders and a related facility fee
($7.4 million), (ii) all amounts outstanding under one of the Company's term
loans ("Term Loan B") ($15.0 million), (iii) a portion of the amount outstanding
under a second of the Company's term loans ("Term Loan A") ($17.5 million), (iv)
substantially all amounts outstanding under the Company's revolving credit
facility ($7.6 million at March 31, 1996), and (v) amounts due to J/T Aviation
Partners ("J/T") in connection with the formation of the Company ($8.7 million
at an assumed offering price of $19.00 per share). Any remaining amounts will be
used for working capital and general corporate purposes. For a description of
the debt to be repaid with the proceeds, and the terms under which J/T will
receive proceeds, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--The Acquisition Loans," "--Liquidity and
Capital Resources," "Certain Transactions" and the Company's Consolidated
Financial Statements and the Notes thereto included elsewhere in this
Prospectus.
Proceeds received by the Company upon the exercise of the over-allotment
option (assuming it is exercised in full at an assumed offering price of
$19.00 per share) will be used to repay additional amounts outstanding under
Term Loan A ($7.3 million) and to pay amounts due to J/T in lieu of shares of
Common Stock that would otherwise have been issued upon formation of the
Company ($1.3 million).
DIVIDEND POLICY
The Company does not intend to pay any cash dividends with respect to its
Common Stock in the foreseeable future. Rather, the Company intends, after
the consummation of the Offering, to retain its earnings, if any, for use in
the operation of its business. Furthermore, the Company's ability to declare
or pay dividends on its Common Stock is limited by the terms of its credit
agreements with financial institutions. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
10
<PAGE>
DILUTION
The difference between the public offering price per share of Common Stock
and the net tangible book value per share of the Company after the Offering
constitutes the dilution to investors in the Offering. Net tangible book
value per share is determined by dividing the net tangible book value of the
Company (tangible assets less total liabilities) by the number of outstanding
shares of Common Stock.
At March 31, 1996, the net tangible book value of the Company was $17.1
million, or $3.43 per share of Common Stock. After giving effect to the sale
of 3,250,000 shares of Common Stock (at an assumed offering price of $19.00
per share) in the Offering (less estimated underwriting discounts and
commissions and expenses of the Offering), the pro forma net tangible book
value of the Company at March 31, 1996 would have been $65.7 million or $8.48
per share, representing an immediate increase in net tangible book value of
$5.05 per share to existing stockholders and an immediate dilution of $10.52
per share to new investors.
The following table illustrates the foregoing information with respect to
dilution to new investors on a per share basis:
Public offering price ............................. $19.00
Net tangible book value before Offering ........ $3.43(1)
Increase attributable to new investors ......... 5.05
-----------
Pro forma net tangible book value after Offering 8.48
---------
Dilution to new investors ........................ $10.52
=========
- ----------
(1) Computed by dividing net tangible book value at March 31, 1996 by the sum of
4,500,000 shares of Common Stock to be issued to partners upon the
contribution to the Company of their interests in the Partnership and
500,000 shares of Common Stock to be sold by the Company in the Offering,
the net proceeds of which will be paid to J/T. See "Certain Transactions"
and Note 15 to Notes to the Company's Consolidated Financial Statements.
The following table sets forth with respect to existing stockholders and
new investors, a comparison of the number of shares of Common Stock acquired
from the Company, the percentage ownership of such shares, the total
consideration paid, the percentage of total consideration paid and the
average price per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------------- ------------------------- AVERAGE PRICE
AMOUNT(2) PERCENT AMOUNT PERCENT PER SHARE
- ------------------------ ------------ ---------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Existing
stockholders(1) ....... 5,000,000 64.5% $ 7,693,146 11.1% $ 1.54
New investors .......... 3,250,000(3) 41.9% 61,750,000 88.9% 19.00
--------- -----------
7,750,000 $69,443,146
===========
<FN>
(1) Shares purchased includes 4,500,000 shares of Common Stock to be issued
to partners upon the contribution to the Company or their interests in the
Partnership and 500,000 shares of Common Stock to be sold by the Company in
the Offering, the net proceeds of which will be paid to J/T. Total
consideration is not reduced by the proceeds to be received by J/T upon the
sale of 500,000 shares by the Company. See "Certain Transactions" and Note
15 to Notes to the Company's Consolidated Financial Statements.
(2) The 500,000 shares to be sold by the Company in the Offering, the net
proceeds of which are to be paid to J/T, are included in the shares
purchased by both the existing stockholders and new investors, but are
only included once in the total number of shares.
(3) If the over-allotment option is exercised in full, the number of shares of
Common Stock held by new investors will be 3,737,500.
</FN>
</TABLE>
11
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Partnership at
March 31, 1996, as adjusted to give effect to formation of the Company, and
as further adjusted at that date to give effect to the sale by the Company of
3,250,000 shares of Common Stock (at an assumed offering price of $19.00 per
share) in the Offering and the application of the net proceeds therefrom.
This table should be read in conjunction with the Company's Consolidated
Financial Statements and the Notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------------------------
AS FURTHER
ACTUAL AS ADJUSTED ADJUSTED
---------- -------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current debt(1):
Current portion of Term Loan A .............................. $10,000 $10,000 $ --
Revolving credit facility ................................... 7,622 7,622 431
---------- ---------- -------
Total current debt ........................................ 17,622 17,622 431
---------- ---------- -------
Long-term debt(1):
Term Loan A ................................................. 27,500 27,500 20,000
Term Loan B ................................................. 15,000 15,000 --
Subordinated debt ........................................... 7,000 7,000 --
---------- ---------- -------
Total long-term debt ...................................... 49,500 49,500 20,000
---------- ---------- -------
Total debt .................................................... 67,122 67,122 20,431
---------- ---------- -------
Due to stockholders(2) ........................................ -- 10,137 --
---------- ---------- -------
Partners' capital ............................................. 17,127 -- --
---------- ---------- -------
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized; none issued ................................... -- -- --
Common stock, $.001 par value, 30,000,000 shares authorized;
4,500,000 shares outstanding, actual and as adjusted (3)(4);
7,750,000 shares outstanding, as further adjusted(4) ...... -- 5 8
Additional paid-in capital .................................... -- 6,985 65,710
---------- ---------- -------
Total stockholders' equity .................................. -- 6,990 65,718(5)(6)
---------- ---------- -------
Total capitalization ...................................... $84,249 $84,249 $86,149
========== ========== =======
<FN>
- ----------
(1) For a description of the term loan and revolving credit facilities, see
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--The Acquisition Loans" and "--Liquidity and Capital
Resources."
(2) Gives effect to an $8,743 liability to J/T that will be incurred in
connection with the formation of the Company, a $1,044 liability for the
distribution to the partners of the Partnership representing 34% of
the income before provision for income taxes for the three months ended
March 31, 1996 and a $350 facility fee payable to certain parties related to
several of the partners of the Partnership. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--The Acquisition
Loans," "--Liquidity and Capital Resources" and "Certain Transactions."
(3) Does not include 500,000 shares of Common Stock to be sold by the Company in
the Offering, the net proceeds of which will be paid to J/T. See "Certain
Transactions."
(4) Excludes 800,000 shares of Common Stock reserved for issuance pursuant to
the Company's Stock Option Plans. See "Management--Stock Option Plans."
(5) Includes an adjustment of approximately $1,100 for the write-off of deferred
financing costs as of March 31, 1996 incurred in connection with borrowings
to finance the acquisition of ASC, which will be repaid with the proceeds of
the Offering. This expense will be recorded in the quarter in which the
Offering is completed. See "Use of Proceeds" and "Management's Discussion
and Analysis of Financial Condition--Liquidity and Capital Resources."
(6) Includes $3,000 representing the deferred tax benefit to be realized by the
Company as a result of the contribution of partnership interests as
described in Note 15 to Notes to the Company's Consolidated Financial
Statements. This benefit will be recorded in the quarter in which the
contribution of partnership interests occurs.
</FN>
</TABLE>
12
<PAGE>
HISTORY OF THE COMPANY
The operations of the Company were initially conducted by AIS. AIS was
formed in February 1992 to acquire the Eastern Inventory. In December 1994,
AIS organized the Partnership to acquire ASC from Aviall Services, Inc.
("Aviall") and to operate the business of AIS and ASC on a going forward
basis. Simultaneously with the ASC acquisition, AIS contributed substantially
all of its assets to the Partnership.
ASC was founded in 1971, initially to acquire aircraft which were
disassembled so that their component parts could be redistributed to airlines
and repair agencies. ASC was subsequently acquired by Ryder Systems, Inc.
("Ryder") in 1982. Ryder provided the financial strength to allow ASC to
participate in capital intensive transactions such as aircraft purchases and
leasing. Ryder also provided significant working capital to ASC in support of
development of proprietary management information systems, digital imaging
systems and other technology that established ASC as a leader in the aircraft
parts redistribution industry.
In June 1993, Ryder announced its intention to spin-off all of its
aviation-related business units into a new public company, Aviall.
Concurrently, Aviall announced that it would sell several of these businesses
to raise capital to repay debt, one of which was ASC. The Company believed
that a combination of AIS, with its extensive Eastern Inventory, and ASC,
with its industry leading market position, reputation for quality,
experienced sales and marketing staff and superior management information
systems, would create a more formidable competitor in the aircraft spare parts
redistribution market. During late 1993 and early 1994 AIS negotiated with
Aviall with respect to this purchase, and on August 14, 1994, AIS entered
into an asset purchase agreement with Aviall to purchase the assets of ASC.
This transaction was completed on December 2, 1994 (effective November 30,
1994) and since December 1994, the operations of the business have been
conducted by the Partnership. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Immediately prior to the effectiveness of the Registration Statement of which
this Prospectus forms a part, all but one of the parties holding interests in
the Partnership will contribute their interests in the Partnership to the
Company in exchange for shares of Common Stock. Simultaneously, one of the
parties holding an interest in the Partnership will contribute its interest in
the Partnership to the Company in exchange for shares of Common Stock and an
amount equal to the proceeds to be received by the Company for 500,000 shares of
Common Stock to be sold in the Offering, plus up to 75,000 additional shares of
Common Stock (and/or the proceeds in respect of the sale of such shares to the
extent the over-allotment option is exercised). See "Use of Proceeds" and
"Certain Transactions."
After the Offering, operations of the business will be conducted by the
Company, which is a newly organized Delaware corporation, and by its wholly
owned subsidiaries, Aviation Sales Operating Company (and its wholly owned
subsidiary, Aviation Sales Leasing Company) and Aviation Sales Finance
Company. Substantially all of the operating assets of the Company will be
owned by Aviation Sales Operating Company and its subsidiary. Unless the
context otherwise requires, references to the "Company" refer to the
operations of the Company and its subsidiaries.
13
<PAGE>
SELECTED FINANCIAL DATA
THE FOLLOWING SELECTED FINANCIAL DATA HAS BEEN DERIVED FROM THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS. THE FINANCIAL STATEMENTS OF THE COMPANY AS
OF DECEMBER 31, 1992, 1993, 1994 AND 1995, FOR THE PERIOD FROM INCEPTION
(FEBRUARY 28, 1992) TO DECEMBER 31, 1992, AND FOR THE YEARS ENDED DECEMBER
31, 1993, 1994 AND 1995 HAVE BEEN AUDITED BY ARTHUR ANDERSEN LLP, INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS, AS INDICATED IN THEIR REPORT INCLUDED ELSEWHERE
HEREIN. THE FINANCIAL DATA AS OF MARCH 31, 1996 AND FOR THE THREE MONTH
PERIODS ENDED MARCH 31, 1995 AND 1996 ARE DERIVED FROM THE UNAUDITED
STATEMENTS OF THE COMPANY WHICH, IN THE OPINION OF MANAGEMENT, INCLUDE ALL
ADJUSTMENTS (CONSISTING OF ONLY NORMAL RECURRING ADJUSTMENTS) NECESSARY FOR A
FAIR PRESENTATION OF THE INFORMATION SET FORTH THEREIN. THE RESULTS OF
OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 ARE NOT NECESSARILY
INDICATIVE OF THE RESULTS THAT MAY BE EXPECTED FOR THE YEAR ENDING DECEMBER
31, 1996. THE COMBINED AND AS ADJUSTED FINANCIAL DATA SET FORTH BELOW IS
UNAUDITED AND IS PRESENTED FOR INFORMATIONAL PURPOSES ONLY AND MAY NOT
REFLECT THE COMPANY'S FUTURE RESULTS OF OPERATIONS AND FINANCIAL POSITION OR
WHAT THE RESULTS OF OPERATIONS AND FINANCIAL POSITION OF THE COMPANY WOULD
HAVE BEEN HAD THE TRANSACTIONS ACTUALLY OCCURRED AS OF THE DATES INDICATED.
SEE ALSO "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
INCEPTION ------------------------------------------------------------ ---------------------------------
(FEBRUARY 28, 1992) 1994 1995 1996
TO ----------------------- ------------------------- -----------------------
DECEMBER 31, 1992 1993 ACTUAL COMBINED(1) ACTUAL AS ADJUSTED(2) 1995 ACTUAL AS ADJUSTED(2)
----------------- -------- --------- ------------ --------- --------------- -------- ------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
INCOME DATA:
Operating revenues . $32,227 $23,429 $28,191 $89,335 $113,803 $113,803 $28,451 $32,898 $32,898
Cost of sales ...... 16,697 11,162 12,017 59,939 71,314 71,314 16,654 21,188 21,188
------- ------- ------- ------- -------- -------- ------- ------- -------
Gross profit ....... 15,530 12,267 16,174 29,396 42,489 42,489 11,797 11,710 11,710
------- ------- ------- ------- -------- -------- ------- ------- -------
Operating expenses
Operating ......... 2,970 3,121 2,900 10,228 8,989 8,989 2,057 2,343 2,343
Selling ........... 3,590 1,845 2,043 4,663 4,820 4,820 1,095 1,589 1,589
General and
administrative ... 5,057 4,199 5,167 10,341 8,641 8,641 2,295 2,329 2,329
Depreciation and
amortization ..... 2,063 217 415 2,553 1,466 1,466 315 457 457
------- ------- ------- ------- -------- -------- ------- ------- -------
Total operating
expenses .......... 13,680 9,382 10,525 27,785 23,916 23,916 5,762 6,718 6,718
------- ------- ------- ------- -------- -------- ------- ------- -------
Income from
operations ........ 1,850 2,885 5,649 1,611 18,573 18,573 6,034 4,992 4,992
Interest and other
expenses, net .... 3,806 6,041 4,458 8,348 8,287 2,617 2,083 1,923 525
------- ------- ------- ------- -------- -------- ------- ------- -------
Net income (loss)
before taxes ...... (1,956) (3,156) 1,191 (6,737) 10,286 15,956 3,951 3,069 4,467
Income taxes(3) .... -- -- -- -- 4,012 6,223(4) 1,541 1,197 1,742(4)
------- ------- ------- ------- -------- -------- ------- ------- -------
Net income (loss) .. $(1,956) $(3,156) $ 1,191 $(6,737) $ 6,274 $ 9,733(5) $ 2,410 $ 1,872 $ 2,725(5)
======= ======= ======= ======= ======== ======== ======= ======= =======
Net income per
share(6) .......... $ 1.25 $ 1.26(5) $ .48 $ .37 $ .35(5)
======== ======== ======= ======= =======
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
14
<PAGE>
<TABLE>
<CAPTION>
(Selected Financial Data continued)
DECEMBER 31, MARCH 31,
--------------------------------------------- --------------------------
1996
--------------------------
1992 1993 1994 1995 ACTUAL AS ADJUSTED
--------- --------- ---------- ---------- ---------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Accounts receivable . $ 4,705 $ 4,166 $16,980 $23,824 $ 26,211 $ 26,211
Inventories .......... 44,473 34,025 52,765 48,957 53,347 53,347
Working capital ...... 33,946 24,519 51,871 46,689 47,444 64,635
Total assets ......... 55,688 42,401 89,265 93,337 100,255 102,155(7)
Total debt ........... 44,472 31,992 69,152 62,043 67,122 20,431
Stockholders' equity.. 6,044 2,888 7,079 14,058 17,127 65,718(7)(8)
<FN>
- ----------
(1) Reflects the pro forma combined historic results of the Company assuming
the acquisition of ASC occurred on January 1, 1994. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and Note 3 to Notes to the Company's Consolidated Financial Statements.
(2) Adjusted for the sale of 3,250,000 shares by the Company (at an assumed
offering price of $19.00 per share) in the Offering and the application of
the net proceeds therefrom as if the closing of the Offering and the
consummation of the Amended Credit Facility had occurred at the beginning of
the applicable period for Statement of Income Data and on March 31, 1996 for
Balance Sheet Data. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
(3) Pro forma adjustments as if the Company had been taxed as a C-corporation
since the beginning of the applicable period for the 1995 and 1996 financial
data presented. See "History of the Company."
(4) Excludes $3,000 representing the deferred tax benefit to be realized by the
Company as a result of the contribution of partnership interests described
in "Certain Transactions" and Note 15 to Notes to the Company's Consolidated
Financial Statements. This benefit will be recorded in the quarter in which
the contribution of partnership interests occurs.
(5) Excludes extraordinary expenses arising from the write-off of deferred
financing costs incurred in connection with borrowings to finance the
acquisition of ASC, which will be repaid with the proceeds of the Offering.
This expense will be recorded in the quarter in which the Offering is
completed and would have been approximately $1,600 for the year ended
December 31, 1995 and approximately $1,300 for the three months ended March
31, 1996. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--The Acquisition Loans" and
"--Liquidity and Capital Resources."
(6) Weighted average shares outstanding are 5,000,000 for 1995 and 1996 and
7,750,000 for 1995 and 1996 as adjusted. See Notes 14 and 15 to Notes to the
Company's Consolidated Financial Statements.
(7) Includes $3,000 representing the deferred tax benefit to be realized by the
Company as a result of the contribution of partnership interests described
in Note 4 above and $1,100 for the write-off of deferred financing costs as
of March 31, 1996 described in Note 5 above.
(8) Gives effect to a $1,044 distribution to the partners of the Partnership
representing 34% of the income before provision for income taxes of
the Company for the three months ended March 31, 1996 and a $350
facility fee payable to certain parties related to several of the partners
of the Partnership. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--The Acquisition Loans," "--Liquidity
and Capital Resources" and "Certain Transactions."
</FN>
</TABLE>
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIS MANAGEMENT'S DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION
WITH THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES
THERETO. THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING INFORMATION WHICH
INVOLVES RISKS AND UNCERTAINTIES. THE ACTUAL RESULTS COULD DIFFER FROM THE
RESULTS ANTICIPATED HEREIN.
OVERVIEW
The Company commenced operations in February 1992 through the acquisition
of the Eastern Inventory, for an aggregate purchase price of $55.2 million.
Between February 1992 and December 1994, the Company's primary business was
the marketing and sale of the Eastern Inventory.
In December 1994, the Company completed the acquisition of certain assets
and assumed certain liabilities of ASC from Aviall for an aggregate purchase
price of $46.8 million. The Company believed that the combination of ASC,
with its leading market position, reputation for quality, experienced sales
and marketing staff and superior management information systems, and AIS,
with its extensive Eastern Inventory, would create a more formidable
competitor in the aircraft spare parts redistribution market. Since acquiring
ASC in December 1994, the Company has significantly increased revenues and
expanded the services which it offers to its customers.
RESULTS OF OPERATIONS
Operating revenues consist primarily of gross sales, net of allowances for
returns and other adjustments. Cost of sales consists primarily of product
costs, freight charges, commissions to outside sales representatives and an
inventory provision for damaged and obsolete products. Product costs consist
of the acquisition cost of the products and any costs associated with
repairs, overhaul or certification.
Operating revenues and gross profit depend in large measure on the volume
and timing of bookings received during the quarter and the mix of aircraft
spare parts contained in the Company's inventory. Revenues and gross profit
can be impacted by the timing of bulk inventory purchases. In general, bulk
inventory purchases allow the Company to obtain large inventories of aircraft
spare parts at a lower cost than can ordinarily be obtained by purchasing
such parts on an individual basis.
Two examples of the impact which a large bulk inventory acquisition can
have on results of operations are illustrated by the Company's acquisition of
the Eastern Inventory and the Company's acquisition of the large inventory
acquired in the ASC acquisition. In connection with the ASC acquisition, the
Company's operating revenues increased during the first two quarters of 1995
following the purchase due to the availability of such inventory.
Additionally, as a result of the lower cost of goods sold associated with
such inventory, the Company's gross profit increased during such periods.
Gross margin for the first half of 1996 is not expected to be favorably
impacted by a bulk inventory purchase in the same manner as gross margin was
impacted during the first half of 1995. The Company believes that the gross
margin experienced during the first quarter of 1996 is more indicative of the
ongoing results of the Company.
16
<PAGE>
THREE MONTHS ENDED MARCH 31, 1995 V. THREE MONTHS ENDED MARCH 31, 1996
The following table sets forth certain information relating to the
Company's operations for the periods indicated:
THREE MONTHS ENDED MARCH 31,
--------------------------------------------
1995 1996
--------------------- ---------------------
$ % $ %
---------- --------- ---------- ---------
(DOLLARS IN THOUSANDS)
Operating revenues ............ $28,451 100.0% $32,898 100.0%
Cost of sales ................. 16,654 58.5 21,188 64.4
---------- --------- ---------- ---------
Gross profit ................. 11,797 41.5 11,710 35.6
---------- --------- ---------- ---------
Operating expenses
Operating .................... 2,057 7.2 2,343 7.1
Selling ...................... 1,095 3.8 1,589 4.8
General and administrative .. 2,295 8.1 2,329 7.1
Depreciation and amortization 315 1.1 457 1.4
---------- --------- ---------- ---------
Total ....................... 5,762 20.3 6,718 20.4
---------- --------- ---------- ---------
Income from operations ........ $ 6,034 21.2% $ 4,992 15.2%
========== ========= ========== =========
The Company's operating revenues increased by $4.4 million, or 15.6%, from
the quarter ended March 31, 1995 to the quarter ended March 31, 1996. During
this period, domestic sales increased 15.5% from $17.4 million to $20.1
million and international sales increased 15.3% from $11.1 million to $12.8
million. Operating revenues increased due to the addition of new sales
personnel, increased customer penetration, increased investment in and
availability of inventory and the expansion of services offered to customers.
See "Business--Operations."
Gross profit remained unchanged and gross margin declined from 41.5% for
the first quarter of 1995 to 35.6% for the first quarter of 1996 due to a
change in the mix of inventories sold. Following the bulk purchase of
inventory associated with the acquisition of ASC in December 1994, the
Company actively sold a portion of ASC's inventory to meet current customer
demand and to better match inventory levels to meet anticipated product
demand.
The Company's aggregate operating expenses increased $1.0 million from the
first quarter of 1995 to the first quarter of 1996. Aggregate operating
expenses as a percent of operating revenues increased slightly from 20.3% of
revenues in the first quarter of 1995 to 20.4% of revenues in the first
quarter of 1996. The increase in absolute dollars from the first quarter of
1995 to the first quarter of 1996 is due to higher selling and operating
expenses as a result of the higher sales levels from the first quarter of
1995 to the first quarter of 1996. Lower general and administrative expenses
as a percentage of operating revenues were the result of economies of scale.
As a result of the above factors, the Company's income from operations
declined $1.0 million from the first quarter of 1995 to the first quarter of
1996.
17
<PAGE>
COMBINED YEAR ENDED DECEMBER 31, 1994 V. YEAR ENDED DECEMBER 31, 1995
The following table sets forth certain information relating to the
Company's operations for the periods indicated. The information for 1994
reflects the pro forma combined historic results of the Company assuming the
acquisition of ASC had occurred January 1, 1994. See Note 3 to Notes to the
Company's Consolidated Financial Statements.
YEAR ENDED DECEMBER 31,
---------------------------------------------
COMBINED
1994 1995
--------------------- ----------------------
$ % $ %
---------- --------- ----------- ---------
(DOLLARS IN THOUSANDS)
Operating revenues ............. $89,335 100.0% $113,803 100.0%
Cost of sales .................. 59,939 67.1 71,314 62.7
---------- --------- ----------- ---------
Gross profit .................. 29,396 32.9 42,489 37.3
Operating expenses:
Operating ..................... 10,228 11.4 8,989 7.9
Selling ....................... 4,663 5.2 4,820 4.2
General and administrative ... 10,341 11.6 8,641 7.6
Depreciation and amortization 2,553 2.9 1,466 1.3
---------- --------- ----------- ---------
Total ........................ 27,785 31.1 23,916 21.0
---------- --------- ----------- ---------
Income from operations ......... $ 1,611 1.8% $ 18,573 16.3%
========== ========= =========== =========
The Company's operating revenues increased by $24.5 million, or 27.4%,
from Combined 1994 to 1995. During this period, domestic sales increased
7.8%, from $63.2 million to $68.1 million and international sales increased
75.1%, from $26.1 million to $45.7 million. Operating revenues increased due
to the addition of new sales personnel, increased customer penetration and
the expansion of services offered to customers. See "Business--Operations."
Gross profit increased $13.1 million, or 44.5%, from Combined 1994 to
1995. The increase in gross profit from Combined 1994 to 1995 was primarily
attributable to the increase in sales. Following the acquisition of ASC in
December 1994, the Company actively sold portions of ASC's inventory to meet
current customer demand and to better match inventory levels to anticipated
product demand. The gross margin during this period increased from 32.9% for
Combined 1994 to 37.3% for 1995, primarily as a result of the bulk purchase
of inventory associated with the acquisition of the assets and business of
ASC.
The Company's aggregate operating expenses for 1995 were lower, both in
absolute dollars and as a percentage of operating revenues, than in Combined
1994. Operating expenses, general and administrative expenses and
depreciation and amortization expenses each declined in both actual dollars
and as a percentage of sales due to consolidations and other efficiencies
achieved as ASC was integrated into the Company's operations during 1995.
Selling expenses increased slightly in absolute dollars as a result of higher
sales levels from Combined 1994 to 1995, but declined as a percentage of
operating revenues due to the reasons described above.
As a result of the above factors, the Company's income from operations
increased by $17.0 million from Combined 1994 to 1995.
18
<PAGE>
YEAR ENDED DECEMBER 31, 1994 V. YEAR ENDED DECEMBER 31, 1995
The following table sets forth certain information relating to the
Company's operations for the periods indicated:
YEAR ENDED DECEMBER 31,
---------------------------------------------
1994 1995
--------------------- ----------------------
$ % $ %
---------- --------- ----------- ---------
(DOLLARS IN THOUSANDS)
Operating revenues .............. $28,191 100.0% $113,803 100.0%
Cost of sales ................... 12,017 42.6 71,314 62.7
---------- --------- ----------- ---------
Gross profit ................... 16,174 57.4 42,489 37.3
Operating expenses:
Operating ...................... 2,900 10.3 8,989 7.9
Selling ........................ 2,043 7.2 4,820 4.2
General and administrative .... 5,167 18.3 8,641 7.6
Depreciation and amortization . 415 1.5 1,466 1.3
---------- --------- ----------- ---------
Total ......................... 10,525 37.3 23,916 21.0
---------- --------- ----------- ---------
Income from operations .......... 5,649 20.0 18,573 16.3
Interest and other expenses, net 4,458 15.8 8,287 7.3
---------- --------- ----------- ---------
Net income ...................... $ 1,191 4.2% $ 10,286 9.0%
========== ========= =========== =========
The Company's operating revenues for 1995 increased 303.7% over 1994,
primarily due to the inclusion in 1995 of one full year of sales from ASC,
compared to one month in 1994.
The Company's gross profit increased by $26.3 million from 1994 to 1995
due to the increase in operating revenues. However, there was a decline in
the gross margin from 57.4% to 37.3% which was primarily attributable to the
change in the nature of the operation of the business, from 1994, when the
Company's primary business was the liquidation of the Eastern Inventory, to
1995, when the Company's primary business was the purchasing and sale of
aircraft spare parts and the providing of inventory management services on a
day-to-day basis through the operation of ASC.
The Company's operating expenses for 1995 increased $13.4 million, or
127.2%, compared to 1994 due to the increase in operating revenues. Operating
expenses as a percentage of operating revenues were 21.0% for 1995, compared
to 37.3% for 1994. The decrease in operating expenses as a percentage of
operating revenues was primarily due to the economies of scale derived from
the increased revenues as a result of the acquisition of ASC.
As a result of the above factors, income from operations for 1995
increased $12.9 million over 1994. Interest expense, amortization of deferred
financing costs and loan administration fees increased 85.9% from $4.5
million in 1994 to $8.3 million in 1995, primarily as a result of the debt
incurred to finance the acquisition of ASC. The Company's net income
increased by $9.1 million from 1994 to 1995.
19
<PAGE>
YEAR ENDED DECEMBER 31, 1993 V. YEAR ENDED DECEMBER 31, 1994
The following table sets forth certain information relating to the
Company's operations for the periods indicated:
YEAR ENDED DECEMBER 31,
----------------------------------------------
1993 1994
----------------------- ---------------------
$ % $ %
----------- ---------- ---------- ---------
(DOLLARS IN THOUSANDS)
Operating revenues ............ $23,429 100.0% $28,191 100.0%
Cost of sales ................. 11,162 47.6 12,017 42.6
----------- ---------- ---------- ---------
Gross profit ................. 12,267 52.4 16,174 57.4
Operating expenses:
Operating .................... 3,121 13.3 2,900 10.3
Selling ...................... 1,845 7.9 2,043 7.2
General and administrative .. 4,199 17.9 5,167 18.3
Depreciation and amortization 217 0.9 415 1.5
----------- ---------- ---------- ---------
Total ....................... 9,382 40.1 10,525 37.3
----------- ---------- ---------- ---------
Income from operations ........ 2,885 12.3 5,649 20.0
Other income .................. 203 0.9 -- --
Interest and other expenses,
net 6,244 26.7 4,458 15.8
----------- ---------- ---------- ---------
Net (loss) income ............. $(3,156) (13.5%) $ 1,191 4.2%
=========== ========== ========== =========
The Company's operating revenues for 1994 increased $4.8 million, or
20.3%, over 1993, primarily due to the inclusion in 1994 of one month's
operating revenues of ASC, which was acquired on December 2, 1994. For the
same reason, the Company's gross profit for 1994 increased by $3.9 million
compared to 1993. The gross margin increased from 52.4% to 57.4% due to the
bulk inventory purchase associated with the acquisition of ASC.
The Company's operating expenses for 1994 increased $1.1 million, or
12.2%, over 1993. The increase in operating expenses was primarily due to
costs associated with the acquisition of ASC and the settlement of certain
litigation during 1994. The decrease in operating expenses as a percentage of
revenues resulted from economies of scale derived as a result of increased
operating revenues from 1993 to 1994.
As a result of the above factors, the Company's income from operations
increased $2.8 million from period to period. Interest expense, amortization
of deferred financing costs and loan administration fees decreased by $1.8
million from $6.2 million in 1993 to $4.5 million in 1994. This decrease
reflects reduced borrowings, offset, in part, by the write-off during 1994 of
deferred financing costs as a result of the retirement of outstanding debt
associated with the acquisition of the Eastern Inventory. The Company
experienced net income of $1.2 million in 1994 as compared to a net loss of
$3.2 million in 1993.
THE ACQUISITION LOANS
In December 1994, to complete the acquisition of ASC and to refinance debt
incurred in connection with the acquisition of the Eastern Inventory, the
Company borrowed $65.4 million from certain financial institutions and $7.0
million from certain stockholders (collectively, the "Acquisition Loans").
The portion of the Acquisition Loans which is due to financial institutions
is composed of two term loans ("Term Loan A" and "Term Loan B") and the
revolving credit facility described under "Liquidity and Capital Resources"
below. Term Loan A in the original principal amount of $45.0 million is
repayable in 18 consecutive equal quarterly installments of $2.5 million,
commencing August 31, 1995, with the final installment due November 30, 1999.
Term Loan A bears interest at prime plus 1.5% (9.75% at March 31, 1996). Term
Loan B is in the original principal amount of $15.0 million and bears
20
<PAGE>
interest at prime plus 2.0% (10.25% at March 31, 1996). Term Loan B is repayable
in two equal installments of $7.5 million each, due on May 31, 2000, and
November 30, 2000. At March 31, 1996, the outstanding principal balances of Term
Loan A and Term Loan B were $37.5 million and $15.0 million, respectively.
On December 1, 1994, the Company entered into an interest rate cap
agreement which provides that the interest rate on $30.0 million of its term
loans will not exceed 9.0% through December 2, 1997. In exchange for this
interest rate limitation, the Company agreed to make quarterly payments to
its lenders ranging from $57,000 to $186,000, depending on the level of the
prime rate. Quarterly payments totaling $228,000 and $57,000, respectively,
were made during 1995 and the first quarter of 1996, which are included in
interest expense, amortization of deferred financing costs and loan
administration fees in the Company's Consolidated Financial Statements.
In addition, in December 1994, the Company entered into a subordinated loan
agreement whereby the Company borrowed $7.0 million from certain parties related
to several of its stockholders (the "Subordinated Debt"). The Subordinated Debt
is payable in a single lump sum on the earlier of June 2, 2001, or six months
after the term loans borrowed from financial institutions in connection with the
Acquisition Loans have been paid in full. The Subordinated Debt bears interest
at prime plus 5.0% (13.25% at March 31, 1996) and upon the earlier to occur of
June 2, 2001 or the repayment of the Subordinated Debt in full, the Partnership
will pay a facility fee of $350,000.
The Company intends to repay (i) all of the Subordinated Debt, (ii) all of
Term Loan B, (iii) substantially all of its revolving credit facility ($7.6
million at March 31, 1996) and (iv) a portion of Term Loan A, with the
proceeds of the Offering. See "Use of Proceeds."
LIQUIDITY AND CAPITAL RESOURCES
Since its formation, the Company has been financed primarily with its cash
flow from operations, and in 1994 and for the first quarter of 1996, with its
cash flow from financing activities. Cash flow from operations was $12.9 million
in 1993, $12.1 million in 1994 and $14.0 million in 1995. During the three
months ended March 31, 1996, the Company used cash of $4.7 million in its
operating activities. During 1994 and for the first quarter of 1996, $35.6 and
$5.1 million, respectively, of cash flow was provided by financing activities.
The Company's primary uses of cash to date have been investing activities
and the repayment of indebtedness. Cash used in investing activities was de
minimus in 1993, $47.1 million in 1994, $4.7 million in 1995 and $300,000
during the three months ended March 31, 1996. Cash provided by financing
activities in 1994 was utilized to complete the acquisition of ASC. Cash used
in financing activities was $12.5 million and $10.5 million for the years
ended December 31, 1993 and 1995, respectively.
During the first quarter of 1996, the Company used cash of $4.7 million in
its operating activities primarily as a result of increased purchases of
inventory to meet future customer demand and increased accounts receivable
resulting from increased sales during the quarter ended March 31, 1996. Cash
flow provided by financing activities for the quarter ended March 31, 1996 of
$5.1 million resulted from an increase in the Company's revolving line of
credit, partially offset by a $2.5 million principal payment on Term Loan A.
The Company presently has a revolving credit facility (collectively with
the term loans, the "Credit Facility") with certain financial institutions
which provides working capital of up to $20.0 million with interest at prime
plus 1.5% subject to an availability calculation based on the eligible
borrowing base. The eligible borrowing base includes certain receivables and
inventories of the Company. The revolving credit facility terminates on
November 30, 1999. At March 31, 1996, the Company had availability under the
Credit Facility of approximately $11.8 million.
The Credit Facility contains certain financial covenants regarding the
financial performance of the Company and certain other covenants including
limitations on the amount of annual capital expenditures and the incurrence of
additional debt, and provides for the suspension of the Credit Facility and
repayment of all debt in the event of a material adverse change in the business
or a change in control. In addition, the Credit Facility requires mandatory
repayments from excess cash flow.
21
<PAGE>
Substantially all of the Company's assets are pledged as collateral for amounts
borrowed. At March 31, 1996, the Company was in compliance with all of its
requirements under the Credit Facility.
In conjunction with the repayment of indebtedness from the proceeds of the
Offering, the Company has entered into a letter of intent (the "Letter of
Intent") to amend the Credit Facility (the "Amended Credit Facility"). The
Amended Credit Facility will be comprised of (i) a term loan facility (the
"Term Loan") in an original principal amount not to exceed $20.0 million and
to be determined based on the application of the proceeds of the Offering,
and (ii) a $50.0 million revolving loan, letter of credit and acquisition
loan facility, subject to an availability calculation based on the eligible
borrowing base (the "Revolving Credit Facility"). The letter of credit
portion of the Revolving Credit Facility will be subject to a $10.0 million
sublimit and the acquisition loan portion of the Revolving Credit Facility
will be subject to a $30.0 million sublimit with the imposition of certain
borrowing criteria based on the satisfaction of certain debt ratios. The
unused portion of the acquisition loan portion of the Revolving Credit
Facility will expire on the second anniversary of the closing date of the
Amended Credit Facility. The interest rate on the Amended Credit Facility will
be, at the option of the Company, (i) prime plus a margin, or (ii) LIBOR plus a
margin, where the margin determination is made based upon the Company's
financial performance over the prior 12 month period (ranging from 0.25% to
1.25% in the event prime is utilized, or 1.75% to 2.75% in the event LIBOR is
utilized). Upon consummation of the Offering, borrowings under the Amended
Credit Facility will initially accrue interest at either prime plus 0.25% or
LIBOR plus 1.75%.
The Term Loan will amortize in equal quarterly installments and will
terminate on November 30, 1999. Interim payments under the Revolving Credit
Facility will be made daily from collections of the Company's accounts
receivable and the Revolving Credit Facility will terminate on November 30,
1999. The Amended Credit Facility will contain similar financial and other
covenants of the Company and similar mandatory prepayment events as set forth in
the existing Credit Facility and is expected to be secured by a lien on
substantially all of the assets of the Company. However, in contrast to the
Credit Facility, the Amended Credit Facility will not require the application of
excess cash flows. Events of default will also be similar to the Credit
Facility; provided however that an event of default based on a change of control
will pertain to a change in more than 50% of the members of the Board of
Directors of either the Company or its Aviation Sales Operating Company
subsidiary in place on the closing date of the Amended Credit Facility.
During 1996, the Company expects to incur capital expenditures of
approximately $1.0 million ($363,000 of which was expended during the first
quarter of 1996), the majority of which will be used to make enhancements to
the Company's management information systems, telecommunication systems and
other capital equipment and improvements. The Company anticipates that funds
for these capital expenditures will be provided from cash flow from
operations. Additionally, immediately prior to the Offering, the Partnership
will distribute to its partners 34% of its 1996 net income through the
closing of the Offering. These distributions, estimated at approximately $1.0
million for the period ended March 31, 1996, will be paid with cash flow from
operations.
The contemplated repayment of indebtedness with the net proceeds of the
Offering is expected to improve the Company's liquidity by reducing both the
Company's interest expense and the principal amount of the indebtedness
required to be repaid in the future. The Company believes that cash flow from
operations and borrowing availability under the Amended Credit Facility will
be sufficient to satisfy the Company's anticipated working capital
requirements over the next two years.
As part of its growth strategy, the Company intends to pursue acquisitions
of bulk inventories of aircraft spare parts and complementary businesses. See
"Business-Company Strategy." Financing for such acquisitions will be provided
from operations and from the proceeds of the Amended Credit Facility. The
Company may also issue additional debt and/or equity securities in connection
with one or more of these acquisitions. The Company is currently evaluating a
number of acquisition opportunities and is at varying stages of negotiation with
respect to such acquisitions. No commitments or binding agreements have been
entered into to date and accordingly no assurance can be given that any of the
acquisitions currently being considered will be consummated. None of such
acquisitions, if consummated, would constitute a material acquisition for the
Company under applicable accounting rules.
22
<PAGE>
BUSINESS
GENERAL
The Company is a recognized worldwide leader in the aircraft spare parts
redistribution market and provides a wide range of value-added inventory
management services to its customers. The Company sells aircraft spare parts
to major commercial passenger airlines, air cargo carriers, maintenance and
repair facilities and other redistributors throughout the world. Parts sold
by the Company include rotable and expendable airframe and engine components
for commercial airplanes, including Boeing, McDonnell Douglas, Lockheed and
Airbus aircraft and Pratt & Whitney, General Electric and Rolls Royce jet
engines. The inventory management services offered by the Company include
purchasing services, repair management, warehouse management, aircraft
disassembly services and consignment and leasing of inventories of aircraft
parts. During 1995, the Company generated operating revenues of $113.8
million, operating income of $18.6 million and, after giving pro forma effect
to income taxes, net income of $6.3 million ($9.7 million as adjusted). Of such
revenues, approximately 60% were derived from sales to domestic customers and
approximately 40% were derived from sales to international customers.
INDUSTRY OVERVIEW AND TRENDS
The Company believes that the annual worldwide market for aircraft spare
parts is approximately $10.0 billion, of which approximately $1.3 billion
reflects annual sales of aircraft spare parts in the redistribution market.
The redistribution market is highly fragmented, with a limited number of
large, well-capitalized companies selling a broad range of aircraft spare
parts, and numerous smaller competitors servicing specialized niches. The
Company believes that the significant trends impacting the redistribution
market will continue to increase its overall size while reducing the number
of competitors. These trends are as follows:
GROWTH IN MARKET FOR AIRCRAFT SPARE PARTS. According to Boeing's 1996
Market Outlook (the "Boeing Report"), the worldwide fleet of commercial
airplanes is expected to double from 11,066 airplanes at the end of 1995 to
23,081 airplanes by 2015. Further, the Boeing Report projects that cargo jet
aircraft will increase from 1,219 airplanes in 1995 to 2,260 airplanes by
2015. Seventy percent of the airplanes delivered to cargo operators are
expected to be used aircraft converted from commercial passenger service.
Additionally, the Company believes that the number of planes in service for
more than 10 years is continuing to increase, and these older planes are the
primary market for redistributors. Finally, cost considerations are forcing
many airlines and repair and maintenance facilities which had historically
purchased their inventory requirements from new parts manufacturers to
utilize aircraft spare parts sold by redistributors. The Company believes
that all of these factors will increase the demand for aircraft spare parts
from the redistribution market.
REDUCTION IN NUMBER OF APPROVED VENDORS. In order to reduce purchasing
costs and streamline purchasing decisions, airline purchasing departments
have been reducing the number of their "approved" suppliers. During the last
few years, several major airlines have reduced their supplier lists from as
many as 50 to a core group of five to ten suppliers. In each such case to
date, the Company was one of the suppliers selected. The Company believes
that this trend will continue in the future and that, due to its market
presence and reputation for quality, the Company will continue to be selected
as an approved supplier.
CONSOLIDATION OF REDISTRIBUTION MARKET. As a result of reductions in the
supplier base by airline purchasing departments, there has been and the
Company believes there will continue to be a consolidation in the
redistribution market. The Company further believes that only those
redistributors such as the Company, with extensive inventories, adequate
capital and the ability to provide the documentation of traceability
necessary to comply with applicable regulatory and customer requirements,
will survive the consolidation of the redistribution market.
INCREASED OUTSOURCING OF INVENTORY MANAGEMENT FUNCTION. Airlines incur
substantial expenditures in connection with fuel, labor and aircraft
ownership. Further, airlines have come under
23
<PAGE>
increasing pressure during the last decade to reduce the costs associated
with providing air transportation services. While several of the expenditures
required to operate an airline are beyond the direct control of airline
operators (e.g., the price of fuel and labor costs), the Company believes
that obtaining replacement parts from the redistribution market and
outsourcing inventory management functions are areas in which airlines can
reduce their operating costs. Outsourcing inventory management functions
allows these functions to be handled more inexpensively and efficiently by a
redistributor like the Company that can achieve economies of scale
unavailable to individual airlines. Several smaller and start-up airlines and
air cargo operators do not presently own an inventory of aircraft spare
parts, but rather have entered into agreements with redistributors for the
supply of all or a portion of their aircraft spare parts requirements.
Additionally, other airlines, including several large airlines, have begun to
outsource portions of their purchasing services, repair management and
warehouse management. The Company believes that its offering of a broad array
of inventory management services to its customers, in conjunction with the
sale of aircraft spare parts, will give the Company a significant competitive
advantage in servicing its customers.
INCREASING EMPHASIS ON TRACEABILITY. Due to concerns regarding unapproved
aircraft spare parts, regulatory authorities have increased the level of
documentation which must be maintained on aircraft spare parts. This
requirement has, in turn, been extended by end-users to the vendors of the
parts. The sophistication required to track the history of an inventory
consisting of thousands of aircraft spare parts is considerable and has
required companies to invest significantly in information systems technology.
The Company has the benefit of the investment made by ASC in technology and
intends to continue to maintain its systems to allow it to effectively
compete in the redistribution market. The high cost of required technology to
effectively compete in the redistribution market has made entry into and
survival in the aircraft spare parts redistribution market increasingly
difficult and expensive.
INCREASED CONSIGNMENT. Certain of the Company's customers adjust inventory
levels on a periodic basis by disposing of excess aircraft spare parts.
Traditionally, larger airlines have used internal purchasing agents to manage
such dispositions. The Company believes that major airlines and other owners
of aircraft spare parts, in order to concentrate on their core businesses and
to more effectively redistribute their excess parts inventories, are
increasingly entering into long-term consignment agreements with
redistributors. By consigning inventories to a redistributor such as the
Company, customers are able to distribute their aircraft spare parts to a
larger number of prospective inventory buyers, allowing the customer to
maximize the value of its inventory. Consignment also enables the Company to
offer for sale significant parts inventory at minimal capital cost to the
Company. Consignment agreements are generally entered into on a long-term
basis and often consist of entire airplanes which are disassembled for sale
of the individual parts. In the Boeing Report it is noted that 5,408 aircraft
will be removed from active commercial service between 1994 and 2014. Many of
these aircraft will be disassembled in order to sell their parts.
LEASING. Over the last few years, several smaller and start-up airlines
have chosen to lease inventories of aircraft spare parts in order to preserve
capital while maintaining adequate spare parts support. The Company believes
that this trend to lease aircraft spare parts will continue in the future and
that it has a competitive advantage in providing this leasing service due to
its ability to maximize the residual value of the leased parts after
termination of the lease through sales of the parts in the ordinary course of
its business.
COMPETITIVE STRENGTHS
The Company believes that its primary competitive strengths are the
following:
LEADING MARKET POSITION. The Company is a recognized worldwide leader in
the aircraft spare parts redistribution market. Further, the Company believes
that it has one of the largest owned inventories of aircraft spare parts
among redistributors, with over 485,000 line items and over 35 million
individual parts currently in stock.
PROPRIETARY INFORMATION SYSTEMS. The Company's management information
systems collect and report data regarding inventory turnover and
traceability, pricing, market availability, customer
24
<PAGE>
demographics and other important data utilized by the Company. The Company
currently maintains data on over 3.6 million line items. Databases are
continually maintained on original equipment manufacturer recommended
upgrades or replacements, including airworthiness directives, for all
inventory components. State-of-the-art electronic data scanning and document
image storage technology are utilized for accurate and rapid retrieval of
inventory documents that are required under applicable regulatory guidelines.
COMPREHENSIVE CUSTOMER SERVICE. The Company believes that its customer
service efforts are critical to its long-term success. The Company's
management information systems allow rapid response to customer requests and
provide the opportunity to locate a required aircraft spare part if not
already present in the Company's inventory. The Company's Miami facility
operates on a seven day a week, 24-hour a day basis to provide timely support
in meeting customer aircraft spare parts requirements. The Company believes
that its South Florida location gives it a competitive advantage in servicing
its customers in North and South America, and Europe.
AVAILABLE CAPITAL. The Company believes that its strong capital position
provides a significant competitive advantage. The Company's capital base
allows it to timely fund bulk purchases and be a viable provider of inventory
management services to its customers. The Company also believes that the
financial sophistication of its management team and the experience of its
management in accessing the capital markets provide a distinct competitive
advantage to the Company.
COMPANY STRATEGY
The Company believes that it is one of a limited number of companies with
the breadth of inventory, technical and financial expertise, computer
information systems and financial strength to satisfy customer demands and be
profitable in the consolidating aircraft spare parts redistribution market.
The basic components of the Company's business strategy are the following:
INTERNAL GROWTH. The Company's strategy is to increase operating revenues
and operating income through continued customer penetration in its existing
markets and expansion into new markets. The Company intends to achieve this
by continuing to increase the size and breadth of its inventory and by
continuing to expand its marketing efforts to its worldwide customer base.
The Company will also continue to offer its customers a broad array of
inventory management services allowing its customers to reduce their costs of
operations by outsourcing some or all of their inventory management functions
and to take advantage of opportunities to maximize the value of their spare
parts inventory. The Company seeks to maintain close working relationships
with its customers and to become their vendor of choice.
CAPITALIZE ON LARGE BULK PURCHASE OPPORTUNITIES. While there is no
predictability as to when opportunities to purchase large inventories in bulk
will become available in the aircraft spare parts industry, such
opportunities have historically become available on a regular basis. "Bulk"
purchase opportunities arise when airlines, in order to reduce capital
requirements, sell large amounts of inventory in a single transaction or when
inventories of aircraft spare parts are sold in conjunction with bankruptcy
proceedings. Bulk inventory purchases allow the Company to obtain large
inventories of aircraft spare parts at a lower cost than can ordinarily be
obtained by purchasing on an individual basis, resulting generally in higher
gross margins on sales of such parts. Since 1992, the Company has evaluated a
number of bulk purchase opportunities and has successfully completed two
large bulk inventory purchases. Because of its market presence, the Company
is usually solicited for a bid when bulk inventories become available for
purchase anywhere in the world. The Company believes that its market
presence, experience in evaluating bulk acquisitions, sophisticated
management information systems and capital strength enable the Company to
quickly analyze and complete large bulk purchases opportunities to the extent
that the economics of such purchases are considered favorable. The Company
further believes that future economic downturns may provide the Company with
the opportunity to acquire additional aircraft spare parts inventories at
favorable prices.
PURSUE ACQUISITIONS OF COMPLEMENTARY BUSINESSES. A key element of the
Company's strategy involves growth through acquisitions of other companies,
assets or product lines that would complement
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or expand the Company's existing aircraft spare parts redistribution and
inventory management services business. The Company believes that
acquisitions will enable it to leverage its fixed costs of operations and
further expand the products and services which it can offer to its customers.
The Company is currently evaluating a number of acquisition opportunities and is
at varying stages of negotiation with respect to such acquisitions. No
commitments or binding agreements have been entered into to date and accordingly
no assurance can be given that any of the acquisitions currently being
considered will be consummated. None of such acquisitions, if consummated, would
constitute a material acquisition for the Company under applicable accounting
rules.
AIRCRAFT SPARE PARTS
Aircraft spare parts can be categorized by their ongoing ability to be
repaired and returned to service. The general categories are as follows: (i)
rotable; (ii) repairable; and (iii) expendable. A rotable is a part which is
removed periodically as dictated by an operator's maintenance procedures or
on an as needed basis and is typically repaired or overhauled and re-used an
indefinite number of times. An important subset of rotables is life limited
parts. A life limited rotable has a designated number of allowable flight
hours and/or cycles (one take-off and landing generally constitutes one
cycle) after which it is rendered unusable. A repairable is similar to a
rotable except that it can only be repaired a limited number of times before
it must be discarded. An expendable is generally a part which is used and not
thereafter repaired for further use.
Aircraft spare parts conditions are classified within the industry as (i)
factory new, (ii) new surplus, (iii) overhauled, (iv) serviceable, and (v) as
removed. A factory new or new surplus part is one that has never been
installed or used. Factory new parts are purchased from manufacturers or
their authorized distributors. New surplus parts are purchased from excess
stock of airlines, repair facilities or other redistributors. An overhauled
part has been completely disassembled, inspected, repaired, reassembled and
tested by a licensed repair facility. An aircraft spare part is classified
serviceable if it is repaired by a licensed repair facility rather than
completely disassembled as in an overhaul. A part may also be classified
serviceable if it is removed by the operator from an aircraft or engine while
operating under an approved maintenance program and is functional and meets
any manufacturer or time and cycle restrictions applicable to the part. A
factory new, new surplus, overhauled or serviceable part designation
indicates that the part can be immediately utilized on an aircraft. A part in
as removed condition requires functional testing, repair or overhaul by a
licensed facility prior to being returned to service in an aircraft.
OPERATIONS
The Company's core business is the buying and selling of aircraft spare
parts. The Company also provides value-added inventory management services to
its customers. These value-added services have become a more significant part
of the Company's business over the last year and the Company believes that
they provide significant opportunities for expansion of the Company's
business in the future.
INVENTORY SALES
The daily operations of the Company encompass inventory sales, brokering and
exchanging aircraft spare parts. The Company advertises its available
inventories held for sale or exchange on the Inventory Locator Service
("ILS") and the Airline Inventory Redistribution System ("AIRS") electronic
databases. Buyers of aircraft spare parts can access the ILS and AIRS
databases and determine the companies which have the desired inventory
available. The Company estimates that 70% of its daily sales activity results
from an ILS or AIRS inquiry. All major airlines and repair agencies subscribe
to one or both of these databases and accordingly, the Company maintains
continual on-line direct access with them. The Company also maintains direct
Electronic Data Interchanges ("EDI") with significant customers. These
programs provide for the electronic exchange of pricing and availability from
the Company to the customer in response to an electronic request for
quotation. ILS and AIRS do not, however, list price information relating to
particular parts. Knowledge of the value of particular parts comes only from
experience in the industry.
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The Company currently has over 485,000 line items in stock with market
availability, pricing and historical data available on more than 3.6 million
line items. The Company sells new, overhauled and serviceable replacement parts
from its inventory and by buying them at the request of its customer against a
specific order, usually purchasing the parts for its own account and selling
them to its customer. In addition, the Company offers a customer exchange
program for rotables. In an exchange transaction, the Company "exchanges" a new
surplus, overhauled or serviceable component taken from stock with a customer's
as-removed unit which has failed. The Company receives an exchange fee for
completing the transaction, plus reimbursement from the customer for the cost to
overhaul or repair the as-removed unit. If the as-removed part cannot be
repaired, it is returned to the customer and the exchange transaction is
converted to an outright sale at a sales price agreed upon at the time the
exchange transaction was negotiated.
INVENTORY MANAGEMENT SERVICES
The Company is meeting the outsourcing requirements of its customers
through providing a number of inventory management services. These services
assist airlines in streamlining their inventory management operations while
utilizing their capital more efficiently and reducing their costs. Through
the offering of various services, the Company believes it can provide an
inventory management program geared to a customer's particular requirements.
CONSIGNMENT. By consigning inventories to a redistributor such as the
Company, customers are able to distribute their aircraft spare parts to a
larger number of prospective inventory buyers, allowing the customer to
maximize the value of its inventory. Consignment also enables the Company to
offer for sale significant parts inventory at minimal capital cost to the
Company. The Company presently has several consignment agreements in place
with major airlines, and its revenues from consignment arrangements have
increased significantly over the last few years.
PURCHASING SERVICES AND REPAIR MANAGEMENT. The Company provides services
whereby it purchases spare parts for several smaller and start-up airlines.
These arrangements allow the Company's customers to take advantage of the
Company's greater purchasing power. The Company also provides repair
management services to certain of its customers, whereby the Company receives
a fee for managing a customer's required spare parts repair requirements. The
Company believes that it is well positioned to offer these repair management
services, since a significant portion of component repair cost relates to the
procurement of the parts to be utilized in the repair. Additionally, because
of its size, the Company procures significant repair services for its own
account, and maintains comprehensive databases on repair and replacement
parts cost, allowing it to capitalize on favorable pricing for repair
services available only to large users of repair services. This permits the
Company to offer these services on a cost-effective basis to its customers.
LEASING. The Company (through its subsidiary, Aviation Sales Leasing
Company) provides long-term leasing of inventories of aircraft spare parts to
airline customers. An increasing number of smaller and start-up airlines have
chosen to lease aircraft spare parts in order to preserve capital while
maintaining adequate spare parts support. The Company believes that it has a
competitive advantage in aircraft spare parts leasing due to its ability to
maximize the residual value of the parts after termination of the lease
through sales of the parts in the ordinary course of its business. As of
March 31, 1996, the Company had $11.6 million of inventories on long-term
lease, $9.3 million of which were maintained outside the United States.
AIRCRAFT DISASSEMBLY. The Company provides "teardown" services at its
Ardmore, Oklahoma facility, both in connection with consignment arrangements
and for the purpose of returning disassembled aircraft spare parts directly
to a customer. The Company expects that the increasing number of older
aircraft will increase the demand for aircraft spare parts and result in
expanded opportunities for aircraft disassembly.
WAREHOUSE MANAGEMENT. The Company provides warehouse management services
which allow a customer to avoid the costs associated with the operation of
its own inventory warehouse facility by
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maintaining inventory at the Company's warehouse facility. The Company also will
manage a customer's inventory at the customer's own facility.
SALES AND MARKETING; CUSTOMERS
The Company utilizes inside salespersons, regional field salespersons,
independent contract representatives and overseas sales offices in its sales
and marketing efforts. The Company's Executive Vice President-Sales and
Marketing directs the Company's global sales force. The Company employs a
regional vice president for each of North America, South America, Europe and
the Far East. The Company's outside sales force is responsible for obtaining
new customers and maintaining relationships with existing customers. The
majority of the Company's day-to-day sales are accomplished through the
Company's inside sales force.
The Company staffs its South Florida facility to provide sales and
delivery services seven days a week, 24 hours a day. This service is critical
to provide support to airline customers which, at any time, may have an
aircraft grounded in need of a particular part. The Company's South Florida
location, with easy access to Miami International Airport and Fort Lauderdale
International Airport, assists the Company in providing reliable and timely
delivery of purchased products.
The Company has over 1,000 customers, which include commercial passenger
airlines, air cargo carriers, maintenance and repair facilities and other
aircraft parts redistribution companies. During 1995, the Company's top 10
and top 100 customers accounted for approximately 23% and 69%, respectively,
of operating revenues, and no single customer accounted for more than 10% of
operating revenues.
MANAGEMENT INFORMATION SYSTEMS
The Company has developed a proprietary management information system
which is an important component of its business and a significant factor in
the Company's leading position in the redistribution market. The Company's
management information systems collect and report data regarding inventory
turnover and traceability, pricing, market availability, customer
demographics and other important data used by the Company. The Company
currently maintains marketing data on and is able to estimate the value of
more than 3.6 million line items. The Company also maintains databases on
recommended upgrades or replacements including airworthiness directives.
Access to such information gives the Company the best possible opportunity to
avoid purchases of aircraft spare parts which might be deemed unusable. In
addition, the data maintained by the Company allows it to provide its
customers with information with respect to obsolescence and
interchangeability of parts. The Company utilizes electronic data scanning
and document image storage technology for accurate and rapid retrieval of
inventory traceability documents that must accompany all sales. These
documents are required by the Company's customers in order for them to comply
with applicable regulatory guidelines. The Company believes that its
continued investment in the development of information systems is a key
factor in maintaining its competitive advantage.
COMPETITION
The aircraft spare parts redistribution market is highly fragmented.
Competition in the redistribution market is generally based on price,
availability of product and quality, including traceability. The Company's
major competitors include AAR Corp., The AGES Group and The Memphis Group.
There is also substantial competition, both domestically and overseas, from
smaller, independent dealers who generally participate in niche markets.
Several of the Company's competitors have greater financial and other
resources than the Company.
GOVERNMENT REGULATION AND TRACEABILITY
The FAA regulates the manufacture, repair and operation of all aircraft
and aircraft parts operated in the United States. Its regulations are
designed to insure that all aircraft and aviation equipment are continuously
maintained in proper condition to ensure safe operation of the aircraft.
Similar rules apply
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in other countries. All aircraft must be maintained under a continuous condition
monitoring program and must periodically undergo thorough inspection and
maintenance. The inspection, maintenance and repair procedures for the various
types of aircraft and equipment are prescribed by regulatory authorities and can
be performed only by certified repair facilities utilizing certified
technicians. Certification and conformance is required prior to installation of
a part on an aircraft. Presently, whenever necessary with respect to a
particular part, the Company utilizes FAA and/or Joint Aviation Authority
certified repair stations to repair and certify parts to ensure worldwide
marketability. The operations of the Company may in the future be subject to new
and more stringent regulatory requirements. In that regard, the Company closely
monitors the FAA and industry trade groups in an attempt to understand how
possible future regulations might impact the Company. See "Risk Factors--Risks
Regarding the Company's Inventory" and "--Government Regulation."
An important factor in the aircraft spare parts redistribution market
relates to the documentation or traceability that is supplied with an
aircraft spare part. The Company requires all of its suppliers to provide
adequate documentation as dictated by the appropriate regulatory authority.
The Company utilizes electronic data scanning and storage techniques to
maintain complete copies of all documentation. Documentation required
includes, where applicable, (i) a maintenance release from a certified
airline or repair facility signed and dated by a licensed airframe and/or
powerplant mechanic who repaired the aircraft spare part and an inspector
certifying that the proper methods, materials, and workmanship were used,
(ii) a "teardown" report detailing the discrepancies and corrective actions
taken during the last shop repair, and (iii) an invoice or purchase order
from an approved source.
EMPLOYEES
As of March 31, 1996, the Company employed approximately 235 persons. None
of the Company's employees are covered by collective bargaining agreements.
The Company believes that its relations with its employees are good.
PROPERTIES
The Company's executive offices are located in Miami, Florida. All of the
Company's properties are maintained on a regular basis and are adequate for
the Company's present requirements. The Company may, in the future,
consolidate its inventory into a single warehouse facility, if it is cost
effective to do so and if required to support the Company's growth.
The following table identifies the principal properties utilized by the
Company. All properties are leased. See "Certain Transactions."
APPROXIMATE
FACILITY DESCRIPTION LOCATION SQUARE FOOTAGE
- -------------------- ------------ --------------
Corporate Headquarters and Central Warehouse Miami, FL 166,000
Aircraft Disassembly and Storage Ardmore, OK 130,000
Warehouse Pearland, TX 100,000
Warehouse Miami, FL 40,000
Warehouse Miami, FL 10,000
Regional Purchasing Office Van Nuys, CA 6,300
PRODUCT LIABILITY AND LEGAL PROCEEDINGS
The Company's business exposes it to possible claims for personal injury
or death which may result from a failure of aircraft spare parts sold by it.
The Company takes what it believes are adequate precautions to ensure the
quality and traceability of the aircraft spare parts which it sells and
maintains what it believes is adequate liability insurance to protect it from
such claims. See "Risk Factors--Product Liability."
The Company is not presently involved in any material legal proceedings.
From time to time the Company may be named as a defendant in suits for
product defects, breach of warranty, breach of implied warranty of
merchantability, or other actions relating to products which it distributes
which are manufactured by others. The Company believes that this exposure is
adequately covered by its products liability insurance.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
NAME AGE POSITION
- ---- --- --------
Dale S. Baker ....... 38 President, Chief Executive Officer and
Chairman of the Board
Harold M. Woody .... 50 Executive Vice President--Sales and Marketing
and Director
Michael A. Saso .... 42 Senior Vice President--Purchasing
Joseph E. Civiletto 36 Vice President and Chief Financial Officer
James D. Innella ... 37 Vice President and Chief Operating Officer
Robert Alpert ....... 46 Director
Tim Watkins ......... 51 Director
Kazutami Okui ....... 55 Director
Sam Humphreys ....... 35 Director
DALE S. BAKER has been the President and Chief Executive Officer of the
Company since February 1992. Prior thereto, Mr. Baker was Senior Vice
President and Manager in GE Capital's Corporate Investment Finance Group.
HAROLD M. WOODY has been the Executive Vice President--Sales and Marketing
of the Company since February 1992. Prior thereto, from 1989 to 1992, Mr.
Woody was Senior Vice President--Sales and Marketing for Japan Fleet
Service(S) Pte. Ltd. and from 1987 to 1989, Mr. Woody was Executive Vice
President of ASC.
MICHAEL A. SASO has been the Senior Vice President--Purchasing of the
Company since December 1994. From 1986 until December 1994, Mr. Saso served
as Vice President--Purchasing for ASC.
JOSEPH E. CIVILETTO has been the Vice President and Chief Financial
Officer of the Company since February 1992. Prior thereto from 1982 to 1992,
Mr. Civiletto held various financial, planning and audit positions with Baker
Hughes Inc. and Arthur Andersen LLP.
JAMES D. INNELLA has been the Vice President and Chief Operating Officer
of the Company since December 1994. Prior thereto: (i) from July 1993 to
December 1994, Mr. Innella served as General Manager of ASC; (ii) from 1991
to July 1993, Mr. Innella was a Director of Operations for Ryder Airlines
Services; and (iii) from 1988 to 1991, Mr. Innella was the Director of
Operations and Purchasing for Aviparts, Inc., a subsidiary of Ryder Airlines
Services.
ROBERT ALPERT is a private investor. In addition to his investment in the
Company, Mr. Alpert has invested significantly in business ventures in the
steel, environmental and waste industries, and oil service industries.
TIM WATKINS has served as the President and Chief Executive Officer of
Japan Fleet Service(S) Pte. Ltd. since 1989. Prior thereto, Mr. Watkins was
President and Chief Executive Officer of Ryder's Aviation Sales and Leasing
Division.
KAZUTAMI OKUI has served as the General Manager of the Electronics and
Aircraft Department of Tomen Corporation, located in Tokyo, Japan, for more
than five years.
SAM HUMPHREYS is Vice Chairman of U.S. Delivery Systems, Inc. ("U.S.
Delivery"). He has served in various capacities at U.S. Delivery since April
1994. From March 1993 to March 1994, Mr. Humphreys served as an executive
officer of Envirofil, Inc., an environmental services company. Prior thereto,
he was a partner in the law firm of Andrews & Kurth.
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The officers of the Company are elected by the Board of Directors to serve
until their successors are elected and qualified. The directors of the
Company are elected at the annual meeting of the stockholders. The
Certificate of Incorporation and Bylaws of the Company provide for a Board of
Directors divided into three classes, as nearly equal in size as possible,
with staggered terms of three years. As a result, approximately one-third of
the Board will be elected each year. Messrs. Okui and Humphreys will serve
until the 1997 Annual Meeting of Stockholders, Messrs. Alpert and Watkins
will serve until the 1998 Annual Meeting of Stockholders, and Messrs. Baker
and Woody will serve until the 1999 Annual Meeting of Stockholders.
The Company's Certificate of Incorporation and Bylaws provide for the
indemnification of, and advancement of expenses to, directors and officers of
the Company. The Company has entered into agreements to provide
indemnification for its directors and certain officers in addition to the
indemnification provided for in the Certificate of Incorporation.
The Company intends to appoint at least one additional independent member
to its Board of Directors following the completion of the Offering.
COMMITTEES
The Board of Directors intends to establish an Audit Committee and a
Nominating and Compensation Committee. The Audit Committee will recommend the
independent accountants appointed by the Board of Directors to audit the
financial statements of the Company, which includes an inspection of the
books and accounts of the Company, and will review with such accountants the
scope of their audit and their report thereon, including any questions and
recommendations that may arise relating to such audit and report of the
Company's internal accounting and auditing procedures. The Nominating and
Compensation Committee will review and approve the compensation of executive
officers, evaluate possible director nominees and make recommendations
concerning such nominees to the Board of Directors, and recommend to the
Chairman and the Board the composition of the Board committees and nominees
for officers of the Company.
DIRECTOR COMPENSATION
The Company intends to pay directors of the Company who are not employed
by the Company an annual retainer fee at the rate of $12,000 per year, $1,000
for each meeting of the Board of Directors attended and $1,000 for each
committee meeting attended.
In addition, all directors will receive on an annual basis mandatory stock
option grants under the 1996 Director Stock Option Plan for serving on the
Board. Five-year options to purchase 5,000 shares of Common Stock will be
automatically granted to each director on July 1 of each year, starting July 1,
1997, at an option exercise price equal to the closing price of the Common Stock
on such date. Existing directors will, upon the organization of the Company,
each be granted five-year options to purchase 10,000 shares of Common Stock, all
of which will be immediately exercisable, at an option exercise price equal to
the initial public offering price. Additionally, directors appointed to the
Board in the future will be granted options to purchase 10,000 shares of Common
Stock when they are appointed to the Board, at an option exercise price equal to
the closing price of the Common Stock on the date of their appointment to the
Board.
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SUMMARY COMPENSATION TABLES
The following table shows remuneration paid or accrued by the Company
during the year ended December 31, 1995 and for each of the two preceding
years, to the Chief Executive Officer and to each of the four most highly
compensated executive officers of the Company, other than the Chief Executive
Officer, for services in all capacities while they were employees of the
Company, and the capacities in which the services were rendered.
SALARY BONUS
NAME YEAR ($) ($)
- ---- ---- ------ -----
Dale S. Baker(1) 1995 237,500 118,750
1994 175,000 --
1993 175,000 --
Harold M. Woody(2) 1995 212,500 106,250
1994 175,000 --
1993 175,000 --
Michael A. Saso(3) 1995 125,000 62,500
1994 8,231 --
Joseph E. Civiletto 1995 130,000 65,000
1994 90,000 --
1993 80,000 --
James D. Innella(3) 1995 125,000 62,500
1994 9,105 --
(1) Mr. Baker also receives $5,000 per year for life insurance premiums. See
"--Employment Agreements" below.
(2) During 1993 and 1994, Mr. Woody was employed by Japan Fleet Service(S) Pte.
Ltd. ("JFS"). The compensation set forth above was paid to JFS in return for
Mr. Woody's services.
(3) Compensation for 1994 reflects one month of service.
No long-term compensation awards were made to management during the three
years ended December 31, 1995.
During 1994, Messrs. Baker, Woody, Civiletto and Innella received payments
of $250,000, $75,000, $50,000 and $25,000, respectively, in connection with
and as a result of the acquisition of ASC by the Company. Additionally, see
"Certain Transactions" and "Principal Stockholders" for information regarding
management's current ownership interest in the Company.
STOCK OPTION PLANS
In connection with the organization of the Company, the Company's Board of
Directors and shareholders will adopt two stock option plans (the "Plans").
Pursuant to the 1996 Director Stock Option Plan (the "Director Plan"), options
to acquire a maximum of the greater of 150,000 shares or 2% of the number of
shares of Common Stock outstanding may be granted to directors of the Company.
Pursuant to the 1996 Stock Option Plan (the "1996 Plan"), options to acquire a
maximum of the greater of 650,000 shares of Common Stock or 8% of the number of
shares of Common Stock outstanding may be granted to executive officers,
employees (including employees who are directors), independent contractors and
consultants of the Company. Options to purchase 165,000 shares at an exercise
price equal to the initial public offering price will be granted under the
Plans, 94,999 of which will be immediately exercisable. See "Principal
Stockholders."
The Plans will be administered by the Compensation Committee of the Board of
Directors. The Compensation Committee will determine which persons will receive
options and the number of options to be granted to such persons. The Director
Plan also provides for annual mandatory grants of options
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to directors. See "Management--Director Compansation." The Compensation
Committee will also interpret the provisions of the Plans and make all other
determinations that it may deem necessary or advisable for the administration of
the Plans.
Pursuant to the Plans, the Company may grant Incentive Stock Options
("ISOs") as defined in Section 422(b) of the Internal Revenue Code of 1986,
as amended (the "Code"), and Non-Qualified Stock Options ("NQSOs"), not
intended to qualify under Section 422(b) of the Code. The price at which the
Company's Common Stock may be purchased upon the exercise of options granted
under the Plans will be required to be at least equal to the per share fair
market value of the Common Stock on the date particular options are granted.
Options granted under the Plans may have maximum terms of not more than 10
years and are not transferable, except by will or the laws of descent and
distribution. None of the ISOs under the Plans may be granted to an
individual owning more than 10% of the total combined voting power of all
classes of stock issued by the Company unless the purchase price of the
Common Stock under such option is at least 110% of the fair market value of
the shares issuable on exercise of the option determined as of the date the
option is granted, and such option is not exercisable more than five years
after the grant date.
Generally, options granted under the Plans may remain outstanding and may
be exercised at any time up to three months after the person to whom such
options were granted is no longer employed or retained by the Company or
serving on the Company's Board of Directors.
Pursuant to the Plans, unless otherwise determined by the Compensation
Committee, one-third of the options granted to an individual are exercisable
upon grant, one-third are exercisable on the first anniversary of such grant and
the final one-third are exercisable on the second anniversary of such grant.
However, options granted under the Plans shall become immediately exercisable if
the holder of such options is terminated by the Company or is no longer a
director of the Company, as the case may be, subsequent to certain events which
are deemed to be a "change in control" of the Company. A "change in control" of
the Company generally is deemed to occur when (i) any person becomes the
beneficial owner of or acquires voting control with respect to more than 20% of
the Common Stock (or 35% if such person is a holder of Common Stock on the
effective date of the Offering); (ii) a change occurs in the composition of a
majority of the Company's Board of Directors during a two-year period, provided
that a change with respect to a member of the Company's Board of Directors shall
be deemed not to have occurred if the appointment of a member of the Company's
Board of Directors is approved by a vote of at least 75% of the individuals who
constitute the then existing Board of Directors; or (iii) the Company's
stockholders approve the sale of all or substantially all of the Company's
assets.
ISOs granted under the Plans are subject to the restriction that the
aggregate fair market value (determined as of the date of grant) of options
which first become exercisable in any calendar year cannot exceed $100,000.
The Plans provide for appropriate adjustments in the number and type of
shares covered by the Plans and options granted thereunder in the event of
any reorganization, merger, recapitalization or certain other transactions
involving the Company.
EMPLOYMENT AGREEMENTS
Effective December 2, 1994, the Company entered into an employment
agreement with Mr. Baker (the "Employment Agreement"). The Employment
Agreement provides for an annual base salary of $237,500 (to be increased
annually by a cost of living adjustment). In addition, the Company agreed to
provide Mr. Baker with all employee benefits established by the Company, and
to pay Mr. Baker an additional sum of $5,000 per year for insurance premiums
to maintain a whole life insurance policy. The Employment Agreement requires
Mr. Baker to use his best efforts to perform the duties of President and
Chief Executive Officer.
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Mr. Woody has an employment agreement with the Company to serve as
Executive Vice President--Sales and Marketing, under which he is entitled to
an annual base salary of $212,500 (to be increased annually by a cost of
living adjustment), and all employee benefits established by the Company.
The employment agreements between the Company and Messrs. Baker and Woody
each provide for an initial term expiring on December 31, 1999. Thereafter, the
respective agreements each shall run for successive one-year periods unless
terminated by the Company upon six months' prior written notice, or by Messrs.
Baker or Woody upon three months' prior written notice.
Mr. Saso has an employment agreement with the Company to serve as Senior
Vice President--Purchasing under which he is entitled to an annual base salary
of $185,000 (to be increased annually by a cost of living adjustment), and all
employee benefits established by the Company. The agreement provides for an
initial term expiring on May 31, 2001, running for successive one-year terms
thereafter, unless terminated by the Company upon six months' prior written
notice, or by Mr. Saso upon three months' prior written notice.
Mr. Civiletto has an employment agreement with the Company to serve as
Vice President and Chief Financial Officer under which he is entitled to an
annual base salary of $130,000 (to be increased annually by a cost of living
adjustment), and all employee benefits established by the Company. The
agreement provides for an initial term expiring on December 31, 1997, running
for successive one-year terms thereafter, unless terminated by the Company
upon six months' prior written notice, or by Mr. Civiletto upon three months'
prior written notice.
Mr. Innella has an employment agreement with the Company to serve as Vice
President and Chief Operating Officer under which he is entitled to an annual
base salary of $150,000 (to be increased annually by a cost of living
adjustment), and all employee benefits established by the Company. The agreement
provides for an initial term expiring on May 31, 2001, running for successive
one-year terms thereafter, unless terminated by the Company upon six months'
prior written notice, or by Mr. Innella upon three months' prior written notice.
Each of Messrs. Baker, Woody, Saso, Civiletto and Innella has further
agreed in his respective employment agreement that he shall refer to the
Company all opportunities in the aerospace industry relating to parts
purchasing, leasing, financing, repair, distribution and manufacturing, and
aircraft purchasing, leasing and financing to which he might become exposed
in carrying out his duties and responsibilities.
Each of the employment agreements for Messrs. Baker, Woody, Saso,
Civiletto and Innella also provides for participation in the Company's EBITDA
Incentive Compensation Plan whereby each of them has the opportunity to earn
an incentive bonus of between 20% and 50% of their base salary. Further, each
of the employment agreements provides that in the event of (i) a change in
the control of the Company including the vesting of decision-making authority
in one of the Company's current principal stockholders; (ii) the sale of all
or substantially all of the assets of the Company to a third party for which
the executive officer does not continue in employment; or (iii) the merger or
consolidation of the Company with an entity for which the executive officer
does not continue in employment, the employment agreement shall be terminable
by the executive officer upon 90 days' notice and one year's base salary
shall be payable to the executive officer as a termination fee.
Section 162(m) of the Code generally disallows an income tax deduction to
public companies for compensation over $1.0 million paid in a year to any one
of the chief executive officer or the four most highly compensated other
executive officers, to the extent that this compensation is not "performance
based" within the meaning of Section 162(m). As a result of this limitation,
there can be no assurance that all of the compensation paid to the Company's
executive officers in the future will be deductible.
34
<PAGE>
CERTAIN TRANSACTIONS
As of December 2, 1994, the Company entered into a 20-year lease with
Aviation Properties, a Delaware general partnership ("Aviation Properties"),
pursuant to which the Company leases its corporate headquarters and warehouse
in Miami, Florida (the "Miami Property"). The Company makes annual payments
under such lease in the amount of approximately $892,990. The sole partners
of Aviation Properties are (i) AVAC Corporation, a Delaware corporation
("AVAC"), and (ii) J/T Aviation Partners, a Delaware general partnership
("J/T"). The sole stockholder and president of AVAC is Robert Alpert, a
principal stockholder of the Company. J/T is also a principal stockholder of
the Company. See "Principal Stockholders."
Immediately prior to the effectiveness of the Registration Statement of which
this Prospectus forms a part, the partners will each contribute their respective
interests in the Partnership to the Company, which has been newly formed for the
purpose of succeeding to the assets, liabilities and business of the
Partnership. In exchange for Mr. Alpert's contribution, Mr. Alpert will receive
2,249,000 shares of Common Stock and in exchange for management's contribution,
management, in the aggregate, will receive 675,000 shares of Common Stock. In
exchange for J/T's contribution, J/T will receive (i) 1,501,000 shares of Common
Stock, (ii) an amount equal to the net proceeds to be received by the Company
from the Underwriters for 500,000 of the shares of Common Stock to be sold in
the Offering ($8,743,000, at an assumed offering price of $19.00 per share) and
(iii) an amount equal to 15.38% of the proceeds received by the Company from the
Underwriters for any shares of Common Stock sold pursuant to the exercise of the
Underwriters' over-allotment option and to the extent such option is not
exercised in full, 15.38% of the 487,500 shares of Common Stock subject to such
option (up to 75,000 shares) which are not purchased by the Underwriters. See
"Principal Stockholders."
In connection with Aviation Properties' purchase of the Miami Property,
the Company and Aviation Properties entered into a loan agreement (the "Loan
Agreement") whereby the Company made a $2,465,519 loan to Aviation
Properties, which loan bears interest at 8% per annum, with principal and
interest due in a single payment on December 2, 2004.
As of December 2, 1994, the Company entered into a six-year lease with
Aviation Properties of Texas, a Delaware general partnership ("AVTEX"),
pursuant to which the Company leases a warehouse in Pearland, Texas. The
Company makes annual payments under such lease in the amount of $114,468. The
sole partners of AVTEX are AVAC and J/T.
The Company believes the terms of the Loan Agreement and the terms of the
leases with Aviation Properties and AVTEX are no less favorable than could be
obtained from an unaffiliated third party.
The Company is obligated to pay a fee of $50,000 per quarter to an entity
controlled by Mr. Alpert for consulting services. The Company's obligation to
pay this fee will expire at the end of February 1997. The Company believes
the terms of the consulting agreement are no less favorable than could be
obtained from an unaffiliated third party.
As of December 2, 1994, the Company entered into the Subordinated Debt
Agreement with RCP Management L.P., a Texas limited partnership controlled by
Mr. Alpert ("RCP"), Japan Fleet Service Co., Ltd., a Japanese corporation ("JFS
Japan") and Tomen America, Inc., a New York corporation ("Tomen America")
(collectively, RCP, JFS Japan and Tomen America are hereinafter, the "Lenders").
JFS Japan and Tomen Corporation ultimately own all of the partnership interests
in J/T. Under the terms of the Subordinated Debt Agreement, the Lenders made a
$7.0 million loan (the "Subordinated Debt") to the Company which is subordinated
in the right of payment to the Acquisition Loans and which is to be repaid by
the Company upon the earlier of (i) June 2, 2001, or (ii) the date which is six
months after the Acquisition Loans have been paid in full. The Subordinated Debt
bears interest at prime plus 5% and is payable quarterly (13.25% at March 31,
1996) and upon the earlier to occur of June 2, 2001 or the repayment of the
Subordinated Debt in full, the Partnership will pay a facility fee of $350,000.
The Company intends to repay the Subordinated Debt, and the related facility
fee, in full with the net proceeds of the Offering. See "Use of Proceeds" and
"Principal Stockholders."
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<PAGE>
At January 1, 1995, Messrs. Baker, Woody, Saso, Civiletto and Innella were
granted options (the "Options") by the partners of the Partnership (AVAC and
J/T) to purchase an aggregate of 13.5% of the outstanding limited partnership
interests in the Partnership for an exercise price greater than the fair
market value of the interests in the Partnership at that date. At January 1,
1996, the Options were exercised in full by delivery to AVAC and J/T of full
recourse promissory notes (the "Notes") in the aggregate principal amounts
set forth below, representing the payment in full of the exercise price of
the Options:
LIMITED PARTNER'S
PERCENTAGE INTEREST IN
PARTNERSHIPACQUIRED PRINCIPAL AMOUNT
NAME UPON EXERCISE OF OPTIONS OF NOTES
- ---- ------------------------ ----------------
Dale S. Baker ....... 6.0% $638,678.75
Harold M. Woody .... 4.0% 425,785.83
James D. Innella ... 1.5% 159,669.69
Michael A. Saso .... 1.5% 159,669.69
Joseph E. Civiletto 0.5% 53,223.23
Management's interests in the Partnership are subject to a first priority
pledge to the lenders under the Credit Facility and a second priority pledge to
AVAC and J/T to secure the repayment of their respective Notes. The Notes bear
interest at the rate of 8.0% per annum, with principal and interest due and
payable on the earlier of January 1, 2001 or from the net proceeds available
upon the sale of any portion of the collateral securing the Notes. Immediately
prior to the Offering, management will contribute their interests in the
Partnership to the Company in exchange for shares of the Common Stock. At such
time, management will pledge their shares of the Common Stock to secure the
repayment of their respective Notes. The exercise price of the Options after
giving effect to the exchange of Partnership interests for shares of Common
Stock would have effectively been $2.13 per share. See "Principal Stockholders"
for a description of the shares of Common Stock to be owned by each of the
members of the Company's management after completion of the Offering.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of the date of this Prospectus, and as adjusted
to reflect the sale of the shares of Common Stock offered hereby, by (a) each of
the Company's directors, (b) all executive officers and directors of the Company
as a group, and (c) all persons known by the Company to own beneficially more
than 5% of the Company's Common Stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR OWNED AFTER
TO THE OFFERING(1) THE OFFERING(1)
------------------------ ------------------------
NAME SHARES PERCENT+ SHARES PERCENT+
- ---------------------------------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Robert Alpert(2)(7) 2,259,000 50.1 2,259,000 29.1
J/T Aviation Partners(3) 1,576,000 35.0 1,576,000 20.3
Dale S. Baker(4)(5)(7) 310,000 6.9 310,000 4.0
Harold M. Woody(4)(7) 210,000 4.7 210,000 2.7
Tim Watkins(6)(7) 10,000 * 10,000 *
Kazutami Okui(6)(7) 10,000 * 10,000 *
Sam Humphreys(7) 10,000 * 10,000 *
Michael A. Saso(4) 75,000 1.7 75,000 *
James D. Innella(4)(8) 76,666 1.7 76,666 *
Joseph E. Civiletto(4)(9) 28,333 * 28,333 *
All directors and executive officers as
a group (9 persons)(6)(10) 2,988,999 65.5 2,988,999 38.2
<FN>
- ----------
* Less than one percent (1%)
+ Based upon 4,500,000 shares outstanding prior to the Offering and 7,750,000
shares outstanding after the Offering, plus all currently exercisable
options, as applicable.
(1) Each person named in the table has the sole voting and investment power
with respect to the shares beneficially owned.
(2) Shares are owned of record by three corporate entities controlled by Mr.
Alpert.
(3) J/T is a general partnership with three general partners. The ultimate
beneficial owners of the partnership interests in J/T are Tomen Corporation
and Japan Fleet Service(S) Pte. Ltd. Assumes no exercise of the
over-allotment option. If the over-allotment option is exercised in full,
shares beneficially owned will be 1,501,000 (18.4% of the shares of Common
Stock outstanding after the Offering). See "Certain Transactions" and Note
15 to Notes to the Company's Consolidated Financial Statements.
(4) Shares shown as beneficially owned, except for currently exercisable
options, are pledged to secure payment of the Notes representing the
purchase price paid for their interest in the Company. See "Certain
Transactions."
(5) A portion of these shares (35,000 shares) are owned by the Dale S. Baker
Family Limited Partnership.
(6) Messrs. Watkins and Okui disclaim beneficial ownership of the shares owned
by J/T.
(7) Includes five-year options to purchase 10,000 shares at an option exercise
price equal to the initial public offering price. See "Management--Director
Compansation."
(8) Includes five-year options to purchase 1,666 shares at an option exercise
price equal to the initial public offering price. Excludes five-year options
to purchase 3,334 shares at an option exercise price equal to the initial
public offering price, which options are not currently vested.
(9) Includes five-year options to purchase 3,333 shares at an option exercise
price equal to the initial public offering price. Excludes five-year options
to purchase 6,667 shares at an option exercise price equal to the initial
public offering price, which options are not currently vested.
(10)Includes five-year options to purchase 64,999 shares at an option exercise
price equal to the initial public offering price.
</FN>
</TABLE>
37
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital consists of 30,000,000 shares of Common
Stock, par value $.001 per share, and 1,000,000 shares of preferred stock,
par value $.01 per share (the "Preferred Stock"). None of the Preferred Stock
is outstanding.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share held of
record on all matters presented to stockholders, including the election of
directors. In the event of a liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share equally and
ratably in the assets of the Company, if any, remaining after paying all
debts and liabilities of the Company and the liquidation preferences of any
outstanding Preferred Stock. The Common Stock has no preemptive rights or
cumulative voting rights and no redemption, sinking fund or conversion
provisions.
Holders of Common Stock are entitled to receive dividends if, as and when
declared by the Board of Directors out of funds legally available therefore,
subject to the dividend and liquidation rights of any Preferred Stock that
may be issued and outstanding and subject to any dividend restrictions in the
Company's credit facilities. No dividend or other distribution (including
redemptions or repurchases of shares of capital stock) may be made if after
giving effect to such distribution, the Company would not be able to pay its
debts as they become due in the usual course of business, or if the Company's
total assets would be less than the sum of its total liabilities plus the
amount that would be needed at the time of a liquidation to satisfy the
preferential rights of any holders of Preferred Stock. See "Dividend Policy."
All of the shares offered hereby, when issued and sold, will be validly
issued, fully paid and nonassessable.
The transfer agent and registrar for the Common Stock will be Continental
Stock Transfer & Trust Company.
PREFERRED STOCK
The Board of Directors is authorized, without further stockholder action,
to divide any or all shares of the authorized Preferred Stock into series and
fix and determine the designations, preferences and relative rights and
qualifications, limitations or restrictions thereon of any series so
established, including voting powers, dividend rights, liquidation
preferences, redemption rights and conversion privileges. As of the date of
this Prospectus, the Board of Directors has not authorized any series of
Preferred Stock, and there are no plans, agreements or understandings for the
authorization or issuance of any shares of Preferred Stock. The issuance of
Preferred Stock with voting rights or conversion rights may adversely affect
the voting power of the Common Stock, including the loss of voting control to
others. The issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change of control of the Company.
CERTAIN PROVISIONS OF THE CERTIFICATE AND BYLAWS
GENERAL. A number of provisions of the Company's Certificate of
Incorporation ("Certificate") and Bylaws ("Bylaws") concern matters of
corporate governance and the rights of stockholders. Certain of these
provisions, as well as the ability of the Board of Directors to issue shares
of Preferred Stock and to set the voting rights, preferences and other terms
thereof, may be deemed to have an anti-takeover effect and may discourage
takeover attempts not first approved by the Board of Directors (including
takeovers which certain stockholders may deem to be in their best interests).
To the extent takeover attempts are discouraged, temporary fluctuations in
the market price of the Common Stock, which may result from actual or rumored
takeover attempts, may be inhibited. These provisions, together with the
classified Board of Directors and the ability of the Board to issue Preferred
Stock without further stockholder action, also could delay or frustrate the
removal of incumbent directors or
38
<PAGE>
the assumption of control by stockholders, even if such removal or assumption
would be beneficial to stockholders of the Company. These provisions also
could discourage or make more difficult a merger, tender offer or proxy
contest, even if they could be favorable to the interests of stockholders,
and could potentially depress the market price of the Common Stock. The Board
of Directors believes that these provisions are appropriate to protect the
interests of the Company and all of its stockholders.
ISSUANCE OF RIGHTS. The Certificate authorizes the Board of Directors to
create and issue rights (the "Rights") entitling the holders thereof to purchase
from the Company shares of capital stock or other securities. The times at
which, and the terms upon which, the Rights are to be issued may be determined
by the Board of Directors and set forth in the contracts or instruments that
evidence the Rights. The authority of the Board of Directors with respect to the
Rights includes, but is not limited to, the determination of (i) the initial
purchase price per share of the capital stock or other securities of the Company
to be purchased upon exercise of the Rights, (ii) provisions relating to the
times at which and the circumstances under which the Rights may be exercised or
sold or otherwise transferred, either together with or separately from, any
other securities of the Company, (iii) antidilutive provisions which adjust the
number or exercise price of the Rights or amount or nature of the securities or
other property receivable upon exercise of the Rights, (iv) provisions which
deny the holder of a specified percentage of the outstanding securities of the
Company the right to exercise the Rights and/or cause the Rights held by such
holder to become void, (v) provisions which permit the Company to redeem the
Rights and (vi) the appointment of a rights agent with respect to the Rights.
MEETINGS OF STOCKHOLDERS. The Bylaws provide that a special meeting of
stockholders may be called only by the Board of Directors unless otherwise
required by law. The Bylaws provide that only those matters set forth in the
notice of the special meeting may be considered or acted upon at that special
meeting, unless otherwise provided by law. In addition, the Bylaws set forth
certain advance notice and informational requirements and time limitations on
any director nomination or any new business which a stockholder wishes to
propose for consideration at an annual meeting of stockholders.
NO STOCKHOLDER ACTION BY WRITTEN CONSENT. The Certificate provides that
any action required or permitted to be taken by the stockholders of the
Company at an annual or special meeting of stockholders must be effected at a
duly called meeting and may not be taken or effected by a written consent of
stockholders in lieu thereof.
INDEMNIFICATION AND LIMITATION OF LIABILITY. The Bylaws provide that
directors and officers of the Company shall be, and in the discretion of the
Board of Directors non-officer employees may be, indemnified by the Company
to the fullest extent authorized by Delaware law, as it now exists or may in
the future be amended, against all expenses and liabilities reasonably
incurred in connection with service for or on behalf of the Company. The
Bylaws also provide that the right of directors and officers to
indemnification shall be a contract right and shall not be exclusive of any
other right possessed or hereafter acquired under any bylaw, agreement, vote
of stockholders or otherwise. The Certificate contains a provision permitted
by Delaware law that generally eliminates the personal liability of directors
for monetary damages for breaches of their fiduciary duty, including breaches
involving negligence or gross negligence in business combinations, unless the
director has breached his or her duty of loyalty, failed to act in good
faith, engaged in intentional misconduct or a knowing violation of law, paid
a dividend or approved a stock repurchase in violation of the Delaware
General Corporation Law or obtained an improper personal benefit. This
provision does not alter a director's liability under the federal securities
laws. In addition, this provision does not affect the availability of
equitable remedies, such as an injunction or rescission, for breach of
fiduciary duty.
AMENDMENT OF THE CERTIFICATE. The Certificate provides that an amendment
thereof must first be approved by a majority of the Board of Directors and (with
certain exceptions) thereafter approved by the holders of a majority of the
total votes eligible to be cast by holders of voting stock with respect to such
amendment or repeal; provided however, that the affirmative vote of 80% of the
total votes eligible to be cast by holders of voting stock, voting together as a
single class, is required to amend provisions relating to the establishment of
the Board of Directors and amendments to the Certificate.
39
<PAGE>
AMENDMENT OF BYLAWS. The Certificate provides that the Bylaws may be
amended or repealed by the Board of Directors or by the stockholders. Such
action by the Board of Directors requires the affirmative vote of a majority
of the directors then in office. Such action by the stockholders requires the
affirmative vote of the holders of at least two-thirds of the total votes
eligible to be cast by holders of voting stock with respect to such amendment
or repeal at an annual meeting of stockholders or a special meeting called
for such purposes, unless the Board of Directors recommends that the
stockholders approve such amendment or repeal at such meeting, in which case
such amendment or repeal shall only require the affirmative vote of a
majority of the total votes eligible to be cast by holders of voting stock
with respect to such amendment or repeal.
STATUTORY BUSINESS COMBINATION PROVISION
The Company has elected that it will exclude itself from coverage of
Section 203 of the Delaware General Corporation Law ("Section 203"). Section 203
provides, with certain exceptions, that a Delaware corporation may not engage in
any of a broad range of business combinations with a person or affiliate, or
associate of such person, who is an "interested stockholder" for a period of
three years from the date that such person became an interested stockholder
unless: (i) the transaction resulting in a person becoming an interested
stockholder, or the business combination, is approved by the board of directors
of the corporation before the person becomes an interested stockholder, (ii) the
interested stockholder acquired 85% or more of the outstanding voting stock of
the corporation in the same transaction that makes it an interested stockholder
(excluding shares owned by persons who are both officers and directors of the
corporation, and shares held by certain employee stock ownership plans); or
(iii) on or after the date the person becomes an interested stockholder, the
business combination is approved by the corporation's board of directors and by
the holders of at least 66 2/3 % of the corporation's outstanding voting stock
at an annual or special meeting, excluding shares owned by the interested
stockholder. Under Section 203, an "interested stockholder" is defined (with
certain limited exceptions) as any person that is (i) the owner of 15% or more
of the outstanding voting stock of the corporation or (ii) an affiliate or
associate of the corporation and was the owner of 15% or more of the outstanding
voting stock of the corporation at any time within the three-year period
immediately prior to the date on which it is sought to be determined whether
such person is an interested stockholder.
40
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
After completion of this Offering, the Company will have 7,750,000 shares
of Common Stock outstanding (8,162,500 if the Underwriters' overallotment
option is exercised in full). Of these shares the 3,250,000 shares of Common
Stock offered hereby (3,737,500 if the Underwriters' over-allotment option is
exercised in full), will be freely tradeable without restriction or further
registration under the Securities Act, unless purchased by "affiliates" of
the Company, as that term is defined in Rule 144, described below. All of the
remaining 4,500,000 shares of Common Stock outstanding upon completion of
this Offering are "Restricted Securities," as that term is defined in Rule
144 under the Securities Act.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated in accordance with the Rule), including an
affiliate of the Company, who has beneficially owned Restricted Securities
for at least two years would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of 1% of the
outstanding shares of Common Stock or the reported average weekly trading
volume in the over-the-counter market for the four weeks preceding the sale.
Sales under Rule 144 are also subject to certain manner of sale restrictions
and notice requirements and to the availability of current public information
concerning the Company. Persons who have not been affiliates of the Company
for at least three months and who have held their shares for more than three
years are entitled to sell Restricted Securities without regard to the
volume, manner of sale, notice and public information requirements of Rule
144.
The Company, its executive officers, directors and stockholders have agreed
that for a period of 180 days from the date of this Prospectus, they will not,
without the prior written consent of Smith Barney Inc., sell, offer to sell,
solicit an offer to buy, contract to sell, grant any option to purchase or
otherwise transfer or dispose of, any shares of Common Stock or any securities
convertible into, or exercisable or exchangeable for, shares of Common Stock,
subject to certain exceptions.
Beginning 180 days after the closing of the Offering, each of the current
stockholders of the Company will generally have the right to require the
Company to file a registration statement under the Securities Act in order to
register an underwritten public offering of all or any part of the Restricted
Securities held by it. In addition, in the event that the Company proposes to
register any of its securities under the Securities Act, either for its own
account or for the account of other security holders, the current
stockholders will be entitled to notice of such registration and be entitled
to include its Restricted Securities in such registration, subject to certain
marketing and other limitations.
Prior to this Offering, there has been no market for the shares of Common
Stock and no prediction can be made as to the effect, if any, that market
sales of shares of Common Stock or the availability of such shares for sale
will have on the market prices prevailing from time to time. The possibility
that substantial amounts of shares of Common Stock may be sold in the public
market may adversely affect prevailing market prices for the shares of Common
Stock and/or may impair the Company's ability to raise equity capital in the
future.
41
<PAGE>
UNDERWRITING
Upon the terms and subject to the conditions of the Underwriting
Agreement, dated the date hereof, each of the Underwriters named below has
severally agreed to purchase from the Company, and the Company has agreed to
sell to such Underwriter, the respective number of shares of Common Stock set
forth opposite the name of such Underwriter.
UNDERWRITER NUMBER OF SHARES
- ----------- ----------------
Smith Barney Inc. ....................
Alex. Brown & Sons Incorporated ......
Sanders Morris Mundy .................
-----------
Total ............................... 3,250,000
===========
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to
take and pay for all shares of Common Stock offered hereby (other than those
covered by the over-allotment option described below) if any such shares are
purchased.
The Underwriters propose to offer part of the shares of Common Stock
directly to the public at the public offering price set forth on the cover
page of this Prospectus and part of the shares to certain dealers at a price
that represents a concession not in excess of $ per share under the
public offering price. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share to certain other
dealers. The Representatives of the Underwriters have advised the Company
that the Underwriters do not intend to confirm sales to any accounts over
which they exercise discretionary authority.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to 487,500 shares of
the Common Stock at the price to public set forth on the cover page of this
Prospectus minus the underwriting discount and commissions. The Underwriters
may exercise such option solely for the purpose of covering over-allotments,
if any, in connection with the Offering of the shares of Common Stock offered
hereby. To the extent such option is exercised, each Underwriter will be
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number of shares set forth
opposite each Underwriter's name in the preceding table bears to the total
number of shares listed in such table.
The Company, its executive officers, directors and stockholders have
agreed that, for a period of 180 days from the date of this Prospectus, they
will not, without the prior written consent of Smith Barney Inc., sell, offer to
sell, solicit an offer to buy, contract to sell, grant any option to purchase or
otherwise transfer or dispose of, any shares of Common Stock or any securities
convertible into, or exercisable or exchangeable for, shares of Common Stock,
subject to certain exceptions.
The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.
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<PAGE>
Prior to the Offering, there has not been any public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
shares of Common Stock included in the Offering has been determined by
negotiations among the Company and the Representatives. Among the factors
considered in determining such price were the history of and prospects for
the Company's business and the industry in which it competes, an assessment
of the Company's management and the present state of the Company's
development, the past and present revenues and earnings of the Company, the
prospects for the growth of the Company's revenues and earnings, the current
state of the economy in the United States and the current level of economic
activity in the industry in which the Company competes and in related or
comparable industries, and currently prevailing conditions in the securities
markets, including current market valuations of publicly traded companies
that are comparable to the Company.
LEGAL MATTERS
Certain legal matters with respect to the Common Stock offered hereby will
be passed upon for the Company by Akerman, Senterfitt & Eidson, P.A., Miami,
Florida, and for the Underwriters by Latham & Watkins, New York, New York.
EXPERTS
The financial statements and schedule of the Partnership as of December
31, 1994 and 1995 and for each of the three years in the period ended
December 31, 1995 included in this prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
certified public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm
as experts in accounting and auditing in giving said reports.
The combined financial statements of Aviation Sales Company (a division of
Aviall Services, Inc.) as of November 30, 1994 and for the year ended
December 31, 1993 and for the eleven months ended November 30, 1994, have
been included in this prospectus and the registration statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein or in the registration statement, and
upon the authority of said firm as experts in accounting and auditing. The
report of KPMG Peat Marwick LLP refers to a change in accounting for post
retirement benefits other than pensions in 1993.
ADDITIONAL INFORMATION
This Prospectus constitutes a part of a Registration Statement filed by
the Company with the Securities and Exchange Commission (the "Commission")
under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus omits certain of the information contained in the
Registration Statement, and reference is hereby made to the Registration
Statement and related exhibits and schedules for further information with
respect to the Company and the Common Stock offered hereby. Any statements
contained herein concerning the provisions of any document are not
necessarily complete, and in each such instance reference is made to the copy
of such document filed as an exhibit to the Registration Statement. Each such
statement is qualified in its entirety by such reference. The Registration
Statement and the exhibits and schedules forming a part thereof can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
DC 20549, and should also be available for inspection and copying at the
following regional offices of the Commission: 7 World Trade Center, New York,
New York 10048; and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be
obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, DC 20549, at prescribed rates.
43
<PAGE>
AVIATION SALES COMPANY
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
THE COMPANY
<S> <C>
Report of Independent Certified Public Accountants ......................................... F-2
Consolidated Balance Sheets at December 31, 1994 and 1995 and March 31, 1996 (unaudited) .. F-3
Consolidated Statements of Income for the Three Years Ended December 31, 1995
and the Three Months Ended March 31, 1995 and March 31, 1996 (unaudited) ................. F-4
Consolidated Statements of Partners' Capital for the Three Years Ended December 31, 1995 .. F-5
Consolidated Statements of Cash Flows for the Three Years Ended December 31, 1995
and the Three Months Ended March 31, 1995 and March 31, 1996 (unaudited) ................. F-6
Notes to Consolidated Financial Statements ................................................. F-8
AVIATION SALES COMPANY BUSINESS UNIT
Report of Independent Certified Public Accountants ......................................... F-22
Combined Balance Sheet at November 30, 1994 ................................................ F-23
Combined Statements of Operations and Changes in Aviall Investment for the
December 31, 1993 and the Eleven Months Ended November 30, 1994 .......................... F-24
Combined Statements of Cash Flows for the Year Ended December 31, 1993 and
the Eleven Months Ended November 30, 1994 .................................................. F-25
Notes to Combined Financial Statements ..................................................... F-26
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners of
ASC Acquisition Partners, L.P.:
We have audited the accompanying consolidated balance sheets of ASC
Acquisition Partners, L.P. (a Delaware Limited Partnership) and subsidiary,
as of December 31, 1994 and 1995, and the related consolidated statements of
income, partners' capital and cash flows for each of the three years in the
period ended December 31, 1995. These consolidated financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ASC
Acquisition Partners, L.P. and subsidiary, as of December 31, 1994 and 1995,
and the results of their operations and their changes in partners' capital
and cash flows for each of the three years in the period ended December 31,
1995 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Miami, Florida,
February 19, 1996 (except with respect
to the matters discussed in Note 16,
as to which the date is May 2, 1996).
F-2
<PAGE>
ASC ACQUISITION PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
PRO FORMA
MARCH 31, MARCH 31,
1994 1995 1996 1996
----------- ------------ ------------- --------------
(UNAUDITED) (UNAUDITED)
(NOTE 15)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................ $ 1,482,279 $ 253,307 $ 283,520 $ 283,520
Accounts receivable, net of allowance for doubtful
accounts of $2,625,809 in 1994, $1,951,395 in
1995 and $1,876,407 in 1996 (unaudited) ........ 16,979,559 23,824,362 26,210,782 26,210,782
Inventories (Note 1) ............................. 52,765,203 48,956,682 53,347,383 53,347,383
Prepaid expenses ................................. 56,868 56,963 352,914 352,914
------------ ------------ ------------- -------------
Total current assets ........................... 71,283,909 73,091,314 80,194,599 80,194,599
------------ ------------ ------------- -------------
SPARE PARTS ON LEASE, net of accumulated
amortization of $69,444 in 1994, $1,024,904 in
1995 and $1,327,148 in 1996 (unaudited) ......... 9,930,556 11,697,151 11,394,907 11,394,907
------------ ------------ ------------- -------------
FIXED ASSETS:
Property and equipment (Note 7) .................. 2,224,159 3,121,702 3,484,303 3,484,303
Less--Accumulated depreciation ................... (749,203) (1,259,658) (1,414,219) (1,414,219)
------------ ------------ ------------- -------------
Total fixed assets ............................. 1,474,956 1,862,044 2,070,084 2,070,084
------------ ------------ ------------- -------------
AMOUNTS DUE FROM AFFILIATES ....................... 2,971,139 3,031,198 2,997,364 2,997,364
------------ ------------ ------------- -------------
OTHER ASSETS:
Deposits and other ............................... 20,043 682,469 795,422 795,422
Deferred financing costs, net (Note 1) ........... 3,584,316 2,972,454 2,802,505 2,802,505
------------ ------------ ------------- -------------
Total other assets ............................. 3,604,359 3,654,923 3,597,927 3,597,927
------------ ------------ ------------- -------------
Total assets ................................... $ 89,264,919 $ 93,336,630 $ 100,254,881 $ 100,254,881
============ ============ ============= =============
LIABILITIES, PARTNERS' CAPITAL AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ................................. $ 6,720,475 $ 10,453,278 $ 10,495,062 $ 10,495,062
Accrued expenses ................................. 3,744,722 4,080,634 2,878,691 2,878,691
Accrued interest payable ......................... 665,538 794,800 782,934 782,934
Other liabilities, vendor-held parts (Note 9) .... 1,129,538 1,030,228 972,349 972,349
Notes payable, current maturities--
Senior (Note 8) ................................. 5,000,000 10,000,000 10,000,000 10,000,000
Other, revolver (Note 8) ........................ 2,152,208 42,808 7,621,576 7,621,576
------------ ------------ ------------- -------------
Total current liabilities ...................... 19,412,481 26,401,748 32,750,612 32,750,612
------------ ------------ ------------- -------------
LONG-TERM LIABILITIES:
Deferred income (Note 6) ......................... 773,740 877,315 877,315 877,315
Notes payable--
Senior (Note 8) ................................. 55,000,000 45,000,000 42,500,000 42,500,000
Subordinated debt (Note 8) ...................... 7,000,000 7,000,000 7,000,000 7,000,000
------------ ------------ ------------- -------------
Total long-term liabilities .................... 62,773,740 52,877,315 50,377,315 50,377,315
------------ ------------ ------------- -------------
DUE TO PARTNERS (NOTE 15) ......................... -- -- -- 10,136,600
------------ ------------ ------------- -------------
COMMITMENTS AND CONTINGENCIES
(Notes 11 and 12)
PARTNERS' CAPITAL ................................. 7,078,698 14,057,567 17,126,954 --
------------ ------------ ------------- -------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none outstanding ................... -- -- -- --
Common stock, $.001 par value 30,000,000 shares
authorized, 4,500,000 shares outstanding ....... -- -- -- 4,500
Additional paid-in capital ....................... -- -- -- 6,985,854
------------ ------------ ------------- -------------
Total equity ................................... 7,078,698 14,057,567 17,126,954 6,990,354
------------ ------------ ------------- -------------
Total liabilities and partners' capital ........ $ 89,264,919 $ 93,336,630 $ 100,254,881 $ 100,254,881
============ ============ ============= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
F-3
<PAGE>
ASC ACQUISITION PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------------------- -----------------------------
1993 1994 1995 1995 1996
------------- ------------- ------------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Sales of aircraft parts, net .... $ 23,428,896 $ 27,799,227 $ 108,434,709 $ 26,961,969 $ 30,722,843
Rentals from leases and other ... -- 391,752 5,368,174 1,488,841 2,175,303
------------ ------------- ------------- ------------ ------------
23,428,896 28,190,979 113,802,883 28,450,810 32,898,146
COST OF SALES .................... 11,161,617 12,016,623 71,314,263 16,654,197 21,187,943
------------ ------------- ------------- ------------ ------------
12,267,279 16,174,356 42,488,620 11,796,613 11,710,203
------------ ------------- ------------- ------------ ------------
OPERATING EXPENSES:
Operating ....................... 3,120,670 2,900,168 8,988,894 2,056,853 2,342,764
Selling ......................... 1,844,739 2,043,147 4,820,081 1,095,148 1,589,428
General and administrative ...... 4,199,120 5,167,245 8,640,423 2,294,962 2,328,851
Depreciation and amortization ... 217,395 414,618 1,465,915 315,346 456,805
------------ ------------- ------------- ------------ ------------
9,381,924 10,525,178 23,915,313 5,762,309 6,717,848
------------ ------------- ------------- ------------ ------------
INCOME FROM OPERATIONS ........... 2,885,355 5,649,178 18,573,307 6,034,304 4,992,355
OTHER (EXPENSES) INCOME:
Other income .................... 202,822 -- -- -- --
Interest expense, amortization of
deferred financing costs
and loan administration fees .. (6,243,889) (4,458,664) (8,287,584) (2,083,454) (1,922,968)
------------ ------------- ------------- ------------ ------------
NET INCOME (LOSS) ................ $ (3,155,712) $ 1,190,514 $ 10,285,723 $ 3,950,850 $ 3,069,387
============ ============= ============= ============ ============
PRO FORMA DATA
(Unaudited) (Notes 14 and 15):
Historical income before
income taxes ................... $ 10,285,723 $ 3,950,850 $ 3,069,387
PRO FORMA ADJUSTMENT TO REFLECT
INCOME TAXES ................... (4,011,432) (1,540,832) (1,197,061)
------------- ------------ ------------
PRO FORMA NET INCOME ............. $ 6,274,291 $ 2,410,018 $ 1,872,326
============= ============ ============
PRO FORMA NET INCOME
PER SHARE ...................... $ 1.25 $ 0.48 $ 0.37
============= ============ ============
PRO FORMA WEIGHTED AVERAGE SHARES
OUTSTANDING .................... 5,000,000 5,000,000 5,000,000
============= ============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE>
ASC ACQUISITION PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
AVIATION
J/T AJT SALES
RCP AVIATION CAPITAL AVAC MANAGEMENT
MANAGEMENT PARTNERS PARTNERS CORPORATION COMPANY TOTAL
------------ ----------- ----------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AS OF
DECEMBER 31, 1992 .... $ 3,142,826 $ 2,901,070 $ -- $ -- $ -- $ 6,043,896
Net loss ............ (1,640,970) (1,514,742) -- -- -- (3,155,712)
----------- ----------- ----------- ----------- --------- ------------
BALANCE AS OF
DECEMBER 31, 1993 .... 1,501,856 1,386,328 -- -- -- 2,888,184
Net income .......... 437,732 534,622 69,744 141,441 6,975 1,190,514
Contribution of net
assets of AJT ..... (1,939,588) (1,790,389) 3,729,977 -- -- --
Capital contributions -- 1,404,000 -- 1,521,000 75,000 3,000,000
----------- ----------- ----------- ----------- --------- ------------
BALANCE AS OF
DECEMBER 31, 1994 .... -- 1,534,561 3,799,721 1,662,441 81,975 7,078,698
Net income .......... -- 3,850,975 2,057,145 4,171,889 205,714 10,285,723
Distribution to
partners .......... -- (1,238,086) (661,371) (1,341,260) (66,137) (3,306,854)
----------- ----------- ----------- ----------- --------- ------------
BALANCE AS OF
DECEMBER 31, 1995 .... $ -- $ 4,147,450 $ 5,195,495 $ 4,493,070 $ 221,552 $ 14,057,567
=========== =========== =========== =========== ========= ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE>
ASC ACQUISITION PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------------- ---------------------------
1993 1994 1995 1995 1996
------------- ------------- ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING
ACTIVITIES:
Net income (loss) ......................... $ (3,155,712) $ 1,190,514 $ 10,285,723 $ 3,950,850 $ 3,069,387
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities--
Depreciation and amortization .......... 2,687,362 1,197,540 2,132,522 483,097 626,754
Provision for doubtful accounts ......... 155,000 110,000 360,000 75,000 160,000
(Increase) decrease in accounts
receivable, net ....................... 383,852 1,261,264 (7,204,803) (8,922,016) (2,546,420)
Decrease in notes receivable ............ 276,396 -- -- -- --
(Increase) decrease in inventories ...... 10,056,688 3,616,958 4,330,960 2,582,931 (4,390,701)
(Increase) decrease in prepaid expenses . (28,544) 109,286 (95) (110,661) (295,950)
(Increase) decrease in deposits ......... (2,263) 185,505 (662,426) (89,001) (112,953)
Increase (decrease) in accounts payable,
accrued expenses, vendor-held parts and
deferred income ....................... 2,569,618 4,432,342 4,740,341 2,393,311 (1,229,905)
------------ ------------ ------------ ----------- -----------
Net cash provided by (used in)
operating activities ................ 12,942,397 12,103,409 13,982,222 363,511 (4,719,788)
------------ ------------ ------------ ----------- -----------
CASH FLOW FROM INVESTING
ACTIVITIES:
Purchase of certain assets of the Aviation
Sales Company business unit ............. -- (44,076,495) (1,060,538) -- --
Purchases of equipment, net ............... (33,133) (534,565) (897,544) (312,437) (362,601)
Purchase of spare parts on lease .......... -- -- (2,722,054) -- --
Due from affiliates ....................... -- (2,465,519) (60,059) 24,525 33,834
------------ ------------ ------------ ----------- -----------
Net cash used in investing activities . (33,133) (47,076,579) (4,740,195) (287,912) (328,767)
------------ ------------ ------------ ----------- -----------
CASH FLOW FROM FINANCING
ACTIVITIES:
Issuance of senior debt ................... -- 60,000,000 -- --
Repayment of senior debt .................. -- -- (5,000,000) -- (2,500,000)
Net issuance (repayment) of senior
revolving facility ...................... 333,445 1,818,763 (2,109,400) (1,096,244) 7,578,768
Repayment of senior notes payable ......... (13,001,807) (23,180,282) -- -- --
Issuance of subordinated debt--
AIS partnership ......................... 200,000 4,200,000 -- -- --
Repayment of senior and junior
subordinated debt--AIS partnership ...... -- (11,400,000) -- -- --
Advances from partners--AIS partnership ... -- 376,364 -- -- --
Repayments to partners--AIS partnership ... -- (376,364) -- -- --
Issuance of subordinated debt--
ASC partnership ......................... -- 7,000,000 -- -- --
Contributions from (distributions to)
partners--ASC partnership ............... -- 3,000,000 (3,306,854) -- --
Payment of financing fees ................. -- (3,719,867) -- -- --
Payment of deferred fees .................. -- (2,135,000) (54,745) (7,461) --
Repayments of other debt .................. (11,670) (11,461) -- -- --
------------ ------------ ------------ ----------- -----------
Net cash provided by (used in)
financing activities ................ (12,480,032) 35,572,153 (10,470,999) (1,103,705) 5,078,768
------------ ------------ ------------ ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS .............................. 429,232 598,983 (1,228,972) (1,028,106) 30,213
CASH AND CASH EQUIVALENTS,
beginning of period ...................... 454,064 883,296 1,482,279 1,482,279 253,307
------------ ------------ ------------ ----------- -----------
CASH AND CASH EQUIVALENTS,
end of period ............................ $ 883,296 $ 1,482,279 $ 253,307 $ 454,173 $ 283,520
============ ============ ============ =========== ===========
</TABLE>
F-6
<PAGE>
ASC ACQUISITION PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------- ---------------------------
1993 1994 1995 1995 1996
----------- ------------- ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Purchase of net assets from Aviation
Sales Company business unit--
Accounts receivable ................... $ -- $ 14,184,533 $ -- $ -- $ --
Inventories ............................. -- 22,357,509 (522,439) -- --
Spare parts on lease .................... -- 10,000,000 -- -- --
Fixed assets ............................ -- 750,000 -- -- --
Accounts payable ........................ -- (2,441,807) 1,582,977 -- --
Deferred income ......................... -- (773,740) -- -- --
----------- ------------ ------------ ---------- ----------
Cash paid ............................ $ -- $ 44,076,495 $ 1,060,538 $ -- $ --
=========== ============ ============ ========== ==========
Transfer of building to AVTEX--
Net book value of building .............. $ -- $ 1,772,567 $ -- $ -- $ --
Mortgage by AVTEX ....................... -- (1,266,947) -- -- --
----------- ------------ ------------ ---------- ----------
Due from affiliate ................... $ -- $ 505,620 $ -- $ -- $ --
=========== ============ ============ ========== ==========
Interest paid ............................ $ 3,712,578 $ 4,231,428 $ 7,717,005 $1,585,633 $1,725,588
=========== ============ ============ ========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-7
<PAGE>
ASC ACQUISITION PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION RELATED TO THE THREE MONTHS ENDING
MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 1--GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND OPERATIONS
ASC Acquisition Partners, L.P. (ASC or the Partnership), a Delaware
limited partnership, d/b/a Aviation Sales Company, was formed on November 30,
1994, by Aviation Sales Management Company (ASMC or the General Partner), a
Delaware corporation, AJT Capital Partners, a Delaware general partnership
d/b/a Aerospace International Services (AIS), AVAC Corporation (AVAC), a
Delaware corporation, and J/T Aviation Partners (J/T), a Delaware general
partnership. ASMC was incorporated on October 25, 1994. The shareholders of
ASMC are AVAC and J/T. AIS was formed on February 28, 1992, between RCP
Management L.P. (RCP or the Managing Partner), a Texas limited partnership,
and J/T. The Partnership is engaged in the business of acquiring,
maintaining, marketing and leasing aircraft and aircraft engine spare parts.
The Partnership's products are distributed in the United States and abroad to
commercial airlines, air cargo carriers, distributors, maintenance
facilities, corporate aircraft operators and other aerospace companies.
On December 2, 1994 (effective November 30, 1994), AIS contributed
substantially all of its assets to the Partnership, and the Partnership
assumed certain liabilities of AIS, in consideration for an equity position
in the Partnership. For accounting purposes, the Partnership and AIS are
considered related parties as the ultimate ownership interests of the
Partnership interests are held by parties who own substantially the same
ownership percentage of AIS. As a result, the combination was accounted for
in a manner similar to a pooling of interest. Accordingly, the accompanying
financial statements include the accounts and operations of AIS for the years
ended December 31, 1993, 1994 and 1995, at the historical net book value of
AIS and also include the historic results of operations of the business
acquired from Aviall Services, Inc., as described below from December 1,
1994 through December 31, 1995. Prior to the combination with AIS, the
Partnership did not have any operations.
On December 2, 1994 (effective November 30, 1994), AIS transferred an
office and warehouse building with a net book value of $1,772,567 to Aviation
Properties of Texas (AVTEX), a Delaware general partnership which was formed
on November 30, 1994 between AVAC and J/T; in addition, AVTEX assumed from
AIS the mortgage liability of $1,266,947 on such facility and agreed to pay
the Partnership $505,620. No gain or loss was recognized on this transaction.
The Partnership entered into a six-year lease with AVTEX for use of the
building for an annual use payment of $114,468 (see Note 12).
On December 2, 1994 (effective November 30, 1994), the Partnership
completed the acquisition of certain assets and assumed certain liabilities
of the Aviation Sales Company business unit from Aviall Services, Inc. (the
ASC Acquisition). The assets acquired include certain aircraft spare parts
inventory, certain aircraft spare parts leased to third parties, accounts
receivable, property and equipment and other tangible assets. The Partnership
also assumed certain obligations of Aviall Services, Inc., to former
employees and certain trade liabilities. This acquisition was accounted for
following the purchase method of accounting. As discussed further in Notes 3
and 8, on December 2, 1994, the Partnership entered into a credit agreement
with four banks providing $60,000,000 in term loans and up to $20,000,000
under a revolving credit facility. The Partnership used $65,400,517 borrowed
pursuant to this credit agreement together with $3,000,000 in partner
contributions and $7,000,000 of new subordinated debt payable to partners of
the Partnership to fund the ASC Acquisition and to retire existing debt
assumed from AIS.
On February 28, 1992, AIS acquired certain aircraft spare parts inventory
owned by Eastern Air Lines, Inc. (the EAL Inventory) and certain outstanding
accounts receivable for $55,165,000. AIS
F-8
<PAGE>
ASC ACQUISITION PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDING
MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 1--GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:--(CONTINUED)
financed the acquisition with a combination of capital contributions and the
issuance of senior and subordinated indebtedness. Eastern Air Lines, Inc.
(EAL), had previously filed a voluntary petition under Chapter 11 of the
United States Bankruptcy Code. The EAL Inventory consisted of avionics and
electrical components, flight control units and landing gear, airframe parts,
interior furnishings, rotables and expendable parts.
INTERIM CONDENSED FINANCIAL STATEMENTS
In the opinion of the management of ASC, the accompanying unaudited
condensed consolidated financial statements of ASC and subsidiary contain all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the financial position of ASC as of March 31, 1996, and the
results of its operations for the three months ended March 31, 1995 and 1996.
The results of operations and cash flows for the three months ended March 31,
1996 are not necessarily indicative of the results of operations or cash
flows which may be reported for the remainder of 1996.
The accompanying unaudited interim financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission for reporting on Form 10-Q. Pursuant to such rules and
regulations, certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
ASC and its 99% owned subsidiary, Aviation Sales Leasing Company, L.P.
(ASLC), a Delaware limited partnership. All significant intercompany
transactions and balances have been eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all deposits with an original maturity of three
months or less to be cash equivalents. Cash and cash equivalents at December
31, 1994 and 1995, include cash held by ASC in demand deposit accounts.
REVENUE RECOGNITION
Sales of aircraft spare parts are recognized as revenues when the product
is shipped and title has passed to the customer. The Partnership records
reserves for estimated sales returns in the period sales are made.
F-9
<PAGE>
ASC ACQUISITION PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDING
MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 1--GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:--(CONTINUED)
INVENTORIES
Inventories, which consist primarily of aviation parts, are stated at the
lower of cost or market. In instances where bulk purchases of inventory items
are made, cost is determined on the specific identification basis and is
based upon an allocation by management of the bulk purchase price to the
individual components. Expenditures required for the recertification of parts
are capitalized as inventory cost as incurred and are expensed as the parts
associated with the recertification are sold.
SPARE PARTS ON LEASE
The Partnership, primarily through ASLC, leases spare part inventories to
the airline industry on a worldwide basis through operating leases. Operating
lease income is recognized on a straight-line basis over the term of the
underlying leases. The cost of spare parts on lease are amortized,
principally on a straight-line basis, down to the estimated remaining net
realizable value over the lease term or the economic life of the spare parts
inventory.
PROPERTY AND EQUIPMENT
For financial reporting purposes, the Partnership provides for
depreciation of property and equipment using the straight-line method at
annual rates sufficient to amortize the cost of the assets during their
estimated useful lives. For tax purposes, the Partnership generally uses
accelerated depreciation methods.
Maintenance and repair expenditures are charged to expense as incurred,
and expenditures for betterments and major renewals are capitalized. The
carrying amounts of assets which are sold or retired and the related
accumulated depreciation are removed from the accounts in the year of
disposal, and any resulting gain or loss is reflected in income. Such gains
or losses were not significant during the years ended December 31, 1993, 1994
and 1995 and for the quarter ended March 31, 1996.
AMORTIZATION
The costs associated with obtaining financing for the Partnership's
acquisitions are included in the accompanying balance sheets as deferred
financing costs and are being amortized over the initial terms of the loans
to which such costs relate. Amortization expense for the years ended December
31, 1993, 1994 and 1995 and for the three months ended March 31, 1995 and
1996 (unaudited) was $2,354,248, $781,103, $666,607, $167,751 and $169,949,
respectively.
INCOME TAXES
The Partnership does not pay income taxes (see Note 14). The Partnership
agreement provides that distributions to the partners for taxes can be made
from available funds on a quarterly basis. The senior loan agreement
prohibits distributions to the partners should the Partnership be in
noncompliance with certain loan covenants.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior-year financial
statements to conform to current-year presentations.
F-10
<PAGE>
ASC ACQUISITION PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDING
MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 2--INITIAL PARTNERSHIP CAPITALIZATION:
The Partnership was formed on November 30, 1994 and was capitalized as
follows: (a) $75,000 initial cash contribution from ASMC for a two percent
general partner interest, (b) $1,521,000 initial cash contribution from AVAC
for a 40.56 percent limited partner interest, (c) $1,404,000 initial cash
contribution from J/T for a 37.44 percent limited partner interest and
$3,729,977 net asset contribution from AIS for a 20 percent limited partner
interest.
NOTE 3--ACQUISITIONS:
On December 2, 1994 (effective November 30, 1994), the Partnership
completed the ASC Acquisition for an estimated purchase price of $47,292,042,
of which $44,076,495 was paid in cash, $1,632,570 of accrued liabilities and
deferred income were assumed and $1,582,977 was claimed by the seller to be
payable to the seller. At December 31, 1994, the Partnership recorded
$1,582,977 of accrued liability relating to an additional purchase price
claimed by the seller. In August 1995, the seller and the Partnership agreed
to a reduced amount of additional purchase price of $1,060,538. The $522,439
reduction in purchase price was allocated to the assets acquired and
liabilities assumed during 1995.
In connection with the ASC Acquisition, the Partnership: (a) received
contributions from partners of $3,000,000, (b) issued senior notes payable to
banks (including senior revolving loans) of $65,400,517 and (c) issued
subordinated debt to partners of $7,000,000. In addition, the Partnership
used a portion of these proceeds to retire senior and subordinated debt it
had assumed from AIS as follows: (a) retirement of senior notes payable of
$15,575,504, and (b) retirement of subordinated debt, junior subordinated
debt and advances from partners of $11,776,364.
The following presents the unaudited pro forma results of operations of
the Partnership for the years ended December 31, 1994 and 1993, as if the ASC
Acquisition had occurred on January 1, 1993 (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1994
--------- --------
(UNAUDITED)
<S> <C> <C>
Pro forma operating revenues .............. $ 102,535 $ 89,335
========= ========
Restructuring charge ...................... $ (49,103) $ (4,450)
========= ========
Pro forma net loss ........................ $ (52,315) $ (6,737)
========= ========
</TABLE>
The pro forma results are based on the historic accounting results of the
Partnership assuming the Partnership had completed the ASC Acquisition on
January 1, 1993, and assumes (a) the issuance of approximately $44,076,000 of
senior bank loans, the proceeds of which were used principally to make such
acquisition, (b) the elimination of historical interest expense recorded by
the Aviation Sales Company business unit from Aviall Services, Inc., (c) the
elimination of historical depreciation expense on the office and warehouse
facility located in Miami, Florida, (d) rental expense on this office and
warehouse facility pursuant to the lease agreement with an affiliate of the
Partnership, and (e) the elimination of general and administration expenses
in excess of the amounts estimated to be incurred by the Partnership
operating the combined business as if such transactions had occurred on
January 1, 1993 (unaudited). In addition, the historical results of
operations of the Aviation Sales Company business unit for the year ended
December 31, 1993 include a $60,163,000 restructuring provision to write down
F-11
<PAGE>
ASC ACQUISITION PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDING
MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 3--ACQUISITIONS:--(CONTINUED)
inventory and other assets to estimated realizable value, to write off
goodwill and to record severance and incentive compensation to certain groups
of employees (unaudited). The pro forma financial information for the year
ended December 31, 1993 reflects the elimination of $11,060,000 of the
$60,163,000 restructuring provision related to severance and incentive pay
and the write-off of goodwill (unaudited). The pro forma results presented
above are not necessarily indicative of the actual results that would have
occurred had the acquisition actually taken place at the beginning of the
period presented. In addition, the pro forma results are not intended to be
projections of future results of combined operations.
Effective November 30, 1994, the Partnership assigned its rights to
acquire the building and warehouse facility of Aviation Sales Company,
located in Miami, Florida, to Aviation Properties (AVPROP), a Delaware
general partnership which was formed on November 30, 1994, between AVAC and
J/T. The acquisition price paid by AVPROP for the building was $7,100,000.
AVPROP purchased this facility on December 2, 1994 for a total price of
$7,465,519, including acquisition-related expenses of $365,519. AVPROP
financed the purchase price with an interest-bearing note payable to the
Partnership of $2,465,519, which bears interest at 8 percent per year with
principal and interest due in a single payment on December 2, 2004, and a
$5,000,000 loan from AVAC and J/T. The Partnership entered into a 20-year
lease, as amended, with AVPROP for use of the building for an annual use
payment of $892,990 (see Note 12).
NOTE 4--ACCOUNTS RECEIVABLE:
The Partnership distributes products in the United States and abroad to
commercial airlines, air cargo carriers, distributors, maintenance
facilities, corporate aircraft operators and other aerospace companies. The
Partnership's credit risks consist of accounts receivable from customers in
the aviation industry. The Partnership performs periodic credit evaluations
of its customers' financial conditions and provides allowances for doubtful
accounts as required. No single customer represents greater than 10 percent
of total revenues for the years ended December 31, 1993, 1994 or 1995.
NOTE 5--INVENTORY ACQUIRED FROM SALES AGENT:
At the time it acquired the EAL Inventory, AIS entered into a management
agreement with a third party sales agent to provide certain sales and
marketing and related support services to AIS on a percentage of cost
reimbursement basis. The sales agent's responsibilities were subject to
certain price controls and criteria established by AIS. The management
agreement had an initial term of five years with extensions for additional
consecutive one-year periods.
On February 28, 1992, AIS advanced $7,500,000 to the sales agent and
charged the sales agent for reimbursement of fully earned facility fees of
$375,000 in exchange for a note receivable of $7,875,000 from the sales agent
(the Secured Loan). The Secured Loan bore interest at prime plus 2 1/2
percent and was secured by significantly all of sales agent's assets. In
addition to the Secured Loan, AIS advanced the sales agent $750,000 for
short-term working capital requirements.
On March 18, 1993, the sales agent filed a petition under Chapter 11 of
the United States Bankruptcy Code in the United States Bankruptcy Court for
the District of New Jersey. Subsequently, on September 7, 1993, the sales
agent's bankruptcy petition was converted to a Chapter 7 liquidation. On
April 27, 1993, prior to appointment of a trustee, the debtor in possession
for the estate of the sales
F-12
<PAGE>
ASC ACQUISITION PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDING
MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 5--INVENTORY ACQUIRED FROM SALES AGENT:--(CONTINUED)
agent filed an adversary complaint against AIS in the United States
Bankruptcy Court claiming that certain contract termination and incentive
fees were due to the sales agent relating to the termination of the
management agreement. Although the management of the Partnership believed the
claim to be without merit, in order to resolve this matter, on January 22,
1996, the Partnership purchased this claim from the bankruptcy estate of the
sales agent for $12,000. On August 4, 1993, AIS was the successful bidder at
a bankruptcy auction for all of the inventories of the sales agent, which
inventories were conveyed to AIS by bill of sale dated August 11, 1993 in
settlement of the outstanding note receivable from the sales agent. In
connection with the bankruptcy and liquidation and lawsuits with the sales
agent, the Partnership incurred contract termination costs of $966,302,
$104,843 and $316,093, respectively, for the years ended December 31,
1993, 1994 and 1995, which are included in general and administrative
expense.
NOTE 6--SPARE PARTS ON LEASE:
In connection with the ASC Acquisition, the Partnership acquired certain
aircraft spare parts and assumed leases to third parties pursuant to
noncancelable operating leases ranging from three to five years.
Additionally, during 1995 the Partnership purchased certain aircraft spare
parts from a third party and leased back the inventory to the same party. The
leases generally provide for residual payments to the Partnership should the
parts be damaged or unlocatable at the expiration of the lease term. The cost
and accumulated amortization of the spare parts under the leases were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Aircraft spare parts at cost $10,000,000 $12,722,055 $12,722,055
Accumulated amortization .... (69,444) (1,024,904) (1,327,148)
----------- ----------- -----------
$ 9,930,556 $11,697,151 $11,394,907
=========== =========== ===========
</TABLE>
At December 31, 1994 and 1995, $9,930,556 and $9,316,198, respectively, of
spare part on lease were maintained in the Far East.
Deposits of $773,740 and $877,315 received from the lessees are recorded
as deferred income in the accompanying December 31, 1994 and 1995
consolidated balance sheets and will be applied in connection with final
settlement of these leases.
Future minimum lease receivables under these leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- -------------------------
<S> <C>
1996 ............................................... $5,238,208
1997 ............................................... 1,878,495
1998 ............................................... 515,000
1999 ............................................... 510,000
2000 ............................................... 510,000
Thereafter ......................................... 869,833
----------
$9,521,536
==========
</TABLE>
F-13
<PAGE>
ASC ACQUISITION PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDING
MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 7--PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
--------------------------- ------------
1994 1995 1996 USEFUL LIVES
------------- ------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Furniture, fixtures
and equipment .... $2,224,159 $3,121,702 $3,484,303 3-7 years
========== ========== ==========
</TABLE>
NOTE 8--NOTES PAYABLE AND LONG-TERM DEBT:
At December 31, 1994 and 1995 and at March 31, 1996, notes payable and
long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
--------------------------------------------------------- ---------------------------
1994 1995 1996
--------------------------- ---------------------------- ---------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
INTEREST INTEREST INTEREST
AMOUNT RATE AMOUNT RATE AMOUNT RATE
-------------- ----------- ------------- ---------- -------------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Senior bank loans--
Term Loan--A .............. $45,000,000 9.5% $ 40,000,000 10.33% $ 37,500,000 9.83%
Term Loan--B .............. 15,000,000 10.0% 15,000,000 10.83% 15,000,000 10.33%
Revolving credit facility 2,152,208 9.5% 42,808 -- 7,621,576 9.78%
Subordinated debt due
to partners of ASC ....... 7,000,000 13.0% 7,000,000 13.83% 7,000,000 13.33%
Less--Current maturities .. (7,152,208) (10,042,808) (17,621,576)
----------- ------------ ------------
Net long-term debt ......... $62,000,000 $ 52,000,000 $ 49,500,000
=========== ============ ============
</TABLE>
Term Loan A is repayable in 18 consecutive equal quarterly installments of
$2,500,000 commencing on August 31, 1995, with the final installment due
November 30, 1999. Term Loan A bears interest at prime plus 1.5 percent. Term
Loan B, in the original principal amount of $15,000,000, bears interest at
prime plus 2 percent. Term Loan B is repayable in two equal installments of
$7,500,000 each, due on May 31, 2000, and November 30, 2000. The revolving
credit facility provides working capital of up to $20,000,000 to the
Partnership with interest at prime plus 1.5 percent, subject to an
availability calculation of the Partnership's eligible borrowing base. In
addition, the Partnership is required to make mandatory repayments from
excess cash flows as defined. The eligible borrowing base includes certain
receivables and inventories of the Partnership. The revolving credit facility
terminates on November 30, 1999. At December 31, 1995 and March 31, 1996, the
Partnership had availability under the revolving credit facility of
approximately $19.0 and $11.8 million, respectively. The credit facility
contains certain financial covenants regarding the financial performance of
the Partnership, certain reporting requirements, a limitation on the amount
of annual capital expenditures and limitations on the incurrence of
additional debt and provides for the suspension of the revolving credit
facility and repayment of all debt in the event of a material adverse change
in the business or the general partner or a change in control. Substantially
all of the Partnership's assets are pledged as collateral for amounts
borrowed pursuant to the credit facility.
F-14
<PAGE>
ASC ACQUISITION PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDING
MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 8--NOTES PAYABLE AND LONG-TERM DEBT:--(CONTINUED)
On December 1, 1994, the Partnership entered into an agreement which
provides that the prime interest rate on $30,000,000 of senior term loans
will not exceed 9 percent through December 2, 1997. In exchange for this
interest rate limitation, the Partnership agreed to make quarterly payments
to its lenders ranging from $57,000 to $186,000, depending on the level of
the prime rate, as defined. Quarterly payments totaling $228,000 and $57,000
were made during 1995 and the first quarter of 1996, which are included in
interest expense in the accompanying consolidated statements of income.
The Partnership entered into a subordinated loan agreement (the Subordinated
Debt) on December 2, 1994, whereby the Partnership borrowed $7,000,000 from the
partners which is payable in a single lump sum on the earlier of June 2, 2001,
or six months after amounts borrowed pursuant to the credit facility have been
paid in full (the Subordinated Debt). In December 1994, the Partnership paid
arrangement and facility fees totaling $560,000 pursuant to the Subordinated
Debt agreement which have been included in deferred financing costs. Upon the
earlier to occur of June 2, 2001 or the repayment of the Subordinated Debt in
full, the Partnership will pay to the partners an additional facility fee of
$350,000, provided that, if the Subordinated Debt is prepaid in full prior to
June 2, 1996, the Partnership will be released from its obligation to pay such
facility fee. The Subordinated Debt agreement provides that amounts borrowed
become due and payable should the Partnership default pursuant to the terms of
the credit facility. The Subordinated Debt bears interest at prime plus 5
percent. During the years ended December 31, 1994 and 1995 and for the quarter
ended March 31, 1996 the Partnership incurred interest expense of $84,389,
$975,868 and $233,000, respectively, in connection with the Subordinated Debt.
On December 9, 1993, AIS received $200,000 from its partners pursuant to
the terms of a junior subordinated note which bore interest at prime plus 5
percent in order to pay certain obligations then due. During 1994, AIS
received $4,576,364 from its partners which was used to fund a $3,000,000
deposit for the ASC Acquisition and to meet working capital needs. The
obligations to repay the junior subordinated note and these cash advances
were assumed by the Partnership and were repaid on December 2, 1994.
In February 1992, AIS entered into two senior loan and security agreements
(the Senior Loan Agreements) that provided funds for the acquisition of the
EAL Inventory. Amounts outstanding at December 2, 1994 were assumed and
repaid by the Partnership, and all liens were released.
AIS entered into a subordinated loan and security agreement in February
1992 which was subsequently assumed and repaid in full by the Partnership.
The four-year term note of $7,000,000 bore interest at prime plus 5 percent
which was payable quarterly.
On January 27, 1992, in connection with the acquisition of certain
warehouse facilities, AIS entered into a promissory note totaling $1,300,000.
The note matures January 27, 1997, bears interest at 8 percent and requires
monthly payments of principal and interest. The loan is secured by a mortgage
on certain land and warehouse/office facilities in Pearland, Texas. On
November 30, 1994, AIS transferred the facility, net of the promissory note
balance, to AVTEX, an affiliate of AIS. The Partnership entered into a
long-term lease agreement with AVTEX for use of the facility (as discussed in
Note 1).
NOTE 9--OTHER LIABILITIES, VENDOR-HELD PARTS:
In connection with the acquisition of the EAL Inventory, AIS acquired
certain identified aircraft inventories. These were acquired subject to
outstanding mechanics' liens for repairs that were ongoing
F-15
<PAGE>
ASC ACQUISITION PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDING
MARCH 31, 1995 AND 1996 IS UNAUDITED)
at the time of purchase. Management of AIS calculated these liens to total
$3,059,318 at acquisition. These inventories are held by the vendors and are
released to AIS or the Partnership upon settlement of the outstanding claims. At
December 31, 1994 and 1995, management of AIS and the Partnership estimates that
$1,129,538 and $1,030,228, respectively, of the vendor-held parts liability
remained outstanding.
NOTE 10--RELATED-PARTY TRANSACTIONS:
Under the terms of the ASC partnership agreement, AVAC is entitled to
receive a fee of $50,000 per quarter for consulting services. Prior to
December 2, 1994, under the terms of the AIS partnership agreement, the
Managing Partner was entitled to receive a quarterly administrative fee of
$50,000. Such fees have been accrued as general and administrative expense in
the accompanying statements of income as incurred and have been paid through
March 31, 1996.
RCP is an issuer of subordinated debt to the Partnership. AVAC is an
affiliated entity of RCP.
Tomen America, Inc., is an issuer of subordinated debt to the Partnership.
T/M Aviation (Japan), Inc., and TM Aviation (USA), Inc. hold an equity
interest in J/T, a minority partner in the Partnership. TM Aviation (Japan),
Inc., is a wholly owned subsidiary of Tomen Corporation. TM Aviation (USA),
Inc. is a wholly owned subsidiary of Tomen America, Inc., which is a wholly
owned subsidiary of Tomen Corporation.
Japan Fleet Service Co. Ltd., a Japanese corporation (JFS Japan), is an
issuer of subordinated debt to the Partnership and is an affiliate of J/T.
Japan Fleet Service (Delaware), Inc. (JFS Delaware) is a wholly owned
subsidiary of Japan Fleet Service (Europe) B.V. (JFS Europe) and holds an
equity interest in J/T. JFS Europe is 60 percent owned by Japan Fleet
Service(S) Pte Ltd. (JFS Singapore) and 40 percent owned by JFS Japan.
JFS Delaware had an option to acquire the office and warehouse facility
located in Pearland, Texas, along with any improvements thereon, for a price
of $1,400,000. On December 2, 1994, the Partnership purchased JFS Delaware's
option for $100,000.
In accordance with a management agreement between AIS and RCP, all
full-time, nontemporary personnel working for the benefit of AIS were
employed through Aircraft Spare Parts, Inc. (ASPI), which is an affiliate of
RCP. Effective December 2, 1994, ASMC replaced ASPI as the employer. The
Partnership reimburses ASMC and, prior to December 2, 1994, AIS reimbursed
ASPI for all of its related expenditures. During the years ended December 31,
1993 and 1994, Aircraft Spare Parts, Inc., was reimbursed by AIS
approximately $2,994,234 and $3,259,127, respectively, for personnel-related
costs. During 1994, ASMC was reimbursed approximately $404,274 by the
Partnership.
NOTE 11--COMMITMENTS AND CONTINGENCIES:
The Partnership is currently involved in various lawsuits and other
contingencies arising out of operations in the normal course of business. In
the opinion of management, the ultimate resolution of those claims and
lawsuits will not have a material adverse effect on the financial position or
results of operations of the Partnership.
On July 29, 1994, AIS filed an action against the Brazoria County, Texas,
Appraisal District seeking relief from ad valorem tax appraisals of certain
property for tax years 1993 and 1994. On February 7,
F-16
<PAGE>
ASC ACQUISITION PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDING
MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 11--COMMITMENTS AND CONTINGENCIES:--(CONTINUED)
1995, a settlement was reached in the matter, and the appraised value on the
property was reduced for 1993 and 1994. The settlement results in a reduction of
1993 property tax of $435,939 and a reduction of 1994 property tax of $33,964.
This reduction in tax liability of $469,903 was recorded in general and
administrative expense in 1994.
Subsequently, on August 29, 1995, the Pearland ISD, City of Pearland and the
County of Brazoria filed a cause of action against AIS seeking penalty and
interest of approximately $86,000 on the settlement previously reached on
February 7, 1995. Management of the Partnership believes that the settlement
entered on February 7, 1995 addressed all matters and that penalty and interest
are not due under the terms of the settlement. In the opinion of management, the
ultimate resolution of these claims and lawsuits will not have a material effect
on the financial position of the Partnership.
On June 18, 1993, the estate of EAL filed an action against AIS claiming
that certain errors were made by EAL in the calculation of credits received
by AIS against the purchase of the EAL Inventory at closing on February 28,
1992. On February 25, 1994, the Partnership filed a counterclaim against the
estate of EAL in United States Bankruptcy Court. In October 1994, the
Partnership and EAL agreed to settle all claims and mutually release all
parties. As a result of the settlement, the Partnership recorded additional
general and administrative expenses of $869,081 in October 1994.
The Partnership has certain employment agreements with officers and
employees dated December 1994, which extend from three to five years and are
renewable in one-year periods thereafter. The employment agreements provide
that such officers and employees may earn bonuses of up to 50 percent of
their base salaries provided the Partnership achieves certain financial
operating results as defined. Further, each of the employment agreements
provides that in the event of (i) a change in the control of the Partnership
including the vesting of decision-making authority in one of the
Partnership's current partners; (ii) the sale of all or substantially all of
the assets of the Partnership to a third party for which the executive
officer does not continue in employment; or (iii) the merger or consolidation
of the Partnership with an entity for which the executive officer does not
continue in employment, the employment agreement shall be terminable by the
executive officer upon 90 days' notice and one year's base salary shall be
payable to the executive officer as a termination fee.
At January 1, 1995, five officers and employees of the Partnership were
granted options (the "Options") by the partners of the Partnership to
purchase an aggregate of 13.5% of the outstanding limited partnership
interests in the Partnership for an aggregate exercise price of $1,437,027
which was greater than the fair market value of the interests in the
Partnership at that date. At January 1, 1996, the Options were exercised in
full by delivery to the partners of full recourse promissory notes
representing the payment in full of the exercise price of the Options.
The Partnership has purchase commitments to various airlines whereby the
Partnership sells aircraft inventory as agent for such airlines. Pursuant to
such agreements, the Partnership has commitments to various airlines
requiring the Partnership to purchase a minimum amount of inventory from such
airlines before February 1997. In the opinion of management, the
Partnership's commitments will be realized through future sales of aircraft
inventory owned by such airlines.
Effective January 1, 1995, the Partnership established a qualified defined
contribution plan for eligible employees. The Plan provides that employees
may contribute up to the maximum percent of pretax earnings as allowed by the
U.S. tax code and the Partnership may elect, at its discretion, to make
contributions to the Plan in any year. The Partnership contributed
approximately $197,000 to the Plan in 1995.
F-17
<PAGE>
ASC ACQUISITION PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDING
MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 11--COMMITMENTS AND CONTINGENCIES:--(CONTINUED)
The Partnership does not provide retired employees any health or life
insurance benefits.
NOTE 12--LEASES:
The Partnership leases certain buildings and office equipment under
operating lease agreements. The buildings are leased from affiliates of the
Partnership. For the years ended December 31, 1993, 1994 and 1995, rent
expense under these leases amounted to $103,957, $407,857 and $1,554,677,
respectively. Minimum rental commitments under operating leases are as
follows:
<TABLE>
<CAPTION>
LEASE OBLIGATIONS LEASE OBLIGATIONS
YEAR ENDING DECEMBER 31, TO RELATED PARTIES TO THIRD PARTIES
- ------------------------ ------------------ -----------------
<S> <C> <C>
1996 .................. $ 1,202,649 $405,643
1997 .................. 1,202,649 191,550
1998 .................. 1,202,649 --
1999 .................. 1,202,649 --
2000 .................. 1,202,649 --
Thereafter ............ 15,234,534 --
----------- --------
$21,247,779 $597,193
=========== ========
</TABLE>
NOTE 13--DOMESTIC AND EXPORT SALES INFORMATION:
Information about the Partnership's domestic and export sales for the
three years ended December 31, 1995 follows (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- --------
<S> <C> <C> <C>
NET REVENUES BY
GEOGRAPHICAL AREAS:
United States .... $22,026 $25,864 $ 68,052
Export sales-- ...
Europe ........... 1,398 2,327 28,666
Far East ......... -- -- 7,525
Latin America ... 5 -- 9,560
------- ------- --------
$23,429 $28,191 $113,803
======= ======= ========
</TABLE>
NOTE 14--PRO FORMA DISCLOSURES (UNAUDITED):
PRO FORMA INCOME TAXES
As described in Note 1, the Partnership is not subject to income taxes.
Assuming completion of the Offering (see Note 15), the net assets of the
Partnership will be held by a C Corporation (New ASC) (see Note 15) and will
be subject to Federal and State income taxes. Upon transfer of the net assets
of the Partnership to New ASC, deferred income taxes reflecting the tax
effect of temporary differences between the Partnership's book and tax basis
of certain assets and liabilities will be charged to operations. A pro forma
adjustment to reflect income taxes has been reflected in the accompanying
1995 consolidated statement of operations. Income taxes have been provided at
the estimated effective rate of 39%.
F-18
<PAGE>
ASC ACQUISITION PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDING
MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 14--PRO FORMA DISCLOSURES (UNAUDITED):--(CONTINUED)
PRO FORMA NET INCOME PER SHARE
Pro Forma net income per share has been computed by dividing pro forma net
income by the number of shares of New ASC the original partners of ASC will
receive upon the completion of the Offering (for a discussion of the pro forma
weighted average number of common shares outstanding, see Note 15).
PRO FORMA SUPPLEMENTARY EARNINGS PER SHARE
The pro forma supplementary earnings per share (before extraordinary items)
for the year ended December 31, 1995 and the three months ended March 31, 1996,
assuming the Offering was completed on January 1, 1995 and January 1, 1996,
respectively, and all proceeds of the Offering were used to pay the $8,743,000
liability to J/T Aviation Partners (see Note 15) and retire outstanding debt, is
$1.26 and $0.35 per share, respectively. The supplementary net income used to
compute the pro forma supplementary earnings per share gives effect to the
elimination of interest expense on the debt assumed retired, less the related
income tax effect. The number of shares used to compute the supplementary net
income per share is the total shares outstanding after the assumed Offering (See
Note 15).
NOTE 15--PROPOSED INITIAL PUBLIC OFFERING AND PRO FORMA FINANCIAL INFORMATION
(UNAUDITED):
Aviation Sales Company (the "Company"), a newly formed Delaware
corporation which does not yet have any operations and has not yet been
capitalized, will publicly offer 3,250,000 shares of its common stock. In
addition, the Company will grant the underwriters a 30-day option to purchase
up to 487,500 additional shares to cover over-allotments, if any.
Immediately prior to the effectiveness of the Company's Registration
Statement relating to the offering (the "Offering"), the partners, other than
J/T Aviation Partners, will contribute to the Company their interest in the
Partnership in exchange for 2,924,000 shares of the Company and J/T Aviation
Partners will contribute to the Company its interest in the Partnership in
exchange for (i) 1,501,000 shares of common stock of the Company, (ii) an amount
equal to the proceeds to be received by the Company from the underwriters for
500,000 of the shares of common stock being sold by it and (iii) an amount equal
to approximately 15.38% of the proceeds received by the Company from the
underwriters for any shares of common stock sold pursuant to the exercise of the
underwriters' over-allotment option and to the extent such option is not
exercised in full, approximately 15.38% of the 487,500 shares of common stock
subject to such option which are not purchased by the underwriters.
The net proceeds from the offering are estimated to be $56,827,500,
assuming an initial public offering price of $19.00 per share. Assuming an
intial public offering price of $19.00 per share, $8,743,000 of such net
proceeds will be paid to J/T Aviation Partners related to the sale of 500,000
shares of common stock as described above. The remaining net proceeds will be
used to repay the outstanding debt balances.
The pro forma balance sheet gives effect to the contribution by the partners
of their interests in the Partnership in exchange for 4,500,000 shares of common
stock (assuming that the underwriters' over-allotment option is not exercised).
The pro forma balance sheet also sets forth the $8,743,000 liability that will
be incurred by the Company related to the exchange of the J/T Aviation Partners
interest as
F-19
<PAGE>
ASC ACQUISITION PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDING
MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 15--PROPOSED INITIAL PUBLIC OFFERING AND PRO FORMA FINANCIAL INFORMATION
(UNAUDITED):--(CONTINUED)
described above, a $1,044,000 liability for the distribution to the partners of
the Partnership of an amount equal to 34% of the Partnership's income before
provision for income taxes for the three months ended March 31, 1996 and a
$350,000 facility fee payable to the partners of the Partnership. The pro forma
weighted average number of common shares outstanding of 5,000,000 assumes that
the 4,500,000 shares to be issued to the partners, as described above, and the
500,000 shares of common stock the net proceeds in respect of which will be paid
to J/T Aviation Partners were also outstanding in all periods.
NOTE 16--SUBSEQUENT EVENTS:
AMENDED CREDIT FACILITY
In conjunction with the repayment of indebtedness from the proceeds of the
Offering, the Company has entered into a letter of intent (the "Letter of
Intent") to amend the credit facility (the "Amended Credit Facility"). The
Amended Credit Facility will be comprised of (i) a term loan facility (the
"Term Loan") in an original principal amount not to exceed $20.0 million and
to be determined based on the application of the proceeds of the Offering,
and (ii) a $50.0 million revolving loan, letter of credit and acquisition
loan facility, subject to an availability calculation based on the eligible
borrowing base (the "Revolving Credit Facility"). The letter of credit
portion of the Revolving Credit Facility will be subject to a $10.0 million
sublimit and the acquisition loan portion of the Revolving Credit Facility
will be subject to a $30.0 million sublimit with the imposition of certain
borrowing criteria based on the satisfaction of certain debt ratios. The
unused portion of the acquisition loan portion of the Revolving Credit
Facility will expire on the second anniversary of the closing date of the
Amended Credit Facility. The interest rate on the Amended Credit Facility will
be, at the option of the Company, (i) prime plus a margin, or (ii) LIBOR plus a
margin, where the margin determination is made based upon the Company's
financial performance over the prior 12 month period (ranging from 0.25% to
1.25% in the event prime is utilized, or 1.75% to 2.75% in the event LIBOR is
utilized). Upon consummation of the Offering, borrowings under the Amended
Credit Facility will initially accrue interest at either prime plus 0.25% or
LIBOR plus 1.75%.
The Term Loan will amortize in equal quarterly installments and will
terminate on December 1, 1999. Interim payments under the Revolving Credit
Facility will be made daily from collections of the Company's accounts
receivable and the Revolving Credit Facility will terminate on December 1, 1999.
The Amended Credit Facility will contain similar financial and other covenants
of the Company and similar mandatory prepayment events as set forth in the
existing credit facility and is expected to be secured by a lien on
substantially all of the assets of the Company. However, in contrast to the
Credit Facility, the Amended Credit Facility will not require the application of
excess cash flows. Events of default will also be similar to the credit
facility; provided however that an event of default based on a change of control
will pertain to a change in more than 50% of the members of the Company's Board
of Directors in place on the closing date of the Amended Credit Facility.
STOCK OPTION PLANS
In connection with the organization of the Company, the Company will adopt
two stock option plans (the "Plans"). Pursuant to the 1996 Director Stock Option
Plan (the "Director Plan"), options to acquire a maximum of the greater of
150,000 shares or 2% of the number of shares of Common Stock
F-20
<PAGE>
ASC ACQUISITION PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE THREE MONTHS ENDING
MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 16--SUBSEQUENT EVENTS:--(CONTINUED)
then outstanding may be granted to directors of the Company. Pursuant to the
1996 Stock Option Plan (the "1996 Plan"), options to acquire a maximum of the
greater of 650,000 shares of Common Stock or 8% of the number of shares of
Common Stock then outstanding may be granted to executive officers, employees
(including employees who are directors), independent contractors and consultants
of the Company. Options to purchase 165,000 shares at an exercise price equal to
the initial public offering price will be granted under the Plans, 94,999 of
which will be immediately exercisable.
The price at which the Company's Common Stock may be purchased upon the
exercise of options granted under the Plans will be required to be at least
equal to the per share fair market value of the Common Stock on the date
particular options are granted. Options granted under the Plans may have
maximum terms of not more than 10 years.
Generally, options granted under the Plans may remain outstanding and may
be exercised at any time up to three months after the person to whom such
options were granted is no longer employed or retained by the Company or
serving on the Company's Board of Directors.
Pursuant to the Plans, unless otherwise determined by the compensation
committee, one-third of the options granted under the Plans are exercisable upon
grant, one-third are exercisable on the first anniversary of such grant and the
final one-third are exercisable on the second anniversary of such grant.
However, options granted under the Plans shall become immediately exercisable if
the holder of such options is terminated by the Company or is no longer a
director of the Company, as the case may be, subsequent to certain events which
are deemed to be a "change in control" of the Company.
F-21
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
ASC Acquisition Partners, L.P.:
We have audited the accompanying combined balance sheet of Aviation Sales
Company (a division of Aviall Services, Inc.) as of November 30, 1994 and the
related combined statements of operations, changes in Aviall investment and
cash flows for the year ended December 31, 1993 and the eleven-month period
ended November 30, 1994. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of Aviation
Sales Company as of November 30, 1994, and the results of their operations
and their cash flows for the year ended December 31, 1993 and the eleven-month
period ended November 30, 1994, in conformity with generally accepted
accounting principles.
As discussed in note 10 to the combined financial statements, Aviation
Sales Company changed its method of accounting for postretirement benefits
other than pensions in 1993.
KPMG PEAT MARWICK LLP
Fort Lauderdale, Florida
November 3, 1995
F-22
<PAGE>
AVIATION SALES COMPANY
COMBINED BALANCE SHEET
NOVEMBER 30, 1994
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NOVEMBER 30,
1994
-------------
<S> <C>
ASSETS
Current assets:
Cash ....................................................... $ 748
Accounts receivable, net ................................... 13,936
Inventories, net ........................................... 23,260
-------
Total current assets ..................................... 37,944
-------
Property, plant and equipment, net .......................... 6,733
Spare parts on lease ........................................ 10,000
Intangible assets, net ...................................... --
Other assets ................................................ 661
-------
Total assets ............................................. $55,338
=======
LIABILITIES AND AVIALL INVESTMENT
Current liabilities:
Accounts payable ............................................. $12,069
Accrued expenses ............................................. 2,652
-------
Total current liabilities .................................. 14,721
-------
Other noncurrent liabilities .................................. 1,273
Commitments and contingencies
Aviall investment:
Investment by and advances from Aviall ....................... 39,344
-------
Total liabilities and Aviall investment .................... $55,338
=======
</TABLE>
See accompanying notes to combined financial statements.
F-23
<PAGE>
AVIATION SALES COMPANY
COMBINED STATEMENTS OF OPERATIONS
AND CHANGES IN AVIALL INVESTMENT
FOR THE YEAR ENDED DECEMBER 31, 1993 AND
THE ELEVEN MONTHS ENDED NOVEMBER 30, 1994
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1994
--------- --------
<S> <C> <C>
Net sales .................................................... $ 79,156 $ 63,326
--------- --------
Costs and expenses:
Cost of sales ............................................... 55,368 49,109
Provision for excess and obsolete inventory ................. 52,367 1,062
Selling, general and administrative expenses ................ 20,984 17,676
Intercompany interest expense ............................... 3,157 2,572
Other income ................................................ (309) (508)
--------- --------
Loss before income taxes and cumulative effect
of change in accounting ................................. (52,411) (6,585)
Income taxes ................................................. -- --
--------- --------
Loss before cumulative effect of change in accounting ..... (52,411) (6,585)
Cumulative effect of change in accounting, net of taxes ...... (193) --
--------- --------
Net loss .................................................. $ (52,604) $ (6,585)
========= ========
Changes in Aviall investment:
Investment by and advances from Aviall at beginning of period 104,551 49,617
Net loss .................................................... (52,604) (6,585)
Net change in investment by and advances from Aviall ........ (2,330) (3,688)
--------- --------
Investment by and advances from Aviall at end of period ... $ 49,617 $ 39,344
========= ========
</TABLE>
See accompanying notes to combined financial statements.
F-24
<PAGE>
AVIATION SALES COMPANY
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1993 AND THE
ELEVEN MONTHS ENDED NOVEMBER 30, 1994
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1994
--------- --------
<S> <C> <C>
Net loss .................................................................. $(52,604) $(6,585)
Adjustments to reconcile loss to net cash provided by operating
activities:
Depreciation and amortization .......................................... 2,474 2,406
Write-off of goodwill ................................................... 4,005 --
Write-off of leased inventory ........................................... -- 2,727
Cumulative effect of accounting change .................................. 193 --
Provision for doubtful accounts ......................................... 471 1,377
Provision for excess and obsolete inventory ............................. 52,367 1,062
Changes in operating assets and liabilities:
(Increase) decrease in receivables ....................................... 1,576 (10)
Decrease in inventories .................................................. 4,069 1,008
Decrease (increase) in prepaid and other assets .......................... (605) 109
Increase (decrease) in accounts payable .................................. (153) 3,309
(Decrease) increase in accrued expenses .................................. 246 (251)
Increase (decrease) in other noncurrent liabilities ...................... 1,033 240
-------- -------
Net cash provided by operating activities ............................ 13,072 5,392
-------- -------
Cash flows from investing activities:
Capital expenditures ..................................................... (14,214) (1,386)
Proceeds from disposal of property, plant and equipment .................. -- --
Other, net ............................................................... 1,843 (121)
-------- -------
Net cash used by investing activities ................................ (12,371) (1,507)
-------- -------
Cash flows from financing activities:
Net decrease in investment by and advances from Aviall ................... (2,330) (3,688)
-------- -------
Net cash used in financing activities ................................ (2,330) (3,688)
-------- -------
Net increase (decrease) in cash ........................................... (1,629) 197
Cash, beginning of period ................................................. 2,180 551
-------- -------
Cash, end of period ....................................................... $ 551 $ 748
======== =======
</TABLE>
See accompanying notes to combined financial statements.
F-25
<PAGE>
AVIATION SALES COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND NOVEMBER 30, 1994
NOTE 1--NATURE OF BUSINESS
Aviation Sales Company ("ASC" or the "Division"), is a division of Aviall
Services, Inc. ("Aviall" or the "Seller"), which is a wholly-owned subsidiary
of Aviall, Inc. The Division is engaged in the redistribution by sale, lease,
exchange and brokerage of surplus factory new, new surplus, and used aircraft
spare parts to commercial airlines, air cargo carriers, distributors,
maintenance facilities, corporate aircraft operators and other aerospace
companies in the United States and abroad.
NOTE 2--ASSET PURCHASE AGREEMENT
On December 2, 1994, and effective November 30, 1994 for accounting
purposes, pursuant to the Asset Purchase Agreement by and between the Seller
and AJT Capital Partners d/b/a Aerospace International Services, ASC
Acquisition Partners, L.P. and Aviation Properties (collectively the "Buyer")
dated as of August 4, 1994 and amended as of December 2, 1994 (the "Purchase
Agreement"), the Seller sold certain assets and transferred certain
liabilities of the Division to the Buyer. The assets sold include certain
aircraft spare parts inventory, certain aircraft spare parts leased to third
parties, accounts receivable, property and equipment and other tangible
assets. The Buyer also assumed certain obligations of Aviall Services, Inc.,
to their former employees for accrued vacation time and certain other
liabilities.
The accompanying combined financial statements are presented for periods
prior to the effective date of the sale utilizing the historical accounting
practices followed by the Seller.
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF COMBINATION
The accompanying combined financial statements include the operations,
assets and liabilities of the Division. The financial statements do not
include Aviall's corporate assets or liabilities not specifically
identifiable to the Division, except for cash and accrued expenses which were
allocated based on reasonable allocation methods. Management believes that
the allocation methods used are reasonable. The combined financial statements
include certain U.S. wholly owned subsidiaries of the Seller, which are
combined to reflect the total redistribution business of the Division, not
necessarily the assets sold. All significant intercompany transactions and
accounts have been eliminated in combination. These financial statements are
presented on a combined rather than consolidated basis because the
controlling financial interest did not rest directly or indirectly in one of
the businesses included in the historical combined financial statements.
The financial information included herein may not necessarily reflect the
financial position and results of operations of Aviation Sales Company in the
future or what the financial position and results of operations of Aviation
Sales Company would have been had it been a separate, stand-alone entity
during the periods covered.
(A) CASH EQUIVALENTS
ASC considers all highly liquid investments with original maturities of
three months or less to be cash equivalents. There were no cash equivalents
at November 30, 1994.
(C) INVENTORIES
Inventories, which consist primarily of aviation parts, are stated at the
lower of cost, including repair costs to improve the condition of a part, or
net realizable value. ASC makes provisions for
F-26
<PAGE>
AVIATION SALES COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND NOVEMBER 30, 1994--(CONTINUED)
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
estimated excess and obsolete inventories. In 1993, Aviall announced its
intention to explore the sale of ASC, at which time inventory that was slow
moving and intangible assets were determined to be permanently impaired. As a
result, ASC wrote-off intangible assets (note 3f) and slow-moving aircraft
parts inventory to reflect net realizable value, as presented on the
statement of operations for fiscal 1993. Additionally, in 1994, the Company
recorded an additional provision of approximately $1.1 million to reflect the
net realizable value received by the Seller based on the final selling price
of the assets (note 2).
(D) SPARE PARTS ON LEASE
Aviation Sales Leasing Company, a leasing subsidiary of ASC, leases spare
part inventories to the airline industry on a worldwide basis through
operating leases. Operating lease income is recognized on a straight-line
basis over the term of the underlying leases. The cost of the parts on lease
are amortized, principally on a straight-line basis, down to the estimated
remaining net realizable value over the shorter of the lease term or the
economic life of the spare parts inventory. In 1994, the Company recorded a
loss of approximately $2,727,000 to write down the leased inventories to net
realizable value received by the Seller based on the final selling price of
the assets (note 2).
(E) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost and depreciated over the
estimated useful lives of the related assets using the straight-line method.
Leasehold improvements are amortized over the shorter of the lease term or
estimated useful life of the asset using the straight-line method. Lives
assigned to asset categories are 10 to 30 years for buildings and
improvements and 3 to 10 years for machinery and equipment.
(F) INTANGIBLE ASSETS
Intangible assets consist principally of goodwill totaling $4,074,000 in
1992, net of accumulated amortization of $968,000. Goodwill is amortized on a
straight-line basis over 40 years. As discussed in note 3c, the Company
wrote-off the unamortized goodwill balance of $4,005,000 to selling, general
and administrative expenses in fiscal 1993.
(G) REVENUE RECOGNITION
Revenue from parts sales is recognized upon shipment of the product to
customers. ASC records reserves for estimated sales returns in the period
sales are made.
(H) INCOME TAXES
For the periods presented, ASC was included in the consolidated Federal
income tax return of Aviall. The income tax provision presented has been
determined, as if ASC was a stand-alone business filing separate tax returns
for the year ended December 31, 1993 and for the eleven months ended November
30, 1994.
ASC has adopted Financial Accounting Standards Board Statement No. 109
("Statement No. 109"), Accounting for Income Taxes. Statement No. 109
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the
F-27
<PAGE>
AVIATION SALES COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND NOVEMBER 30, 1994--(CONTINUED)
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to
reverse.
(I) DEFERRED LEASE REVENUE
Advance payments and deposits received on operating leases are initially
deferred and subsequently recognized as ASC's obligations under the lease
agreement are fulfilled.
NOTE 4--TRANSACTIONS WITH AVIALL
(A) GENERAL AND ADMINISTRATIVE SERVICES
Aviall provided certain corporate general and administrative services to
ASC, including legal, treasury, human resources, and finance, among others.
Costs related to these services were allocated to ASC on a basis that
approximated Aviall's incremental cost of the actual services provided which
management believes is a reasonable basis of allocation. Total allocated
expenses included in "Selling general and administrative expenses" in the
accompanying combined statements of operations approximated $3,832,000 in
1993 and $3,659,000 in 1994.
These historical amounts allocated by Aviall are not necessarily
representative of the costs that Aviation Sales Company would have incurred
as a stand-alone company.
(B) INTERCOMPANY FINANCING AND INTEREST EXPENSE
Aviall manages the cash and financial requirements of all of its business
divisions. The accompanying combined balance sheets and statements of
operations include allocated corporate debt included in Aviall investment,
which was used to finance the operations of ASC, and allocated corporate
interest expense based upon a target debt to equity ratio, respectively. The
composition of the "Investment by and advances from Aviall" in the combined
balance sheets has been periodically adjusted to effect this target debt to
equity ratio. Information relating to interest bearing advances from Aviall
and related interest allocations is presented below as of and for the year
ended December 31, 1993 and as of and for the eleven months ended November
30, 1994 (in thousands, except percentages):
<TABLE>
<CAPTION>
1993 1994
------- -------
<S> <C> <C>
Interest-bearing advance at period end ...... $49,617 $39,344
Average annual interest-bearing advance ..... 77,084 44,480
Net intercompany interest allocation ........ 3,157 2,572
</TABLE>
"Intercompany interest expense" reflected in the combined statements of
operations is based upon an allocation of interest cost incurred by Aviall
for certain of its indebtedness based upon a target debt to equity ratio.
Therefore, it does not reflect the interest expense that ASC would have
incurred as an independent company. Management believes that the method of
allocating intercompany interest expense is reasonable.
Under Aviall's debt agreements entered into pursuant to Aviall's spin-off
from Ryder (note 10), all assets of Aviation Sales Company are pledged as
collateral to Aviall's outstanding debt.
(C) CORPORATE INSURANCE AND EMPLOYEE BENEFITS PROGRAM
ASC participated in Aviall's combined risk management programs for
property and casualty insurance and certain employee health benefit programs,
including medical and dental benefits. ASC
F-28
<PAGE>
AVIATION SALES COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND NOVEMBER 30, 1994--(CONTINUED)
NOTE 4--TRANSACTIONS WITH AVIALL--(CONTINUED)
was charged amounts which represented an allocation of third party premiums,
Aviall's administrative costs, and losses for Aviall's self-insured layers
including claims incurred but not reported. Costs allocated under these
programs were $558,538 and $420,381 during 1993 and 1994, respectively, and
are reflected in selling, general and administrative expenses. Management
believes the method of allocating costs related to risk management programs
for property and casualty insurance and certain employee health benefit
programs to be reasonable.
NOTE 5--ACCOUNTS RECEIVABLE ALLOWANCE
ASC provides services to a wide variety of aviation-related businesses,
including commercial airlines. Economic conditions within the commercial
airline industry have been weak over the past several years due to a number
of factors. Management believes that sufficient allowances for doubtful
accounts have been provided as of November 30, 1994 in relation to its total
accounts receivable balance. The following is a summary of the accounts
receivable allowances for the eleven months ended November 30, 1994 (in
thousands):
<TABLE>
<CAPTION>
1993 1994
------- -------
<S> <C> <C>
Balance at beginning of period ....................... $ 1,539 $ 1,884
Provision for doubtful accounts ...................... 471 1,377
Write-off of doubtful accounts, net of recoveries .... (126) (1,344)
------- -------
Balance at end of period ........................... $ 1,884 $ 1,917
======= =======
</TABLE>
NOTE 6--INVENTORY ALLOWANCE
The following is a summary of the reserve for excess and obsolete
inventories for the year ended December 31, 1993 and for the eleven months
ended November 30, 1994 (in thousands):
<TABLE>
<CAPTION>
1993 1994
--------- --------
<S> <C> <C>
Balance at beginning of period ..................... $ 11,741 $ 63,033
Provision for excess and obsolete inventory ........ 52,367 1,062
Write-off of excess and obsolete inventory ......... (1,075) (342)
-------- --------
Balance at end of period ......................... $ 63,033 $ 63,753
======== ========
</TABLE>
NOTE 7--PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consists of the following at November
30, 1994 (in thousands):
<TABLE>
<CAPTION>
1994
---------
<S> <C>
Land ....................................................... $ 1,460
Buildings and improvements ................................. 6,761
Machinery and equipment .................................... 9,520
--------
Total .................................................... 17,741
Less accumulated depreciation .............................. (11,008)
--------
Property, plant and equipment, net ....................... $ 6,733
========
</TABLE>
F-29
<PAGE>
AVIATION SALES COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND NOVEMBER 30, 1994--(CONTINUED)
NOTE 8--ACCRUED EXPENSES--(CONTINUED)
The following is a summary of accrued expenses at November 30, 1994 (in
thousands):
<TABLE>
<CAPTION>
1994
------
<S> <C>
Salaries, wages and benefits ................................ $1,322
Operating taxes ............................................. 219
Self-insurance reserve ...................................... 420
Repair order reserve ........................................ 350
Deferred credit ............................................. --
Other ....................................................... 341
------
Total accrued expenses .................................... $2,652
======
</TABLE>
Salaries, wages and benefits, operating taxes and the self-insurance
reserve were allocated to the Division based on methods of allocation which
management believes are reasonable (note 4a).
NOTE 9--INCOME TAXES
As disclosed under "Nature of Business" and "Asset Purchase Agreement,"
Aviation Sales was a division of Aviall Services, Inc. prior to the November
30, 1994. The deferred tax inventory shown below reflects deferred tax assets
and liabilities as though ASC was a separate company and not part of a
consolidated filing for U.S. federal income tax purposes. Certain amounts,
such as the net operating loss, included as a deferred tax asset may have
been utilized in prior years as part of Aviall's consolidated filing for U.S.
income tax purposes and may not be available to offset future taxable income
of ASC. On the date of acquisition the deferred tax assets and liabilities
will be redetermined by the buyer at purchase date under APB16. No tax
benefits carryover to the buyer.
There is no provision for income taxes because the division incurred
operating losses for both book and tax purposes during the eleven months
ended November 30, 1994 and the year ended December 31, 1993.
Income tax expense from continuing operations differed from the amount
computed by applying the statutory federal income tax rate of 34 percent to
income before income taxes as a result of the following for the year ended
December 31, 1993 and for the eleven months ended November 30, 1994:
<TABLE>
<CAPTION>
1993 1994
------ -------
<S> <C> <C>
Computed benefit ..................................... (34.0)% (34.0)%
Increase/decrease resulting from:
Change in valuation allowance ....................... 37.6 % 37.6 %
State income tax (net of federal benefit) ........... (3.6)% (3.6)%
----- -----
Income tax benefit ................................. -- % -- %
===== =====
</TABLE>
F-30
<PAGE>
AVIATION SALES COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND NOVEMBER 30, 1994--(CONTINUED)
NOTE 9--INCOME TAXES--(CONTINUED)
The tax effects of the temporary differences that give rise to the
significant portions of the deferred tax assets and deferred tax liabilities
as of November 30, 1994 are presented below (in thousands):
<TABLE>
<CAPTION>
1994
--------
<S> <C>
Deferred tax assets:
Net operating loss carryforward .............................................. $ 832
Accounts receivable, principally due to allowance for doubtful accounts ..... 2,147
Inventory, principally due to reserve for obsolete inventory ................. 24,186
Uniform capitalization under Tax Reform Act of 1986 .......................... 1,330
Intangible assets, principally due to differences in amortization ........... 56
Accrued employee expenses .................................................... 129
Deferred lease revenue ....................................................... 291
Property, plant and equipment, principally due to differences in depreciation 163
Insurance, principally due to accrual for statement reporting purposes ...... 187
Inventory adjustments ........................................................ 132
Other ........................................................................ 62
--------
Total gross deferred assets ................................................. 29,515
Less valuation allowance ...................................................... (29,515)
--------
$
Net deferred tax assets ..................................................... --
========
</TABLE>
The net increase in the total valuation allowance for the periods ended
December 31, 1993 and November 30, 1994 was $19,926 and $2,672, respectively
(in thousands).
NOTE 10--PENSION PLANS
PENSION PLANS
Substantially all employees are covered by defined benefit plans
maintained by Aviall or Ryder System, Inc. ("Ryder") for the periods prior to
December 7, 1993, the effective date that Ryder distributed one share of
common stock for every four shares of Ryder common stock in a distribution
("Distribution") for the benefit of its employees.
Ryder retained the pension fund assets and accumulated benefit obligation
related to participants in the Ryder System, Inc. Retirement Plan (the "Ryder
Plan") for services rendered through the Distribution date. Aviall's pension
plan funding policy is to contribute such amounts as are necessary on an
actuarial basis to provide the plan with sufficient assets to meet the
benefits payable to plan participants. The plan's assets are primarily
invested in equities and interest bearing accounts.
Separate calculations of the components of net pension cost for Aviation
Sales Company and Aviation Sales Company's funded status with the Aviall Plan
and the Ryder Plan are not available. Pension expense included in the
combined statements of operations includes amounts allocated by and charged
to ASC by both Aviall and Ryder based on head count of approximately $124,000
and $325,000 in 1993 and 1994, respectively. Management believes the method
of allocating pension expense to be reasonable.
Aviall also maintains a qualified defined contribution plan of which ASC
was a component. Contribution expense included in the combined statements of
operations includes amounts allocated
F-31
<PAGE>
AVIATION SALES COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND NOVEMBER 30, 1994--(CONTINUED)
NOTE 10--PENSION PLANS--(CONTINUED)
based on head count of approximately $33,940 and $38,570 for 1993 and 1994,
respectively. Management believes the method of allocating contribution
expense is reasonable.
POSTRETIREMENT BENEFITS
Aviall, of which Aviation Sales Company was a component, maintains plans
which provide retired employees with certain health care and life insurance
benefits. Substantially all domestic employees are eligible for these
benefits. Generally, these plans require employee contributions, limit
Company contributions to $95 per month for nonunion employees, and provide
for a $10,000 lifetime maximum benefit for union employees. Effective January
1, 1993, ASC adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." As a
result, approximately $193,000, net of taxes, was recorded as the cumulative
effect of a change in accounting principle to establish a liability for the
present value of expected future benefits attributed to employees' service
rendered prior to January 1, 1993. Periodic postretirement benefit expense
included in the combined statements of operations includes amounts allocated
to ASC by Aviall based on head count of approximately $193,000 and $36,000,
respectively, for the year ended December 31, 1993 and for the eleven months
ended November 30, 1994. Separate calculations of the components of net
periodic postretirement benefit expense and the unfunded status for Aviation
Sales Company is not available. Management believes the method of allocating
postretirement benefits to be reasonable.
NOTE 11--BUSINESS AND CREDIT CONCENTRATIONS
The Company grants credit primarily on an unsecured basis to a wide
variety of aviation-related businesses that are located primarily in North
and South America, Europe and Indonesia. The Company's policy for granting
credit is dependent upon the customers' financial stability. Management
believes that sufficient allowances for doubtful accounts have been provided
at November 30, 1994.
NOTE 12--COMMITMENTS AND CONTINGENCIES
Aviation Sales Company leases facilities at its three primary locations.
The future minimum lease payments owed by the Company under noncancelable
operating leases are $273,998 in 1995 and $114,194 in 1996.
ASC is subject to claims and legal actions that arise in the ordinary
course of their business. Management believes that the ultimate liability, if
any, with respect to these claims and legal actions will not have a material
effect on the financial position or results of operations of ASC.
F-32
<PAGE>
- -----------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT
RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO
WHICH IT RELATES IN ANY STATE OR TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO
MAKE SUCH OFFER IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS DOES NOT IMPLY
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary ................. 3
Risk Factors ....................... 7
Use of Proceeds .................... 10
Dividend Policy .................... 10
Dilution ........................... 11
Capitalization ..................... 12
History of the Company ............. 13
Selected Financial Data ............ 14
Management's Discussion and
Analysis of Financial Condition
and Results of Operations .......... 16
Business ........................... 23
Management ......................... 30
Certain Transactions ............... 35
Principal Stockholders ............. 37
Description of Capital Stock ...... 38
Shares Eligible for Future Sale ... 41
Underwriting ....................... 42
Legal Matters ...................... 43
Experts ............................ 43
Additional Information ............. 43
Index to Financial Statements ..... F-1
</TABLE>
Until , 1996, all dealers effecting transactions in the Common Stock,
whether or not participating in this distribution, may be required to deliver
a Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus when acting as Underwriters and with respect to their unsold
allotments or subscriptions.
- -----------------------------------------------------------------------------
3,250,000 Shares
[LOGO]
COMMON STOCK
- -----------------------------------------------------------------------------
P R O S P E C T U S
, 1996
- -----------------------------------------------------------------------------
SMITH BARNEY INC.
ALEX. BROWN & SONS
INCORPORATED
SANDERS MORRIS MUNDY
- -----------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the issuance of the securities
being registered are as follows:
SEC Registration Fee ......................................... $ 25,775.86
NASD Filing Fee .............................................. 7,975.00
NYSE Listing Fee ............................................. 85,000.00
Printing Expenses ............................................ 140,000.00
Accounting Fees and Expenses ................................. 130,000.00
Legal Fees and Expenses ...................................... 140,000.00
Blue Sky Fees and Expenses ................................... 20,000.00
Transfer Agent and Registrar Fees and Expenses ............... 10,000.00
Miscellaneous ................................................ 41,249.14
-----------
Total ........................................................ $600,000.00
===========
- --------
* All amounts, except the SEC registration fee and the NASD filing fee, are
estimated.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Pursuant to the provisions of Section 145(a) of the Delaware General
Corporation Law, the Company has the power to indemnify anyone made or
threatened to be made a party to any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (other than an action by or in the right of the Company)
because such person is or was a director or officer of the Company against
expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred in the defense or settlement of
such action, suit, or proceeding, provided that (i) such person acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
Company's best interest and (ii) in the case of a criminal proceeding such
person had no reasonable cause to believe his conduct was unlawful.
With respect to an action or suit by or in the right of the Company to
procure a judgment in its favor, Section 145(b) of the Delaware General
Corporation Law provides that the Company shall have the power to indemnify
anyone who was, is, or is threatened to be made a party to any threatened,
pending, or completed action or suit brought by or in the right of the
Company to procure a judgment in its favor because such person is or was a
director or officer of the Company against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense
or settlement of such action or suit, provided that such person acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
Company's best interests, except that no indemnification shall be made in a
case in which such person shall have been adjudged to be liable to the
Company unless and only to the extent that the Court of Chancery or the court
in which such action or suit was brought shall have determined upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses.
Indemnification as described above shall only be granted in a specific
case upon a determination that indemnification is proper under the
circumstances using the applicable standard of conduct which is made by (a) a
majority of a quorum of directors who were not parties to such proceeding,
(b) independent legal counsel in a written opinion if such quorum cannot be
obtained or if a quorum of disinterested directors so directs, or (c) the
shareholders of the Company.
Section 145(g) of the Delaware General Corporation Law permits the
purchase and maintenance of insurance to indemnify directors and officers
against any liability asserted against or incurred by them
II-1
<PAGE>
in any such capacity, whether or not the Company itself would have the power
to indemnify any such director or officer against such liability. The Company
intends to obtain such insurance and premiums will be paid by the Company.
The Certificate of Incorporation of the Company provides for the
indemnification of directors and officers of the Company to the fullest
extent permitted by Section 145 of the Delaware General Corporation Law, as
the same may be amended or supplemented. The Certificate of Incorporation
further provides that the indemnification provided for therein shall not be
exclusive of any rights to which those indemnified may be entitled under any
bylaw, agreement, vote of shareholders or disinterested directors, or
otherwise.
The Certificate of Incorporation also contains a provision that eliminates
the personal liability of the Company's directors to the Company or its
shareholders for monetary damages for breach of fiduciary duty as a director.
The provision does not limit a director's liability for (i) breaches of duty
of loyalty to the Company or its shareholders, (ii) acts or omissions not in
good faith, involving intentional misconduct or involving knowing violations
of law, (iii) the payment of unlawful dividends or unlawful stock repurchases
or redemptions under Section 174 of the Delaware General Corporation Law, or
(iv) transactions in which the director received an improper personal
benefit. Depending on judicial interpretation, the provision may not affect
liability for violations of the federal securities laws.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification
is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Immediately prior to the effectiveness of this Registration Statement, in
connection with the organization of the Company, the Company will issue an
aggregate of 2,924,000 shares of Common Stock to AVAC Corporation (2,249,000
shares), Dale S. Baker (300,000 shares), Harold M. Woody (200,000 shares),
Michael A. Saso (75,000 shares), James D. Innella (75,000 shares) and Joseph E.
Civiletto (25,000 shares) in exchange for the contribution to the Company of
their interests in the Partnership. In addition, the Company will issue to J/T
Aviation Partners, in exchange for the contribution to the Company of its
interest in the Partnership (i) 1,501,000 shares of Common Stock and, to the
extent the over-allotment option is not exercised in full, 15.38% of the 487,500
shares of Common Stock subject to such option (up to 75,000 shares) which is not
purchased by the Underwriters. The shares of Common Stock are being issued in
exchange for partnership interests in ASC Acquisition Partners, L.P. and in
reliance on an exemption from registration under Section 4(2) of the Securities
Act of 1933, as amended. No commissions or other renumeration will be paid in
connection with the above-described issuance of securities.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1 Form of Underwriting Agreement between the Company and the Underwriters*
3.1 Certificate of Incorporation of the Company and amendment thereto**
3.2 Second Amendment to Certificate of Incorporation**
3.3 Bylaws of the Company**
4 Form of Registration Rights Agreement*
5 Opinion of Akerman, Senterfitt & Eidson, P.A.*
10.1 Credit Agreement, dated as of December 2, 1994 by and between the Partnership and Citicorp Securities,
Inc., as agent**
10.2 Subordinated Loan Agreement, dated as of December 2, 1994, by and among the Partnership, RCP
Management L.P., Japan Fleet Service Co., Ltd. and Tomen America, Inc.**
10.3 Lease, dated as of December 2, 1994, by and between Aviation Properties and the Partnership**
10.4 Lease, dated as of December 2, 1994, by and between Aviation Properties of Texas and the Partnership**
10.5 Amended Employment Agreement, effective as of December 2, 1994, by and between Dale S. Baker and the Company**
10.6 Amended Employment Agreement, effective as of December 2, 1994, by and between Harold Woody and the Company**
10.7 Amended Employment Agreement, effective as of December 2, 1994, by and between Joseph E. Civiletto and the
Company**
10.8 Amended Employment Agreement, effective as of June 1, 1996, by and between James D. Innella and the Company**
10.9 Amended Employment Agreement, effective as of June 1, 1996, by and between Michael A. Saso and the Company**
10.10 1996 Director Stock Option Plan**
10.11 1996 Stock Option Plan**
10.12 Form of Amended and Restated Credit Agreement, dated June 26, 1996, between Aviation Sales Operating Company
and Citicorp USA, Inc., as agent*
23.1 Consent of Akerman, Senterfitt & Eidson, P.A. (included in Exhibit 5)*
23.2 Consent of Arthur Andersen LLP**
23.3 Consent of KPMG Peat Marwick LLP**
<FN>
* Filed herewith.
** Previously filed.
</FN>
</TABLE>
II-3
<PAGE>
(b) Schedules.
Schedule II -- Valuation and Qualifying Accounts Three Years Ended December
31, 1995
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required
by the underwriters to permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of Prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 2 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Miami, State of Florida, on the 26th day of June, 1996.
AVIATION SALES COMPANY
By: /s/ DALE S. BAKER
----------------------------------------
Dale S. Baker, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacity and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ DALE S. BAKER President, Chief Executive Officer June 26, 1996
- ------------------------- and Chairman of the Board
Dale S. Baker
/s/ HAROLD M. WOODY* Executive Vice President - Sales June 26, 1996
- ------------------------ and Marketing and Director
Harold M. Woody
/s/ MICHAEL A. SASO* Executive Vice President - June 26, 1996
- ------------------------ Purchasing
Michael A. Saso
/s/ JOSEPH E. CIVILETTO* Vice President and June 26, 1996
- ------------------------ Chief Financial and
Joseph E. Civiletto Accounting Officer
/s/ JAMES D. INNELLA* Vice President and June 26, 1996
- ------------------------ Chief Operating Officer
James D. Innella
/s/ ROBERT ALPERT* Director June 26, 1996
- ------------------------
Robert Alpert
/s/ TIM WATKINS* Director June 26, 1996
- ------------------------
Tim Watkins
- ------------------------ Director June , 1996
Kazutami Okui
- ------------------------ Director June , 1996
Sam Humphreys
- -----------
* Executed pursuant to power of
attorney, dated April 12, 1996.
By: /s/ DALE S. BAKER
---------------------
Dale S. Baker
II-5
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners of
ASC Acquisition Partners, L.P.:
We have audited in accordance with generally accepted auditing standards,
the financial statements of ASC Acquisition Partners, L.P. and subsidiary, as
of December 31, 1994 and 1995, and for each of the three years in the period
ended December 31, 1995, included in this registration statement and have
issued our report thereon dated February 19, 1996. Our audit was made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. The schedule of valuation and qualifying accounts (Schedule II) that
follows is the responsibility of the Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly states in all material
respect the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Miami, Florida,
February 19, 1996.
S-1
<PAGE>
SCHEDULE II
ASC ACQUISITION PARTNERS, L.P. AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
--------------------
BALANCE AT CHARGED TO
BEGINNING COST AND (B) BALANCE AT
DESCRIPTION OF YEAR EXPENSES OTHER DEDUCTIONS END OF YEAR
- ----------- ---------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Allowances for Doubtful
Accounts Receivable:
Year Ended December 31--
1993 .................. $ 898,191 $155,000 $ -- $ 41,459 $1,011,732
========== ======== ========== =========== ==========
1994 ................... $1,011,732 $110,000 $1,504,077 (A) $ -- $2,625,809
========== ======== ========== =========== ==========
1995 ................... $2,625,809 $360,000 $ -- $ 1,034,414 $1,951,395
========== ======== ========== =========== ==========
<FN>
- --------
(A) Represents allowances for doubtful accounts receivable purchased from
Aviation Sales Company business unit.
(B) Represents accounts receivable written-off.
</FN>
</TABLE>
S-2
Draft of June 21, 1996
3,250,000 Shares
AVIATION SALES COMPANY
Common Stock
UNDERWRITING AGREEMENT
June __, 1996
SMITH BARNEY INC.
ALEX. BROWN & SONS INCORPORATED
SANDERS MORRIS MUNDY
As Representatives of the Several Underwriters
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
Aviation Sales Company, a Delaware corporation (the "Company"),
proposes to issue and sell an aggregate of 3,250,000 shares (the "Firm Shares")
of its common stock, $0.001 par value per share (the "Common Stock"), to the
several Underwriters named in Schedule I hereto (the "Underwriters"). The
Company also proposes to sell to the Underwriters, upon the terms and conditions
set forth in Section 2 hereof, up to an additional 487,500 shares (the
"Additional Shares") of Common Stock. The Firm Shares and the Additional Shares
are hereinafter collectively referred to as the "Shares".
The Company is a newly formed corporation. The operations of the
business described in the Prospectus (as defined below) are currently conducted
by the Company and were previously conducted by ASC Acquisition Partners, L.P.
d/b/a/ Aviation Sales Company (the "Partnership") and its affiliates, Aviation
Sales Management Company ("ASMC") and Aviation Sales Leasing Company, L.P.
("ASLC"). The Company and its Subsidiaries (as defined below) were formed for
the purpose of succeeding to the assets, liabilities and business of the
Partnership, ASMC and ASLC. On June __, 1996, the parties holding interests in
the Partnership contributed their respective interests in the Partnership to
the Company and its subsidiaries in exchange for shares of the Common Stock
(except for one party who, in addition to receiving Common Stock, received an
amount equal to the net proceeds to be received by the Company for 500,000
shares of Common Stock to be sold in the Offering, plus an amount equal to
15.38% of the proceeds received by the Company for the sale of Additional
Shares, if any, and to the extent the amount of Additional Shares
<PAGE>
sold in the Offering is less than 487,500, 15.38% of the 487,500 Additional
Shares which are not purchased by the Underwriters), and the Partnership
contributed its assets to the Company (such exchange of partnership interests,
contribution of assets and related transactions are referred to herein as the
"Exchange and Contribution").
The Company wishes to confirm as follows its agreement with you (the
"Representatives") and the other several Underwriters on whose behalf you are
acting, in connection with the several purchases of the Shares by the
Underwriters.
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-1 under the Act (the "registration
statement"), including a prospectus subject to completion relating to the
Shares. The term "Registration Statement" as used in this Agreement means the
registration statement (including all financial schedules and exhibits), as
amended at the time it becomes effective, or, if the registration statement
became effective prior to the execution of this Agreement, as supplemented or
amended prior to the execution of this Agreement. If it is contemplated, at the
time this Agreement is executed, that a post-effective amendment to the
registration statement will be filed and must be declared effective before the
offering of the Shares may commence, the term "Registration Statement" as used
in this Agreement means the registration statement as amended by said
post-effective amendment, and such term shall also include any registration
statement filed pursuant to Rule 462(b) of the Act relating to the Common Stock.
The term "Prospectus" as used in this Agreement means the prospectus in the form
included in the Registration Statement, or, if the prospectus included in the
Registration Statement omits information in reliance on Rule 430A under the Act
and such information is included in a prospectus filed with the Commission
pursuant to Rule 424(b) under the Act, the term "Prospectus" as used in this
Agreement means the prospectus in the form included in the Registration
Statement as supplemented by the addition of the Rule 430A information contained
in the prospectus filed with the Commission pursuant to Rule 424(b). The term
"Prepricing Prospectus" as used in this Agreement means the prospectus subject
to completion in the form included in the registration statement at the time of
the initial filing of the registration statement with the Commission, and as
such prospectus shall have been amended from time to time prior to the date of
the Prospectus.
2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees, subject
to all the terms and conditions set forth herein, to issue and sell to each
Underwriter and, upon the basis of the representations, warranties and
agreements of the Company herein contained and subject to all the terms and
conditions set forth herein, each Underwriter agrees, severally and not jointly,
to purchase from the Company, at a purchase price of $_____ per Share (the
"purchase price per share"), the number of Firm Shares set forth opposite the
name of such Underwriter in Schedule I hereto (or such number of Firm Shares
increased as set forth in Section 10 hereof).
The Company also agrees, subject to all the terms and conditions set
forth herein, to sell to the Underwriters, and, upon the basis of the
representations, warranties and
2
<PAGE>
agreements of the Company herein contained and subject to all the terms and
conditions set forth herein, the Underwriters shall have the right to purchase
from the Company at the purchase price per share, pursuant to an option (the
"over-allotment option") which may be exercised on one occasion only at any time
prior to 9:00 P.M., New York City time, on the 30th day after the date of the
Prospectus (or, if such 30th day shall be a Saturday or Sunday or a holiday, on
the next business day thereafter when the New York Stock Exchange is open for
trading), up to an aggregate of 487,500 Additional Shares. Additional Shares may
be purchased only for the purpose of covering over-allotments made in connection
with the offering of the Firm Shares. Upon any exercise of the over-allotment
option, each Underwriter, severally and not jointly, agrees to purchase from the
Company the number of Additional Shares (subject to such adjustments as you may
determine in order to avoid fractional shares) which bears the same proportion
to the number of Additional Shares to be purchased by Underwriters as the number
of Firm Shares set forth opposite the name of such Underwriter in Schedule I
hereto (or such number of Firm Shares increased as set forth in Section 10
hereof) bears to the aggregate number of Firm Shares.
3. TERMS OF PUBLIC OFFERING. The Company has been advised by you that
the Underwriters propose to make a public offering of their respective portions
of the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable and initially to offer the
Shares upon the terms set forth in the Prospectus.
4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the
Underwriters of and payment for the Firm Shares shall be made at the office of
Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, at 10:00 A.M., New
York City time, on , 1996 (the "Closing Date"). The place of closing for the
Firm Shares and the Closing Date may be varied by agreement between you and the
Company.
Delivery to the Underwriters of and payment for any Additional Shares to
be purchased by the Underwriters shall be made at the aforementioned office of
Smith Barney Inc. at such time on such date (the "Option Closing Date"), which
may be the same as the Closing Date but shall in no event be earlier than the
Closing Date nor earlier than two nor later than ten business days after the
giving of the notice hereinafter referred to, as shall be specified in a written
notice from you on behalf of the Underwriters to the Company of the
Underwriters' determination to purchase a number, specified in such notice, of
Additional Shares. The place of closing for any Additional Shares and the Option
Closing Date for such Shares may be varied by agreement between you and the
Company.
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as you shall request prior to 9:30 A.M., New York City time, on the second
business day preceding the Closing Date or any Option Closing Date, as the case
may be. Such certificates shall be made available to you in New York City for
inspection and packaging not later than 9:30 A.M., New York City time, on the
business day next preceding the Closing Date or the Option Closing Date, as the
case may be. The certificates evidencing the Firm Shares and any Additional
Shares to be purchased hereunder shall be delivered to you on the Closing Date
3
<PAGE>
or the Option Closing Date, as the case may be, against payment of the purchase
price therefor in immediately available funds to the order of the Company.
5. AGREEMENTS OF THE COMPANY. The Company agrees with the several
Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered,
it is necessary for the Registration Statement or a post-effective amendment
thereto to be declared effective before the offering of the Shares may commence,
the Company will endeavor to cause the Registration Statement or such
post-effective amendment to become effective as soon as possible and will advise
you promptly and, if requested by you, will confirm such advice in writing, when
the Registration Statement or such post-effective amendment has become
effective.
(b) The Company will advise you promptly and, if requested by
you, will confirm such advice in writing: (i) of any request by the Commission
for amendment of or a supplement to the Registration Statement, any Prepricing
Prospectus or the Prospectus or for additional information; (ii) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (iii) within the period of time referred to in paragraph (f)
below, of any material change in the Company's condition (financial or other),
business, prospects, properties, net worth or results of operations, or of the
happening of any event, which makes any statement of a material fact made in the
Registration Statement or the Prospectus (as then amended or supplemented)
untrue or which requires the making of any additions to or changes in the
Registration Statement or the Prospectus (as then amended or supplemented) in
order to state a material fact required by the Act or the regulations thereunder
to be stated therein or necessary in order to make the statements therein not
misleading, or of the necessity to amend or supplement the Prospectus (as then
amended or supplemented) to comply with the Act or any other law. If at any time
the Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to obtain
the withdrawal of such order at the earliest possible time.
(c) The Company will furnish to you, without charge, four
signed copies of the registration statement as originally filed with the
Commission and of each amendment thereto, including financial statements and all
exhibits thereto, and will also furnish to you, without charge, such number of
conformed copies of the registration statement as originally filed and of each
amendment thereto, but without exhibits, as you may request.
(d) The Company will not (i) file any amendment to the
Registration Statement or make any amendment or supplement to the Prospectus of
which you shall not previously have been advised or to which you shall
reasonably object after being so advised or (ii) so long as, in the opinion of
counsel for the Underwriters, a Prospectus is required to be delivered in
connection with sales by any Underwriter or dealer, file any information,
documents or reports pursuant to the Securities Exchange Act of 1934, as amended
(the
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"Exchange Act"), without delivering a copy of such information, documents or
reports to you, as Representatives of the Underwriters, prior to or concurrently
with such filing.
(e) Prior to the execution and delivery of this Agreement, the
Company has delivered to you, without charge, in such quantities as you have
requested, copies of each form of the Prepricing Prospectus. The Company
consents to the use, in accordance with the provisions of the Act and with the
securities or Blue Sky laws of the jurisdictions in which the Shares are offered
by the several Underwriters and by dealers, prior to the date of the Prospectus,
of each Prepricing Prospectus so furnished by the Company.
(f) As soon after the execution and delivery of this Agreement
as possible and thereafter from time to time for such period as in the opinion
of counsel for the Underwriters a prospectus is required by the Act to be
delivered in connection with sales by any Underwriter or dealer, the Company
will expeditiously deliver to each Underwriter and each dealer, without charge,
as many copies of the Prospectus (and of any amendment or supplement thereto) as
you may reasonably request. The Company consents to the use of the Prospectus
(and of any amendment or supplement thereto) in accordance with the provisions
of the Act and with the securities or Blue Sky laws of the jurisdictions in
which the Shares are offered by the several Underwriters and by all dealers to
whom Shares may be sold, both in connection with the offering and sale of the
Shares and for such period of time thereafter as the Prospectus is required by
the Act to be delivered in connection with sales by any Underwriter or dealer.
If during such period of time any event shall occur that is required to be set
forth in the Prospectus (as then amended or supplemented) or should be set forth
therein in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
to supplement or amend the Prospectus to comply with the Act or any other law,
the Company will forthwith prepare and, subject to the provisions of paragraph
(d) above, file with the Commission an appropriate supplement or amendment
thereto, and will expeditiously furnish to the Underwriters and dealers a
reasonable number of copies thereof. In the event that the Company and you, as
Representatives of the several Underwriters, agree that the Prospectus should be
amended or supplemented, the Company, if requested by you, will promptly issue a
press release announcing or disclosing the matters to be covered by the proposed
amendment or supplement.
(g) The Company will cooperate with you and with counsel for
the Underwriters in connection with the registration or qualification of the
Shares for offering and sale by the several Underwriters and by dealers under
the securities or Blue Sky laws of such jurisdictions as you may designate and
will file such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification; provided that
in no event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which would
subject it to service of process in suits, other than those arising out of the
offering or sale of the Shares, in any jurisdiction where it is not now so
subject.
(h) The Company will make generally available to its security
holders a consolidated earnings statement, which need not be audited, covering a
twelve-month period commencing after the effective date of the Registration
Statement and ending not later than
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15 months thereafter, as soon as practicable after the end of such period, which
consolidated earnings statement shall satisfy the provisions of Section 11(a) of
the Act.
(i) During the period of five years hereafter, the Company
will furnish to you (i) as soon as available, a copy of each report of the
Company mailed to stockholders or filed with the Commission, and (ii) from time
to time such other information concerning the Company as you may request.
(j) If this Agreement shall terminate or shall be terminated
after execution pursuant to any provisions hereof (otherwise than pursuant to
the second paragraph of Section 10 hereof or by notice given by you terminating
this Agreement pursuant to Section 10 or Section 11 hereof) or if this Agreement
shall be terminated by the Underwriters because of any failure or refusal on the
part of the Company to comply with the terms or fulfill any of the conditions of
this Agreement, the Company agrees to reimburse the Representatives for all
out-of-pocket expenses (including fees and expenses of counsel for the
Underwriters) incurred by you in connection herewith.
(k) The Company will apply the net proceeds from the sale of
the Shares substantially in accordance with the description set forth in the
Prospectus.
(l) If Rule 430A of the Act is employed, the Company will
timely file the Prospectus pursuant to Rule 424(b) under the Act and will advise
you of the time and manner of such filing.
(m) Except as provided in this Agreement and except for
options granted pursuant to the Company's 1996 Stock Option Plan and the
Company's 1996 Director Stock Option Plan, the Company will not sell, offer to
sell, solicit an offer to buy, contract to sell or otherwise dispose of any
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock, or grant any options or warrants to purchase Common Stock, for
a period of 180 days after the date of the Prospectus, without the prior written
consent of Smith Barney Inc.
(n) The Company has furnished or will furnish to you "lock-up"
letters, in form and substance satisfactory to you, signed by each of its
current officers and directors and each of its stockholders designated by you.
(o) Except as stated in this Agreement and in the Prepricing
Prospectus and Prospectus, neither the Partnership nor the Company has taken,
and the Company will not take, directly or indirectly, any action designed to or
that might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Shares.
(p) The Company will use its best efforts to have the Common
Stock listed, subject to notice of issuance, on the New York Stock Exchange
concurrently with the effectiveness of the registration statement.
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6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Underwriter that:
(a) Each Prepricing Prospectus included as part of the
registration statement as originally filed or as part of any amendment or
supplement thereto, or filed pursuant to Rule 424 under the Act, complied when
so filed in all material respects with the provisions of the Act. The Commission
has not issued any order preventing or suspending the use of any Prepricing
Prospectus.
(b) The registration statement in the form in which it became
or becomes effective and also in such form as it may be when any post-effective
amendment thereto shall become effective and the prospectus and any supplement
or amendment thereto when filed with the Commission under Rule 424(b) under the
Act, complied or will comply in all material respects with the provisions of the
Act and did not or will not at any such times contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, except that this
representation and warranty does not apply to statements in or omissions from
the registration statement or the prospectus made in reliance upon and in
conformity with information relating to any Underwriter furnished to the
Company in writing by or on behalf of any Underwriter through you expressly for
use therein.
(c) All the outstanding shares of Common Stock of the Company
have been duly authorized and validly issued, are fully paid and nonassessable
and are free of any preemptive or similar rights; the Shares have been duly
authorized and, when issued and delivered to the Underwriters against payment
therefor in accordance with the terms hereof, will be validly issued, fully paid
and nonassessable and free of any preemptive or similar rights; and the capital
stock of the Company conforms to the description thereof in the registration
statement and the prospectus.
(d) All the outstanding shares of capital stock of each of the
Company's subsidiaries (the "Subsidiaries") have been duly authorized and
validly issued, are fully paid and nonassessable, and are owned by the Company
directly, or indirectly through one of the other Subsidiaries, free and clear of
any lien, adverse claim, security interest (except for security interests in
favor of Citicorp USA, Inc., as agent for the Company's various lenders),
equity, or other encumbrance.
(e) The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the
Prospectus and is duly registered and qualified to conduct its business and is
in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify does not have
a material adverse effect on the condition (financial or other), business,
properties, net worth or results of operations of the Company and the
Subsidiaries taken as a whole.
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(f) All the Subsidiaries are listed in an exhibit to the
Registration Statement. Each Subsidiary is a corporation duly organized,
validly existing and in good standing in the jurisdiction of its incorporation,
with full corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Registration Statement and the
Prospectus, and is duly registered and qualified to conduct its business and is
in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify does not have
a material adverse effect on the condition (financial or other), business,
properties, net worth or results of operations of the Company and the
Subsidiaries, taken as a whole.
(g) There are no legal or governmental proceedings pending or,
to the knowledge of the Company, threatened, against the Company or any of the
Subsidiaries, or to which the Company or any of the Subsidiaries, or to which
any of their respective properties is subject, that are required to be described
in the Registration Statement or the Prospectus but are not described as
required, and there are no agreements, contracts, indentures, leases or other
instruments that are required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration Statement that
are not described or filed as required by the Act.
(h) Neither the Company nor any of the Subsidiaries is in
violation of its certificate or articles of incorporation, by-laws, or other
organizational documents, or of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or any of the
Subsidiaries or of any decree of any court or governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries, except where such
violation does not have a material adverse effect on the condition (financial or
other), business, properties, net worth or results of operations of the Company
and the Subsidiaries taken as a whole, or is in default in any material respect
in the performance of any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or in any material
agreement, indenture, lease or other instrument to which the Company or any of
the Subsidiaries is a party or by which any of them or any of their respective
properties may be bound, except where such violation does not have a material
adverse effect on the condition (financial or other), business, properties, net
worth or results of operations of the Company and the Subsidiaries taken as a
whole.
(i) Neither the issuance and sale of the Shares by the Company,
the execution, delivery or performance of this Agreement by the Company nor the
consummation of the transactions contemplated hereby (A) requires any consent,
approval, authorization or other order of or registration or filing with, any
court, regulatory body, administrative agency or other governmental body, agency
or official (except such as may be required for the registration of the Shares
under the Act and the Exchange Act and compliance with the securities or Blue
Sky laws of various jurisdictions, all of which have been or will be effected in
accordance with this Agreement) or conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, the certificate
or articles of incorporation, bylaws, or other organizational documents, of the
Company or any of the Subsidiaries or (B) conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, any material
agreement, indenture, lease or other instrument to
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<PAGE>
which the Company or any of the Subsidiaries is a party or by which any of them
or any of their respective properties may be bound, or violates or will violate
any statute, law, regulation or filing or judgment, injunction, order or decree
applicable to the Company or any of the Subsidiaries or any of their respective
properties, or will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of the
Subsidiaries pursuant to the terms of any agreement or instrument to which any
of them is a party or by which any of them may be bound or to which any of the
property or assets of any of them is subject.
(j) The accountants, Arthur Andersen LLP and KPMG Peat Marwick
LLP, who have certified or shall certify the financial statements included in
the Registration Statement and the Prospectus (or any amendment or supplement
thereto) are independent public accountants as required by the Act.
(k) The consolidated historical and pro forma financial
statements, together with related schedules and notes, included in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto), comply as to form in all material respects with the requirements of
the Act. Such historical financial statements present fairly the consolidated
financial position, results of operations and changes in financial position of
the entities covered thereby on the basis stated in the Registration Statement
at the respective dates indicated and the results of their operations and their
cash flows for the respective periods indicated, in accordance with generally
accepted accounting principles consistently applied throughout such periods. The
pro forma financial statements included in the Registration Statement and the
Prospectus and any amendment or supplement thereto, have been prepared on a
basis consistent with such historical financial statements, except for the pro
forma adjustments specified therein, and give effect to assumptions made on a
reasonable basis and present fairly the historical and proposed transactions
contemplated by this Agreement and the Prospectus (and any amendment or
supplement thereto). The other financial and statistical data included in the
Prospectus and in the Registration Statement, historical and pro forma, are, in
all material respects, accurately presented and prepared on a basis consistent
with such financial statements and the books and records of the entities covered
thereby.
(l) The execution, delivery, and performance of each of the
documents relating to the Exchange and Contribution (the "Exchange and
Contribution Documents"), was duly and validly authorized by each of the parties
thereto, and each Exchange and Contribution Document was duly executed and
delivered by each such party and constitutes the legally valid and binding
agreement of each such party, enforceable against such party in accordance with
its terms. The Exchange and Contribution has been consummated in accordance with
the terms of the Exchange and Contribution Documents. The execution, delivery
and performance of the Exchange and Contribution Documents by each of the
parties thereto and the consummation of the transactions contemplated thereby
(A) did not require any consent, approval, authorization or other order of or
registration or filing with, any court, regulatory body, administrative agency
or other governmental body, agency or official (except for the filing of that
certain certificate of merger of ASMC into Aviation Sales Operating Company, a
Subsidiary of the Company, which shall have occurred prior to the execution of
this Agreement), or conflict with or constitute a breach of, or a default
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<PAGE>
under, the certificate or articles of incorporation, bylaws, partnership
agreement, or other organizational documents, of any of the parties thereto or
(B) did not conflict with or constitute a breach of, or a default under, any
material agreement, indenture, lease or other instrument to which any of the
parties thereto is a party or by which any of them or any of their respective
properties may be bound, or violate any statute, law, regulation or filing or
judgment, injunction, order or decree applicable to any of the parties thereto
or any of their respective properties, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of any of the
parties thereto pursuant to the terms of any agreement or instrument to which
any of them is a party or by which any of them may be bound or to which any of
the property or assets of any of them is subject.
(m) The execution and delivery of, and the performance by the
Company of its obligations under, this Agreement have been duly and validly
authorized by the Company, and this Agreement has been duly executed and
delivered by the Company and constitutes the valid and legally binding agreement
of the Company, enforceable against the Company in accordance with its terms,
except as rights to indemnity and contribution hereunder may be limited by
federal or state securities laws, bankruptcy, insolvency, reorganization,
moratorium or other similar laws or equitable principles affecting the
enforcement of creditors' rights.
(n) Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given in the Registration
Statement and the Prospectus (or any amendment or supplement thereto), neither
the Company, the Partnership, any of the Subsidiaries, ASMC nor ASLC has
incurred any liability or obligation, direct or contingent, or entered into any
transaction, not in the ordinary course of business, that is material to the
Company and the Subsidiaries taken as a whole, and there has not been any change
in the capital stock of the Company or any of the Subsidiaries, any material
increase in the short-term debt or long-term debt of the Company or any of the
Subsidiaries, any material adverse change, or any development involving, or
which may reasonably be expected to involve, a prospective material adverse
change, in the condition (financial or other), business, net worth or results of
operations of the Company and the Subsidiaries taken as a whole.
(o) Each of the Company and the Subsidiaries has good and
marketable title to all property (real and personal) described in the Prospectus
as being owned by such persons, free and clear of all liens, claims, security
interests or other encumbrances except such as are described in the Registration
Statement and the Prospectus or in a document filed as an exhibit to the
Registration Statement, and all the property described in the Prospectus as
being held under lease is held by the Company and the Subsidiaries, under valid,
subsisting and enforceable leases.
(p) Neither the Company nor the Partnership has distributed
and, prior to the later to occur of (i) the Closing Date and (ii) completion of
the distribution of the Shares, the Company will not distribute any offering
material in connection with the offering and sale of the Shares other than the
Registration Statement, the Prepricing Prospectus, the Prospectus or other
materials, if any, permitted by the Act.
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(q) Each of the Company and the Subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits") as are necessary to own their respective properties and
to conduct their business in the manner described in the Prospectus, subject to
such qualifications as may be set forth in the Prospectus; each of the Company
and the Subsidiaries has fulfilled and performed all their material obligations
with respect to such permits and no event has occurred which allows, or after
notice or lapse of time would allow, revocation or termination thereof or
results in any other material impairment of the rights of the holder of any such
permit, subject in each case to such qualification as may be set forth in the
Prospectus; and, except as described in the Prospectus, none of such permits
contains any restriction that is materially burdensome to the operation of the
business conducted by the Company or any of the Subsidiaries.
(r) The Partnership maintained, and the Company maintains, a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(s) To the knowledge of the Company, neither the Company, the
Partnership, any of the Subsidiaries, ASMC, ASLC nor any employee or agent of
the Company, the Partnership, any Subsidiary, ASMC or ASLC has made any payment
of funds of the Company, the Partnership, any Subsidiary, ASMC or ASLC or
received or retained any funds in violation of any law, rule or regulation,
which payment, receipt or retention of funds is of a character required to be
disclosed in the Prospectus.
(t) The Company, the Partnership, each of the Subsidiaries,
ASMC and ASLC have filed all tax returns required to be filed on or prior to the
date hereof (giving effect to applicable extension periods), which returns are
complete and correct, and neither the Company, the Partnership, any Subsidiary,
ASMC nor ASLC is in default in the payment of any taxes which were payable
pursuant to said returns or any assessments with respect thereto.
(u) Except as disclosed in the Prospectus, no holder of any
security of the Company has any right to require registration of shares of
Common Stock or any other security of the Company because of the filing of the
registration statement or consummation of the transactions contemplated by this
Agreement.
(v) The Company and the Subsidiaries own or possess all
patents, trademarks, trademark registrations, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets and
rights described in the Prospectus as being owned by them or any of them or
necessary for the conduct of their respective businesses, and the Company is not
aware of any claim to the contrary or any challenge by any other person to the
rights of the Company and the Subsidiaries with respect to the foregoing.
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(w) The Company is not now, and after sale of the Shares to be
sold by the Company hereunder and application of the net proceeds from such sale
as described in the Prospectus under the caption "Use of Proceeds" will not be,
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
(x) As of the date hereof, the Company is in compliance with
all provisions of Florida Statutes, ss. 517.075, relating to issuers doing
business with Cuba.
(y) The Company and each of the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are customary in the businesses in which they are
engaged; all policies of insurance and fidelity or surety bonds insuring the
Company or any of the Subsidiaries or their respective businesses, assets,
employees, officers and directors are in full force and effect; the Company and
the Subsidiaries are in compliance with the terms of such policies and
instruments in all material respects; and there are no claims by the Company or
any of the Subsidiaries under any such policy or instrument as to which any
insurance company is denying liability or defending under a reservation of
rights clause.
(z) To the best knowledge of the Company, no labor problem
exists with its employees or with employees of any Subsidiary or is imminent,
which labor problem could adversely affect the Company and the Subsidiaries,
taken as a whole, and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its or its Subsidiaries' principal
suppliers, contractors or customers that could be expected to materially
adversely affect the condition (financial or otherwise), earnings, business
affairs or business prospects of the Company and the Subsidiaries, taken as a
whole.
(aa) Immediately prior to the consummation of the Contribution
and Exchange, the Partnership, ASMC and ASLC were, and the Company and the
Subsidiaries are (i) in compliance with any and all applicable foreign, federal,
state and local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (ii) in receipt of all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) in
compliance with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or failure to comply with
the terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a material adverse effect on the Company and
the Subsidiaries, taken as a whole. Neither the Company, the Partnership, any of
the Subsidiaries, ASMC nor ASLC has been named as a "potentially responsible
party" under the Comprehensive Environmental Response Compensation and Liability
Act of 1980, as amended ("CERCLA").
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each of
you and each other Underwriter and each person, if any, who controls any
Underwriter within the
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meaning of Section 15 of the Act or Section 20(a) of the Exchange Act from and
against any and all losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
Prepricing Prospectus or in the Registration Statement or the Prospectus or in
any amendment or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or omitted therefrom in
reliance upon and in conformity with the information relating to such
Underwriter furnished in writing to the Company by or on behalf of any
Underwriter through you expressly for use in connection therewith; provided,
however, that the indemnification contained in this paragraph (a) with respect
to any Prepricing Prospectus shall not inure to the benefit of any Underwriter
(or to the benefit of any person controlling such Underwriter) on account of any
such loss, claim, damage, liability or expense arising from the sale of the
Shares by such Underwriter to any person if a copy of the Prospectus shall not
have been delivered or sent to such person within the time required by the Act
and the regulations thereunder, and the untrue statement or alleged untrue
statement or omission or alleged omission of a material fact contained in such
Prepricing Prospectus was corrected in the Prospectus, provided that the Company
has delivered the Prospectus to the several Underwriters in requisite quantity
on a timely basis to permit such delivery or sending. The foregoing indemnity
agreement shall be in addition to any liability which the Company may otherwise
have.
(b) If any action, suit or proceeding shall be brought against
any Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Company such Underwriter or such controlling
person shall promptly notify the Company, and the Company shall assume the
defense thereof, including the employment of counsel selected by the Company and
payment of all fees and expenses. Such Underwriter or any such controlling
person shall have the right to employ separate counsel in any such action, suit
or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Underwriter or such
controlling person unless (i) the Company has agreed in writing to pay such fees
and expenses, (ii) the Company has failed to assume the defense and employ
counsel, or (iii) the named parties to any such action, suit or proceeding
(including any impleaded parties) include both such Underwriter or such
controlling person and the Company and such Underwriter or such controlling
person shall have been advised in writing by its counsel that representation of
such indemnified party and the Company by the same counsel would be
inappropriate under applicable standards of professional conduct (whether or not
such representation by the same counsel has been proposed) due to actual or
potential differing interests between them (in which case the indemnifying party
shall not have the right to assume the defense of such action, suit or
proceeding on behalf of such Underwriter or such controlling person). It is
understood, however, that the Company shall, in connection with any one such
action, suit or proceeding or separate but substantially similar or related
actions, suits or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of only one separate firm of attorneys (in addition to any local
counsel) at any time for all such
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Underwriters and controlling persons not having actual or potential differing
interests with you or among themselves, which firm shall be designated in
writing by Smith Barney Inc., and that all such fees and expenses shall be
reimbursed as they are incurred. The Company shall not be liable for any
settlement of any such action, suit or proceeding effected without its written
consent, but if settled with such written consent, or if there be a final
judgment for the plaintiff in any such action, suit or proceeding, the Company
agrees to indemnify and hold harmless any Underwriter, to the extent provided in
the preceding paragraph, and any such controlling person from and against any
loss, claim, damage, liability or expense by reason of such settlement or
judgment.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement, and any person who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, to the
same extent as the foregoing indemnity from the Company to each Underwriter, but
only with respect to information relating to such Underwriter furnished in
writing by or on behalf of such Underwriter through you expressly for use in the
Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto. If any action, suit or proceeding shall be
brought against the Company, any of its directors, any such officer, or any such
controlling person based on the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto, and in respect of
which indemnity may be sought against any Underwriter pursuant to this paragraph
(c), such Underwriter shall have the rights and duties given to the Company by
paragraph (b) above (except that if the Company shall have assumed the defense
thereof such Underwriter shall not be required to do so, but may employ separate
counsel therein and participate in the defense thereof, but the fees and
expenses of such counsel shall be at such Underwriter's expense), and the
Company, its directors, any such officer, and any such controlling person shall
have the rights and duties given to the Underwriters by paragraph (b) above. The
foregoing indemnity agreement shall be in addition to any liability which any
Underwriter may otherwise have.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the offering
of the Shares, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault of the
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Company on the one hand and the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or by the Underwriters on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The Company and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this Section 7 were determined
by a pro rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price of the Shares underwritten by it and distributed to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 7 are several
in proportion to the respective numbers of Firm Shares set forth opposite their
names in Schedule I hereto (or such numbers of Firm Shares increased as set
forth in Section 10 hereof) and not joint.
(f) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 7 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any person
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter or any person controlling any Underwriter, or to the Company, its
directors or officers, or any person controlling the Company, shall be entitled
to the benefits of the indemnity, contribution, and reimbursement agreements
contained in this Section 7.
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8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations
of the Underwriters to purchase the Firm Shares hereunder are subject to the
following conditions:
(a) If, at the time this Agreement is executed and delivered,
it is necessary for the registration statement or a post-effective amendment
thereto to be declared effective before the offering of the Shares may commence,
the registration statement or such post-effective amendment shall have become
effective not later than 5:30 P.M., New York City time, on the date hereof, or
at such later date and time as shall be consented to in writing by you, and all
filings, if any, required by Rules 424 and 430A under the Act shall have been
timely made; no stop order suspending the effectiveness of the registration
statement shall have been issued and no proceeding for that purpose shall have
been instituted or, to the knowledge of the Company, the Partnership or any
Underwriter, threatened by the Commission, and any request of the Commission for
additional information (to be included in the registration statement or the
prospectus or otherwise) shall have been complied with to your satisfaction.
(b) Subsequent to the effective date of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting the condition (financial or other),
business, properties, net worth, or results of operations of the Company or the
Subsidiaries not contemplated by the Prospectus, which in your opinion, as
Representatives of the several Underwriters, would materially, adversely affect
the market for the Shares, or (ii) any event or development relating to or
involving the Company or any officer or director of the Company, which makes any
statement made in the Prospectus untrue or which, in the opinion of the Company
and its counsel or the Underwriters and their counsel, requires the making of
any addition to or change in the Prospectus in order to state a material fact
required by the Act or any other law to be stated therein or necessary in order
to make the statements therein not misleading, if amending or supplementing the
Prospectus to reflect such event or development would, in your opinion, as
Representatives of the several Underwriters, materially adversely affect the
market for the Shares.
(c) You shall have received on the Closing Date, an opinion of
Akerman, Senterfitt & Eidson, P.A., counsel for the Company, dated the Closing
Date and addressed to you, as Representatives of the several Underwriters, to
the effect that:
(i) The Company is a corporation duly organized and
validly existing in good standing under the laws of the State of Delaware with
full corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Registration Statement and the
Prospectus (and any amendment or supplement thereto) and is duly registered and
qualified to conduct its business and is in good standing in each jurisdiction
or place where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure so to
register or qualify does not have a material adverse effect on the condition
(financial or other), business, properties, net worth or results of operations
of the Company and the Subsidiaries taken as a whole;
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(ii) The authorized and outstanding capital stock of th
Company is as set forth under the caption "Capitalization" in the Prospectus;
and the authorized capital stock of the Company conforms in all material
respects as to legal matters to the description thereof contained in the
Prospectus under the caption "Description of Capital Stock";
(iii) All the shares of capital stock of the Company
outstanding prior to the issuance of the Shares have been duly authorized and
validly issued and are fully paid and nonassessable;
(iv) The Shares have been duly authorized and, when
issued and delivered to the Underwriters against payment therefor in accordance
with the terms hereof, will be validly issued, fully paid and nonassessable and
free of any preemptive, or to the best knowledge of such counsel after
reasonable inquiry, similar rights that entitle or will entitle any person to
acquire any Shares upon the issuance thereof by the Company;
(v) To the best knowledge of such counsel after
reasonable inquiry, except as described in the Prospectus, there are no
outstanding options, warrants or other rights calling for the issuance of, and
such counsel does not know of any commitment, plan or arrangement to issue, any
shares of capital stock of the Company or any security convertible into or
exchangeable or exercisable for capital stock of the Company;
(vi) To the best knowledge of such counsel after
reasonable inquiry, except as described in the Prospectus, there is no holder of
any security of the Company or any other person who has the right, contractual
or otherwise, to cause the Company to sell or otherwise issue to them, or to
permit them to underwrite the sale of, the Shares or the right to have any
Common Stock or other securities of the Company included in the registration
statement or the right, as a result of the filing of the registration statement,
to require registration under the Act of any shares of Common Stock or other
securities of the Company.
(vii) The form of certificates for the Shares conforms
to the requirements of the Delaware General Corporation Law;
(viii) The Registration Statement and all post-effective
amendments, if any, have become effective under the Act and, to the best
knowledge of such counsel after reasonable inquiry, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose are pending before or contemplated by the Commission; and any
required filing of the Prospectus pursuant to Rule 424(b) has been made in
accordance with Rule 424(b);
(ix) No registration under the Act of any of the Common
Stock issued to the parties holding interests in the Partnership in connection
with the Exchange and Contribution is required for the issuance of such
securities to such parties;
(x) The Company has the corporate power and authority
to enter into this Agreement and to issue, sell and deliver the Shares to be
sold by it to the
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Underwriters as provided herein, and this Agreement has been duly authorized,
executed and delivered by the Company and is a valid, legal and binding
agreement of the Company;
(xi) To the best knowledge of such counsel after
reasonable inquiry, neither the Company nor any of the Subsidiaries is in
violation of its respective certificate or articles of incorporation, bylaws, or
other organizational documents, or is in default in the performance of any
material obligation, agreement or condition contained in any bond, debenture,
note or other evidence of indebtedness, except as may be disclosed in the
Prospectus;
(xii) Neither the offer, sale or delivery of the Shares
by the Company, the execution, delivery or performance of this Agreement,
compliance by the Company with the provisions hereof, nor consummation by the
Company of the transactions contemplated hereby conflicts or will conflict with
or constitutes or will constitute a breach of, or a default under, the
certificate or articles of incorporation, bylaws, or other organizational
documents, of the Company or any of the Subsidiaries or any material agreement,
indenture, lease or other instrument to which the Company or any of the
Subsidiaries is a party or by which any of them or any of their respective
properties is bound that is an exhibit to the Registration Statement, or is
known to such counsel after reasonable inquiry, or will result in the creation
or imposition of any lien, charge or encumbrance upon any property or assets of
the Company or any of the Subsidiaries, nor will any such action result in any
violation of any existing law, regulation, ruling (assuming compliance with all
applicable state securities and Blue Sky laws), judgment, injunction, order or
decree known to such counsel after reasonable inquiry, applicable to the
Company, the Subsidiaries or any of their respective properties;
(xiii) No consent, approval, authorization or other order
of, or registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency, or official is required on the part
of the Company (except as have been obtained under the Act and the Exchange Act
or such as may be required under state securities or Blue Sky laws governing the
purchase and distribution of the Shares) for the valid issuance and sale of the
Shares to the Underwriters as contemplated by this Agreement;
(xiv) The Registration Statement and the Prospectus and
any supplements or amendments thereto (except for the financial statements and
the notes thereto and the schedules and other financial and statistical data
included therein, as to which such counsel need not express any opinion) comply
as to form in all material respects with the requirements of the Act;
(xv) To the best knowledge of such counsel after
reasonable inquiry, (A) other than as described or contemplated in the
Prospectus (or any supplement thereto), there are no legal or governmental
proceedings pending or threatened against the Company or any of the
Subsidiaries, or to which the Company or any of the Subsidiaries, or any of
their property, is subject, which are required to be described in the
Registration Statement or Prospectus (or any amendment or supplement thereto)
and (B) there are no agreements, contracts, indentures, leases or other
instruments, that are required to be described in the
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Registration Statement or the Prospectus (or any amendment or supplement
thereto) or to be filed as an exhibit to the Registration Statement that are
not described or filed as required, as the case may be;
(xvi) To the best knowledge of such counsel after
reasonable inquiry, neither the Company nor any of the Subsidiaries is in
violation of any law, ordinance, administrative or governmental rule or
regulation applicable to the Company or any of the Subsidiaries or of any decree
of any court or governmental agency or body having jurisdiction over the Company
or any of the Subsidiaries;
(xvii) The statements in the Registration Statement and
Prospectus, insofar as they are descriptions of contracts, agreements or other
legal documents, or refer to statements of law or legal conclusions, are
accurate and present fairly the information required to be shown;
(xviii) The statements in the Registration Statement and
Prospectus in the penultimate paragraph under the caption "Certain
Transactions," insofar as they relate to the grant and exercise of the options
referred to therein, are accurate and present fairly the information required to
be shown;
(xix) Upon delivery of the Shares pursuant to this
Agreement and payment therefor as contemplated herein the Underwriters will
acquire good and marketable title to the Shares free and clear of any lien,
claim, security interest, or other encumbrance, restriction on transfer or other
defect in title; and
(xx) Although counsel has not undertaken, except as
otherwise indicated in their opinion, to determine independently, and does not
assume any responsibility for, the accuracy or completeness of the statements in
the Registration Statement, such counsel has participated in the preparation of
the Registration Statement and the Prospectus, including review and discussion
of the contents thereof, and nothing has come to the attention of such counsel
that has caused it to believe that the Registration Statement at the time the
Registration Statement became effective, or the Prospectus, as of its date and
as of the Closing Date or the Option Closing Date, as the case may be, contained
an untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or that any amendment or supplement to the Prospectus, as of its
respective date, and as of the Closing Date or the Option Closing Date, as the
case may be, contained any untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading (it being
understood that such counsel need express no opinion with respect to the
financial statements and the notes thereto and the schedules and other financial
and statistical data included in the Registration Statement or the Prospectus).
In rendering their opinion as aforesaid, counsel may rely upon an
opinion or opinions, each dated the Closing Date, of other counsel retained by
them or the Company as to laws of any jurisdiction other than the United States
or the State of Florida, provided that (1) each such local counsel is acceptable
to the Representatives, (2) such reliance is
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expressly authorized by each opinion so relied upon and a copy of each such
opinion is delivered to the Representatives and is, in form and substance
satisfactory to them and their counsel, and (3) counsel shall state in their
opinion that they believe that they and the Underwriters are justified in
relying thereon. Counsel may also rely upon certificates of officers of the
Company with respect to certain factual matters and upon certificates and
assurances from public officials.
For purposes of their opinion as aforesaid, the term "to the best
knowledge of such counsel after reasonable inquiry" or other similar words means
the actual, current knowledge of those attorneys in counsel's law firm who have
provided services to the Company and that such counsel has, among other actions
deemed appropriate by such counsel, made reasonable inquiries of those
representatives of the Company who are, in the judgment of such counsel, likely
to know the facts upon which the opinion will be based and does not mean that
such counsel has made searches of public records or inquiries of third parties
to verify the facts underlying the opinion.
(d) You shall have received on the Closing Date, an opinion of
Boyar, Simon & Miller, P.C., counsel for the Company and the Partnership, dated
the Closing Date and addressed to you, as Representatives of the several
Underwriters, to the effect that:
(i) Each of the Subsidiaries is a corporation duly
organized and validly existing in good standing under the laws of the
jurisdiction of its organization, with full corporate power and authority to
own, lease, and operate its properties and to conduct its business as described
in the Registration Statement and the Prospectus (and any amendment or
supplement thereto); and all the outstanding shares of capital stock of each of
the Subsidiaries have been duly authorized and validly issued, are fully paid
and nonassessable, and are owned of record and, to the best knowledge of such
counsel after reasonable inquiry, beneficially by the Company directly, or
indirectly through one of the other Subsidiaries, free and clear of any
perfected security interest (except for security interests in favor of Citicorp
USA, Inc., as agent for the Company's various lenders), or, to the best
knowledge of such counsel after reasonable inquiry, any other security interest,
lien, adverse claim, equity or other encumbrance;
(ii) The Company and each of the Subsidiaries has full
corporate power and authority, and all necessary governmental authorizations,
approvals, orders, licenses, certificates, franchises and permits of and from
all governmental regulatory officials and bodies (except where the failure so to
have any such authorizations, approvals, orders, licenses, certificates,
franchises or permits, individually or in the aggregate, would not have a
material adverse effect on the condition (financial or other), business,
properties, net worth, or results of operation of the Company and the
Subsidiaries, taken as a whole and except as may be required under the Act or
the Blue Sky or securities laws of certain jurisdictions for which no opinion is
expressed, to own their respective properties and to conduct their respective
businesses as now being conducted, as described in the Prospectus;
(iii) The execution, delivery, and performance of each
of the Exchange and Contribution Documents, was duly and validly authorized by
each of the parties thereto, and each Exchange and Contribution Document was
duly executed and
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delivered by each such party and constitutes the legally valid and binding
agreement of such party, enforceable against such party in accordance with its
terms;
(iv) The Exchange and Contribution has been consummated
in accordance with the terms of the Exchange and Contribution Documents. The
execution, delivery and performance of the Exchange and Contribution Documents
by each of the parties thereto and the consummation of the transactions
contemplated thereby (A) did not require any consent, approval, authorization or
other order of or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency or official, or
conflict with or constitute a breach of, or a default under, the certificate or
articles of incorporation, bylaws, partnership agreement, or other
organizational documents, of any of the parties thereto or (B) did not conflict
with or constitute a breach of, or a default under, any material agreement,
indenture, lease or other instrument to which any of the parties thereto is a
party or by which any of them or any of their respective properties may be bound
that is an exhibit to the Registration Statement or is known to such counsel
after reasonable inquiry, or violate any statute, law, regulation or filing or
judgment, injunction, order or decree known to such counsel after reasonable
inquiry applicable to any of the parties thereto or any of their respective
properties, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or, assets of any of the parties thereto that were
transferred to the Company or any of the Subsidiaries pursuant to the Exchange
and Contribution Documents;
(v) To the best knowledge of such counsel after
reasonable inquiry, upon consummation of the Exchange and Contribution, the
Company and the Subsidiaries acquired valid and marketable title to the assets
transferred to them in connection with the Exchange and Contribution, free and
clear of all liens, claims, security interests or other encumbrances, except
such as are described in the Registration Statement and the Prospectus or in a
document filed as an exhibit to the Registration Statement;
(vi) Such counsel is not aware of any claim or challenge
by any other person to the rights of the Company and the Subsidiaries with
respect to any patents, trademarks, trademark registrations, service marks,
service mark registrations, trade names, copyrights, licenses, inventions, trade
secrets and rights described in the Prospectus as being owned by them or any of
them or necessary for the conduct of their respective businesses; and
(vii) To the best knowledge of such counsel after
reasonable inquiry, neither the Company, nor any of the Subsidiaries is in
violation of any law, ordinance, administrative or governmental rule or
regulation applicable to the Company or any of the Subsidiaries which might have
a material adverse effect on the condition (financial or other), business,
properties, net worth or results of operation of the Company and the
Subsidiaries, taken as a whole (except that no opinion need be expressed in this
subparagraph (vii) concerning state and federal securities laws or rules and
regulations thereunder), or of any decree of any court or governmental agency or
body having jurisdiction over the Company, or any of the Subsidiaries.
(e) You shall have received on the Closing Date, an opinion of
Paul, Hastings, Janofsky & Walker, special New York counsel for the Company,
dated the Closing Date and addressed to you, as Representatives of the several
Underwriters, to the effect
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that this Agreement is a valid, legal and binding obligation of the Company,
enforceable against the Company in accordance with its terms, [subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity) and except
to the extent that rights to indemnity and contribution hereunder may be limited
by federal or state securities laws or public policy relating thereto];
(f) You shall have received on the Closing Date an opinion of
Latham & Watkins, counsel for the Underwriters, dated the Closing Date and
addressed to you, as Representatives of the several Underwriters, with respect
to the matters referred to in clauses (iv), (viii), (x), (xiv) and (xx) of the
foregoing paragraph (c) and such other related matters as you may request.
(g) You shall have received letters addressed to you, as
Representatives of the several Underwriters, and dated the date hereof and the
Closing Date from Arthur Andersen LLP, independent certified public accountants,
substantially in the forms heretofore approved by you.
(h) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission at or prior to the Closing Date; (ii) there shall
not have been any change in the capital stock of the Company nor any material
increase in the short-term or long-term debt of the Company (other than in the
ordinary course of business) from that set forth or contemplated in the
Registration Statement or the Prospectus (or any amendment or Supplement
thereto); (iii) there shall not have been, since the respective dates as of
which information is given in the Registration Statement and the Prospectus (or
any amendment or supplement thereto), except as may otherwise be stated in the
Registration Statement and Prospectus (or any amendment or supplement thereto),
any material adverse change in the condition (financial or other), business,
prospects, properties, net worth or results of operations of the Company and the
Subsidiaries, taken as a whole; (iv) the Company and the Subsidiaries shall not
have any liabilities or obligations, direct or contingent (whether or not in the
ordinary course of business), that are material to the Company and the
Subsidiaries, taken as a whole, other than those reflected in the Registration
Statement or the Prospectus (or any amendment or supplement thereto); and (v)
all the representations and warranties of the Company contained in this
Agreement shall be true and correct on and as of the date hereof and on and as
of the Closing Date as if made on and as of the Closing Date, and you shall have
received a certificate, dated the Closing Date and signed by the chief executive
officer and the chief financial officer of the Company (or such other officers
as are acceptable to you), to the effect set forth in this Section 8(h) and in
Section 8(i) hereof.
(i) The Company shall not have failed at or prior to the
Closing Date to have performed or complied with any of its agreements herein
contained and required to be performed or complied with by it hereunder at or
prior to the Closing Date.
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(j) The Shares shall have been listed or approved for listing
upon notice of issuance on the New York Stock Exchange.
(k) The Company shall have furnished or caused to be furnished
to you such further certificates and documents as you shall have reasonably
requested.
All such opinions, certificates, letters and other documents will
be in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to you and your counsel.
Any certificate or document signed by any officer of the Company
and delivered to you, as Representatives of the Underwriters, or to counsel for
the Underwriters, shall be deemed a representation and warranty by the Company
to each Underwriter as to the statements made therein.
The several obligations of the Underwriters to purchase
Additional Shares hereunder are subject to the satisfaction on and as of any
Option Closing Date of the conditions set forth in this Section 8, except that,
if any Option Closing Date is other than the Closing Date, the certificates,
opinions and letters referred to in paragraphs (c) through (h) shall be dated
the Option Closing Date in question and the opinions called for by paragraphs
(c), (d), (e) and (f) shall be revised to reflect the sale of Additional Shares.
9. EXPENSES. The Company agrees to pay the following costs and expenses
and all other costs and expenses incident to the performance by it of its
obligations hereunder: (i) the preparation, printing or reproduction, and filing
with the Commission of the registration statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the Prospectus,
and each amendment or supplement to any of them; (ii) the printing (or
reproduction) and delivery (including postage, air freight charges and charges
for counting and packaging) of such copies of the registration statement, each
Prepricing Prospectus, the Prospectus, and all amendments or supplements to any
of them as may be reasonably requested for use in connection with the offering
and sale of the Shares; (iii) the preparation, printing, authentication,
issuance and delivery of certificates for the Shares, including any stamp taxes
in connection with the original issuance and sale of the Shares; (iv) the
printing (or reproduction) and delivery of this Agreement, the preliminary and
supplemental Blue Sky Memoranda and all other agreements or documents printed
(or reproduced) and delivered in connection with the offering of the Shares; (v)
the registration of the Shares under the Exchange Act and the listing of the
Shares on the New York Stock Exchange; (vi) the registration or qualification of
the Shares for offer and sale under the securities or Blue Sky laws of the
several states as provided in Section 5(g) hereof (including the reasonable
fees, expenses and disbursements of counsel for the Underwriters relating to the
preparation, printing or reproduction, and delivery of the preliminary and
supplemental Blue Sky Memoranda and such registration and qualification); (vii)
the filing fees and the fees and expenses of counsel for the Underwriters in
connection with any filings required to be made with the National Association of
Securities Dealers, Inc.; (viii) the transportation and other expenses incurred
by or on behalf of Company representatives in connection with presentations to
prospective purchasers of the Shares; and (ix) the fees
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and expenses of the Company's and the Partnership's accountants and the fees and
expenses of counsel (including local and special counsel) for the Company and
the Partnership.
10. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become effective:
(i) upon the execution and delivery hereof by the parties hereto; or (ii) if, at
the time this Agreement is executed and delivered, it is necessary for the
registration statement or a post-effective amendment thereto to be declared
effective before the offering of the Shares may commence, when notification of
the effectiveness of the registration statement or such post-effective amendment
has been released by the Commission. Until such time as this Agreement shall
have become effective, it may be terminated by the Company by notifying you, or
by you, as Representatives of the several Underwriters, by notifying the
Company.
If any one or more of the Underwriters shall fail or refuse to
purchase Shares which it or they are obligated to purchase hereunder on the
Closing Date, and the aggregate number of Shares which such defaulting
Underwriter or Underwriters are obligated but fail or refuse to purchase is not
more than one-tenth of the aggregate number of Shares which the Underwriters are
obligated to purchase on the Closing Date, each non-defaulting Underwriter shall
be obligated, severally, in the proportion which the number of Firm Shares set
forth opposite its name in Schedule I hereto bears to the aggregate number of
Firm Shares set forth opposite the names of all non-defaulting Underwriters or
in such other proportion as you may specify in accordance with Section 20 of the
Master Agreement Among Underwriters of Smith Barney Inc., to purchase the Shares
which such defaulting Underwriter or Underwriters are obligated, but fail or
refuse, to purchase. If any one or more of the Underwriters shall fail or refuse
to purchase Shares which it or they are obligated to purchase on the Closing
Date and the aggregate number of Shares with respect to which such default
occurs is more than one-tenth of the aggregate number of Shares which the
Underwriters are obligated to purchase on the Closing Date and arrangements
satisfactory to you and the Company for the purchase of such Shares by one or
more non-defaulting Underwriters or other party or parties approved by you and
the Company are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Company. In any such case which does not result in termination of this
Agreement, either you or the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting Underwriter from liability in respect
of any such default of any such Underwriter under this Agreement. The term
"Underwriter" as used in this Agreement includes, for all purposes of this
Agreement, any party not listed in Schedule I hereto who, with your approval and
the approval of the Company, purchases Shares which a defaulting Underwriter is
obligated, but fails or refuses, to purchase.
Any notice under this Section 10 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
11. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company, by notice to the Company, if prior to the Closing
Date or any Option Closing Date (if
24
<PAGE>
different from the Closing Date and then only as to the Additional Shares), as
the case may be, (i) trading in securities generally on the New York Stock
Exchange, American Stock Exchange or the Nasdaq National Market shall have been
suspended or materially limited, (ii) a general moratorium on commercial banking
activities in New York or Florida shall have been declared by either federal or
state authorities, or (iii) there shall have occurred any outbreak or escalation
of hostilities or other international or domestic calamity, crisis or change in
political, financial or economic conditions, the effect of which on the
financial markets of the United States is such as to make it, in your judgment,
impracticable or inadvisable to commence or continue the offering of the Shares
at the offering price to the public set forth on the cover page of the
Prospectus or to enforce contracts for the resale of the Shares by the
Underwriters. Notice of such termination may be given to the Company by
telegram, telecopy or telephone and shall be subsequently confirmed by letter.
12. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth
in the last paragraph on the cover page, the stabilization legend on the inside
cover page, and the statements in the first and third paragraphs under the
caption "Underwriting" in any Prepricing Prospectus and in the Prospectus,
constitute the only information furnished by or on behalf of the Underwriters
through you as such information is referred to in Sections 6(b) and 7 hereof.
13. MISCELLANEOUS. Except as otherwise provided in Sections 5, 10
and 11 hereof, notice given pursuant to any provision of this Agreement shall be
in writing and shall be delivered (i) if to the Company, at the office of the
Company at 6905 N.W. 25th Street, Miami, Florida 33122, Attention: Dale S. Baker
or (ii) if to you, as Representatives of the several Underwriters, care of Smith
Barney Inc., 388 Greenwich Street, New York, New York 10013, Attention: Manager,
Investment Banking Division.
This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, its directors and officers, and the other
controlling persons referred to in Section 7 hereof and their respective
successors and assigns, to the extent provided herein, and no other person shall
acquire or have any right under or by virtue of this Agreement. Neither the term
"successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from any Underwriter of any of the Shares in his
status as such purchaser.
14. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York applicable
to contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which
together constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
25
<PAGE>
Please confirm that the foregoing correctly sets forth the
agreement between the Company and the several Underwriters.
Very truly yours,
AVIATION SALES COMPANY
By_________________________
Chairman of the Board
Confirmed as of the date first
above mentioned on behalf of
themselves and the other several
Underwriters named in Schedule I
hereto.
SMITH BARNEY INC.
ALEX. BROWN & SONS INCORPORATED
SANDERS MORRIS MUNDY
As Representatives of the Several Underwriters
By SMITH BARNEY INC.
By_____________________________
Managing Director
26
<PAGE>
SCHEDULE I
AVIATION SALES COMPANY
NUMBER OF
UNDERWRITER FIRM SHARES
- ----------- -----------
Smith Barney Inc.
Alex. Brown & Sons Incorporated
Sanders Morris Mundy
------------
Total..... 3,250,000
============
27
Exhibit 4
REGISTRATION RIGHTS AGREEMENT
This Agreement, dated as of June ___, 1996, is entered into by and among
Aviation Sales Company, a Delaware corporation (the "Company"), and the
stockholders of the Company, who are more particularly identified on signature
pages attached hereto (collectively, the "Stockholders").
WHEREAS, in connection with the corporate organization of the Company, the
Stockholders received shares of the Company's Common Stock; and
WHEREAS, the Company desires to provide to the Stockholders certain
registration rights with respect to the registration of the shares of Common
Stock under the Securities Act;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"COMMISSION" means the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"COMMON STOCK" means the common stock, par value $.001 per share,
of the Company.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations
promulgated thereunder, all as the same shall be in effect at the time.
"REGISTRATION STATEMENT" means a registration statement filed by
the Company with the Commission for a public offering and sale of Common Stock
(other than a Registration Statement on Form S-8 or Form S-4, or their
successors, or any other form for a similar limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"REGISTRATION EXPENSES" means the expenses described in Section 5.
"REGISTRABLE SHARES" means shares of Common Stock issued by the
Company to the Stockholders in connection with the corporate organization of the
Company, as more particularly described in EXHIBIT A attached hereto.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations promulgated
thereunder, all as the same shall be in effect at the time.
<PAGE>
2. REQUIRED REGISTRATIONS.
a. At any time after 180 days after the closing of the Company's
initial public offering of shares of Common Stock pursuant to an effective
Registration Statement on Form S-1, filed with the Commission, a Stockholder or
Stockholders may request, in writing, that the Company effect the registration
of the Registrable Shares on Form S-3 (S-1 or Form S-2 (or any successor form)
if Form S-3 is not available) of Registrable Shares owned by such Stockholder or
Stockholders. If the Stockholders initiating the registration intend to
distribute the Registrable Shares by means of an underwritten offering, they
shall so advise the Company in their request. In the event such registration is
underwritten, the right of other Stockholders to participate shall be
conditioned on such Stockholders' participation in such underwritten offering.
Upon receipt of any such request for registration from a Stockholder or
Stockholders, the Company shall promptly give written notice of such proposed
registration to all other Stockholders. Such Stockholders shall have the right,
by giving written notice to the Company within 30 days after the Company
provides its notice, to elect to have included in such registration such of
their Registrable Shares as such Stockholders may request in such notice of
election; PROVIDED, HOWEVER, that if the underwriter (if any) managing the
offering determines that, because of marketing factors, all of the Registrable
Shares requested to be registered by all Stockholders may not be included in the
offering, then all Stockholders who have requested registration shall
participate in the registration pro rata based upon the number of Registrable
Shares which they have requested to be so registered. Thereupon, the Company
shall, as expeditiously as possible, use its best efforts to effect the
registration of all Registrable Shares which the Company has been requested to
so register.
b. The Company shall not be required to effect more than two
registrations pursuant to paragraph (a). In addition, the Company shall not be
required to effect any registration (other than on Form S-3 or any successor
form relating to secondary offerings) within 180 days after the effective date
of any other Registration Statement of the Company.
c. If at the time of any request to register Registrable Shares
pursuant to this Section 2, the Company is engaged or has fixed plans to engage
within 30 days of the time of the request in a registered public offering as to
which the Stockholders may include Registrable Shares pursuant to Section 3 or
is engaged in any other activity which, in the good faith determination of the
Company's Board of Directors, would be adversely affected by the requested
registration to the material detriment of the Company, or such registration
would, in the good faith judgment of the Board, require a disclosure which would
be detrimental to the Company, then the Company may at its option direct that
such request be delayed for a period not in excess of six months from the
effective date of such offering or the date of commencement of such other
material activity, as the case may be, such right to delay a request to be
exercised by the Company not more than once in any 18-month period.
2
<PAGE>
3. PIGGY-BACK REGISTRATION.
a. Whenever the Company proposes to file a Registration Statement
(other than pursuant to Section 2) at any time and from time to time, it will,
prior to such filing, give written notice to all Stockholders of its intention
to do so and, upon the written request of a Stockholder or Stockholders given
within 20 days after the Company provides such notice (which request shall state
the intended method of disposition of such Registrable Shares), the Company
shall use its best efforts to cause all Registrable Shares which the Company has
been requested by such Stockholder or Stockholders to register to be registered
under the Securities Act to the extent necessary to permit their sale or other
disposition in accordance with the intended methods of distribution specified in
the request of such Stockholder or Stockholders; PROVIDED, HOWEVER, that the
Company shall have the right postpone or withdraw any registration effected
pursuant to this Section 3 without any obligation to any Stockholder whatsoever.
b. In connection with any registration under this Section 3
involving an underwritten offering, the Company shall not be required to include
any Registrable Shares in such registration unless the holders thereof accept
the terms of the underwriting as agreed upon between the Company and the
underwriters selected by it. If, in the opinion of the managing underwriter, it
is appropriate because of marketing factors to limit the number of Registrable
Shares to be included in the offering, then the Company shall be required to
include in the registration only that number of Registrable Shares, if any,
which the managing underwriter believes should be included therein, and shall be
entitled to include before such Registrable Shares up to the number of shares of
Common Stock to be issued by the Company in the offering; PROVIDED, HOWEVER,
that no persons or entities other than the Company and the Stockholders shall be
permitted to include securities in the offering. If the number of Registrable
Shares to be included in the offering in accordance with the foregoing is less
than the total number of shares which the holders of Registrable Shares have
requested to be included, then the holders of Registrable Shares who have
requested registration and other holders of securities entitled to be included
in such registration shall participate in the registration pro rata based upon
their total ownership of shares of Common Stock.
4. REGISTRATION PROCEDURES. If and whenever the Company is required by the
provisions of this Agreement to use its best efforts to effect the registration
of any of the Registrable Shares under the Securities Act, the Company shall:
a. file with the Commission a Registration Statement with respect
to such Registrable Shares and use its best efforts to cause that Registration
Statement to become and remain effective;
b. as expeditiously as possible prepare and file with the
Commission any amendments and supplements to the Registration Statement and the
prospectus included in the Registration Statement as may be necessary to keep
the Registration Statement effective, in the case of a firm commitment
underwritten public offering, until each underwriter has completed the
distribution of all securities purchased by it but not more than 9 months after
the effective date and,
3
<PAGE>
in the case of any other offering, until the earlier of the sale of all
Registrable Shares covered thereby or 120 days after the effective date thereof;
c. as expeditiously as possible furnish to each selling Stockholder
such reasonable numbers of copies of the prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as the selling Stockholder may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Shares owned
by the selling Stockholder; and
d. as expeditiously as possible use its best efforts to register or
qualify the Registrable Shares covered by the Registration Statement under the
securities or blue sky laws of such states as the selling Stockholders shall
reasonably request, and do any and all other acts and things that may be
necessary or desirable to enable the selling Stockholders to consummate the
public sale or other disposition in such states of the Registrable Shares owned
by the selling Stockholder; PROVIDED, HOWEVER, that the Company shall not be
required in connection with this paragraph (d) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction.
If the Company has delivered preliminary or final prospectuses to the
selling Stockholders and after having done so the prospectus is amended to
comply with the requirements of the Securities Act, the Company shall promptly
notify the selling Stockholders and, if requested, the selling Stockholders
shall immediately cease making offers of Registrable Shares and return all
prospectuses to the Company. The Company shall promptly provide the selling
Stockholders with revised prospectuses and, following receipt of the revised
prospectuses, the selling Stockholders shall be free to resume making offers of
the Registrable Shares.
5. ALLOCATION OF EXPENSES. The Company will pay all Registration Expenses
of all registrations under this Agreement. For purposes of this Section 5, the
term "Registration Expenses" shall mean all expenses incurred by the Company in
complying with this Agreement, including, without limitation, all registration
and filing fees, exchange listing fees, printing expenses, fees and expenses of
counsel for the Company and the reasonable fees and expenses of one counsel
selected by the selling Stockholders to represent the selling Stockholders,
state blue sky fees and expenses, and the expense of any special audits incident
to or required by any such registration, but excluding underwriting discounts,
selling commissions and the fees and expenses of selling Stockholders' own
counsel (other than the counsel selected to represent all selling Stockholders).
6. INDEMNIFICATION AND CONTRIBUTION.
a. In the event of any registration of any of the Registrable
Shares under the Securities Act pursuant to this Agreement, the Company will
indemnify and hold harmless the seller of such Registrable Shares, each
underwriter of such Registrable Shares, and each other person, if any, who
controls such seller or underwriter within the meaning of the Securities Act or
the Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which such seller, underwriter or controlling person may become
subject under the Securities Act, the Exchange Act, state securities
4
<PAGE>
or blue sky laws or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement under which such Registrable Shares were registered
under the Securities Act, any preliminary prospectus or final prospectus
contained in the Registration Statement, or any amendment or supplement to such
Registration Statement, or arise out of or are based upon the omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and the Company will
reimburse such seller, underwriter and each such controlling person for any
legal or any other expenses reasonably incurred by such seller, underwriter or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action; PROVIDED, HOWEVER, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any untrue statement or omission made
in such Registration Statement, preliminary prospectus or final prospectus, or
any such amendment or supplement, (i) in reliance upon and in conformity with
information furnished to the Company, in writing, by or on behalf of such
seller, underwriter or controlling person specifically for use in the
preparation thereof or (ii) which untrue statement was corrected by the Company
and delivered to the seller prior to consummation of the sale by the seller
resulting in such loss, claim, damage or liability.
b. In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of Registrable
Shares, severally and not jointly, will indemnify and hold harmless the Company,
each of its directors and officers and each underwriter (if any) and each
person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages or liabilities, joint or several, to which the Company, such directors
and officers, underwriter or controlling person may become subject under the
Securities Act, Exchange Act, state securities or blue sky laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, provided that such statement or omission was made in
reliance upon and in conformity with information relating to such seller
furnished in writing to the Company by and on behalf of such seller specifically
for use in connection with the preparation of such Registration Statement,
prospectus, amendment or supplement; PROVIDED, HOWEVER, that the obligations of
such Stockholders hereunder shall be limited to an amount equal to the proceeds
to each Stockholder of Registrable Shares sold in connection with such
registration.
c. Each party entitled to indemnification under this Section 6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; PROVIDED, HOWEVER, that counsel for the
Indemnifying Party, who shall
5
<PAGE>
conduct the defense of such claim or litigation, shall be approved by the
Indemnified Party (whose approval shall not be unreasonably withheld); and,
PROVIDED, FURTHER, that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 6, except to the extent that such delay prejudices such
indemnifying party. The Indemnified Party may participate in such defense at
such party's expense; PROVIDED, HOWEVER, that the Indemnifying Party shall pay
such expense if representation of such Indemnified Party by the counsel retained
by the Indemnifying Party would be inappropriate due to actual or potential
differing interests between the Indemnified Party and any other party
represented by such counsel in such proceeding. No Indemnifying Party, in the
defense of any such claim or litigation shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect of such claim or litigation, and no Indemnified Party shall consent
to entry of any judgment or settle such claim or litigation without the prior
written consent of the Indemnifying Party.
7. INDEMNIFICATION WITH RESPECT TO UNDERWRITTEN OFFERING. In the event
that Registrable Shares are sold pursuant to a Registration Statement in an
underwritten offering pursuant to Section 2, the Company agrees to enter into an
underwriting agreement containing customary representations and warranties with
respect to the business and operations of an issuer of the securities being
registered and customary covenants and agreements to be performed by such
issuer, including without limitation customary provisions with respect to
indemnification by the Company of the underwriters of such offering.
8. INFORMATION BY STOCKHOLDER. Each Stockholder including Registrable
Shares in any registration shall furnish to the Company such information
regarding such Stockholder and the distribution proposed by such Stockholder as
the Company may reasonably request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
this Agreement.
9. TERMINATION. All of the Company's obligations to register Registrable
Shares under this Agreement shall terminate on the fifth anniversary of this
Agreement.
10. GENERAL.
NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
given if sent by registered or certified mail, first class postage prepaid,
return receipt requested, to the address of such parties set forth on the
signature pages of this Agreement or such other future address as may be
specified by any party by notice to all of the other parties. Such
communications may also be given by personal delivery, by facsimile or by
regular mail, but shall be effective only if and when actually received.
6
<PAGE>
a. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter.
b. AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
with the written consent of the Company and each of the Stockholders. No waivers
of or exceptions to any term, condition or provision of this Agreement, in any
one or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such term, condition or provision. A party hereto may
waive the performance of any covenant for its benefit (either generally or in a
particular instance and either retroactively or prospectively), PROVIDED,
HOWEVER, that no such waiver shall be effective unless in writing and signed by
such party.
c. SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
d. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
* * * *
7
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed this
Agreement this _____ day of June, 1996.
COMPANY
AVIATION SALES COMPANY
By:
Dale S. Baker, President
ADDRESS FOR NOTICE:
6905 N.W. 25th St.
Miami, Florida 33122
Telecopy: (305) 599-6610
STOCKHOLDERS
AVAC CORPORATION
By:
Robert Alpert, President
ADDRESS FOR NOTICE:
15311 Vantage Parkway West
Suite 315
Houston, Texas 77032
Telecopy: (713) 442-0025
8
<PAGE>
J/T AVIATION PARTNERS
By: Japan Fleet Service (Delaware)
Inc.,
General Partner
By:
Tim L. Watkins, President
By: TM Aviation (Japan) Inc.,
General Partner
By:
Name:
Title:
By: TM Aviation (USA) Inc., General
Partner
By:
Name:
Title:
ADDRESS FOR NOTICE:
c/o Tomen America, Inc.
1285 Avenue of the Americas
New York, NY 10019
Telecopy: (212) 397-3351
9
<PAGE>
RCP MANAGEMENT L.P.
By: Aircraft Spare Parts, Inc., a
Delaware corporation,
General Partner
By:
Robert Alpert, Chairman
ADDRESS FOR NOTICE:
15311 Vantage Parkway West
Suite 315
Houston, Texas 77032
Telecopy: (713) 442-0025
DALE S. BAKER
ADDRESS FOR NOTICE:
545 Coconut Circle
Palm Island
Ft. Lauderdale, Florida 33326
Telecopy: (305) 599-6610
10
<PAGE>
HAROLD M. WOODY
ADDRESS FOR NOTICE:
10855 S.W. 75th Court
Miami, Florida 33156
Telecopy: (305) 599-6610
JOSEPH E. CIVILETTO
ADDRESS FOR NOTICE:
1070 Pine Branch Drive
Ft. Lauderdale, Florida 33326
Telecopy: (305) 599-6610
JAMES D. INNELLA
ADDRESS FOR NOTICE:
11946 S.W. 44th Street
Davie, Florida 33330
Telecopy: (305) 599-6610
11
<PAGE>
MICHAEL SASO
ADDRESS FOR NOTICE:
11812 Poema Place
Chatsworth, California 91311
Telecopy: (818) 895-6888
12
<PAGE>
EXHIBIT A
STOCKHOLDERS REGISTRABLE SHARES
- ------------ ------------------
AVAC Corporation 1,729,000
J/T Aviation Partners 1,501,000
RCP Management L.P. 520,000
Dale S. Baker 300,000
Harold M. Woody 200,000
Joseph E. Civiletto 25,000
James D. Innella 75,000
Michael A. Saso 75,000
---------
Total 4,425,000
13
AKERMAN, SENTERFITT & EIDSON, P.A.
SUNTRUST INTERNATIONAL CENTER
28TH FLOOR
ONE SOUTHEAST THIRD AVENUE
MIAMI, FLORIDA 33131-1704
(305) 374-5600
ATTORNEYS AT LAW
June 26, 1996
Aviation Sales Company
6905 N.W. 25th Street
Miami, Florida 33122
RE: REGISTRATION STATEMENT ON FORM S-1
Gentlemen:
We have acted as special counsel to Aviation Sales Company, a Delaware
corporation (the "Company"), with respect to the registration statement on Form
S-1 (the "Registration Statement") filed with the Securities and Exchange
Commission for the purpose of registering for sale by the Company under the
Securities Act of 1933, as amended (the "Securities Act"), of up to 3,737,500
shares of common stock of the Company, $.001 par value (the "Common Stock").
Based on our review of the Certificate of Incorporation of the Company, as
amended, the By-laws of the Company, the minutes of the meetings of the Board of
Directors of the Company and such other documents and records as we have deemed
necessary and appropriate, we are of the opinion that the Common Stock, if and
when issued and paid for in accordance with the terms of the Underwriting
Agreement by and among the Company and Smith Barney Inc., Alex. Brown & Sons
Incorporated and Sanders Morris Murdy Inc., on their own behalf and as
representatives of certain underwriters, will be validly issued, fully paid and
nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to us under the caption "Legal Matters" in the
prospectus which is a part of the Registration Statement. In giving such
consent, we do not thereby admit that we are included within the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations promulgated thereunder.
Very truly yours,
AKERMAN, SENTERFITT & EIDSON, P.A.
S&A DRAFT 6/24/96
===============================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of June 26, 1996
among
Aviation Sales Operating Company,
a Delaware corporation
as Borrower
THE INSTITUTIONS FROM TIME TO TIME
PARTY HERETO AS LENDERS
THE INSTITUTIONS FROM TIME TO TIME
PARTY HERETO AS ISSUING BANKS
and
CITICORP USA, INC.
as Agent
===============================================================================
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
This Amended and Restated Credit Agreement dated as of June
26, 1996 (as amended, supplemented or modified from time to time, the
"Agreement") is entered into among Aviation Sales Operating Company, a Delaware
corporation (the "Borrower"), the institutions from time to time a party hereto
as Lenders, whether by execution of this Agreement or an Assignment and
Acceptance, the institutions from time to time a party hereto as Issuing Banks,
whether by execution of this Agreement or an Assignment and Acceptance, Citicorp
Securities, Inc., a Delaware corporation, in its capacity as arranger, and
Citicorp USA, Inc., a Delaware corporation, in its capacity as agent for the
Lenders and the Issuing Banks hereunder (in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, ASC Acquisition Partners, L.P., a limited partnership
organized under the laws of the State of Delaware (the "Partnership"), entered
into that certain Credit Agreement dated as of December 2, 1994, as amended,
with Citicorp Securities, Inc., as arranger and agent, Citicorp USA, Inc., Sanwa
Business Credit Corporation, Congress Financial Corporation, and Ryoshin Leasing
(USA) Inc., as lenders, and Citibank, N.A., as issuing bank pursuant to which
Credit Agreement the aforesaid lenders and issuing bank have made certain
extensions of credit and other financial accommodations to or for the benefit of
the Partnership;
WHEREAS, the Borrower has been formed as a Delaware
corporation and wholly-owned subsidiary of Aviation Sales Company, a Delaware
corporation, and Aviation Sales Company shall, on the Effective Date, consummate
an initial public offering of its equity securities, a portion of the proceeds
of which are to be used to repay certain of the obligations of the Partnership
under the aforesaid Credit Agreement;
WHEREAS, the Partnership has been liquidated in connection
with the aforesaid securities offering, whereupon (i) the liabilities of the
Partnership have become liabilities of the Borrower, including, without
limitation, its liabilities under the aforesaid Credit Agreement, and (ii) the
Borrower has succeeded to the Partnership as owner of the assets of the
Partnership; and
WHEREAS, in view of the foregoing and certain other related
transactions being consummated concurrently therewith, the Borrower has
requested that the aforesaid Credit Agreement be amended and restated and the
Agent, Lenders and Issuing Bank have agreed thereto;
NOW, THEREFORE, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
1.01. CERTAIN DEFINED TERMS. The following terms used in this
Agreement shall have the following meanings, applicable both to the singular and
the plural forms of the terms defined:
"ACCOMMODATION OBLIGATION" means any Contractual Obligation,
contingent or otherwise, of one Person with respect to any Indebtedness,
obligation or liability of another, if the primary purpose or intent thereof by
the Person incurring the Accommodation Obligation is to provide assurance to the
obligee of such Indebtedness, obligation or liability of another that such
Indebtedness, obligation or liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders thereof
will be protected (in whole or in part) against loss in respect thereof
including, without limitation, direct and indirect guarantees, endorsements
(except for collection or deposit in the ordinary course of busi ness), notes
co-made or discounted, recourse agreements, take-or-pay agreements, keep-well
agreements, agreements to purchase or repurchase such Indebtedness, obligation
or liability or any security therefor or to provide funds for the payment or dis
charge thereof, agreements to maintain solvency, assets, level of income, or
other financial condition, and agreements to make payment other than for value
received. The amount of any Accom modation Obligation shall be equal to the
amount of the Indebtedness, obligation or liability so guaranteed or otherwise
supported; PROVIDED, that (i) if the liability of the Person extending such
guaranty or support is limited with respect thereto to an amount less than the
Indebtedness, obligation or liability guaranteed or supported, or is limited to
recourse against a particular asset or assets of such Person, the amount of the
corresponding Accommodation Obligation shall be limited (in the case of a
guaranty or other support limited by amount) to such lesser amount or (in the
case of a guaranty or other support limited by recourse to a particular asset or
assets) to the higher of the Fair Market Value of such asset or assets at the
date for determination of the amount of the Accommodation Obliga tion or the
value at which such asset or assets would, in con formity with GAAP, be
reflected on or valued for the purposes of preparing a consolidated balance
sheet of such Person as at such determination date; and (ii) if any obligation
or liability is guaranteed or otherwise supported jointly and severally by a
Person and others, then the amount of the obligation or liability of such Person
with respect to such guaranty or other support to be included in the amount of
such Person's Accommodation Obligation shall be the whole principal amount so
guaranteed or otherwise supported.
"ACQUISITION LOAN AVAILABILITY" is defined in SECTION
2.03(A).
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"ACQUISITION LOAN NOTES" means promissory notes executed by
Borrower and delivered to the Revolving Lenders evidencing the Loans made under
the Acquisition Subfacility, as the same may be amended, supplemented, modified
or restated from time to time, and any promissory note issued in substitution
therefor, substantially in the form attached hereto as EXHIBIT D- 1; and
"ACQUISITION LOAN NOTE" means any one of the Acquisition Loan Notes.
"ACQUISITION SUBFACILITY" means a subfacility of the Revolving
Credit Commitments in an aggregate amount of $30,000,000 available for Loans to
be made in connection with Permitted Acquisitions; PROVIDED THAT, at no time,
may the amount of the Loans outstanding under the Acquisition Subfacility PLUS
the amount of the Revolving Loans exceed the Revolving Credit Commitments.
"ACQUISITION SUBFACILITY TERMINATION DATE" means the earlier
to occur of (i) July 2, 1998, (ii) the date on which Loans made under the
Acquisition Subfacility equal $30,000,000, or (iii) the Revolving Credit
Termination Date.
"AFFILIATE", as applied to any Person, means any other Person
that directly or indirectly controls, is controlled by, or is under common
control with, that Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any Person, means (i) the
possession, directly or indirectly, of the power to vote ten percent (10.0%) or
more of the Securities having voting power for the election of directors of such
Person or otherwise to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting Securities or
by contract or otherwise, or (ii) the ownership of (a) a general partnership
interest or (b) a limited partnership interest representing ten percent (10.0%)
or more of the outstanding limited partnership interests of a Person.
"AGENT" means Citicorp and each successor agent appointed
pursuant to the terms of ARTICLE XIII of this Agreement.
"AGENT ADVANCE" is defined in SECTION 2.02(C)(I)(B).
"AGREEMENT" is defined in the preamble hereto.
"AIRCRAFT PARTS LEASE AGREEMENT" means an agreement between
Borrower, as lessor, and a Person which is not an Affiliate of the Borrower, as
lessee, pursuant to which Inventory of the Borrower is leased to such Person and
includes, as of the Closing Date, those agreements identified on SCHEDULE 1.01.1
attached hereto.
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"APPRAISALS" means those certain appraisals of Inventory and
Equipment of the Borrower prepared by MB Valuation, Inc. for the Agent and the
Lenders dated July 11, 1994, copies of which have been delivered to the Agent
and the Lenders.
"ASSIGNMENT AND ACCEPTANCE" means an Assignment and Acceptance
in substantially the form of EXHIBIT A attached hereto and made a part hereof
(with blanks appropriately completed) delivered to the Agent in connection with
an assignment of a Lender's interest under this Agreement in accordance with the
provisions of SECTION 15.01.
"BANKRUPTCY CODE" means Title 11 of the United States
Code (11 U.S.C. ss.ss. 101 ET SEQ.), as amended from time to time,
and any successor statute.
"BASE EURODOLLAR RATE" means, with respect to any Eurodollar
Interest Period applicable to a Borrowing of Eurodollar Rate Loans, the rate per
annum at which deposits in Dollars are offered by the principal office of
Citibank in London, England to major banks in the London interbank market at
approximately 11:00 a.m. (London time) on the Eurodollar Interest Rate
Determination Date for such Eurodollar Interest Period for a period equal to
such Eurodollar Interest Period in an amount substantially equal to the amount
of the Eurodollar Rate Loan to be outstanding to Citicorp for such Eurodollar
Interest Period.
"BASE RATE" means, for any period, a fluctuating interest rate
per annum as shall be in effect from time to time, which rate per annum shall at
all times be equal to the highest of:
(i) the rate of interest announced publicly by
Citibank in New York, New York from time to time, as
Citibank's base rate; and
(ii) the sum (adjusted to the nearest one-quarter of one percent
(0.25%) or, if there is no nearest one-quarter of one percent (0.25%),
to the next higher one-quarter of one percent (0.25%)) of (A) one-half
of one percent (0.50%) per annum PLUS (B) the rate per annum obtained
by dividing (I) the latest three-week moving average of secondary
market morning offering rates in the United States for three-month
certificates of deposit of major United States money market banks, such
three-week moving average (adjusted to the basis of a year of 360 days)
being determined weekly on each Monday (or, if such day is not a
Business Day, on the next succeeding Business Day) for the three-week
period ending on the previous Friday (or, if such day is not a Business
Day, on the next preceding Business Day) by Citibank on the basis of
such rates reported by certificate of deposit dealers to, and published
by, the Federal Reserve Bank of New York, or, if such publication shall
be suspended or terminated, on the basis of quotations for such rates
received by Citibank from
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three (3) New York certificate of deposit dealers of recognized
standing selected by Citibank, by (II) a percentage equal to 100% minus
the average of the daily percentages specified during such three-week
period by the Federal Reserve Board (or any successor) for determining
the maximum reserve requirement (including, but not limited to, any
emergency, supplemental or other marginal reserve requirement) for
Citibank in respect of liabilities which consist of or which include
(among other liabilities) three-month Dollar nonpersonal time deposits
in the United States PLUS (C) the average during such three-week period
of the annual assessment rates estimated by Citibank for determin ing
the then current annual assessment payable by Citibank to the Federal
Deposit Insurance Corporation (or any successor) for insuring Dollar
deposits of Citibank in the United States; and
(iii) the sum of (A) one-half of one percent (0.50%) per annum
PLUS (B) the Federal Funds Rate in effect from time to time during such
period.
"BASE RATE LOANS" means all Loans which bear interest at a
rate determined by reference to the Base Rate and Base Rate Margin as provided
in SECTION 5.01(A).
"BASE RATE MARGIN" means, as of any date of determination, a
per annum rate equal to the rate set forth below opposite the then applicable
Performance Level set forth below:
PERFORMANCE LEVEL BASE RATE MARGIN
----------------- ----------------
1 0.25%
2 0.75%
3 1.00%
4 1.25%
"BENEFIT PLAN" means a defined benefit plan as defined in
Section 3(35) of ERISA (other than a Multiemployer Plan or Foreign Employee
Benefit Plan) in respect of which the Borrower or any ERISA Affiliate is, or
within the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
"BORROWER" is defined in the preamble of this
Agreement.
"BORROWING" means a borrowing consisting of Loans of the same
type made, continued or converted on the same day.
"BORROWING BASE" means, as of any date of determina tion, an
amount equal to the sum of (i) seventy-five percent (75%) of the face amount of
Eligible Receivables (net of maximum discounts, allowances, retainage and any
other amounts deferred with respect thereto), PLUS (ii) the lesser of (a) up to
the
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respective percentages of the value of Eligible Inventory included in Inventory
Asset Group A, Inventory Asset Group B, and Inventory Asset Group C, in each
case as set forth on the Borrowing Base Certificate or (b) seventy percent (70%)
of the appraised value of Eligible Inventory included in Inventory Asset Group
A, Inventory Asset Group B, and Inventory Asset Group C, in each case as set
forth in appraisals prepared in form and substance and by appraisers
satisfactory to the Requisite Lenders on an orderly liquidation basis consistent
with that methodology used in preparation of the Appraisals. For purposes of
this definition, Eligible Receivables and Eligible Inventory, in each case and
as of any date of determination, shall be determined after deduction of all
Eligibility Reserves then effective with respect to such items and the value
referenced in CLAUSE (II)(A) shall be determined on the bases described in the
Borrowing Base Certificate as reflected on the books and records of the
Borrower. In each instance, the amounts described hereinabove shall be
designated as such on the Borrowing Base Certificate dated as of such date of
determination.
"BORROWING BASE CERTIFICATE" means a certificate, in
substantially the form of EXHIBIT B attached hereto and made a part hereof,
setting forth Eligible Receivables, Eligible Inventory (including
classifications, quantities, valuations and condition of the Eligible Inventory
and the respective advance percentages with respect thereto), and the
calculation of the resultant Borrowing Base, in each instance, as of the date of
such certificate.
"BUSINESS ACTIVITY REPORT" means (A) a Notice of Business
Activities Report from the State of New Jersey Division of Taxation or (B) a
Minnesota Business Activity Report from the Minnesota Department of Revenue.
"BUSINESS DAY" means a day, in the applicable local time,
which is not a Saturday or Sunday or a legal holiday and on which banks are not
required or permitted by law or other govern mental action to close (i) in New
York, New York and (ii) in the case of Letter of Credit transactions for a
particular Issuing Bank, in the place where its office for issuance or
administra tion of the pertinent Letter of Credit is located and (iii) in the
case of Eurodollar Rate Loans, in London, England.
"CAPITAL EXPENDITURES" means, for any period, the aggregate of
all expenditures (whether payable in cash or other Property or accrued as a
liability (but without duplication)) during such period that, in conformity with
GAAP, are required to be included in or reflected by the Parent's or any of its
Subsid iaries' fixed asset accounts as reflected in any of their respective
balance sheets; PROVIDED, HOWEVER, (i) Capital Expenditures shall include,
whether or not such a designation would be in conformity with GAAP, (A)
expenditures for the purchase or development of computer software and systems,
(B) that portion of Capital Leases which is capitalized on the
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consolidated balance sheet of the Parent and its Subsidiaries and (C)
expenditures for Equipment which is purchased simultaneously with the trade-in
of existing Equipment owned by the Parent or any of its Subsidiaries, to the
extent the gross purchase price of the purchased Equipment exceeds the book
value of the Equipment being traded in at such time; and (ii) Capital
Expenditures shall exclude, whether or not such a designation would be in
conformity with GAAP, (A) expenditures made in con nection with the replacement
or restoration of Property, to the extent reimbursed or financed from insurance
or condemnation proceeds not constituting Net Cash Proceeds of Sale and (B)
expenditures for leased Inventory.
"CAPITAL LEASE" means any lease of any property (whether real,
personal or mixed) by a Person as lessee which, in conformity with GAAP, is
accounted for as a capital lease on the balance sheet of that Person.
"CAPITAL STOCK" means, with respect to any Person, any capital
stock of such Person, regardless of class or designation, and all warrants,
options, purchase rights, conversion or ex change rights, voting rights, calls
or claims of any character with respect thereto.
"CASH COLLATERAL" means cash or Cash Equivalents held by the
Agent, any of the Issuing Banks or any of the Lenders as security for the
Obligations.
"CASH COLLATERAL ACCOUNT" means an interest bearing account at
Citibank's offices in New York, New York designated by the Agent into which Cash
Collateral shall be deposited. The Cash Collateral Account shall be under the
sole dominion and control of the Agent, PROVIDED THAT all amounts deposited
therein shall be held by the Agent for the benefit of the Holders and shall be
subject to the terms of SECTION 12.03.
"CASH EQUIVALENTS" means (i) marketable direct obligations
issued or unconditionally guaranteed by the United States government and backed
by the full faith and credit of the United States government; and (ii) domestic
and Eurodollar certificates of deposit and time deposits, bankers' acceptances,
commercial paper, and floating rate certificates of deposit issued by any
commercial bank organized under the laws of the United States, any state
thereof, the District of Columbia, any foreign bank, or its branches or agencies
(fully protected against currency fluctuations), which, at the time of
acquisition, are rated A-1 (or better) by Standard & Poor's Rating Group, a
division of McGraw-Hill, Inc., or P-1 (or better) by Moody's Investors Services,
Inc.; PROVIDED, THAT (x) the maturities of such Cash Equivalents shall not
exceed one year and (y) such Cash Equivalents shall be maintained in investment
and other accounts of the Agent at Citibank or accounts at other investment
banks or financial institutions acceptable to the Agent and pledged to the Agent
as part of the Collateral.
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"CASH INTEREST EXPENSE" means, for any period, total interest
expense, whether paid or accrued, but without duplication, (including the
interest component of Capital Leases but net of the difference between payments
received by Borrower on all Hedge Agreements and payments made by the Borrower
on all Hedge Agreements other than the initial payments made to enter into such
Hedge Agreements) of Parent and its Subsidiaries (other than Special Purpose
Subsidiaries), which is payable in cash, all as determined in conformity with
GAAP.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. ss.ss. 9601 ET SEQ., any
amendments thereto, any successor statutes, and any regulations promulgated
thereunder.
"CHANGE OF CONTROL" means (i) with respect to the Parent, the
occurrence of a change in more than fifty percent (50%) of those members of the
Board of Directors of the Parent who are members of such Board of Directors on
the Closing Date and (ii) with respect to the Borrower, (a) the occurrence of a
change in more than fifty percent (50%) of those members of the Board of
Directors of the Borrower who are members of such Board of Directors on the
Closing Date or (b) the Parent ceasing to own and retain voting control of all
issued and outstanding Capital Stock of the Borrower, in any instance, without
the prior written consent of the Lenders, which consent shall not be
unreasonably withheld.
"CITIBANK" means Citibank, N.A., a national banking
association.
"CITICORP" means Citicorp USA, Inc., a Delaware
corporation.
"CLAIM" means any claim or demand, by any Person, of
whatsoever kind or nature for any alleged Liabilities and Costs, whether based
in contract, tort, implied or express warranty, strict liability, criminal or
civil statute, Permit, ordinance or regulation, common law or otherwise.
"CLOSING DATE" means June 26, 1996.
"COLLATERAL" means all Property and interests in Prop erty now
owned or hereafter acquired by the Borrower or any Guarantor upon which a Lien
is granted under any of the Loan Documents.
"COLLECTION ACCOUNT" means each lock-box and blocked
depository account maintained by the Borrower or any Subsidiary of the Borrower
subject to a Collection Account Agreement for the collection of Receivables and
other proceeds of Collateral.
"COLLECTION ACCOUNT AGREEMENT" means a written agreement,
substantially in the form attached hereto as EXHIBIT C with such modifications
as the Agent, from time to time, deems
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acceptable, among the Borrower or a Subsidiary of the Borrower, the Agent, and,
as applicable, each of the banks at which the Borrower or a Subsidiary of the
Borrower maintains a Collection Account.
"COMMERCIAL LETTER OF CREDIT" means any documentary letter of
credit issued by an Issuing Bank pursuant to SECTION 3.01 for the account of the
Borrower or for the account of any of the Borrower's Subsidiaries if the
Borrower is jointly and severally liable for reimbursement of amounts drawn
under such letter of credit, which is drawable upon presentation of documents
evidencing the sale or shipment of goods purchased by the Borrower or such
Subsidiary in the ordinary course of its business.
"COMMISSION" means the Securities and Exchange
Commission and any Person succeeding to the functions thereof.
"COMMITMENT" means, with respect to any Lender at the time of
determination thereof, the aggregate amount of such Lender's Revolving Credit
Commitment and Term Loan Commitment; and "COMMITMENTS" means the aggregate
amount of all Term Loan Commitments and Revolving Credit Commitments.
"COMPLIANCE CERTIFICATE" is defined in SECTION 8.01(D).
"CONCENTRATION ACCOUNT" means the depository account
maintained at Citibank in New York, New York, or such other financial
institution designated for such purpose by the Agent into which collections of
Receivables, other proceeds of Collateral and other amounts are transferred
pursuant to the terms of the Collection Account Agreements or otherwise as
described in SECTION 4.04.
"CONTAMINANT" means any waste, pollutant, hazardous substance,
toxic substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, radioactive materials, asbestos (in any form or condition),
polychlorinated biphenyls (PCBs), or any constituent of any such substance or
waste, and includes, but is not limited to, these terms as defined in federal,
state or local laws or regulations.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any
provision of any Securities issued by that Person or any indenture, mortgage,
deed of trust, security agreement, pledge agreement, guaranty, contract,
undertaking, agreement or instrument to which that Person is a party or by which
it or any of its properties is bound, or to which it or any of its properties is
subject.
"CURE LOANS" is defined in SECTION 4.02(B)(V)(C).
"CUSTOMARY PERMITTED LIENS" means
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(i) Liens (other than Environmental Liens and Liens in favor
of the PBGC) with respect to the payment of taxes, assessments or
governmental charges in all cases which are not yet due or which are
being contested in good faith by appropriate proceedings and with
respect to which adequate reserves or other appropriate provisions are
being maintained in accordance with GAAP;
(ii) statutory Liens of landlords and Liens of suppliers,
mechanics, carriers, materialmen, warehousemen or workmen and other
Liens imposed by law created in the ordinary course of business for
amounts not yet due or which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves or
other appropriate provisions are being maintained in accordance with
GAAP;
(iii) Liens (other than any Lien in favor of the PBGC)
incurred or deposits made in the ordinary course of business in
connection with worker's compensation, unemployment insurance or other
types of social security benefits or to secure the performance of bids,
tenders, sales, contracts (other than for the repayment of borrowed
money), surety, appeal and performance bonds; PROVIDED that (A) all
such Liens do not in the aggregate materially detract from the value of
the Borrower's or any of its Subsidiaries' assets or Property or
materially impair the use thereof in the operation of their respective
businesses, and (B) all Liens of attachment or judgment and Liens
securing bonds to stay judgments or in connection with appeals do not
secure at any time an aggregate amount exceeding $500,000; and
(iv) Liens arising with respect to zoning restrictions,
easements, licenses, reservations, covenants, rights-of-way, utility
easements, building restrictions and other similar charges or
encumbrances on the use of Real Property which do not interfere with
the ordinary conduct of the business of the Borrower or any of its
Subsidiaries.
"DESIGNATED PREPAYMENT" means each mandatory prepayment
required by CLAUSES (I) and (III) of SECTION 4.01(B).
"DOL" means the United States Department of Labor and any
Person succeeding to the functions thereof.
"DOLLARS" and "$" mean the lawful money of the United
States.
"DOMESTIC LENDING OFFICE" means, with respect to any
Lender, such Lender's office, located in the United States,
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specified as the "Domestic Lending Office" under its name on the signature pages
hereof or on the Assignment and Acceptance by which it became a Lender or such
other United States office of such Lender as it may from time to time specify by
written notice to the Borrower and the Agent.
"EBITDA" means, for any period, the amount calculated, without
duplication, for such period as (i) Net Income, PLUS (ii) depreciation and
amortization expense, PLUS (iii) other non-cash expenses identified to the
Agent, PLUS (iv) Cash Interest Expense, PLUS (v) federal, state, and local
income taxes deducted from Net Income in accordance with GAAP, PLUS (vi)
extraordinary losses (and any unusual losses arising in or outside of the
ordinary course of business of the Borrower not included in extraordinary losses
determined in accordance with GAAP) which have been included in the
determination of Net Income MINUS extraordinary gains, including, without
limitation, any unusual gains arising in or outside of the ordinary course of
business of the Parent and its Subsidiaries not included in extraordinary gains
determined in accordance with GAAP which have been included in the determination
of Net Income.
"EFFECTIVE DATE" is defined in SECTION 6.01.
"ELIGIBILITY RESERVES" means, as of three (3) Business Days
after the date of written notice of any determination thereof to the Borrower by
the Agent, or to the Borrower and the Agent by the Requisite Revolving Lenders,
such amounts as the Agent, or the Requisite Revolving Lenders, as the case may
be, in the exercise of its or their reasonable credit judgment, may from time to
time establish against the gross amounts of Eligible Inventory to reflect
material changes in risks or contingencies arising after the Closing Date which
may affect such items.
"ELIGIBLE ASSIGNEE" means (i) a Lender or any Affiliate
thereof; (ii) a commercial bank having total assets in excess of $2,500,000,000;
(iii) the central bank of any country which is a member of the Organization for
Economic Cooperation and Development; or (iv) a finance company, insurance
company, other financial institution or fund, acceptable to the Agent, which is
regularly engaged in making, purchasing or investing in loans and having total
assets in excess of $300,000,000, and (v) in the cases of Persons described in
CLAUSES (II) through (IV) above, are consented to by the Borrower, which consent
shall not be unreasonably withheld or delayed.
"ELIGIBLE INVENTORY" means, as of the date of determination
therefor, all Inventory of the Borrower consisting of commercial aircraft spare
parts which, when scheduled to the Agent on a Borrowing Base Certificate and at
all times thereafter, is included in Inventory Asset Group A, Inventory Asset
Group B, or Inventory Asset Group C, is in the required quantity and in the
required condition as set forth on such Borrowing Base Certificate, and is (i)
not Leased Inventory and
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is located at Borrower's owned or leased warehouses in the United States or is
(ii) Leased Inventory and:
(a) is stored and maintained in an identifiable, segregated
area disclosed to the Agent in the United States or in a location with
respect to which Borrower has obtained a Hedge Agreement with respect
to the sovereign risk associated with such location on terms
satisfactory to the Agent;
(b) is subject to a first priority perfected Lien in
favor of the Agent for the benefit of the Holders and no
other Liens; and
(c) with respect to which the Agent has obtained a landlord
waiver satisfactory to the Agent or consignee/bailee agreement as
described in SECTION 9.14, if stored and maintained on leased premises
or under a consignment or bailment agreement.
In any event, Eligible Inventory shall not consist of:
(1) goods in transit; or
(2) goods held on consignment or any similar arrangement,
including, without limitation, goods held by the Borrower but owned by
a customer of the Borrower; or
(3) goods (A) with respect to which the Agent does not have a
perfected security interest senior in priority to any other, (B) which
are subject to a Lien in favor of a landlord or bailee, or (C) which
are subject to a Lien which is not permitted under SECTION 10.03; or
(4) goods located on premises with respect to which the Agent
has not received a landlord's waiver, bailee agreement, or consignee
agreement in form and substance satisfactory to the Agent (and
substantially in the applicable form attached as part of EXHIBIT M)
within the time required by the terms of this Agreement.
"ELIGIBLE RECEIVABLES" means each Receivable of the Borrower
which, when scheduled to the Agent and at all times thereafter, is not of any of
the following types:
(i) it is due or unpaid more than ninety (90) days after the
date of the original invoice issued by the Borrower with respect to the
sale giving rise thereto; or
(ii) it arises out of (a) a sale not made in the ordinary
course of the Borrower's business or (b) a sale to a Person which is an
Affiliate of the Borrower or controlled by an Affiliate of the
Borrower; or
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(iii) it fails to meet or violates any warranty,
representation or covenant contained in this Agreement or any of the
other Loan Documents relating directly or indirectly to the Receivables
of the Borrower; or
(iv) the account debtor (a) is also the Borrower's supplier or
creditor and the Receivable is or may become subject to any right of
setoff by the account debtor, and such account debtor has not entered
into an agreement with the Agent with respect to the waiver of rights
of setoff which is in form and substance satisfactory to the Agent, or
(b) has disputed liability with respect to such Receivable, or made any
claim with respect to any other Receivable due from such account debtor
to the Borrower, in which cases the Receivable shall be ineligible to
the extent of (I) such setoff with respect to which an agreement as
described in CLAUSE (A) above is not in effect, (II) such dispute or
(III) such claim; or
(v) the account debtor has filed a petition for bankruptcy or
any other petition for relief under the Bankruptcy Code or any similar
statute (unless the account debtor is a debtor-in-possession in a
Chapter 11 case and has available debtor-in-possession financing from
sources and under terms reasonably acceptable to the Agent and the
Receivable is entitled to priority under Section 507 of the Bankruptcy
Code as an administrative expense allowed under Section 503(b) of the
Bankruptcy Code), made an assignment for the benefit of creditors, or
if any petition or other application for relief under the Bankruptcy
Code or any similar statute has been filed against the account debtor,
or if the account debtor has failed, suspended its business operations,
become insolvent, suffered a receiver or a trustee to be appointed for
any of its assets or affairs; or
(vi) the sale is to an account debtor outside the United
States, unless (a) the account debtor's obligations (or that portion of
such obligations which is acceptable to the Agent) with respect to such
sale is secured by a letter of credit, guaranty or eligible bankers'
acceptance having terms, and from such issuers and confirmation banks,
as are acceptable to the Agent [or (b) such account debtor is
identified on SCHEDULE 1.01.2 or otherwise acceptable to the Agent as
confirmed to the Borrower in writing or (c) such account debtor is
located in a foreign jurisdiction identified on SCHEDULE 1.01.2 or
otherwise acceptable to the Agent as confirmed to the Borrower in
writing]; or
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(vii) the sale is on a bill-and-hold, guaranteed
sale, sale-and-return, sale on approval, consignment,
or any other repurchase or return basis; or
(viii) the Agent believes, in the exercise of its reasonable
credit judgment, or the Requisite Revolving Lenders believe, in the
exercise of their reasonable credit judgment, that collection of such
Receivable is insecure or that such Receivable may not be paid by
reason of the account debtor's financial inability to pay; or
(ix) the account debtor is the United States of America or any
department, agency or instrumentality thereof, unless the Borrower
assigns its right to payment of such Receivable to the Agent pursuant
to the Assignment of Claims Act of 1940, as amended, (31 U.S.C. ss.
3727); or
(x) the Inventory of the Borrower, the sale of which has given
rise to such Receivable, have not been shipped and delivered to the
account debtor by the Borrower and accepted by the account debtor or
the services, the performance of which has given rise to such
Receivable, have not been performed by the Borrower and accepted by the
account debtor; or
(xi) the Receivable(s) of the respective account debtor
exceed(s) a credit limit determined by the Agent, in the exercise of
its reasonable credit judgment, or determined by the Requisite
Revolving Lenders, in the exercise of their reasonable credit judgment,
at any time or times hereafter, in which case such Receivable(s) shall
be ineligible to the extent such Receivable(s) exceed(s) such limit; or
(xii) the Agent does not have a senior, perfected security
interest in such Receivable or such Receivable is subject to a Lien
which is not permitted under SECTION 10.03; or
(xiii) the account debtor is located in the state of New
Jersey or Minnesota and the Borrower has not filed and maintained
effective (unless exempt from the requirements for filing) a current
Business Activity Report with the appropriate Governmental Authority in
the states of Minnesota and/or New Jersey, as applicable.
"ENVIRONMENTAL, HEALTH OR SAFETY REQUIREMENTS OF LAW" means
all Requirements of Law derived from or relating to any federal, state or local
law, ordinance, rule, regulation, Permit, license or other binding determination
of any Governmental Authority relating to, imposing liability or standards
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concerning, or otherwise addressing, the environment, health and/or safety,
including, but not limited to the Clean Air Act, the Clean Water Act, CERCLA,
RCRA, any so-called "Superfund" or "Superlien" law, the Toxic Substances Control
Act, OSHA, and applicable public health codes, each as from time to time in
effect.
"ENVIRONMENTAL LIEN" means a Lien in favor of any Governmental
Authority for any (i) liabilities under any Environmental, Health or Safety
Requirement of Law, or (ii) damages arising from, or costs incurred by such
Governmental Authority in response to, a Release or threatened Release of a
Contaminant into the environment.
"ENVIRONMENTAL PROPERTY TRANSFER ACTS" means any applicable
Requirement of Law that conditions, restricts, prohibits or requires any
notification or disclosure triggered by the transfer, sale, lease or closure of
any Property or deed or title for any Property for environmental reasons,
including, but not limited to, any so-called "Industrial Site Recovery Acts" or
"Responsible Property Transfer Acts".
"EQUIPMENT" means, with respect to any Person, all of such
Person's present and future (i) equipment, including, without limitation,
machinery, manufacturing, distribution, selling, data processing and office
equipment, assembly systems, tools, molds, dies, fixtures, appliances,
furniture, furnishings, vehicles, vessels, aircraft, aircraft engines, and trade
fixtures, (ii) other tangible personal property (other than such Person's
Inventory), and (iii) any and all accessions, parts and appurtenances attached
to any of the foregoing or used in connection therewith, and any substitutions
therefor and replacements, products and proceeds thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, 29 U.S.C. ss.ss. 1000 ET SEQ., any amendments thereto, any successor
statutes, and any regulations or guidance promulgated thereunder.
"ERISA AFFILIATE" means (i) any corporation which is a member
of the same controlled group of corporations (within the meaning of Section
414(b) of the Internal Revenue Code) as the Borrower; (ii) a partnership or
other trade or business (whether or not incorporated) which is under common
control (within the meaning of Section 414(c) of the Internal Revenue Code) with
the Borrower; and (iii) a member of the same affiliated service group (within
the meaning of Section 414(m) of the Internal Revenue Code) as the Borrower, any
corporation described in CLAUSE (I) above or any partnership or trade or
business described in CLAUSE (II) above.
"EURODOLLAR AFFILIATE" means, with respect to each Lender, the
Affiliate of such Lender (if any) set forth below such Lender's name under the
heading "Eurodollar Affiliate" on
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the signature pages hereof or on the Assignment and Acceptance by which it
became a Lender or such Affiliate of a Lender as it may from time to time
specify by written notice to the Borrower and the Agent.
"EURODOLLAR INTEREST PAYMENT DATE" means (i) with respect to
any Eurodollar Rate Loan, the last day of each Eurodollar Interest Period
applicable to such Loan and (ii) with respect to any Eurodollar Interest Period
in excess of three (3) calendar months, the last day of each three (3) calendar
month interval during such Eurodollar Interest Period.
"EURODOLLAR INTEREST PERIOD" is defined in SECTION 5.03
(B).
"EURODOLLAR INTEREST RATE DETERMINATION DATE" is
defined in SECTION 5.03(C).
"EURODOLLAR LENDING OFFICE" means, with respect to any Lender,
the office or offices of such Lender (if any) set forth below such Lender's name
under the heading "Eurodollar Lending Office" on the signature pages hereof or
on the Assignment and Acceptance by which it became a Lender or such office or
offices of such Lender as it may from time to time specify by written notice to
the Borrower and the Agent.
"EURODOLLAR RATE" means, with respect to any Eurodollar
Interest Period applicable to a Eurodollar Rate Loan, an interest rate per annum
obtained by dividing (i) the Base Eurodollar Rate applicable to that Eurodollar
Interest Period by (ii) a percentage equal to 100% MINUS the Eurodollar Reserve
Percentage in effect on the relevant Eurodollar Interest Rate Determination
Date.
"EURODOLLAR RATE LOANS" means those Loans which bear interest
at a rate determined by reference to the Eurodollar Rate and the Eurodollar Rate
Margin as provided in SECTION 5.01(A).
"EURODOLLAR RATE MARGIN" means, as of any date of
determination, a per annum rate equal to the rate set forth below opposite the
then applicable Performance Level set forth below:
PERFORMANCE LEVEL EURODOLLAR RATE MARGIN
----------------- ----------------------
1 1.75%
2 2.25%
3 2.50%
4 2.75%
"EURODOLLAR RESERVE PERCENTAGE" means, for any day, that
percentage which is in effect on such day, as prescribed by the Federal Reserve
Board for determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve requirement)
for a member
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bank of the Federal Reserve System in New York, New York with deposits exceeding
Five Billion Dollars ($5,000,000,000) in respect of "Eurocurrency Liabilities"
(or in respect of any other category of liabilities which includes deposits by
reference to which the interest rate on Eurodollar Rate Loans is determined or
any category of extensions of credit or other assets which includes loans by a
non-United States office of any bank to United States residents.
"EVENT OF DEFAULT" means any of the occurrences set forth in
SECTION 12.01 after the expiration of any applicable grace period, as expressly
provided in SECTION 12.01.
"FAIR MARKET VALUE" means, with respect to any asset, the
value of the consideration obtainable in a sale of such asset in the open
market, assuming a sale by a willing seller to a willing purchaser dealing at
arm's length and arranged in an orderly manner over a reasonable period of time,
each having reasonable knowledge of the nature and characteristics of such
asset, neither being under any compulsion to act, and, if in excess of $250,000,
as determined in an appraisal of such asset, PROVIDED THAT for purposes of
SECTION 10.02 such appraisal was performed relatively contemporaneously with
such sale by an independent third party appraiser and the basic assumptions
underlying such appraisal have not materially changed since the date thereof.
"FEDERAL FUNDS RATE" means, for any period, a fluctu ating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published for such
day (or, if such day is not a Business Day in New York, New York, for the next
preceding Business Day) in New York, New York by the Federal Reserve Bank of New
York, or if such rate is not so published for any day which is a Business Day in
New York, New York, the average of the quotations for such day on such
transactions received by the Agent from three federal funds brokers of recog
nized standing selected by the Agent.
"FEDERAL RESERVE BOARD" means the Board of Governors of the
Federal Reserve System or any Governmental Authority succeed ing to its
functions.
"FINANCE AFFILIATE" means Aviation Sales Finance
Company, a Delaware corporation and wholly-owned Subsidiary of
the Parent.
"FINANCE AFFILIATE INDEBTEDNESS" means Indebtedness of
the Borrower owing to Finance Affiliate under that certain
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promissory note dated the Closing Date in the principal amount of
$______________.1
"FINANCIAL STATEMENTS" means (i) statements of income and
retained earnings, statements of cash flow, and balance sheets, (ii) such other
financial statements as the Parent and/or and its Subsidiaries shall routinely
and regularly prepare and (iii) such other financial statements as the Agent or
the Requisite Lenders may from time to time reasonably specify.
"FISCAL YEAR" means the fiscal year of the Parent and its
Subsidiaries for accounting and tax purposes, which shall be the 52-week period
ending on the last Saturday of each calendar year.
"FIXED CHARGE COVERAGE RATIO" means, for any period, the ratio
of (a) the amount calculated as (i) EBITDA MINUS (ii) all taxes paid in cash
during such period MINUS (iii) the aggregate amount of Capital Expenditures made
in cash during such period to (b) the sum of (i) the aggregate amount of
interest paid in cash on Indebtedness of the Parent and its Subsidiaries (other
than Special Purpose Subsidiaries) during such period (net of amounts under
Hedge Agreements and interest income, in each case actually received, without
duplication) plus (ii) the aggregate amount of scheduled payments of principal
of Funded Debt (other than Funded Debt of Special Purpose Subsidiaries) during
such period.
"FOREIGN EMPLOYEE BENEFIT PLAN" means any employee benefit
plan as defined in Section 3(3) of ERISA which is main tained or contributed to
for the benefit of the employees of the Borrower, any of its Subsidiaries, or
any of its ERISA Affiliates and is not covered by ERISA pursuant to ERISA
Section 4(b)(4).
"FOREIGN SUBSIDIARY" means any Subsidiary of the Borrower
which is domiciled outside of the United States of America and its states,
districts and possessions.
"FRONTING FEE" is defined in SECTION 5.02(A).
"FUNDED DEBT" means Indebtedness of the Parent and its
Subsidiaries for borrowed money (determined in accordance with GAAP), including,
without limitation, Indebtedness under Capital Leases.
"FUNDING DATE" means, with respect to any Loan, the date of
funding of such Loan.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the American Institute of Certified
Public Accountants' Accounting Principles Board and Financial Accounting
Standards Board or in such other
- --------
1 Amount to be inserted dependent upon net proceeds of the Offering
contributed to Finance Affiliate by Parent.
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<PAGE>
statements by such other entity as may be in general use by significant segments
of the accounting profession as in effect on the date hereof (unless otherwise
specified herein as in effect on another date or dates).
"GENERAL INTANGIBLES" means, with respect to any Person, all
of such Person's present and future (i) general intangibles, (ii) rights,
interests, choses in action, causes of action, claims and other intangible
property of every kind and nature (other than Receivables), (iii) corporate and
other business records, (iv) loans, royalties, and other obligations receivable,
(v) trademarks, registered trademarks, trademark applications, service marks,
registered service marks, service mark applications, patents, registered
patents, patent applications, trade names, rights of use of any name, labels,
fictitious names, inventions, designs, trade secrets, computer programs,
software, printouts and other computer materials, goodwill, registrations,
copyrights, copyright applications, permits, licenses, franchises, customer
lists, credit files, correspondence, and advertising materials, (vi) customer
and supplier contracts, firm sale orders, rights under license and franchise
agreements, rights under tax sharing agreements, and other contracts and
contract rights, (vii) interests in partnerships and joint ventures, (viii) tax
refunds and tax refund claims, (ix) right, title and interest under leases,
subleases, licenses and concessions and other agreements relating to property,
(x) deposit accounts (general or special) with any bank or other financial
institution, (xi) credits with and other claims against third parties (including
carriers and shippers), (xii) rights to indemnification and with respect to
support and keep-well agreements, (xiii) reversionary interests in pension and
profit sharing plans and reversionary, beneficial and residual interests in
trusts, (xiv) proceeds of insurance of which such Person is beneficiary, (xv)
letters of credit, guarantees, Liens, security interests and other security held
by or granted to such Person, (xvi) uncertificated securities, and (xvii)
dividends and distributions and claims with respect to dividends and
distributions.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
federal, state, local or other political sub division thereof and any entity
exercising executive, legisla tive, judicial, regulatory or administrative
functions of or pertaining to government.
"GUARANTOR" means any of the Parent, Finance Affiliate, and
each Subsidiary of the Borrower which is not a Special Purpose Subsidiary or a
Foreign Subsidiary.
"HEDGE AGREEMENT" means any agreement, including, without
limitation, interest rate exchange, swap, collar or cap agreement, interest rate
future or option contract, currency swap agreement, currency future or option
contract, and other similar agreement, evidencing an agreement or arrangement
intended to
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protect against fluctuation in interest rates and/or foreign exchange rates,
conversion rates for conversion of foreign currencies to Dollars, or inability
of any foreign Person to transfer Dollars to the Borrower in the United States.
"HOLDER" means any Person entitled to enforce any of the
Obligations, whether or not such Person holds any evidence of Indebtedness,
including, without limitation, the Agent, each Lender and each Issuing Bank.
"INDEBTEDNESS", as applied to any Person, means, at any time,
without duplication, (a) all indebtedness, obligations or other liabilities of
such Person (i) for borrowed money or evidenced by debt securities, debentures,
acceptances, notes or other similar instruments, and any accrued interest, fees
and charges relating thereto, (ii) under profit payment agreements or in respect
of obligations to redeem, repurchase or exchange any Securities of such Person
or to pay dividends in respect of any stock, (iii) with respect to letters of
credit issued for such Person's account, (iv) to pay the deferred purchase price
of property or services, except accounts payable and accrued expenses arising in
the ordinary course of business, (v) in respect of Capital Leases, (vi) which
are Accommodation Obligations or (vii) under warranties and indemnities; (b) all
indebtedness, obligations or other liabilities of such Person or others secured
by a Lien on any property of such Person, whether or not such indebtedness,
obligations or liabilities are assumed by such Person, all as of such time; (c)
all indebtedness, obligations or other liabilities of such Person in respect of
Hedge Agreements, net of liabilities owed to such Person by the counterparties
thereon; (d) all preferred stock subject (upon the occurrence of any contingency
or otherwise) to mandatory redemp tion; (e) all ERISA obligations currently due
and payable; and (f) all contingent Contractual Obligations with respect to any
of the foregoing.
"INDEMNIFIED MATTERS" is defined in SECTION 15.03.
"INDEMNITEES" is defined in SECTION 15.03.
"INTEREST COVERAGE RATIO" means, for any period, the ratio of
Parent's (i) EBITDA to (ii) Cash Interest Expense.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of
1986, as amended to the date hereof and from time to time hereafter, any
successor statute and any regulations or guidance promulgated thereunder.
"INVENTORY" means, with respect to any Person, all of such
Person's present and future (i) inventory, (ii) goods, merchandise and other
personal property furnished or to be furnished under any contract of service or
intended for sale or lease, and all consigned goods and all other items which
have previously constituted Equipment of such Person but are then
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currently being held for sale or lease in the ordinary course of such Person's
business, (iii) raw materials, work-in-process and finished goods, (iv)
materials and supplies of any kind, nature or description used or consumed in
such Person's business or in connection with the manufacture, production,
packing, shipping, advertising, finishing or sale of any of the property
described in CLAUSES (I) through (III) above, (v) goods in which such Person has
a joint or other interest or right of any kind (including, without limitation,
goods in which such Person has an interest or right as consignee), and (vi)
goods which are returned to or repossessed by such Person; in each case whether
in the possession of such Person, a bailee, a consignee, or any other Person for
sale, storage, transit, processing, use or otherwise, and any and all documents
for or relating to any of the foregoing.
"INVENTORY ASSET GROUP A" means a classification of Borrower's
Inventory including those aircraft spare parts (identified by full and complete
part number) of which there has been a sale of at least a quantity of one (1) in
the two, three, four or more year period immediately preceding the date of
designation of such Inventory as such on a given Borrowing Base Certificate and
of which there remains a quantity of at least one (1) in Borrower's Inventory.
"INVENTORY ASSET GROUP B" means a classification of Borrower's
Inventory including aircraft spare parts for use on a Stage 3 Aircraft or engine
but which are not part of Inventory Asset Group A.
"INVENTORY ASSET GROUP C" means a classification of Borrower's
Inventory including those aircraft spare parts which have either a quoted sales
value greater than $25,000 per unit or no quoted activity but a catalog value
greater than $50,000 per unit and which are not part of Inventory Asset Group A
or Inventory Asset Group B.
"INVESTMENT" means, with respect to any Person, (i) any
purchase or other acquisition by that Person of Securities, or of a beneficial
interest in Securities, issued by any other Person, (ii) any purchase by that
Person of all or substantially all of the assets of a business conducted by
another Person, and (iii) any loan, advance (other than deposits with financial
institu tions available for withdrawal on demand, prepaid expenses, accounts
receivable, advances to employees and similar items made or incurred in the
ordinary course of business) or capital contribution by that Person to any other
Person, including all Indebtedness to such Person arising from a sale of
property by such Person other than in the ordinary course of its business. The
amount of any Investment shall be the original cost of such Investment, plus the
cost of all additions thereto less the amount of any return of capital or
principal to the extent such return is in cash with respect to such Investment
without any
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adjustments for increases or decreases in value or write-ups, write-downs or
write-offs with respect to such Investment.
"IRS" means the Internal Revenue Service and any Person
succeeding to the functions thereof.
"ISSUING BANKS" means Citibank and each Lender designated as
an "Issuing Bank" on the signature pages hereof or the signature page of the
Assignment and Acceptance by which it became a Lender and each other Lender
approved by the Agent and the Borrower who has agreed to become an Issuing Bank
for the purpose of issuing Letters of Credit pursuant to SECTION 3.01.
"LEASED INVENTORY" means Inventory of the Borrower which is
subject to an Aircraft Parts Lease Agreement.
"LEASING LP" means ASC Leasing Company, L.P., formerly known
as Aviation Sales Leasing Company, L.P., a limited partnership organized under
the laws of Delaware, d/b/a Aviation Sales Leasing Company.
"LEASING SUBSIDIARY" means Aviation Sales Leasing
Company, a Delaware corporation and wholly-owned Subsidiary of
the Borrower.
"LENDER" means, as of the Closing Date, each financial
institution which is a signatory hereto as a Lender and, at any other given
time, each financial institution which is a party hereto as a Lender, whether as
a signatory hereto or pursuant to an Assignment and Acceptance.
"LENDER AFFILIATE" means any financial institution that
directly or indirectly controls or is controlled by or is under common control
with a Lender.
"LETTER OF CREDIT" means any Commercial Letter of
Credit or Standby Letter of Credit.
"LETTER OF CREDIT FEE" is defined in SECTION 5.02(A).
"LETTER OF CREDIT OBLIGATIONS" means, at any particular time,
the sum of (i) all outstanding Reimbursement Obligations, PLUS (ii) the
aggregate undrawn face amount of all outstanding Letters of Credit, PLUS (iii)
the aggregate face amount of all Letters of Credit requested by the Borrower but
not yet issued (unless the request for an unissued Letter of Credit has been
denied by the designated Issuing Bank as referenced in SECTION 3.01(C)(I)).
"LETTER OF CREDIT REIMBURSEMENT AGREEMENT" means, with respect
to a Letter of Credit, such form of application therefor and form of
reimbursement agreement therefor (whether in a single or several documents,
taken together) as the Issuing Bank from which the Letter of Credit is requested
may employ in the
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ordinary course of business for its own account, with such modifications thereto
as may be agreed upon by the Issuing Bank and the Borrower and as are not
materially adverse (in the judgment of the Issuing Bank and Agent) to the
interests of the Lenders; PROVIDED, HOWEVER, in the event of any conflict
between the terms of any Letter of Credit Reimbursement Agreement and this
Agreement, the terms of this Agreement shall control.
"LIABILITIES AND COSTS" means all liabilities, obligations,
responsibilities, losses, damages, personal injury, death, punitive damages,
economic damages, consequential damages, treble damages, intentional, willful or
wanton injury, damage or threat to the environment, natural resources or public
health or welfare, costs and expenses (including, without limitation, attorney,
expert and consulting fees and costs and fees and costs associated with any
investigation, feasibility or Remedial Action studies), fines, penalties and
monetary sanctions, interest, direct or indirect, known or unknown, absolute or
contingent, past, present or future.
"LIEN" means any mortgage, deed of trust, pledge,
hypothecation, assignment, conditional sale or other title retention agreement,
deposit arrangement, security interest, encumbrance (including, without
limitation, easements, rights-of-way, zoning restrictions and the like), lien
(statutory or other and including, without limitation, any Environmental Lien),
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever in respect of any property of a Person, whether
granted voluntarily or imposed by law, and includes the interest of a lessor
under a Capital Lease or under any financing lease having substantially the same
economic effect as any of the foregoing and the filing of any financing
statement or similar notice (other than a financing statement filed by a "true"
lessor pursuant to ss. 9-408 of the Uniform Commercial Code), naming the owner
of such property as debtor, under the Uniform Commercial Code or other
comparable law of any jurisdiction.
"LIQUIDATION DOCUMENTS" means, collectively, those agreements
and documents filed with Governmental Authorities or entered into to effect the
Liquidations; "LIQUIDATION DOCUMENT" means any one of the Liquidation Documents.
"LIQUIDATIONS" means, collectively, the liquidation of the
Partnership into the Borrower and the liquidation of Leasing LP into Leasing
Subsidiary in each instance in accordance with the Liquidation Documents related
thereto; "LIQUIDATION" means, individually, either of the Liquidations.
"LOAN ACCOUNT" is defined in SECTION 4.03(B).
"LOAN DOCUMENTS" means this Agreement, the Notes, Hedge
Agreements to which any Lender or any Affiliate of a Lender is a party, and all
other instruments, agreements and written
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Contractual Obligations between any Guarantor, the Borrower or any of its
Subsidiaries and any of the Agent, any Lender or any Issuing Bank delivered to
either the Agent, such Lender or such Issuing Bank pursuant to or in connection
with the transactions contemplated hereby.
"LOANS" means all Term Loans, Revolving Loans, and
Loans made under the Acquisition Subfacility.
"MARGIN STOCK" means "margin stock" as such term is defined in
Regulation U and Regulation G.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon
(i) the financial condition, operations, assets or prospects of the Borrower or
the Borrower and the Guarantors taken as a whole, (ii) the ability of the
Borrower or any Guarantor to perform its respective obligations under the Loan
Documents, or (iii) the ability of the Lenders, the Issuing Banks or the Agent
to enforce any of the Loan Documents.
"MAXIMUM REVOLVING CREDIT AMOUNT" means, at any particular
time, the amount equal to lesser of (i) the Commitments at such time MINUS the
Term Loan Reserve at such time MINUS the Texas Tax Reserve at such time if such
Texas Tax Reserve exceeds $200,000 and (ii) the Borrowing Base at such time
MINUS the Term Loan Reserve at such time MINUS the Texas Tax Reserve at such
time if such Texas Tax Reserve exceeds $200,000.
"MERGER" means the merger of Aviation Sales Management
Company, a Delaware corporation, effective the Closing Date with and into the
Borrower pursuant to the Merger Documents.
"MERGER DOCUMENTS" means, collectively, the Agreement of
Merger dated as of June 26, 1996 among the Borrower, Parent and Aviation Sales
Management Company, a Delaware corporation, and all agreements and instruments
executed and delivered in connection therewith; "MERGER DOCUMENT" means any one
of the Merger Documents.
"MIS" means computerized management information system for
recording and maintenance of information regarding purchases, sales, aging,
categorization, and locations of Inventory, creation and aging of Receivables,
and accounts payable (including agings thereof).
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA (other than a Foreign Employee Benefit Plan)
which is, or within the immediately preceding six (6) years was, contributed to
by either the Borrower or any ERISA Affiliate or in respect of which the
Borrower or any ERISA Affiliate has assumed any liability.
"NET CASH PROCEEDS OF ISSUANCE OF EQUITY SECURITIES OR
INDEBTEDNESS" means (i) net cash proceeds (including cash,
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equivalents readily convertible into cash, and such proceeds of any notes
received as consideration or any other non-cash consideration) received by the
Borrower, any of its Subsidiaries, or Finance Affiliate at any time after the
Closing Date on account of the issuance of (a) equity Securities of the Borrower
or Finance Affiliate to any Person other than the Parent or equity Securities of
any Subsidiary of the Borrower to any Person other than the Borrower or (b)
Indebtedness (other than Indebtedness permitted under SECTION 10.01) of the
Borrower or any of its Subsidiaries, in each case net of all transaction costs
and underwriters' discounts with respect thereto; and (ii) proceeds received by
the Borrower at any time after the Closing Date as a contribution to its capital
on account of the issuance of equity Securities of the Borrower to any Person
other than the Parent.
"NET CASH PROCEEDS OF SALE" means (i) proceeds received by the
Borrower, any of its Subsidiaries, or Finance Affiliate in cash (including cash,
equivalents readily convertible into cash, and such proceeds of any notes
received as consideration or any other non-cash consideration) from the sale,
assignment or other disposition of (but not the lease or license of) any
Property, other than sales permitted under CLAUSES (B), (C)(II)(A), and (D) of
SECTION 10.02, net of (A) the costs of sale, assignment or other disposition,
(B) any income, franchise, transfer or other tax liability arising from such
transaction and (C) amounts applied to the repayment of Indebtedness (other than
the Obligations) secured by a Lien permitted by SECTION 10.03 on the asset
disposed of, if such net proceeds arise from any individual sale, assignment or
other disposition or from any group of related sales, assignments or other
dispositions; and (ii) to the extent provided in SECTION 9.08, proceeds of
insurance on account of the loss of or damage to any such Property or
Properties, and payments of compensation for any such Property or Properties
taken by condemnation or eminent domain. Notwithstanding the foregoing, "Net
Cash Proceeds of Sale" shall not include proceeds received by a Special Purpose
Subsidiary from the sale of Inventory.
"NET INCOME" means, for any period, the net earnings (or loss)
after taxes of the Parent and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in conformity with GAAP.
"1994 CREDIT AGREEMENT" means that certain Credit Agreement
dated as of December 2, 1994 among the Partnerships, Citicorp USA, Inc.,
Citicorp Securities, Inc., Citibank, N.A., Sanwa Business Credit Corporation,
Congress Financial Corporation, and Ryoshin Leasing (USA) Inc., as amended.
"1994 FEE LETTER" means that certain fee letter
addressed to Citicorp Securities, Inc. from the Partnership dated
June 3, 1994.
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"1996 FEE LETTER" means that certain fee letter addressed to
Citicorp from the Partnership dated May 3, 1996.
"NON PRO RATA LOAN" is defined in SECTION 4.02(B)(V).
"NOTE" means a promissory note in the form attached hereto as
EXHIBIT D payable to a Lender, evidencing certain of the Obligations of the
Borrower to such Lender and executed by the Borrower as required by SECTION
4.03(A), as the same may be amended, supplemented, modified or restated from
time to time; "NOTES" means, collectively, all of such Notes outstanding at any
given time.
"NOTICE OF BORROWING" means a notice substantially in the form
of EXHIBIT E attached hereto and made a part hereof.
"NOTICE OF CONVERSION/CONTINUATION" means a notice
substantially in the form of EXHIBIT F attached hereto and made a part hereof.
"OBLIGATIONS" means all Loans, advances, debts, liabilities,
obligations, covenants and duties owing by the Borrower to the Agent, any
Lender, any Issuing Bank, any Affiliate of the Agent, any Lender or any Issuing
Bank, or any Person entitled to indemnification pursuant to SECTION 15.03 of
this Agreement, of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, arising under this
Agreement, the Notes or any other Loan Document, whether or not for the payment
of money, whether arising by reason of an extension of credit, opening or
amendment of a Letter of Credit or payment of any draft drawn thereunder, loan,
guaranty, indemnification, foreign exchange contract, Hedge Agreement or in any
other manner, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising and however acquired. The term includes, without limitation,
all interest, charges, expenses, fees, attorneys' fees and disbursements and any
other sum chargeable to the Borrower under this Agreement or any other Loan
Document.
"OFFERING" means the offering of equity Securities of the
Parent as more particularly described in the S-1.
"OFFERING DOCUMENTS" means the S-1 and all agreements and
instruments executed and delivered in connection with the Offering; "OFFERING
DOCUMENT" means any one of the Offering Documents.
"OFFICER'S CERTIFICATE" means a certificate executed on behalf
of Borrower by its president, chief financial officer, or treasurer.
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"OPERATING LEASE" means, as applied to any Person, any lease
of any property (whether real, personal or mixed) by that Person as lessee which
is not a Capital Lease.
"ORGANIZATIONAL DOCUMENTS" means, with respect to any
corporation, limited liability company, or partnership (i) the
articles/certificate of incorporation (or the equivalent organizational
documents) of such corporation or limited liability company, (ii) the
partnership agreement executed by the partners in the partnership, (iii) the
by-laws (or the equivalent governing documents) of the corporation, limited
liability company or partnership, and (iv) any document setting forth the
designation, amount and/or relative rights, limitations and preferences of any
class or series of such corporation's Capital Stock or such limited liability
company's or partnership's equity or ownership interests.
"OSHA" means the Occupational Safety and Health Act of 1970,
29 U.S.C. ss.ss. 651 ET SEQ., any amendments thereto, any successor statutes and
any regulations or guidance promulgated thereunder.
"PARENT" means Aviation Sales Company, a Delaware corporation,
and owner of all outstanding Capital Stock of Borrower and Finance Affiliate.
"PARTNERSHIP" means ASC Acquisition Partners, L.P., a limited
partnership organized under the laws of Delaware, d/b/a Aviation Sales Company.
"PBGC" means the Pension Benefit Guaranty Corporation and any
Person succeeding to the functions thereof.
"PERFORMANCE LEVEL 1" means that level of financial
performance of the Parent and its Subsidiaries, on a consolidated basis,
measured as of the end of a fiscal quarter of the Parent, at which the ratio of
Funded Debt to EBITDA for the then most recently ended four (4) fiscal quarter
period of the Parent is less than or equal to 1.5 : 1.0.
"PERFORMANCE LEVEL 2" means that level of financial
performance of the Parent and its Subsidiaries, on a consolidated basis,
measured as of the end of a fiscal quarter of the Parent, at which the ratio of
Funded Debt to EBITDA for the then most recently ended four (4) fiscal quarter
period of the Parent is greater than 1.5 : 1.0 and less than or equal to 2.0 :
1.0.
"PERFORMANCE LEVEL 3" means that level of financial
performance of the Parent and its Subsidiaries, on a consolidated basis,
measured as of the end of a fiscal quarter of the Parent, at which the ratio of
Funded Debt to EBITDA for the then most recently ended four (4) fiscal quarter
period of the Parent is greater than 2.0 : 1.0 and less than or equal to 2.5 :
1.0.
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"PERFORMANCE LEVEL 4" means that level of financial
performance of the Parent and its Subsidiaries, on a consolidated basis,
measured as of the end of a fiscal quarter of the Parent, at which the ratio of
Funded Debt to EBITDA for the then most recently ended four (4) fiscal quarter
period of the Parent is greater than 2.5 : 1.0.
"PERMITS" means any permit, approval, authorization license,
variance, or permission required from a Governmental Authority or other Person
under an applicable Requirement of Law.
"PERMITTED ACQUISITION" means any acquisition of the equity
Securities, assets (other than Property acquired in the ordinary course of
business) or operations of any Person domiciled in the United States of America
by the Borrower or merger of any such Person with and into the Borrower (with
the Borrower being the surviving corporation) or with a direct Subsidiary of the
Borrower other than a Foreign Subsidiary using proceeds of Loans made under the
Acquisition Subfacility or Net Cash Proceeds of Issuance of Equity Securities or
Indebtedness (to the extent permissible under SECTION 4.01(B)(III)) to pay the
purchase price therefor and related fees and expenses; PROVIDED THAT such
acquisition is made at a time when, after giving effect to such acquisition and
the related financing thereof:
(i) no Event of Default or Potential Event of Default
exists or would occur;
(ii) on an historical, PRO FORMA consolidated basis giving effect to
the acquisition for the twelve (12) consecutive months immediately
preceding the acquisition closing date the ratio of Funded Debt to
EBITDA does not exceed 2.5 :
1.0;
(iii) the Person which is the subject of such acquisition shall be
engaged in the business of manufacture, repair or distribution of
aircraft spare parts, related engineering or inventory management
services, aircraft parts leasing, or other similar business activities
that are complimentary to Borrower's business as of the Closing Date;
(iv) no equity Securities of the Borrower, Finance Affiliate, or any
Subsidiary of the Borrower or Finance Affiliate shall comprise any part
of the acquisition purchase price or related fees and expenses;
(v) in the event of an acquisition of equity Securities of a Person or
a merger in which the acquired Person is the surviving corporation,
such Person shall become a Guarantor upon consummation of such
acquisition or merger and grant a Lien against substantially all of the
assets of such Person to the Agent for the benefit of the Holders to
secure the Obligations and such guarantee;
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(vi) in the event Borrower acquires assets of any Person, no Liens,
other than Liens securing the Obligations and Customary Permitted
Liens, shall exist against the assets acquired;
(vii) in the event of an acquisition of equity Securities of a Person,
no Liens, other than Liens securing the Obligations, shall exist
against the equity Securities acquired; and
(viii) Borrower shall have delivered to (a) the Agent and all Lenders a
copy of the letter of intent, if executed, promptly following its
execution and (b) the Agent and its counsel such instruments and
documents with respect to such acquisition as they shall reasonably
request by no later than the date of the Notice of Borrowing delivered
in connection with a Borrowing of Loans under the Acquisition
Subfacility requested with respect to such acquisition.
"PERMITTED EQUITY SECURITIES OPTIONS" means the subscriptions,
options, warrants, rights, convertible securities and other agreements or
commitments relating to the issuance of equity Securities of the Parent
identified as such on SCHEDULE 1.01.3.
"PERMITTED EXISTING ACCOMMODATION OBLIGATIONS" means
those Accommodation Obligations of the Borrower identified as
such on SCHEDULE 1.01.4.
"PERMITTED EXISTING INDEBTEDNESS" means the Indebted
ness of the Borrower and its Subsidiaries identified as such on
SCHEDULE 1.01.5.
"PERMITTED EXISTING INVESTMENTS" means those Invest ments of
the Borrower identified as such on SCHEDULE 1.01.6.
"PERMITTED EXISTING LIENS" means the Liens on assets of the
Borrower and Leasing Subsidiary identified as such on SCHEDULE 1.01.7.
"PERSON" means any natural person, corporation, limited
liability company, limited partnership, general partnership, joint stock
company, joint venture, association, company, trust, bank, trust company, land
trust, business trust or other organization, whether or not a legal entity, any
other non-governmental entity, and any Governmental Authority.
"PLAN" means an employee benefit plan defined in Section 3(3)
of ERISA (other than a Foreign Employee Benefit Plan) in respect of which the
Borrower or any ERISA Affiliate is, or within the immediately preceding six (6)
years was, an "employer" as defined in Section 3(5) of ERISA or the Borrower or
any ERISA Affiliate has assumed any liability.
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"POTENTIAL EVENT OF DEFAULT" means an event which, with the
giving of notice or the lapse of time, or both, would consti tute an Event of
Default.
"PROCESS AGENT" is defined in SECTION 15.17(A).
"PRO FORMA" means, collectively, the unaudited pro forma
opening consolidated and consolidating balance sheets of the Parent and its
Subsidiaries attached hereto as EXHIBIT G, prepared in accordance with GAAP,
dated the Effective Date, and giving effect to the extensions of credit
contemplated hereby, the Liquidations, the Merger, the Finance Affiliate
Indebtedness and repayment of the Subordinated Debt.
"PROJECTIONS" means the consolidated and consolidating
financial projections (including, without limitation, capital expenditure
budget) of the Parent and its Subsidiaries and related assumptions prepared by
the Borrower dated as of the Effective Date and attached hereto as EXHIBIT H.
"PROPERTY" means any Real Property or personal prop erty,
plant, building, facility, structure, underground storage tank or unit,
Equipment, Inventory, General Intangible, Receivable, or other asset owned,
leased or operated by the Borrower or any Guarantor, as applicable, (including
any surface water thereon, and soil and groundwater thereunder).
"PRO RATA SHARE" means, with respect to any Lender, the
percentage obtained by dividing (i) the sum of such Lender's Term Loan
Commitment and Revolving Credit Commitment (in each case, as adjusted from time
to time in accordance with the provisions of this Agreement or any Assignment
and Acceptance to which such Lender is a party) by (ii) the aggregate amount of
all of the Term Loan Commitments and Revolving Credit Commitments (notwith
standing the termination of any such Commitments).
"PROTECTIVE ADVANCE" is defined in SECTION 13.09(A).
"RCRA" means the Resource Conservation and Recovery Act
of 1976, 42 U.S.C. ss.ss. 6901 ET SEQ., any amendments thereto, any
successor statutes, and any regulations promulgated thereunder.
"REAL PROPERTY" means, with respect to any Person, all of such
Person's present and future right, title and interest (including, without
limitation, any leasehold estate) in (i) any plots, pieces or parcels of land,
(ii) any improvements, buildings, structures and fixtures now or hereafter
located or erected thereon or attached thereto of every nature whatsoever (the
rights and interests described in CLAUSES (I) and (II) above being the
"Premises"), (iii) all easements, rights of way, gores of land or any lands
occupied by streets, ways, alleys, passages, sewer rights, water courses, water
rights and powers, and public places adjoining such land, and any other
interests in property constituting appurtenances to the Premises, or which
hereafter
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shall in any way belong, relate or be appurtenant thereto, (iv) all
hereditaments, gas, oil, minerals (with the right to extract, sever and remove
such gas, oil and minerals), and easements, of every nature whatsoever, located
in or on the Premises and (v) all other rights and privileges thereunto
belonging or appertaining and all extensions, additions, improvements,
betterments, renewals, substitutions and replace ments to or of any of the
rights and interests described in CLAUSES (III) and (IV) above.
"RECEIVABLES" means, with respect to any Person, all of such
Person's present and future (i) accounts, (ii) contract rights, chattel paper,
instruments, documents, deposit accounts, and other rights to payment of any
kind, whether or not arising out of or in connection with the sale or lease of
goods or the rendering of services, and whether or not earned by performance,
(iii) any of the foregoing which are not evidenced by instruments or chattel
paper, (iv) intercompany receivables, and any security documents executed in
connection therewith, (v) proceeds of any letters of credit or insurance
policies on which such Person is named as beneficiary, (vi) claims against third
parties for advances and other financial accommodations and any other
obligations whatsoever owing to such Person, (vii) rights in and to all security
agreements, leases, guarantees, instruments, securities, documents of title and
other contracts securing, evidencing, supporting or otherwise relating to any of
the foregoing, together with all rights in any goods, merchandise or Inventory
which any of the foregoing may represent, and (viii) rights in returned and
repossessed goods, merchandise and Inventory which any of the same may
represent, including, without limitation, any right of stoppage in transit.
"REGISTER" is defined in SECTION 15.01(C).
"REGULATION A" means Regulation A of the Federal Reserve Board
as in effect from time to time.
"REGULATION G" means Regulation G of the Federal Reserve Board
as in effect from time to time.
"REGULATION T" means Regulation T of the Federal Reserve Board
as in effect from time to time.
"REGULATION U" means Regulation U of the Federal Reserve Board
as in effect from time to time.
"REGULATION X" means Regulation X of the Federal Reserve Board
as in effect from time to time.
"REIMBURSEMENT DATE" is defined in SECTION
3.01(D)(I)(A).
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"REIMBURSEMENT OBLIGATIONS" means the aggregate non-contingent
reimbursement or repayment obligations of the Borrower with respect to amounts
drawn under Letters of Credit.
"RELEASE" means any release, spill, emission, leaking,
pumping, pouring, dumping, injection, deposit, disposal, abandonment, or
discarding of barrels, containers or other receptacles, discharge, emptying,
escape, dispersal, leaching or migration into the indoor or outdoor environment
or into or out of any Property, including the movement of Contaminants through
or in the air, soil, surface water, groundwater or Property.
"REMEDIAL ACTION" means actions required to (i) clean up,
remove, treat or in any other way address Contaminants in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release or minimize the
further Release of Contaminants; or (iii) investigate and determine if a
remedial response is needed and to design such a response and post-remedial
investigation, monitoring, operation and maintenance and care.
"REPLACEMENT PROCEEDS" means the amount of (i) proceeds of
insurance paid on account of the loss of or damage to any Property and awards of
compensation for Property taken by condemnation or eminent domain to the extent
actually used to replace, rebuild or restore the Property so lost, damaged or
taken, PROVIDED THAT (a) Borrower shall have delivered written notice to the
Agent that it or its applicable Subsidiary intends to so replace, rebuild or
restore such Property and (b) the Borrower or such applicable Subsidiary of the
Borrower replaces or commences the restoration or rebuilding of such Property
within 180 days after the Agent's receipt of the proceeds of such insurance
payment or condemnation award and (ii) insurance paid on account of a business
interruption occurrence to the extent actually used in the restoration or
conduct of the business interrupted.
"REPORTABLE EVENT" means any of the events described in
Section 4043(b) of ERISA and the regulations promulgated thereunder as in effect
from time to time other than an event for which the thirty (30) day notice
requirement has been waived by the PBGC.
"REQUIREMENTS OF LAW" means, as to any Person, the charter and
by-laws or other organizational or governing docu ments of such Person, and any
law, rule or regulation, or deter mination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is subject
including, without limitation, the Securities Act, the Securities Exchange Act,
Regulations G, T, U and X, ERISA, the Fair Labor Standards Act, the Worker
Adjustment and Retraining Notification Act, Americans with Disabilities Act of
1990, and any certificate of occupancy, zoning ordinance,
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building, environmental or land use requirement or Permit or any Environmental,
Health or Safety Requirement of Law.
"REQUISITE LENDERS" means Lenders whose Pro Rata Shares, in
the aggregate, are greater than fifty percent (50%); PROVIDED, HOWEVER, that, in
the event any of the Revolving Lenders shall have failed to fund its Revolving
Loan Pro Rata Share of any Revolving Loan requested by the Borrower which
Revolving Lenders are obligated to fund under the terms of this Agreement and
any such failure has not been cured, then for so long as such failure continues,
"REQUISITE LENDERS" means Lenders (excluding all Revolving Lenders whose failure
to fund their respective Revolving Loan Pro Rata Shares of such Revolving Loans
have not been so cured) whose Pro Rata Shares represent more than fifty percent
(50%) of the aggregate Pro Rata Shares of such Lenders; PROVIDED, FURTHER,
HOWEVER, that, in the event that the Commitments have been terminated pursuant
to the terms of this Agreement, "REQUISITE LENDERS" means Lenders (without
regard to such Lenders' performance of their respective obligations hereunder)
whose aggregate ratable shares (stated as a percentage) of the aggregate
outstanding principal balance of all Loans are greater than fifty percent (50%).
"REQUISITE REVOLVING LENDERS" means Revolving Lenders whose
Revolving Loan Pro Rata Shares, in the aggregate, are greater than fifty percent
(50%); PROVIDED, HOWEVER, that, in the event any of the Revolving Lenders shall
have failed to fund its Revolving Loan Pro Rata Share of any Revolving Loan
requested by the Borrower which Revolving Lenders are obligated to fund under
the terms of this Agreement and any such failure has not been cured, then for so
long as such failure continues, "REQUISITE REVOLVING LENDERS" means Revolving
Lenders (excluding all Revolving Lenders whose failure to fund their respective
Revolving Loan Pro Rata Shares of such Revolving Loans have not been so cured)
whose Revolving Loans represent more than fifty percent (50%) of the aggregate
Revolving Loan Pro Rata Shares of such Revolving Lenders; PROVIDED, FURTHER,
HOWEVER, that, in the event that the Revolving Credit Commitments have been
terminated pursuant to the terms of this Agreement, "REQUISITE REVOLVING
LENDERS" means Revolving Lenders (without regard to such Revolving Lenders'
performance of their respective obligations hereunder) whose aggregate ratable
shares (stated as a percentage) of the aggregate outstanding principal balance
of all Revolving Loans are greater than fifty percent (50%).
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any equity Securities of the
Borrower or any of its Subsidiaries now or hereafter outstanding, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any Securities of the Borrower or
any of its Subsidiaries now or hereafter outstanding, (iii) any payment or
prepayment of principal of, premium, if any, or interest, fees or other charges
on or with respect to, and any redemption,
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purchase, retirement, defeasance, sinking fund or similar payment and any claim
for rescission with respect to, the Finance Affiliate Indebtedness or any other
Indebtedness owing at any time to any Affiliate of the Borrower, (iv) any
payment made to redeem, purchase, repurchase or retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
equity Securities of the Borrower or any of its Subsidiaries now or hereafter
outstanding, and (v) any fees or other remuneration paid to Parent, Finance
Affiliate, or any Subsidiary of the Borrower by the Borrower or any Guarantor.
"REVOLVING CREDIT AVAILABILITY" means, at any particular time,
the amount by which the Maximum Revolving Credit Amount at such time exceeds the
sum of (i) the Revolving Credit Obligations at such time PLUS (ii) the
outstanding balance of Protective Advances at such time PLUS (iii) the Loans
which have been made, as of such time, under the Acquisition Subfacility.
"REVOLVING CREDIT COMMITMENT" means, with respect to any
Revolving Lender, the obligation of such Lender to make Revolving Loans and
Loans under the Acquisition Subfacility and to participate in Letters of Credit
pursuant to the terms and conditions of this Agreement, in an aggregate amount
at any time outstanding which shall not exceed the principal amount set forth
opposite such Lender's name under the heading "Revolving Credit Commitment" on
the signature pages hereof or the signature page of the Assignment and
Acceptance by which it became a Lender, as modified from time to time pursuant
to the terms of this Agreement or to give effect to any applicable Assignment
and Acceptance, and "REVOLVING CREDIT COMMITMENTS" means the aggregate principal
amount of the Revolving Credit Commitments of all the Revolving Lenders, the
maximum amount of which shall be $50,000,000, as reduced from time to time
pursuant to SECTION 4.01.
"REVOLVING CREDIT OBLIGATIONS" means, at any particular time,
the sum of (i) the outstanding principal amount of the Revolving Loans at such
time, PLUS (ii) the Letter of Credit Obligations at such time.
"REVOLVING CREDIT TERMINATION DATE" means the earlier to occur
of (i) November 30, 1999 (or, if not a Business Day, the next preceding Business
Day) and (ii) the date of termination of the Revolving Credit Commitments
pursuant to the terms of this Agreement.
"REVOLVING LENDERS" means those Lenders having a Revolving
Credit Commitment; and "REVOLVING LENDER" means one of the Revolving Lenders,
individually.
"REVOLVING LOAN" is defined in SECTION 2.02(A)(II).
"REVOLVING LOAN PRO RATA SHARE" means, with respect to
any Revolving Lender, the percentage obtained by dividing (i) the
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amount of such Revolving Lender's Revolving Credit Commitment (as adjusted from
time to time in accordance with the provisions of this Agreement or any
Assignment and Acceptance to which such Revolving Lender is a party) by (ii) the
aggregate amount of the Revolving Credit Commitments (notwithstanding the
termination of such Revolving Credit Commitments).
"REVOLVING NOTES" means promissory notes executed by Borrower
and delivered to the Revolving Lenders evidencing the Revolving Loans, as the
same may be amended, supplemented, modified or restated from time to time, and
any promissory note issued in substitution therefor, substantially in the form
attached hereto as EXHIBIT D-2; and "REVOLVING NOTE" means any one of the
Revolving Notes.
"S-1" means that certain Form S-1 Registration Statement filed
with the Commission under the Securities Act by Parent on April 15, 1996, as
amended on June 6, 1996 and June 26, 1996, or otherwise amended solely with
respect to the issuance of additional equity Securities to cover
over-allotments.
"SECURITIES" means any stock, shares, voting trust
certificates, limited partnership certificates, bonds, debentures, notes or
other evidences of indebtedness, secured or unsecured, convertible, subordinated
or otherwise, or in general any instruments commonly known as "securities",
including, without limitation, any "security" as such term is defined in Section
8-102 of the Uniform Commercial Code, or any certificates of interest, shares,
or participations in temporary or interim certificates for the purchase or
acquisition of, or any right to subscribe to, purchase or acquire any of the
foregoing, but shall not include the Notes or any other evidence of the
Obligations.
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time, and any successor statute.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended from time to time, and any successor statute.
"SOLVENT", when used with respect to any Person, means that at
the time of determination:
(i) the Fair Market Value of its assets is in excess of the
total amount of its liabilities (including, without limitation,
contingent liabilities); and
(ii) the present fair saleable value of its assets is greater than
its probable liability on its existing debts as such debts become
absolute and matured; and
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(iii) it is then able and expects to be able to pay its debts
(including, without limitation, contingent debts and other commitments)
as they mature; and
(iv) it has capital sufficient to carry on its business
as conducted and as proposed to be conducted.
"SPECIAL PURPOSE SUBSIDIARY" means a Subsidiary of Leasing
Subsidiary formed for the sole purpose of leasing Inventory of such Subsidiary
and which conforms to all of the criteria set forth on SCHEDULE 1.01.8.
"STAGE 3 AIRCRAFT" means aircraft which is in compliance with
the Stage 3 noise levels prescribed in Section C36.5(a)(3) of Appendix C of Part
36 of Title 14 of the Code of Federal Regulations.
"STANDBY LETTER OF CREDIT" means any letter of credit issued
by an Issuing Bank pursuant to SECTION 3.01 for the account of the Borrower, or
for the account of any Subsidiary of the Borrower if the Borrower is jointly and
severally liable for reimbursement of amounts drawn under such letter of credit,
which is not a Commercial Letter of Credit.
"SUBORDINATED DEBT" means the Indebtedness of the Borrower
issued pursuant to, and evidenced by (i) that certain Subordinated Loan
Agreement dated as of December 2, 1994 by and among the Partnership, RCP
Management L.P., a Texas limited partnership, Japan Fleet Service Co., LTD., a
Japanese corporation, and Tomen America Inc., a New York corporation and (ii)
the Subordinated Promissory Notes issued on December 2, 1994 under such
Subordinated Loan Agreement.
"SUBSIDIARY" of a Person means any corporation, limited
liability company, general or limited partnership, trust, or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions with respect to such entity are at the time directly or indirectly
owned or controlled by such Person, one or more of the other subsidiaries of
such Person or any combination thereof.
"TAXES" is defined in SECTION 14.01(A).
"TERM LENDER" means each Lender having a Term Loan
Commitment; "TERM LENDERS" means, collectively, all Term Loan
Lenders.
"TERM LOAN" means a term loan made under the 1994 Credit
Agreement, the outstanding principal balance (as of the Effective Date) of which
is evidenced by a Term Note.
"TERM LOAN COMMITMENT" means, with respect to any Lender, the
obligation of such Lender to make a Term Loan pursuant to the terms and
conditions of this Agreement in an
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amount equal to the amount set forth under such Lender's name under the heading
"Term Loan Commitment" on SCHEDULE 1.01.9 attached hereto and made a part hereof
or the signature page of the Assignment and Acceptance by which it became a
Lender, as modified from time to time pursuant to the terms of this Agreement or
to give effect to any applicable Assignment and Acceptance, and "TERM LOAN
COMMITMENTS" means the aggregate principal amount of the Term Loan Commitments
of all the Lenders, the maximum amount of which shall be $[20,000,000]2, as
reduced from time to time pursuant to SECTIONS 2.01(D) or 4.01.
"TERM LOAN PRO RATA SHARE" means, (i) with respect to any Term
Lender, the percentage obtained by dividing (a) the amount of such Term Lender's
Term Loan Commitment (as adjusted from time to time in accordance with the
provisions of this Agreement or any Assignment and Acceptance to which such Term
Lender is a party) by (b) the aggregate amount of all of the Term Loan
Commitments (notwithstanding termination of any such Commitments).
"TERM LOAN RESERVE" means, at any time, a reserve in an amount
equal to the sum of (i) the then outstanding balance of the Term Loans and
interest accrued and unpaid thereon PLUS (ii) the then outstanding balance of
Loans made under the Acquisition Subfacility and interest accrued and unpaid
thereon.
"TERM LOAN TERMINATION DATE" means the earlier of (i) November
30, 1999 and (ii) the date of acceleration of the Obligations pursuant to
SECTION 12.02.
"TERM NOTES" means promissory notes executed by the Borrower
and delivered to the Term Lenders evidencing the outstanding balance on the
Effective Date of the "Term Loans" made under the 1994 Credit Agreement after
giving effect to certain payments made with respect thereto from proceeds of the
Offering, as the same may be amended, supplemented, modified or restated from
time to time, and any promissory note issued in substitution therefor,
substantially in the form attached hereto as EXHIBIT D-1; and "TERM NOTE" means
any one of the Term Notes.
"TERMINATION EVENT" means (i) a Reportable Event with respect
to any Benefit Plan; (ii) the withdrawal of the Borrower or any ERISA Affiliate
from a Benefit Plan during a plan year in which the Borrower or such ERISA
Affiliate was a "substantial employer" as defined in Section 4001(a)(2) of ERISA
or the cessa tion of operations which results in the termination of employment
of 20% of Benefit Plan participants who are employees of the Borrower or any
ERISA Affiliate; (iii) the imposition of an obli gation on the Borrower or any
ERISA Affiliate under Section 4041 of ERISA to provide affected parties written
notice of intent to terminate a Benefit Plan in a distress termination described
in
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2Amount to be dependent upon net proceeds of Offering.
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Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to
terminate a Benefit Plan; (v) any event or condition which could reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Benefit Plan; or (vi) the
partial or complete withdrawal of the Borrower or any ERISA Affiliate from a
Multiemployer Plan.
"TEXAS TAX RESERVE" means, at any time, a reserve in an amount
equal to the taxes payable by Borrower and/or Leasing Subsidiary under the
statutes of the State of Texas with respect to which a tax lien attaches to
Property of the Borrower or Leasing Subsidiary located in the State of Texas
pursuant to ss. 32.01 of the Texas Tax Code, which amount shall be determined by
the Borrower as of the date of each Borrowing Base Certificate and, if in excess
of $200,000, disclosed by the Borrower thereon.
"TRANSACTION COSTS" means the fees, costs and expenses payable
by the Borrower in connection with the execution, delivery and performance of
the Transaction Documents.
"TRANSACTION DOCUMENTS" means the Loan Documents, the
Liquidation Documents, the Merger Documents, the agreements and instruments
evidencing or relating to the Finance Affiliate Indebtedness and the Offering
Documents.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as
enacted in the State of New York, as it may be amended from time to time.
"UNUSED COMMITMENT FEE" is defined in SECTION
5.02(B)(I).
"WORKING CAPITAL" means, as at any date of determina tion, the
excess, if any, of (i) the Parent's and its Subsidiaries consolidated current
assets, except cash and Cash Equivalents, over (ii) the Parent's and its
Subsidiaries consolidated current liabilities, except current liabilities of
Special Purpose Subsidiaries and current maturities of long-term debt, Revolving
Credit Obligations, and Obligations for Loans made under the Acquisition
Subfacility as of such date.
1.02. COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding". Periods of days referred to in this Agreement shall be
counted in calendar days unless Business Days are expressly prescribed. Any
period determined hereunder by reference to a month or months or year or years
shall end on the day in the relevant calendar month in the relevant year, if
applicable, immediately preceding the date numerically corresponding to the
first day of such period, PROVIDED that if such period commences on the last day
of a calendar month (or on a day for which there is no numerically corresponding
day in the calendar month during which such period
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is to end), such period shall, unless otherwise expressly required by the other
provisions of this Agreement, end on the last day of the calendar month.
1.03. ACCOUNTING TERMS. Subject to SECTION 15.04, for purposes
of this Agreement, all accounting terms not otherwise defined herein shall have
the meanings assigned to them in conformity with GAAP.
1.04. FINANCIAL COVENANT CALCULATIONS. Notwithstanding any
requirements under GAAP, calculations made with respect to (a) the definitions
of "EBITDA", "Net Income", "Fixed Charge Coverage Ratio", and "Interest Coverage
Ratio" and (b) determination of compliance with the financial covenants set
forth in ARTICLE XI, each shall be made without regard to the requirements of
Accounting Principles Board Opinion 16 or, unless otherwise agreed as described
in SECTION 15.04, changes in requirements under GAAP which become effective
after the Closing Date.
1.05. OTHER TERMS. All other terms contained in this
Agreement shall, unless the context indicates otherwise, have the
meanings assigned to such terms by the Uniform Commercial Code to
the extent the same are defined therein.
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ARTICLE II
AMOUNTS AND TERMS OF LOANS
2.01. TERM LOANS. (a) AMOUNT OF TERM LOANS. The principal
balance of "Term Loans" made under the 1994 Credit Agreement and outstanding on
the Effective Date is $____________3 and shall continue as Term Loans hereunder
and, in each case, shall be subject to and governed by the terms and provisions
of this Agreement and is re-evidenced by the Term Notes; and the "Term Lenders"
under the 1994 Credit Agreement upon their receipt of payment of the amounts
referenced in SECTION 2.01(C) shall be deemed to have made such assignments of
their respective "Term Loans" as are required to effect the Term Lenders under
this Agreement becoming the obligees with respect to the Term Loans hereunder in
accordance with their respective Term Loan Pro Rata Shares.
(b) Intentionally omitted.
(c) ALLOCATION OF TERM LOANS. On the Effective Date, each Term
Lender which was not a "Term Lender" under the 1994 Credit Agreement shall
deposit an amount equal to its Term Loan Commitment with the Agent at its office
in New York, New York, in immediately available funds. Subject to the
fulfillment of the conditions precedent set forth in SECTION 6.01, the Agent
shall make such amounts received by it available to the "Term Lenders" under the
1994 Credit Agreement at the Agent's office in New York, New York on the
Effective Date and shall disburse such proceeds to such "Term Lenders" under the
1994 Credit Agreement as necessary to effect the assignments referenced in
SECTION 2.01(A) and applicable settlements related thereto as identified on
SCHEDULE 2.01-C attached hereto and made a part hereof. The failure of any Term
Lender to deposit the amount described above with the Agent on the Effective
Date shall not relieve any other Term Lender of its obligations hereunder to
make its required deposit with respect to Term Loans on the Effective Date. In
the event the conditions precedent set forth in SECTION 6.01 are not fulfilled
or duly waived as of the Effective Date, the Agent shall promptly return, by
wire transfer of immediately available funds, the amount deposited by each Term
Lender to such Term Lender.
(d) REPAYMENT OF THE TERM LOANS. (i) The Term Loans shall be
repayable in fourteen (14) consecutive equal quarterly installments of $________
each due on the last day of each consecutive three calendar month period
commencing on August 31, 1996 with a final payment on November 30, 1999, unless
the Term Loan Termination Date earlier occurs, and the Term Loan Commitments
shall be permanently reduced by the amount of each
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3 Amount not to exceed $20,000,000.
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installment on the date payment thereof is required to be made
hereunder.
(ii) In addition to the scheduled payments on the Term Loans,
the Borrower may make voluntary prepayments as and when described in SECTION
4.01(A)(I) and shall make the mandatory prepayments required in SECTION 4.01(B),
for credit against such scheduled payments on the Term Loans pursuant to the
provisions of SECTION 4.01(A)(II) or SECTION 4.01(B)(VII), as applicable.
2.02. REVOLVING CREDIT FACILITY. (a) OUTSTANDING
BALANCE ON THE EFFECTIVE DATE; AVAILABILITY. (i) The principal
balance of the "Revolving Loans" made under the 1994 Credit
Agreement and outstanding on the Effective Date in the amount of
$__________ has been repaid in full from proceeds of the Offering
contributed by Parent to Finance Affiliate and loaned to Borrower
as the Finance Affiliate Indebtedness.
(ii) Subject to the terms and conditions set forth in this
Agreement, each Revolving Lender hereby severally and not jointly agrees to make
revolving loans, in Dollars (each individually, a "Revolving Loan" and,
collectively, the "Revolving Loans") to the Borrower from time to time during
the period from the Effective Date to the Business Day next preceding the
Revolving Credit Termination Date, in an amount not to exceed such Revolving
Lender's Revolving Loan Pro Rata Share of the Revolving Credit Availability at
such time. All Revolving Loans comprising the same Borrowing under this
Agreement shall be made by the Revolving Lenders simultaneously and
proportionately to their then respective Revolving Loan Pro Rata Shares, it
being understood that no Lender shall be responsible for any failure by any
other Lender to perform its obligation to make a Revolving Loan hereunder nor
shall the Revolving Credit Commitment of any Revolving Lender be increased or
decreased as a result of any such failure. Subject to the provisions of this
Agreement, the Borrower may repay any outstanding Revolving Loan on any day
which is a Business Day and any amounts so repaid may be reborrowed, up to the
amount available under this SECTION 2.02(A) at the time of such Borrowing,
through the Business Day next preceding the Revolving Credit Termination Date;
PROVIDED, HOWEVER, the Borrower shall, without notice or demand of any kind,
immediately make such repayments of the Revolving Loans to the extent necessary
to reduce the aggregate outstanding principal amount of the Revolving Loans to
an amount less than or equal to the difference between the then Maximum
Revolving Credit Amount and the Letter of Credit Obligations as of such time.
Each requested Borrowing of Revolving Loans funded on any Funding Date for
Revolving Loans shall be in a principal amount of at least $1,000,000 and in
integral multiples of $100,000 in excess of that amount.
(b) NOTICE OF BORROWING. When the Borrower desires to borrow
under this SECTION 2.02, it shall deliver to the Agent a Notice of Borrowing,
signed by it, (i) no later than 11:00 a.m.
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(New York time) on the proposed Funding Date, in the case of a Borrowing of Base
Rate Loans, and (ii) no later than 11:00 a.m. (New York time) at least three (3)
Business Days in advance of the proposed Funding Date therefor, in the case of a
Borrowing of Eurodollar Rate Loans. Such Notice of Borrowing shall specify (i)
the proposed Funding Date (which shall be a Business Day), (ii) the amount of
the proposed Borrowing, (iii) the Revolving Credit Availability as of the date
of such Notice of Borrowing, and (iv) instructions for the disbursement of the
proceeds of the proposed Borrowing, and shall be accompanied by the then most
recently delivered Borrowing Base Certificate duly completed and signed by the
Borrower's chief financial officer, chief executive officer or controller in
compliance with SECTION 8.03. In lieu of delivering such a Notice of Borrowing
(except with respect to a Borrowing of Revolving Loans on the Effective Date),
the Borrower may give the Agent telephonic notice of any proposed Borrowing by
the time required under this SECTION 2.02(B), if the Borrower confirms such
notice by delivery of the required Notice of Borrowing to the Agent by facsimile
transmission promptly, but in no event later than 5:00 p.m. (New York time) on
the same day, the original of which facsimile copy shall be delivered to the
Agent within three (3) days after the date of such transmission. Any Notice of
Borrowing (or telephonic notice in lieu thereof) given pursuant to this SECTION
2.02(B) shall be irrevocable.
(c) MAKING OF REVOLVING LOANS. (i) Promptly after
receipt of a Notice of Borrowing under SECTION 2.02(B) (or
telephonic notice in lieu thereof), the Agent, at its option and
in its sole discretion, shall do either of the following:
(A) The Agent shall notify each Revolving Lender by telecopy,
or other similar form of transmission, of the proposed Borrowing. Each
Revolving Lender shall deposit an amount equal to its Revolving Loan
Pro Rata Share of the amount requested by the Borrower to be made as
Revolving Loans with the Agent at its office in New York, New York, in
immediately available funds, (A) on the Effective Date with respect to
the Borrowing of Revolving Loans on such date specified in the initial
Notice of Borrowing and (B) not later than 1:00 p.m. (New York time) on
any other Funding Date for Revolving Loans. Subject to the fulfillment
of the conditions precedent set forth in SECTION 6.01 or SECTION 6.02,
as applicable, the Agent shall make the proceeds of such amounts
received by it available to the Borrower at the Agent's office in New
York, New York on such Funding Date (or on the date received if later
than such Funding Date) and shall disburse such proceeds in accordance
with the Borrower's disbursement instructions set forth in the
applicable Notice of Borrowing. The failure of any Revolving Lender to
deposit the amount described above with the Agent on the applicable
Funding Date shall not relieve any other Revolving Lender of its
obligations hereunder to make its Revolving Loan on such Funding Date.
In the event the conditions precedent set forth in SECTION 6.01 or
6.02,
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as applicable, are not fulfilled as of the proposed Funding Date for
any Borrowing, the Agent shall promptly return, by wire transfer of
immediately available funds, the amount deposited by each Revolving
Lender to such Revolving Lender.
or
(B) Subject to the fulfillment of the conditions precedent set
forth in SECTION 6.01 or SECTION 6.02, as applicable, the Agent shall,
PROVIDED THAT the requested Borrowing is of an amount which is less
than the amount of Citicorp's unused Commitment (after taking into
account all other then outstanding Agent Advances) as of the Funding
Date for such Borrowing, advance the amount of the proposed Borrowing
(an "Agent Advance") to the Borrower out of the Agent's own funds. The
Lenders, upon notice (in the form provided for in CLAUSE (A) above)
from the Agent as to the amount required to do so, shall remit to the
Agent on a weekly or more frequent basis that amount which is necessary
to conform each Lender's Revolving Loans outstanding at such time to
its Revolving Loan Pro Rata Share thereof. Each Lender shall make
available the amount required from it as aforesaid to the Agent in
Dollars and in immediately available funds not later than 1:00 p.m.
(New York time) on the day such notice is given by the Agent. In the
event of the making of any such Agent Advance, each Lender's share of
the interest allocable thereto shall be adjusted as necessary to
account for the period of time the same is outstanding from the Agent.
Any payment by a Lender to the Agent pursuant to this CLAUSE (B) shall
constitute a Revolving Loan to the Borrower and an assignment by
Citicorp of a portion of its Revolving Loans to such Lender equal to
the amount of the payment received by the Agent from such Lender.
(ii) In connection with the funding of Revolving Loans
pursuant to SECTION 2.02(C)(I)(A), unless the Agent shall have been notified by
any Revolving Lender on the Business Day immediately preceding the applicable
Funding Date in respect of any Borrowing of Revolving Loans that such Revolving
Lender does not intend to fund its Revolving Loan requested to be made on such
Funding Date, the Agent may assume that such Revolving Lender has funded its
Revolving Loan and is depositing the proceeds thereof with the Agent on the
Funding Date therefor, and the Agent in its sole discretion may, but shall not
be obligated to, disburse a corresponding amount to the Borrower on the
applicable Funding Date. If the Revolving Loan proceeds corresponding to that
amount are advanced to the Borrower by the Agent but are not in fact deposited
with the Agent by such Revolving Lender on or prior to the applicable Funding
Date or a Lender's Revolving Loan Pro Rata Share of an Agent Advance is not
remitted to the Agent as and when required pursuant to SECTION 2.02(C)(I)(B),
the Revolving Lender not making such deposit or remitting such amount agrees to
pay, and in addition the Borrower
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agrees to repay, to the Agent forthwith on demand such corresponding amount,
together with interest thereon, for each day from the date such amount is
disbursed to or for the benefit of the Borrower until the date such amount is
paid or repaid to the Agent, (A) in the case of the Borrower, at the interest
rate applicable to such Borrowing and (B) in the case of such Revolving Lender,
at the Federal Funds Rate for the first three (3) Business Days, and thereafter
at the interest rate applicable to such Borrowing. If such Revolving Lender
shall pay to the Agent the corresponding amount, the amount so paid shall
constitute such Revolving Lender's Revolving Loan, and if both such Revolving
Lender and the Borrower shall pay and repay such corresponding amount, the Agent
shall promptly pay to the Borrower such corresponding amount. This SECTION
2.02(C)(II) does not relieve any Revolving Lender of its obligation to make its
Revolving Loan on any applicable Funding Date as and when required under SECTION
2.02(C)(I)(A) or to remit its Revolving Loan Pro Rata Share of any Agent Advance
as and when required under SECTION 2.02(C)(I)(B).
(d) REVOLVING CREDIT TERMINATION DATE. Unless earlier
terminated in accordance with the provisions of SECTION 4.01, the Revolving
Credit Commitments shall terminate on the Revolving Credit Termination Date.
Each Revolving Lender's obligation to make Revolving Loans shall terminate on
the Business Day next preceding the Revolving Credit Termination Date. All
outstanding Revolving Credit Obligations shall be paid in full (or, in the case
of unmatured Letter of Credit Obligations, provision for payment in cash shall
be made to the satisfaction of the Issuing Banks and the Requisite Revolving
Lenders) (i) if the Revolving Credit Commitments are terminated pursuant to
SECTION 4.01, on the Revolving Credit Termination Date, and (ii) otherwise, on
the earlier to occur of (A) November 30, 1999 or, if not a Business Day, the
next preceding Business Day, and (B) the date of acceleration of the Obligations
pursuant to SECTION 12.02.
(e) MAXIMUM REVOLVING CREDIT FACILITY. Notwithstanding
anything in this Agreement to the contrary, in no event shall the aggregate
principal Revolving Credit Obligations exceed the lesser of (i) the Maximum
Revolving Credit Amount and (ii) $50,000,000, such amount in CLAUSE (II) being
reduced by the amount of each permanent reduction of the Revolving Credit
Commitments made pursuant to SECTION 4.01(A) and SECTION 4.01(B).
(f) Intentionally omitted.
2.03. LOANS UNDER ACQUISITION SUBFACILITY. (a)
AMOUNT. Subject to the terms and conditions set forth in this
Agreement, each Revolving Lender hereby severally and not jointly
agrees to make Loans, in Dollars, to the Borrower from time to
time during the period from the Effective Date to the Business
Day next preceding the Acquisition Subfacility Termination Date
in an amount not to exceed such Revolving Lender's Revolving Loan
Pro Rata Share of the lesser of (i) the undrawn amount of the
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Acquisition Subfacility and (ii) the Revolving Credit Commitments then in effect
MINUS the Revolving Credit Obligations (such lesser amount being referred to as
the "Acquisition Loan Availability"); PROVIDED THAT, after giving effect to such
Loans, the Revolving Credit Availability is no less than zero (0).
(b) NOTICE OF BORROWING. When the Borrower desires to borrow
under this SECTION 2.03, it shall deliver to the Agent a Notice of Borrowing,
signed by it, no later than 11:00 a.m. (New York time) on the fifth (5th)
Business Day immediately preceding the proposed Funding Date. Such Notice of
Borrowing shall specify (i) the proposed Funding Date (which shall be a Business
Day), (ii) the amount of the proposed Borrowing, (iii) the Revolving Credit
Availability and the Acquisition Loan Availability as of the date of such Notice
of Borrowing, and (iv) instructions for disbursement of the proceeds of such
proposed Borrowing. Any Notice of Borrowing given pursuant to this SECTION
2.03(B) shall be irrevocable unless the Borrower informs the Agent by telecopy
or other writing no later than the proposed Funding Date that the Permitted
Acquisition with respect to which such Notice of Borrowing applies will not or
has not closed on the proposed Funding Date and thereby withdraws such Notice of
Borrowing, in which event Agent shall promptly notify the Revolving Lenders by
telecopy, or other similar form of transmission, of Borrower's withdrawal of
such Notice of Borrowing and, (A) if the Revolving Lenders have not theretofore
deposited their respective Revolving Credit Pro Rata Share of the requested
Loans with the Agent, the Revolving Lenders shall thereupon have no obligation
to make any Loan under such Notice of Borrowing, (B) if the Revolving Lenders
have theretofore deposited their respective Revolving Credit Pro Rata Share of
the requested Loans with the Agent and the Agent has not yet made the requested
Loans available to the Borrower, the Agent shall thereupon return the amount
deposited by each Revolving Lender in connection with such requested Loans to
the respective Revolving Lenders, and (C) if the requested Loans have been
disbursed to the Borrower, the Borrower shall repay such Loans by no later than
the Business Day immediately succeeding the Business Day on which such Loans
were disbursed, whereupon the Acquisition Subfacility shall be deemed undrawn to
the extent of the Loans so repaid. In the event either CLAUSE (B) or CLAUSE (C)
above are applicable, the Borrower shall reimburse the Agent and Lenders for any
expenses incurred by them in connection therewith, shall pay all amounts
chargeable under the provisions of ARTICLE XIV, and shall pay all interest
accrued with respect to such Loans at the rate applicable thereto, (X) in the
case of CLAUSE (B), on the Business Day immediately following the date on which
such notice of withdrawal of the related Notice of Borrowing is delivered and
(Y) in the case of CLAUSE (C), on the date such Loans are due and payable as
aforesaid.
(c) MAKING OF LOANS UNDER ACQUISITION SUBFACILITY.
(i) Promptly after receipt of a Notice of Borrowing under SECTION
2.03(B) (or telephonic notice in lieu thereof), the Agent shall
notify each Revolving Lender by telecopy, or other similar form
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of transmission, of the proposed Borrowing. Each Revolving Lender shall deposit
an amount equal to its Revolving Loan Pro Rata Share of the amount requested by
the Borrower to be made as Loans under the Acquisition Subfacility with the
Agent at its office in New York, New York, in immediately available funds not
later than 11:00 a.m. (New York time) on the Funding Date therefor. Subject to
the fulfillment of the conditions precedent set forth in SECTION 6.02 and
SECTION 6.03, the Agent shall make the proceeds of such amounts received by it
available to the Borrower at the Agent's office in New York, New York and shall
disburse such proceeds in accordance with the Borrower's disbursement
instructions set forth in the applicable Notice of Borrowing. The failure of any
Revolving Lender to deposit the amount described above with the Agent on the
applicable Funding Date shall not relieve any other Revolving Lender of its
obligations hereunder to make its Loan under the Acquisition Subfacility on such
Funding Date. In the event the conditions precedent set forth in SECTION 6.02 or
SECTION 6.03 are not fulfilled as of the proposed Funding Date for any such
Borrowing, the Agent shall promptly return, by wire transfer of immediately
available funds, the amount deposited by each Revolving Lender to such Revolving
Lender.
(ii) Unless the Agent shall have been notified by any
Revolving Lender on the Business Day immediately preceding the applicable
Funding Date in respect of any Borrowing of Loans under the Acquisition
Subfacility that such Revolving Lender does not intend to fund its Loan under
the Acquisition Subfacility requested to be made on such Funding Date, the Agent
may assume that such Revolving Lender has funded such Loan and is depositing the
proceeds thereof with the Agent on the Funding Date therefor, and the Agent in
its sole discretion may, but shall not be required to, disburse a corresponding
amount to the Borrower on the applicable Funding Date. If the Loan proceeds
corresponding to that amount are advanced to the Borrower by the Agent but are
not in fact deposited with the Agent by such Revolving Lender on or prior to the
applicable Funding Date, such Revolving Lender agrees to pay, and in addition
the Borrower agrees to repay, to the Agent forthwith on demand such
corresponding amount, together with interest thereon, for each day from the date
such amount is disbursed to or for the benefit of the Borrower until the date
such amount is paid or repaid to the Agent, (A) in the case of the Borrower, at
the interest rate applicable to such Borrowing and (B) in the case of such
Revolving Lender, at the Federal Funds Rate for the first three (3) Business
Days, and thereafter at the interest rate applicable to such Borrowing. If such
Revolving Lender shall pay to the Agent the corresponding amount, the amount so
paid shall constitute such Revolving Lenders' Loan under the Acquisition
Subfacility, and if both such Revolving Lender and the Borrower shall pay and
repay such corresponding amount, the Agent shall promptly pay to the Borrower
such corresponding amount. This SECTION 2.03(C)(II) does not relieve any
Revolving Lender of its obligation to make its Loan under the Acquisition
Subfacility on any applicable Funding Date.
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(d) ACQUISITION LOAN NOTES; REPAYMENT OF LOANS UNDER
ACQUISITION SUBFACILITY. (i) On the Funding Date for each Loan made under the
Acquisition Subfacility, the Borrower shall execute and deliver to the Agent
Acquisition Loan Notes payable to the respective Revolving Lenders in a
principal amount equal to the respective Revolving Lender's Revolving Loan Pro
Rata Share of the Loans requested to be made on such Funding Date under the
Acquisition Subfacility, which Notes the Agent shall promptly deliver to the
respective Revolving Lenders. On the Funding Date for each such Loan, the
Revolving Loan Commitments shall be permanently reduced by the aggregate
principal amount of all such Loans made on such Funding Date.
(ii) Except as otherwise provided in SECTION 2.03(B)(C), each
Loan made under the Acquisition Subfacility shall be repayable in consecutive
equal quarterly installments, each due on the same dates as the Term Loan
installments are due commencing on the first such installment due date after the
Funding Date for such Loan with a final payment on November 30, 1999, unless the
Revolving Loan Termination Date earlier occurs.
2.04. AUTHORIZED OFFICERS AND AGENTS. On the Closing Date the
Borrower shall deliver, and from time to time thereafter the Borrower may
deliver, to the Agent an Officer's Certificate setting forth the names of the
Borrower's officers, employees and agents authorized to request Loans and
Letters of Credit, in each instance containing a specimen signature of each such
officer, employee or agent. The president of the Borrower shall also be
authorized to act for the Borrower in respect of all other matters relating to
the Loan Documents. The Agent, Lenders and Issuing Banks shall be entitled to
rely conclusively on such officer's, employee's or agent's authority to request
such Loan or Letter of Credit until the Agent, Lenders and Issuing Banks receive
written notice to the contrary. None of the Agent, the Lenders, or the Issuing
Banks shall have any duty to verify the authenticity of the signature appearing
on any such Officer's Certificate, written Notice of Borrowing or any other
document, and, with respect to an oral request for such a Loan or Letter of
Credit, the Agent shall have no duty to verify the identity of any person
representing himself or herself as one of the Borrower's officers, employees or
agents authorized to make such request or otherwise to act on behalf of the
Borrower. None of the Agent, any Lender or any Issuing Bank shall incur any
liability to the Borrower or any other Person in acting upon any telephonic or
facsimile notice referred to above which the Agent, such Lender, or such Issuing
Bank believes to have been given by a duly authorized officer or other person
authorized to borrow on behalf of the Borrower.
2.05. USE OF PROCEEDS OF LOANS. The proceeds of the
Loans shall be used to pay the Transaction Costs, for working
capital in the ordinary course of business of the Borrower and
its Subsidiaries, for Permitted Acquisitions, and for other
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lawful general corporate purposes of the Borrower and its
Subsidiaries.
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ARTICLE III
LETTERS OF CREDIT
3.01. LETTERS OF CREDIT. Subject to the terms and conditions
set forth in this Agreement, each Issuing Bank hereby severally agrees to issue
for the account of the Borrower, or for the account of any of the Borrower's
Subsidiaries if the Borrower is jointly and severally liable for reimbursement
of amounts drawn under such Letter of Credit, one or more Letters of Credit,
subject to the following provisions:
(a) TYPES AND AMOUNTS. An Issuing Bank shall not have any
obligation to issue, amend or extend, and shall not issue, amend or extend, any
Letter of Credit at any time:
(i) if the aggregate Letter of Credit Obligations with respect
to such Issuing Bank, after giving effect to the issuance, amendment or
extension of the Letter of Credit requested hereunder, shall exceed any
limit imposed by law or regulation upon such Issuing Bank;
(ii) if the Issuing Bank receives written notice from the
Agent at or before 11:00 a.m. (New York time) on the date of the
proposed issuance, amendment or extension of such Letter of Credit that
(A) immediately after giving effect to the issuance, amendment or
extension of such Letter of Credit, (I) the Letter of Credit
Obligations at such time would exceed $10,000,000, or (II) the
Revolving Credit Obligations at such time would exceed the Maximum
Revolving Credit Amount at such time, or (B) one or more of the
conditions precedent contained in SECTIONS 6.01 or 6.02, as applicable,
would not on such date be satisfied, unless such conditions are
thereafter satisfied and written notice of such satisfaction is given
to the Issuing Bank by the Agent (it being understood that an Issuing
Bank shall not otherwise be required to determine that, or take notice
whether, the conditions precedent set forth in SECTIONS 6.01 or 6.02,
as applicable, have been satisfied);
(iii) if the expiration date therefor is later than the
earlier of (A) the date one (1) year after the date of issuance
(without regard to any automatic renewal provisions thereof) or (B) the
Business Day next preceding the scheduled Revolving Credit Termination
Date; or
(iv) if the requested Letter of Credit is in a
currency other than Dollars and Borrower has not
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obtained a Hedge Agreement with respect thereto
satisfactory to the Agent.
(b) CONDITIONS. In addition to being subject to the
satisfaction of the conditions precedent contained in SECTIONS 6.01 and 6.02, as
applicable, the obligation of an Issuing Bank to issue, amend or extend any
Letter of Credit is subject to the satisfaction in full of the following
conditions:
(i) if the Issuing Bank so requests, the Borrower or, in the
case of Letters of Credit issued for the account of any Subsidiary of
the Borrower, the Borrower and such Subsidiary shall have executed and
delivered to such Issuing Bank and the Agent a Letter of Credit
Reimbursement Agreement and such other documents and materials as may
be required pursuant to the terms thereof; and
(ii) the terms of the proposed Letter of Credit shall be
satisfactory to the Issuing Bank in its sole discretion.
(c) ISSUANCE OF LETTERS OF CREDIT. (i) The Borrower shall give
an Issuing Bank and the Agent written notice that it has selected such Issuing
Bank to issue a Letter of Credit not later than 11:00 a.m. (New York time) on
the third (3rd) Business Day preceding the requested date for issuance thereof
under this Agreement, or such shorter notice as may be acceptable to such
Issuing Bank and the Agent. Such notice shall be irrevocable unless and until
such request is denied by the applicable Issuing Bank and shall specify (A) that
the requested Letter of Credit is either a Commercial Letter of Credit or a
Standby Letter of Credit, (B) that such Letter of Credit is solely for the
account of the Borrower or the name of the Subsidiary of the Borrower which is
jointly and severally applying for such Letter of Credit, (C) the stated amount
of the Letter of Credit requested, (D) the effective date (which shall be a
Business Day) of issuance of such Letter of Credit, (E) the date on which such
Letter of Credit is to expire (which shall be a Business Day and no later than
the Business Day immediately preceding the scheduled Revolving Credit
Termination Date), (F) the Person for whose benefit such Letter of Credit is to
be issued, (G) other relevant terms of such Letter of Credit, (H) the Revolving
Credit Availability at such time, and (I) the amount of the then out standing
Letter of Credit Obligations. Such Issuing Bank shall notify the Agent
immediately upon receipt of a written notice from the Borrower requesting that a
Letter of Credit be issued, or that an existing Letter of Credit be extended or
amended and, upon the Agent's request therefor, send a copy of such notice to
the Agent.
(ii) The Issuing Bank shall (A) give the Agent written notice,
or telephonic notice confirmed promptly thereafter in writing, of the issuance,
amendment or extension of a Letter of
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Credit and (B) promptly after issuance thereof, provide the Agent with a copy of
each Letter of Credit issued and each amendment thereto.
(d) REIMBURSEMENT OBLIGATIONS; DUTIES OF ISSUING
BANKS. (i) Notwithstanding any provisions to the contrary in
any Letter of Credit Reimbursement Agreement:
(A) the Borrower shall reimburse, or cause its Subsidiary for
whose account a Letter of Credit is issued to reimburse, the Issuing
Bank for amounts drawn under such Letter of Credit, in Dollars, no
later than the date (the "Reimbursement Date") which is the earlier of
(I) the time specified in the applicable Letter of Credit Reimbursement
Agreement and (II) one (1) Business Day after the Borrower receives
written notice from the Issuing Bank that payment has been made under
such Letter of Credit by the Issuing Bank; and
(B) all Reimbursement Obligations with respect to any Letter
of Credit shall bear interest at the rate applicable in accordance with
SECTION 5.01(A) from the date of the relevant drawing under such Letter
of Credit until the Reimbursement Date and thereafter at the rate
applicable in accordance with SECTION 5.01(C).
(ii) The Issuing Bank shall give the Agent written notice, or
telephonic notice confirmed promptly thereafter in writing, of all drawings
under a Letter of Credit issued under this Agreement and the payment (or the
failure to pay when due) by the Borrower or its Subsidiary on account of a
Reimbursement Obligation.
(iii) No action taken or omitted in good faith by an Issuing Bank
under or in connection with any Letter of Credit issued under this Agreement
shall put such Issuing Bank under any resulting liability to any Lender, the
Borrower or any of its Subsidiaries or, so long as it is not issued in violation
of SECTION 3.01(A), relieve any Revolving Lender of its obligations hereunder to
such Issuing Bank. Solely as between the Issuing Banks and the Lenders, in
determining whether to pay under any such Letter of Credit, the respective
Issuing Bank shall have no obligation to the Lenders other than to confirm that
any documents required to be delivered under a respective Letter of Credit
appear to have been delivered and that they appear on their face to comply with
the requirements of such Letter of Credit.
(e) PARTICIPATIONS. (i) Immediately upon issuance by an
Issuing Bank of any Letter of Credit in accordance with the procedures set forth
in this SECTION 3.01, each Revolving Lender shall be deemed to have irrevocably
and unconditionally purchased and received from that Issuing Bank, without
recourse or warranty, an undivided interest and participation in such Letter
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of Credit and the related Letter of Credit Reimbursement Agreement to the extent
of such Revolving Lender's Revolving Loan Pro Rata Share, including, without
limitation, all rights of the Issuing Bank with respect to obligations of the
Borrower with respect thereto (other than amounts owing to the Issuing Bank
under SECTION 3.01(G)) and any security therefor and guaranty pertaining
thereto.
(ii) If any Issuing Bank makes any payment under any Letter of
Credit issued under this Agreement and the Borrower or the Subsidiary of the
Borrower for whose account such Letter of Credit was issued does not repay such
amount to the Issuing Bank on the Reimbursement Date, the Issuing Bank shall
promptly notify the Agent, which shall promptly notify each Revolving Lender,
and each Revolving Lender shall promptly and unconditionally pay to the Agent
for the account of such Issuing Bank, in immediately available funds, the amount
of such Revolving Lender's Revolving Loan Pro Rata Share of such payment (net of
that portion of such payment, if any, made by such Revolving Lender in its
capacity as an Issuing Bank), and the Agent shall promptly pay to the Issuing
Bank such amounts received by it, and any other amounts received by the Agent
for the Issuing Bank's account, pursuant to this SECTION 3.01(E). If a Revolving
Lender does not make its Revolving Loan Pro Rata Share of the amount of such
payment available to the Agent, such Revolving Lender agrees to pay to the Agent
for the account of the Issuing Bank, forthwith on demand, such amount together
with interest thereon, for the first three (3) Business Days after the date such
payment was first due at the Federal Funds Rate, and thereafter at the interest
rate then applicable in accordance with SECTION 5.01(A). The failure of any
Revolving Lender to make available to the Agent for the account of an Issuing
Bank its Revolving Loan Pro Rata Share of any such payment shall neither relieve
any other Revolving Lender of its obligation hereunder to make available to the
Agent for the account of such Issuing Bank such other Revolving Lender's
Revolving Loan Pro Rata Share of any payment on the date such payment is to be
made nor increase the obligation of any other Revolving Lender to make such
payment to the Agent.
(iii) Whenever an Issuing Bank receives a payment on account
of a Reimbursement Obligation, including any interest thereon, as to which the
Agent has previously received payments from any Revolving Lender for the account
of such Issuing Bank pursuant to this SECTION 3.01(E), such Issuing Bank shall
promptly pay to the Agent and the Agent shall promptly pay to such Revolving
Lender an amount equal to such Revolving Lender's Revolving Loan Pro Rata Share
thereof. Each such payment shall be made by such Issuing Bank or the Agent, as
the case may be, on the Business Day on which such Person receives the funds
paid to such Person pursuant to the preceding sentence, if received prior to
11:00 a.m. (New York time) on such Business Day, and otherwise on the next
succeeding Business Day.
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(iv) Upon the request of any Lender, an Issuing Bank shall
furnish such Lender copies of any Letter of Credit or Letter of Credit
Reimbursement Agreement to which such Issuing Bank is party and such other
documentation as reasonably may be requested by such Lender.
(v) The obligations of a Revolving Lender to make payments to
the Agent for the account of any Issuing Bank with respect to a Letter of Credit
issued under this Agreement shall be irrevocable, shall not be subject to any
qualification or exception whatsoever except willful misconduct or gross
negligence of such Issuing Bank, and shall be honored in accordance with this
ARTICLE III (irrespective of the satisfaction of the conditions described in
SECTIONS 6.01 and 6.02, as applicable) under all circumstances, including,
without limitation, any of the following circumstances:
(A) any lack of validity or enforceability of
this Agreement or any of the other Loan Documents;
(B) the existence of any claim, setoff, defense or other right
which the Borrower may have at any time against a beneficiary named in
a Letter of Credit or any transferee of a beneficiary named in a Letter
of Credit (or any Person for whom any such transferee may be acting),
the Agent, the Issuing Bank, any Lender, or any other Person, whether
in connection with this Agreement, any Letter of Credit, the
transactions contemplated herein or any unrelated transactions
(including any underlying transactions between the account party and
beneficiary named in any Letter of Credit);
(C) any draft, certificate or any other document presented
under the Letter of Credit having been determined to be forged,
fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;
(D) the surrender or impairment of any security
for the performance or observance of any of the terms
of any of the Loan Documents;
(E) any failure by that Issuing Bank to make any
reports required pursuant to SECTION 3.01(H) or the
inaccuracy of any such report; or
(F) the occurrence of any Event of Default or Potential Event
of Default.
(f) PAYMENT OF REIMBURSEMENT OBLIGATIONS. (i) The Borrower
unconditionally agrees to pay, or cause its Subsidiary for whose account a
Letter of Credit is issued to pay, to each Issuing Bank, in Dollars, the amount
of all Reimbursement
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Obligations, interest and other amounts payable to such Issuing Bank under or in
connection with the Letters of Credit when such amounts are due and payable,
irrespective of any claim, setoff, defense or other right which the Borrower may
have at any time against any Issuing Bank or any other Person.
(ii) In the event any payment by the Borrower or such Subsidiary
received by an Issuing Bank with respect to a Letter of Credit and distributed
by the Agent to the Revolving Lenders on account of their participations is
thereafter set aside, avoided or recovered from such Issuing Bank in connection
with any receivership, liquidation or bankruptcy proceeding, each Revolving
Lender which received such distribution shall, upon demand by such Issuing Bank,
contribute such Revolving Lender's Revolving Loan Pro Rata Share of the amount
set aside, avoided or recovered together with interest at the rate required, if
any, to be paid by such Issuing Bank upon the amount required to be repaid by
it.
(g) ISSUING BANK CHARGES. The Borrower shall pay, or cause its
Subsidiary for whose account a Letter of Credit is issued to pay, to each
Issuing Bank, solely for its own account, the standard charges assessed by such
Issuing Bank in connection with the issuance, administration, amendment and
payment or cancellation of Letters of Credit and such compensation in respect of
such Letters of Credit for the Borrower's or such Subsidiary's account, as
applicable, as may be agreed upon by the Borrower and such Issuing Bank from
time to time.
(h) ISSUING BANK REPORTING REQUIREMENTS. Each Issuing Bank
shall, no later than the tenth (10th) Business Day following the last day of
each calendar month, provide to the Agent, the Borrower, and each Revolving
Lender separate schedules for Commercial Letters of Credit and Standby Letters
of Credit issued as Letters of Credit, in form and substance reasonably
satisfactory to the Agent, setting forth the aggregate Letter of Credit
Obligations outstanding to it at the end of each month and, to the extent not
otherwise provided in accordance with the provisions of SECTION 3.01(C)(II), any
information requested by the Agent or the Borrower relating to the date of
issue, account party, amount, expiration date and reference number of each
Letter of Credit issued by it.
(i) INDEMNIFICATION; EXONERATION. (i) In addition to all other
amounts payable to an Issuing Bank, the Borrower hereby agrees to defend,
indemnify, and save the Agent, each Issuing Bank and each Lender harmless from
and against any and all claims, demands, liabilities, penalties, damages, losses
(other than loss of profits), costs, charges and expenses (including reasonable
attorneys' fees but excluding taxes) which the Agent, such Issuing Bank or such
Lender may incur or be subject to as a consequence, direct or indirect, of (A)
the issuance of any Letter of Credit other than as a result of the gross
negligence or willful misconduct of the Issuing Bank, as determined by a
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court of competent jurisdiction, or (B) the failure of the Issu ing Bank issuing
a Letter of Credit to honor a drawing under such Letter of Credit as a result of
any act or omission, whether rightful or wrongful, of any present or future DE
JURE or DE FACTO government or Governmental Authority.
(ii) As between the Borrower and any of its Subsidiaries for whose
account a Letter of Credit is issued on the one hand and the Agent, the Lenders
and the Issuing Banks on the other hand, the Borrower assumes all risks of the
acts and omissions of, or misuse of Letters of Credit by, the respective
beneficiaries of the Letters of Credit. In furtherance and not in limitation of
the foregoing, subject to the provisions of the Letter of Credit Reimbursement
Agreements, the Issuing Banks and the Lenders shall not be responsible for: (A)
the form, validity, legality, sufficiency, accuracy, genuineness or legal effect
of any document submitted by any party in connection with the application for
and issuance of the Letters of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (B)
the validity, legality or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason; (C) failure of the beneficiary of a
Letter of Credit to comply duly with conditions required in order to draw upon
such Letter of Credit; (D) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (E) errors in interpretation of
technical terms; (F) any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any Letter of Credit or of
the proceeds thereof; (G) the misapplication by the beneficiary of a Letter of
Credit of the proceeds of any drawing under such Letter of Credit; and (H) any
consequences arising from causes beyond the control of the Agent, the Issuing
Banks or the Lenders.
3.02 OBLIGATIONS SEVERAL. The obligations of each Issuing Bank
and each Revolving Lender under this ARTICLE III are several and not joint, and
no Issuing Bank or Revolving Lender shall be responsible for the obligation to
issue Letters of Credit or participation obligation hereunder, respectively, of
any other Issuing Bank or Revolving Lender.
3.03 TRANSITIONAL PROVISIONS. SCHEDULE 3.03 contains a
schedule of certain "Letters of Credit" issued under the 1994 Credit Agreement
for the account of the Partnership or Leasing LP with respect to which the
Partnership was jointly and severally liable for reimbursement of amounts drawn
thereunder. Such letters of credit shall automatically and without further
action of the parties hereto be converted to Letters of Credit and be deemed
issued pursuant to this SECTION 3.03 and subject to the provisions of this
Agreement other than the provisions of SECTION
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5.02(A) pertaining to the payment of a Fronting Fee upon issuance; the undrawn
face amount of such Letters of Credit shall be included in the calculation of
Letter of Credit Obligations; and all liabilities with respect thereto shall
constitute Obligations.
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ARTICLE IV
PAYMENTS AND PREPAYMENTS
4.01. PREPAYMENTS; REDUCTIONS IN COMMITMENTS.
(a) VOLUNTARY PREPAYMENTS/REDUCTIONS. (i) NOTICE. The
Borrower may, upon at least three (3) Business Days' prior written notice to the
Agent (which the Agent shall promptly transmit to each Lender), at any time and
from time to time, prepay the Term Loans or Loans made under the Acquisition
Subfacility, in whole or in part. Any notice of prepayment given to the Agent
under this SECTION 4.01(A)(I) shall specify the date (which shall be a Business
Day) of prepayment and the aggregate principal amount of the prepayment. When
notice of prepayment is delivered as provided herein, the principal amount of
the Term Loans or Loans made under the Acquisition Subfacility specified in the
notice shall become due and payable on the prepayment date specified in such
notice. The Borrower may repay Revolving Loans, without prior written notice to
the Agent or any Lender, at any time and from time to time.
(ii) AMOUNT; APPLICATION; TERM LOAN COMMITMENT REDUCTION.
Unless the aggregate outstanding principal balance of the Term Loans or the
outstanding principal balance of Loans made under the Acquisition Subfacility
and evidenced by Acquisition Loan Notes of an even date is to be prepaid in
full, voluntary prepayments of the Term Loans or such Loans made under the
Acquisition Subfacility shall be in an aggregate minimum amount of $500,000 and
integral multiples of $100,000 in excess of that amount. Each voluntary
prepayment of the Term Loans shall be allocated ratably to the Term Loans based
on the then outstanding principal balance thereof and then applied ratably to
the unpaid installments of such Term Loans in the inverse order of maturity
until paid in full and shall permanently reduce the Term Loan Commitment of each
Term Lender proportionately in accordance with its applicable Term Loan Pro Rata
Share. Each voluntary prepayment of such Loans made under the Acquisition
Subfacility shall be allocated ratably to such Loans based on the then
outstanding principal balance thereof and then applied ratably to the unpaid
installments of such Loans in the inverse order of maturity until paid in full.
(iii) VOLUNTARY REVOLVING CREDIT COMMITMENT REDUCTIONS. The
Borrower, upon at least three (3) Business Days' prior written notice to the
Agent (which the Agent shall promptly transmit to each Lender), shall have the
right, at any time and from time to time, to terminate in whole or permanently
reduce in part the Revolving Credit Commitments; PROVIDED THAT the Borrower
shall have made whatever payment may be required to reduce the Revolving Credit
Obligations to an amount less than or equal to the Revolving Credit Commitments
as reduced or terminated. Any partial reduction of the Revolving Credit
Commitments shall be in an aggregate minimum amount of $500,000 and integral
multiples of
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$100,000 in excess of that amount, and shall reduce the Revolving Credit
Commitment of each Revolving Lender proportionately in accordance with its
Revolving Loan Pro Rata Share. Any notice of termination or reduction given to
the Agent under this SEC TION 4.01(A)(III) shall specify the date (which shall
be a Business Day) of such termination or reduction and, with respect to a
partial reduction, the aggregate principal amount thereof. When notice of
termination or reduction is delivered as provided herein, the principal amount
of the Revolving Loans specified in the notice shall become due and payable on
the date specified in such notice.
(b) MANDATORY PREPAYMENTS/REDUCTIONS.
(i) NET CASH PROCEEDS OF SALE. Immediately upon the receipt by
the Borrower or any Subsidiary of the Borrower of any Net Cash Proceeds of Sale,
the Borrower shall make or cause to be made a mandatory prepayment of the
Obligations in an amount equal to one hundred percent (100%) of such Net Cash
Proceeds of Sale.
(ii) Intentionally omitted.
(iii) NET CASH PROCEEDS OF ISSUANCE OF EQUITY SECURITIES OR
INDEBTEDNESS. Immediately upon the receipt by the Borrower or any Subsidiary of
the Borrower of any Net Cash Proceeds of Issuance of Equity Securities or
Indebtedness, the Borrower shall make or cause to be made a mandatory prepayment
in an amount equal to one hundred percent (100%) of such Net Cash Proceeds of
Issuance of Equity Securities or Indebtedness. Notwithstanding the foregoing,
(A) in the event the subject issuance of equity Securities (I) does not result
in a failure by the Borrower to comply with the provisions of ARTICLE XI and
(II) the proceeds of such issuance are used by the Borrower to consummate a
Permitted Acquisition or purchase of Inventory, that portion of the Net Cash
Proceeds of Issuance of Equity Securities used by the Borrower for the purposes
described in CLAUSE (A)(II) within ten (10) Business Days after Borrower's or
Borrower's Subsidiary's receipt of such proceeds shall not be subject to the
requirement for a mandatory prepayment under this CLAUSE (III); and (B) with
respect to issuance of Indebtedness, (I) PROVIDED THAT all Lenders have
consented to the subject issuance of Indebtedness, and the terms and conditions
pertaining thereto, and (II) the proceeds of such issuance of Indebtedness are
used by the Borrower to consummate a Permitted Acquisition, that portion of the
Net Cash Proceeds of Issuance of Indebtedness used by the Borrower for the
purposes described in CLAUSE (B)(II) within ten (10) Business Days after
Borrower's or Borrower's Subsidiary's receipt of such proceeds shall not be
subject to the requirement for a mandatory prepayment under this CLAUSE (III).
(iv) INSUFFICIENT COLLATERAL. Borrower shall,
immediately and without notice or demand of any kind, make such
repayments of the Loans to the extent necessary to reduce the
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outstanding principal amount of the Loans to an amount not to
exceed the Borrowing Base.
(v) NO WAIVER OR CONSENT. Nothing in this SECTION 4.01(B)
shall be construed to constitute the Lenders' consent to any transaction
referenced in CLAUSES (I) and (III) above which is not expressly permitted by
ARTICLE X or the consent of all Lenders referenced in CLAUSE (III)(B), as
applicable.
(vi) NOTICE. The Borrower shall give the Agent prior written
notice or telephonic notice promptly confirmed in writing (each of which the
Agent shall promptly transmit to each Lender), when a Designated Prepayment will
be made (which date of prepayment shall be no later than the date on which such
Designated Prepayment becomes due and payable pursuant to this SECTION 4.01(B)).
(vii) APPLICATION OF PREPAYMENTS. (A) Designated
Prepayments shall be allocated and applied to the Obligations as
follows:
(I) the amount of each Designated Prepayment shall be applied
ratably to the unpaid installments of the Term Loans in the inverse
order of maturity until paid in full and shall permanently reduce the
Term Loan Commitment of each Term Lender in accordance with the
respective amounts of such Designated Prepayment so applied to the
respective Term Loans;
(II) following the payment in full of the Term Loans, the
remaining balance of each Designated Prepayment shall be applied
ratably to the Loans made under the Acquisition Subfacility and applied
to the unpaid installments thereof in the inverse order of maturity
until paid in full;
(III) following the payment in full of the Loans made under
the Acquisition Subfacility, the remaining balance of each Designated
Prepayment shall be applied to the outstanding Revolving Loans and, if
such Designated Prepayment is made from either Net Cash Proceeds of
Sale or Net Cash Proceeds of Issuance of Equity Securities or
Indebtedness, shall permanently reduce the Revolving Credit Commitment
of each Revolving Lender proportionately in accordance with its
Revolving Loan Pro Rata Share of such Designated Prepayment; and
(IV) following the payment in full of the Revolving Loans, the
remaining balance of each Designated Prepayment shall be applied to the
Letter of Credit Obligations (or, to the extent such Letter of Credit
Obligations are contingent, deposited in the
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Cash Collateral Account to provide Cash Collateral in respect of such
Letter of Credit Obligations).
(B) Prepayments required by SECTION 4.01(B)(IV) shall be
allocated and applied to the Term Loans ratably based on the then outstanding
principal balance thereof and then applied ratably to the unpaid installments of
such Term Loans in the inverse order of maturity and shall permanently reduce
the Term Loan Commitment of each Term Lender proportionately in accordance with
its applicable Term Loan Pro Rata Share.
4.02. PAYMENTS. (a) MANNER AND TIME OF PAYMENT. All
payments of principal of and interest on the Loans and Reimburse
ment Obligations and other Obligations (including, without
limitation, fees and expenses) which are payable to the Agent,
the Lenders or any Issuing Bank shall be made without condition
or reservation of right, and, with respect to payments made other
than from application of deposits in the Concentration Account,
in immediately available funds, delivered to the Agent (or, in
the case of Reimbursement Obligations, to the pertinent Issuing
Bank) not later than 1:00 p.m. (New York time) on the date and at
the place due, to such account of the Agent (or such Issuing
Bank) as it may designate, for the account of the Agent, the
Lenders or such Issuing Bank, as the case may be; and funds
received by the Agent, including, without limitation, funds in
respect of any Revolving Loans to be made on that date, not later
than 1:00 p.m. (New York time) on any given Business Day shall be
credited against payment to be made that day and funds received
by the Agent after that time shall be deemed to have been paid on
the next succeeding Business Day. Payments actually received by
the Agent for the account of the Lenders or the Issuing Banks, or
any of them, shall be paid to them by the Agent promptly after
receipt thereof.
(b) APPORTIONMENT OF PAYMENTS. (i) Subject to the provisions
of SECTION 4.01 and SECTION 4.02(B)(V), all payments of principal and interest
in respect of outstanding Loans, all payments in respect of Reimbursement
Obligations, all payments of fees and all other payments in respect of any other
Obligations, shall be allocated among such of the Lenders and Issuing Banks as
are entitled thereto, in proportion to their respective Pro Rata Shares, Term
Loan Pro Rata Shares, Revolving Loan Pro Rata Shares, or otherwise as provided
herein. Except as provided in SECTION 4.02(B)(II) with respect to payments and
proceeds of Collateral received after the occurrence of an Event of Default, all
such payments and any other amounts received by the Agent from or for the
benefit of the Borrower shall be applied:
(A) FIRST, to pay principal of and interest on any portion of
the Revolving Loans and Loans made under the Acquisition Subfacility
which the Agent may have advanced on behalf of any Revolving Lender
other than Citicorp for which
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the Agent has not then been reimbursed by such Revolving
Lender or the Borrower,
(B) SECOND, to pay principal of and interest on any Protective
Advance for which the Agent or Revolving Lenders have not then been
reimbursed by the Borrower,
(C) THIRD, to pay the principal of the Term Loans, Loans made
under the Acquisition Subfacility, and Revolving Loans then due and
payable in the order described hereinbelow and interest on such Loans
then due and payable, ratably, based on the then outstanding balances
of such Loans,
(D) FOURTH, to pay all other Obligations then due and
payable, ratably, and
(E) FIFTH, as the Borrower so designates.
All payments of principal and interest in respect of Loans pursuant to CLAUSE
(C) shall be applied FIRST, to the Term Loans (to installments and accrued
interest thereon then due and payable, ratably, in accordance with the Term
Lenders' respective Term Loan Pro Rata Shares), SECOND, to the Loans made under
the Acquisition Subfacility (to installments and accrued interest thereon then
due and payable, ratably, in accordance with the Revolving Lenders' respective
Revolving Loan Pro Rata Shares), and THIRD, Revolving Loans and accrued interest
thereon ratably, in accordance with the Revolving Lenders' respective Revolving
Loan Pro Rata Shares.
(ii) After the occurrence of an Event of Default and while the same
is continuing, the Agent shall apply all payments in respect of any Obligations
and all proceeds of Collateral in the following order:
(A) FIRST, to pay principal of and interest on any portion of
the Revolving Loans and Loans made under the Acquisition Subfacility
which the Agent may have advanced on behalf of any Revolving Lender
other than Citicorp for which the Agent has not then been reimbursed by
such Revolving Lender or the Borrower;
(B) SECOND, to pay principal of and interest on any Protective
Advance for which the Agent or Revolving Lenders have not then been
reimbursed by the Borrower;
(C) THIRD, to pay Obligations in respect of any fees then due
to the Agent, Lenders and Issuing Banks and any expense reimbursements
or indemnities then due to the Agent;
(D) FOURTH, to pay principal of and interest on
Letter of Credit Obligations (or, to the extent such
Obligations are contingent, deposited in the Cash
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Collateral Account to provide Cash Collateral in
respect of such Obligations);
(E) FIFTH, to pay Obligations in respect of any
expense reimbursements or indemnities then due to the
Lenders and the Issuing Banks;
(F) SIXTH, to pay interest due in respect of the
Loans, ratably, in accordance with the Lenders'
respective Pro Rata Shares;
(G) SEVENTH, to the ratable payment or prepayment of principal
outstanding on all Loans with application to installments on the Term
Loans and Loans made under the Acquisition Subfacility in the inverse
order of maturity;
(H) EIGHTH, to the ratable payment of Hedge
Agreements to which any of the Lenders or any Affiliate
of any of the Lenders is a party; and
(I) NINTH, to the ratable payment of all other
Obligations.
The order of priority set forth in this SECTION 4.02(B) and the related
provisions of this Agreement are set forth solely to determine the rights and
priorities of the Agent, the Lenders, the Issuing Banks and other Holders as
among themselves.
(iii) The Agent, in its sole discretion subject only to the
terms of this SECTION 4.02(B)(III), may pay from the proceeds of Revolving Loans
made to the Borrower hereunder, whether made following a request by the Borrower
pursuant to SECTION 2.02 or this SECTION 4.02(B)(III), all amounts payable by
the Borrower hereunder when due, including, without limitation, amounts payable
with respect to payments of principal, interest, Reimbursement Obligations and
fees and all reimbursements for expenses pursuant to SECTION 15.02. The Borrower
hereby irrevocably authorizes the Revolving Lenders to make Revolving Loans, in
each case, upon notice from the Agent as described in the following sentence for
the purpose of paying principal, interest, Reimbursement Obligations and fees
due from the Borrower, reimbursing expenses pursuant to SECTION 15.02 and paying
any and all other amounts due and payable by the Borrower hereunder or under the
Notes, and agrees that all such Revolving Loans so made shall be deemed to have
been requested by it pursuant to SECTION 2.02 as of the date of the
aforementioned notice. The Agent shall request Revolving Loans on behalf of the
Borrower as described in the preceding sentence by notifying the Revolving
Lenders by telecopy, telegram or other similar form of transmission (which
notice the Agent shall thereafter promptly transmit to the Borrower), of the
amount and Funding Date of the proposed Borrowing and that such Borrowing is
being requested on the Borrower's behalf pursuant to this SECTION 4.02(B)(III).
On
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the proposed Funding Date for such Revolving Loan, the Revolving Lenders shall
make the requested Revolving Loans in accordance with the procedures and subject
to the conditions specified in SECTION 2.02.
(iv) Subject to SECTION 4.02(B)(V), the Agent shall promptly
distribute to each Lender and Issuing Bank at its primary address set forth on
the appropriate signature page hereof or the signature page to the Assignment
and Acceptance by which it became a Lender or Issuing Bank, or at such other
address as a Lender, an Issuing Bank or other Holder may request in writing,
such funds as such Person may be entitled to receive hereunder; PROVIDED THAT
the Agent shall under no circumstances be bound to inquire into or determine the
validity, scope or priority of any interest or entitlement of any Holder and may
suspend all payments or seek appropriate relief (including, without limitation,
instructions from the Requisite Lenders or an action in the nature of
interpleader) in the event of any doubt or dispute as to any apportionment or
distribution contemplated hereby.
(v) In the event that any Revolving Lender fails to fund its
Revolving Loan Pro Rata Share of any Revolving Loan or Loan under the
Acquisition Subfacility requested by the Borrower which such Revolving Lender is
obligated to fund under the terms of this Agreement (the funded portion of such
Loan being hereinafter referred to as a "Non Pro Rata Loan"), until the earlier
of such Revolving Lender's cure of such failure and the termination of the
Revolving Credit Commitments, the proceeds of all amounts thereafter repaid to
the Agent by the Borrower and otherwise required to be applied to such Revolving
Lender's share of all other Obligations pursuant to the terms of this Agreement
shall be advanced to the Borrower by the Agent on behalf of such Revolving
Lender to cure, in full or in part, such failure by such Revolving Lender, but
shall nevertheless be deemed to have been paid to such Revolving Lender in
satisfaction of such other Obligations. Notwithstanding anything in this
Agreement to the contrary:
(A) the foregoing provisions of this SECTION 4.02(B)(V) shall
apply only with respect to the proceeds of payments of Obligations;
(B) a Revolving Lender shall be deemed to have cured its
failure to fund its Revolving Loan Pro Rata Share of any Revolving Loan
or Loan under the Acquisition Subfacility at such time as an amount
equal to such Revolving Lender's original Revolving Loan Pro Rata Share
of the requested principal portion of such Loan is fully funded to the
Borrower, whether made by such Revolving Lender itself or by operation
of the terms of this SECTION 4.02(B)(V), and whether or not the Non Pro
Rata Loan with respect thereto has been repaid;
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(C) amounts advanced to the Borrower to cure, in full or in
part, any such Revolving Lender's failure to fund its Revolving Loan
Pro Rata Share of any Revolving Loan or Loan under the Acquisition
Subfacility ("Cure Loans") shall bear interest at the rate in effect
from time to time pursuant to the terms of SECTION 5.01; and
(D) regardless of whether or not an Event of Default has
occurred or is continuing, and notwithstanding the instructions of the
Borrower as to its desired application, all repayments of principal
which, in accordance with the other terms of this SECTION 4.02, would
be applied to the outstanding Revolving Loans and Loans made under the
Acquisition Subfacility shall be applied FIRST, ratably to all such
Loans constituting Non Pro Rata Loans, SECOND, ratably to such Loans
other than those constituting Non Pro Rata Loans or Cure Loans and,
THIRD, ratably to such Loans constituting Cure Loans.
(c) PAYMENTS ON NON-BUSINESS DAYS. Whenever any pay ment to be
made by the Borrower hereunder or under the Notes is stated to be due on a day
which is not a Business Day, the payment shall instead be due on the next
succeeding Business Day, and any such extension of time shall be included in the
computation of the payment of interest and fees hereunder.
4.03. PROMISE TO REPAY; EVIDENCE OF INDEBTEDNESS.
(a) PROMISE TO REPAY. The Borrower hereby agrees to pay when
due the principal amount of each Loan which is made to it, and further agrees to
pay all unpaid interest accrued thereon, in accordance with the terms of this
Agreement and the Notes. The Borrower shall execute and deliver to each Lender
on the Effective Date one or more promissory notes, in form and substance
acceptable to the Agent and such Lender, evidencing the Loans made by such
Lender and thereafter shall execute and deliver such other promissory notes as
are necessary to evidence Loans owing to the Lenders (i) which are Loans made
under the Acquisition Subfacility or (ii) after giving effect to any assignment
thereof pursuant to SECTION 15.01, all in form and substance acceptable to the
Agent and in substantially the form attached hereto as EXHIBIT D, as applicable.
On the Effective Date, the "Term Notes" executed and delivered under the terms
of the 1994 Credit Agreement shall be returned to the Borrower and the Term
Notes executed and delivered by the Borrower hereunder substituted therefor.
(b) LOAN ACCOUNT. Each Lender shall maintain in accordance
with its usual practice an account or accounts (a "Loan Account") evidencing the
Indebtedness of the Borrower to such Lender resulting from each Loan owing to
such Lender from time to time, including the amount of principal and interest
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payable and paid to such Lender from time to time hereunder and under the Notes.
(c) CONTROL ACCOUNT. The Register maintained by the Agent
pursuant to SECTION 15.01(C) shall include a control account, and a subsidiary
account for each Lender, in which accounts (taken together) shall be recorded
(i) the date and amount of each Borrowing made hereunder, the type of Loan
comprising such Borrowing, (ii) the effective date and amount of each Assignment
and Acceptance delivered to and accepted by it and the parties thereto, (iii)
the amount of any principal or interest due and payable or to become due and
payable from the Borrower to each Lender hereunder or under the Notes, and (iv)
the amount of any sum received by the Agent from the Borrower hereunder and each
Lender's share thereof. All entries in the Register shall be made in accordance
with the Agent's customary accounting practices as in effect from time to time.
(d) ENTRIES BINDING. The entries made in the Register and each
Loan Account shall be conclusive and binding for all purposes, absent manifest
error; in the event there are discrepancies between the Register and any
individual Loan Account, entries in the Register shall govern.
4.04. PROCEEDS OF COLLATERAL; CONCENTRATION ACCOUNT
ARRANGEMENTS. (a) ESTABLISHMENT. The Borrower shall establish and maintain
depository accounts and shall cause its Subsidiaries to establish and maintain
depository accounts subject to Collection Account Agreements into which all
collections of Receivables shall be deposited and promptly transferred directly
to the Concentration Account. Borrower shall cause all proceeds of Collateral to
be deposited in the Concentration Account or pursuant to other similar
arrangements for the collection of such amounts established by the Borrower and
the Agent. All collections of Receivables and proceeds of Collateral which are
received directly by the Borrower or any Subsidiary of the Borrower shall be
deemed to have been received by the Borrower or such Subsidiary of the Borrower
as the Agent's trustee and, upon the Borrower's or such Subsidiary's receipt
thereof, the Borrower shall immediately transfer or cause to be transferred, all
such amounts into the Concentration Account in their original form. All
collections of Receivables and proceeds of other Collateral deposited in the
Concentration Account as described above shall be deemed to have been received
by the Agent and will be held by the Agent, for the benefit of the Holders, as
Cash Collateral for the Obligations, subject to the rights of the Borrower set
forth in SECTION 4.04(B) and the rights of the Agent set forth in SECTION 12.03.
(b) PRE-DEFAULT WITHDRAWALS FROM CONCENTRATION ACCOUNT. The
Agent shall, so long as no Event of Default shall have occurred and be
continuing or unwaived, from time to time, (i) apply funds in the Concentration
Account (A) promptly after deposit therein to payment of the outstanding
Revolving Loans,
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(B) to payment of other Obligations as they become due and payable, (ii) invest
funds on deposit in the Concentration Account and accrued interest thereon,
after giving effect to the aforesaid payments, reinvest proceeds of any such
investments which may mature or be sold, and invest interest or other income
received from such investments, in such Cash Equivalents as the Borrower may
select, and (iii) upon the Borrower's request therefor, transfer funds on
deposit in the Concentration Account after giving effect to the payments
described in CLAUSE (I) above to Borrower's or its Subsidiaries' designated
accounts. Such funds, interest, proceeds, or income which are not so disbursed,
invested or reinvested shall be deposited and held in the Concentration Account
for the benefit of the Holders as provided in SECTION 4.04(A). None of the
Agent, any Lender or any Issuing Bank shall be liable to the Borrower or any
Subsidiary of the Borrower for, or with respect to, any decline in value of
amounts on deposit in the Concentration Account which shall have been invested
pursuant to this SECTION 4.04(B). Cash Equivalents from time to time purchased
and held pursuant to this SECTION 4.04(B) shall constitute Cash Collateral and
shall, for purposes of this Agreement, be deemed to be part of the funds held in
the Concentration Account in amounts equal to their respective outstanding
principal amounts.
(c) REASONABLE CARE. The Agent shall exercise reasonable care
in the custody and preservation of any funds held in the Concentration Account
and shall be deemed to have exercised such care if such funds are accorded
treatment substantially equivalent to that which the Agent accords its own like
property, it being understood that the Agent shall not have any responsibility
for taking any steps necessary to preserve rights against any parties with
respect to any such funds but may do so at its option. In the event the Agent
takes any such steps, it shall provide the Borrower with prompt written notice
thereof. All reasonable expenses incurred in connection therewith shall be for
the sole account of the Borrower and shall constitute Obligations hereunder.
4.05. CASH COLLATERAL ACCOUNT. (a) INVESTMENTS. If
requested by the Borrower, the Agent shall, so long as no Event
of Default shall have occurred and be continuing, from time to
time invest funds on deposit in the Cash Collateral Account and
accrued interest thereon, reinvest proceeds of any such
investments which may mature or be sold, and invest interest or
other income received from any such Investments, in each case in
such Cash Equivalents as the Borrower may select. Such funds,
interest, proceeds or income which are not so invested or
reinvested in Cash Equivalents shall, except as otherwise
provided in SECTION 4.05(B) and SECTION 12.03, be deposited and
held by the Agent in the Cash Collateral Account. None of the
Agent, any Lender or any Issuing Bank shall be liable to the
Borrower for, or with respect to, any decline in value of amounts
on deposit in the Cash Collateral Account which shall have been
invested pursuant to this SECTION 4.05(A) at the direction of the
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Borrower. Cash Equivalents from time to time purchased and held pursuant to this
SECTION 4.05(A) shall constitute Cash Collateral and shall, for purposes of this
Agreement, be deemed to be part of the funds held in the Cash Collateral Account
in amounts equal to their respective outstanding principal amounts.
(b) WITHDRAWAL RIGHTS. Neither the Borrower nor any Person or
entity claiming on behalf of or through the Borrower shall have any right to
withdraw any of the funds held in the Cash Collateral Account, except that, upon
the later to occur of (i) the expiration or termination of all of the Letters of
Credit in accordance with their respective terms and (ii) the payment in full in
cash of the Obligations, any funds remaining in the Cash Collateral Account
shall be returned by the Agent to the Borrower or paid to whomever may be
legally entitled thereto.
(c) ADDITIONAL DEPOSITS. If at any time the Agent determines
that any funds held in the Cash Collateral Account are subject to any interest,
right, claim or Lien of any Person other than the Agent, the Borrower will,
forthwith upon demand by the Agent, pay to the Agent, as additional funds to be
deposited and held in the Cash Collateral Account, an amount equal to the amount
of funds subject to such interest, right, claim or Lien.
(d) REASONABLE CARE. The Agent shall exercise reasonable care
in the custody and preservation of any funds held in the Cash Collateral Account
and shall be deemed to have exercised such care if such funds are accorded
treatment substantially equivalent to that which the Agent accords its own like
property, it being understood that the Agent shall not have any responsibility
for taking any necessary steps to preserve rights against any parties with
respect to any such funds but may do so at its option. In the event the Agent
takes any such steps, it shall provide the Borrower with prompt written notice
thereof. All reasonable expenses incurred in connection therewith shall be for
the sole account of the Borrower and shall constitute Obligations hereunder.
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ARTICLE V
INTEREST AND FEES
5.01. INTEREST ON THE LOANS AND OTHER OBLIGATIONS. (a) RATE OF
INTEREST. All Loans and the outstanding principal balance of all other
Obligations shall bear interest on the unpaid principal amount thereof from the
date such Loans are made and such other Obligations are incurred until paid in
full, except as otherwise provided in SECTION 5.01(C) or SECTION 14.06, as
follows:
(i) If a Base Rate Loan, at a rate per annum equal to the sum
of (A) the Base Rate, as in effect from time to time as interest
accrues PLUS (B) the applicable Base Rate Margin; and
(ii) If a Eurodollar Rate Loan, at a rate per annum equal to
the sum of (A) the Eurodollar Rate determined for the applicable
Eurodollar Interest Period PLUS (B) the applicable Eurodollar Rate
Margin.
The applicable basis for determining the rate of interest on the Loans shall be
selected by the Borrower at the time a Notice of Borrowing or a Notice of
Conversion/Continuation is delivered by the Borrower to the Agent; PROVIDED,
HOWEVER, that the Borrower may not select the Eurodollar Rate as the applicable
basis for determining the rate of interest on such Loan if at the time of such
selection an Event of Default or a Potential Event of Default would occur or has
occurred and is continuing. If on any day any Loan is outstanding with respect
to which notice has not been timely delivered to the Agent in accordance with
the terms of this Agreement specifying the basis for determining the rate of
interest on that day, then for that day interest on that Loan shall be
determined by reference to the Base Rate.
(b) INTEREST PAYMENTS. (i) Interest accrued on each Base Rate
Loan shall be payable in arrears (A) on the first day of each calendar month
(for the immediately preceding calendar month), commencing on the first such day
following the making of such Loan, (B) upon conversion thereof to a Eurodollar
Rate Loan, and (C) if not theretofore paid in full, at maturity (whether by
acceleration or otherwise) of such Loan.
(ii) Interest accrued on each Eurodollar Rate Loan shall be
payable in arrears (A) on each Eurodollar Interest Payment Date applicable to
such Loan and (B) if not theretofore paid in full, at maturity (whether by
acceleration or otherwise) of such Loan.
(iii) Interest accrued on the principal balance of all other
Obligations shall be payable in arrears (A) on the first day of each calendar
month, commencing on the first such day
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following the incurrence of such Obligation, (B) upon repayment thereof in full
or in part, and (C) if not theretofore paid in full, at the time such other
Obligation becomes due and payable (whether by acceleration or otherwise).
(c) DEFAULT INTEREST. Notwithstanding the rates of interest
specified in SECTION 5.01(A), effective immediately upon the occurrence of an
Event of Default, and for as long thereafter as such Event of Default shall be
continuing unwaived, the principal balance of all Loans and of all other
Obligations, shall bear interest at a rate which is two percent (2.0%) per annum
in excess of the rate of interest specified in SECTION 5.01(A)(I).
(d) COMPUTATION OF INTEREST. Interest on all Obliga tions
shall be computed on the basis of the actual number of days elapsed in the
period during which interest accrues and a year of 360 days. In computing
interest on any Loan, the date of the making of the Loan shall be included and
the date of payment shall be excluded; PROVIDED, HOWEVER, if a Loan is repaid on
the same day on which it is made, one (1) day's interest shall be paid on such
Loan.
(e) CONVERSION OR CONTINUATION. (i) The Borrower shall have
the option (A) to convert at any time all or any part of outstanding Base Rate
Loans to Eurodollar Rate Loans; (B) to convert all or any part of outstanding
Eurodollar Rate Loans having Eurodollar Interest Periods which expire on the
same date to Base Rate Loans on such expiration date; or (C) to continue all or
any part of an outstanding Eurodollar Rate Loan at the expiry of the applicable
Eurodollar Interest Period, and the succeeding Eurodollar Interest Period of
such continued Loans shall commence on such expiration date; PROVIDED, HOWEVER,
no such outstanding Loan may be continued as, or be converted into, a Eurodollar
Rate Loan (1) if the continuation of, or the conversion into, would violate any
of the provisions of SECTION 5.03 or (2) if an Event of Default or a Potential
Event of Default would occur or has occurred and is continuing unwaived. Any
conversion into or continuation of Eurodollar Rate Loans under this SECTION
5.01(E) shall be in a minimum amount of $1,000,000 and in integral multiples of
$100,000 in excess of that amount except in the case of a conversion into or a
continuation of an entire Borrowing or Non-Pro Rata Loans.
(ii) To convert or continue a Loan under SECTION 5.01(E)(I),
the Borrower shall deliver a Notice of Conversion/Continuation to the Agent no
later than 11:00 a.m. (New York time) at least three (3) Business Days in
advance of the proposed conversion/continuation date. A Notice of
Conversion/Continuation shall specify (A) the proposed conversion/continuation
date (which shall be a Business Day), (B) the principal amount of the Loan to be
converted/continued, (C) whether such Loan shall be converted and/or continued,
and (D) in the case of a conversion to, or continuation of, a Eurodollar
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Rate Loan, the requested Eurodollar Interest Period. In lieu of delivering a
Notice of Conversion/Continuation, the Borrower may give the Agent telephonic
notice of any proposed converstion/continuation by the time required under this
SECTION 5.01(E)(II), and such notice shall be confirmed in writing delivered to
the Agent by facsimile transmission promptly (but in no event later than 5:00
p.m. (New York time) on the same day), the original of which facsimile copy
shall be delivered to the Agent within three (3) days after the date of such
transmission. Promptly after receipt of a Notice of Conversion/Continuation
under this SECTION 5.01(E)(II) (or telephonic notice in lieu thereof), the Agent
shall notify each Lender by telecopy, or other similar form of transmission, of
the proposed conversion/continuation. Any Notice of Conversion/Continuation for
conversion to, or continuation of, a Loan (or telephonic notice in lieu thereof)
shall be irrevocable, and the Borrower shall be bound to convert or continue in
accordance therewith.
5.02. FEES. (a) LETTER OF CREDIT FEE. In addition to any
charges paid pursuant to SECTION 3.01(G), the Borrower shall pay (i) to the
Issuing Bank, a fee (the "Fronting Fee") accruing at a rate equal to one-quarter
of one percent (0.25%) per annum on the undrawn face amount of each outstanding
Letter of Credit issued by such Issuing Bank, payable quarterly, in arrears, on
the first day of each calendar quarter (for the immediately preceding calendar
quarter) and (ii) to the Agent, for the account of the Revolving Lenders based
on their respective Revolving Loan Pro Rata Shares, a fee (the "Letter of Credit
Fee") accruing at a rate equal to the Eurodollar Rate Margin applicable from
time to time on the undrawn face amount of each outstanding Letter of Credit,
payable quarterly, in arrears, on the first day of each calendar quarter (for
the immediately preceding calendar quarter); PROVIDED, HOWEVER, upon the
occurrence of an Event of Default, and for so long thereafter as such Event of
Default shall be continuing, the rate at which the (A) Fronting Fee shall accrue
and be payable shall be equal to two and one-quarter percent (2.25%) per annum
and (B) Letter of Credit Fee shall accrue and be payable shall be equal to four
and three-quarters percent (4.75%) per annum.
(b) UNUSED COMMITMENT FEE. (i) The Borrower shall pay to the
Agent, for the account of the Revolving Lenders in accordance with their
respective Revolving Loan Pro Rata Shares, a fee (the "Unused Commitment Fee"),
accruing at the rate of one-half of one percent (0.50%) per annum on the average
daily amount by which the Revolving Credit Commitments exceed the sum of (A) the
outstanding principal amount of the Revolving Loans, PLUS (B) the outstanding
Reimbursement Obligations, PLUS (C) the aggregate undrawn face amount of all
outstanding Letters of Credit, for the period commencing on the Effective Date
and ending on the Revolving Credit Termination Date, such Unused Commitment Fee
being payable (I) monthly, in arrears, commencing on the first day of the
calendar month next succeeding the Effective Date and (II) on the Revolving
Credit Termination Date.
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(ii) Notwithstanding the foregoing, in the event that any
Revolving Lender fails to fund its Revolving Loan Pro Rata Share of any
Revolving Loan requested by the Borrower which such Revolving Lender is
obligated to fund under the terms of this Agreement, (A) such Revolving Lender
shall not be entitled to any Unused Commitment Fees with respect to its
Revolving Credit Commitment until such failure has been cured in accordance with
SECTION 4.02(B)(V)(B) and (B) until such time, the Unused Commitment Fee shall
accrue in favor of the Revolving Lenders which have funded their respective
Revolving Loan Pro Rata Shares of such requested Revolving Loan, shall be
allocated among such performing Revolving Lenders ratably based upon their
relative Revolving Credit Commitments, and shall be calculated based upon the
average amount by which the aggregate Revolving Credit Commitments of such
performing Revolving Lenders exceeds the sum of (1) the outstanding principal
amount of the Revolving Loans owing to such performing Revolving Lenders, PLUS
(2) the outstanding Reimbursement Obligations owing to such performing Revolving
Lenders, PLUS (3) the aggregate participation interests of such performing
Revolving Lenders arising pursuant to SECTION 3.01(E) with respect to undrawn
and outstanding Letters of Credit.
(c) OTHER FEES. The Borrower shall pay to the Agent
in addition to any other fee referenced in this Agreement those
certain fees described in the 1996 Fee Letter.
(d) CALCULATION AND PAYMENT OF FEES. All of the above fees
shall be calculated on the basis of the actual number of days elapsed in a 360
day year. All such fees shall be payable in addition to, and not in lieu of,
interest, compensation, expense reimbursements, indemnification and other
Obligations. Fees shall be payable to the Agent at its office in New York, New
York in immediately available funds. All fees shall be fully earned and
nonrefundable when paid. All fees specified or referred to (directly or by
reference to an agreement pursuant to which such fees are payable) in this
Agreement due to the Agent, any Issuing Bank or any Lender shall bear interest,
if not paid when due, at the interest rate described in SECTION 5.01(C), shall
constitute Obligations and shall be secured by all of the Collateral.
5.03. SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE
LOANS. With respect to Eurodollar Rate Loans:
(a) AMOUNT OF EURODOLLAR RATE LOANS. Each Eurodollar
Rate Loan shall be for a minimum amount of $1,000,000 and in
integral multiples of $100,000 in excess of that amount.
(b) DETERMINATION OF EURODOLLAR INTEREST PERIOD. By giving
notice as set forth in SECTION 2.02(B) or SECTION 2.03(B) (with respect to a
Borrowing of Eurodollar Rate Loans) or SECTION 5.01(E) (with respect to a
conversion into or continuation of Eurodollar Rate Loans), the Borrower shall
have the option,
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subject to the provisions of this SECTION 5.03, to select an interest period
(each a "Eurodollar Interest Period") to apply to the Loans described in such
notice, subject to the following provisions:
(i) The Borrower may only select, as to a particular Borrowing
of Eurodollar Rate Loans, a Eurodollar Interest Period of one (1),
three (3), six (6), or, if available to all Lenders, nine (9) or twelve
(12) months in duration;
(ii) In the case of immediately successive Eurodollar Interest
Periods applicable to a Borrowing of Eurodollar Rate Loans, each
successive Eurodollar Interest Period shall commence on the day on
which the next preceding Eurodollar Interest Period expires;
(iii) If any Eurodollar Interest Period would otherwise expire
on a day which is not a Business Day, such Eurodollar Interest Period
shall be extended to expire on the next succeeding Business Day if the
next succeeding Business Day occurs in the same calendar month, and if
there will be no succeeding Business Day in such calendar month, the
Eurodollar Interest Period shall expire on the immediately preceding
Business Day;
(iv) The Borrower may not select a Eurodollar Interest Period
as to any Revolving Loan or Loan made under the Acquisition Subfacility
if such Eurodollar Interest Period terminates later than the scheduled
Revolving Credit
Termination Date;
(v) The Borrower may not select a Eurodollar Interest Period
as to any Term Loan if such Eurodollar Interest Period terminates later
than the scheduled Term Loan Termination Date;
(vi) The Borrower may not select a Eurodollar Interest Period
with respect to any portion of principal of a Loan which extends beyond
a date on which the Borrower is required to make a scheduled payment of
such portion of principal; and
(vii) There shall be no more than eight (8) Eurodollar
Interest Periods in effect at any one time.
(c) DETERMINATION OF INTEREST RATE. As soon as practicable on
the second Business Day prior to the first day of each Eurodollar Interest
Period (the "Eurodollar Interest Rate Determination Date"), the Agent shall
determine (pursuant to the procedures set forth in the definition of "Eurodollar
Rate") the interest rate which shall apply to the Eurodollar Rate Loans for
which an interest rate is then being determined for the applicable Eurodollar
Interest Period and shall promptly give notice thereof (in writing or by
telephone confirmed in writing)
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to the Borrower and to each Lender. The Agent's determination shall be presumed
to be correct, absent manifest error, and shall be binding upon the Borrower.
(d) INTEREST RATE UNASCERTAINABLE, INADEQUATE OR
UNFAIR. In the event that at least one (1) Business Day before
the Eurodollar Interest Rate Determination Date:
(i) the Agent is advised by Citibank that deposits in Dollars
(in the applicable amounts) are not being offered by Citibank in the
London interbank market for such Eurodollar Interest Period; or
(ii) the Agent determines that adequate and fair means do not
exist for ascertaining the applicable interest rates by reference to
which the Eurodollar Rate then being determined is to be fixed; or
(iii) the Requisite Lenders advise the Agent that the
Eurodollar Rate for Eurodollar Rate Loans comprising such Borrowing
will not adequately reflect the cost to such Requisite Lenders of
obtaining funds in Dollars in the London interbank market in the amount
substantially equal to such Lenders' Eurodollar Rate Loans in Dollars
and for a period equal to such Eurodollar Interest Period;
then the Agent shall forthwith give notice thereof to the Borrower, whereupon
(until the Agent notifies the Borrower that the circumstances giving rise to
such suspension no longer exist) the right of the Borrower to elect to have
Loans bear interest based upon the Eurodollar Rate shall be suspended and each
outstanding Eurodollar Rate Loan shall be converted into a Base Rate Loan on the
last day of the then current Eurodollar Interest Period therefor,
notwithstanding any prior election by the Borrower to the contrary.
(e) BOOKING OF EURODOLLAR RATE LOANS. Any Lender may make,
carry or transfer Eurodollar Rate Loans at, to, or for the account of, its
Eurodollar Lending Office or Eurodollar Affiliate or its other offices or
Affiliates. No Lender shall be entitled, however, to receive any greater amount
under ARTICLE XIV as a result of the transfer of any such Eurodollar Rate Loan
to any office (other than such Eurodollar Lending Office) or any Affiliate
(other than such Eurodollar Affiliate) than such Lender would have been entitled
to receive immediately prior thereto, unless (i) the transfer occurred at a time
when circumstances giving rise to the claim for such greater amount did not
exist and (ii) such claim would have arisen even if such transfer had not
occurred.
(f) AFFILIATES NOT OBLIGATED. No Eurodollar Affiliate
or other Affiliate of any Lender shall be deemed a party to this
Agreement or shall have any liability or obligation under this
Agreement.
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5.04. DETERMINATION OF APPLICABLE BASE RATE MARGIN AND
EURODOLLAR RATE MARGIN. The Base Rate Margin and Eurodollar Rate Margin
applicable for the period commencing on the Effective Date and ending on January
31, 1997 shall be determined based on Performance Level [1]. The Base Rate
Margin and Eurodollar Rate Margin applicable from time to time thereafter shall
be determined on the date the Financial Statements for each fiscal quarter of
Borrower are due pursuant to SECTION 8.01(A) by reference to Borrower's
compliance with Performance Levels 1 through 4 as of the end of each fiscal
quarter and be effective during the period commencing on the first day of the
month in which such Financial Statements for the preceding fiscal quarter are
due and ending on the last day of the first month of the next fiscal quarter for
which such determination is made.
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ARTICLE VI
CONDITIONS TO LOANS AND LETTERS OF CREDIT
6.01. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF
AGREEMENT. This Agreement shall become effective upon and be
subject to the satisfaction by 5:00 p.m. (New York time) on July
3, 1996 (the "Effective Date") of all of the following conditions
precedent:
(a) DOCUMENTS. The Agent shall have received on or
before the Effective Date all of the following:
(i) this Agreement, the Notes and all other agreements,
documents and instruments relating to the loan and other credit
transactions contemplated by this Agreement and described in the List
of Closing Documents attached hereto as EXHIBIT I and made a part
hereof, each duly executed where appropriate and in form and substance
satisfactory to the Agent; without limiting the foregoing, the Borrower
hereby directs its counsel, Boyar, Simon & Miller, its special New York
counsel, Paul, Hastings, Janofsky & Walker, and its special Florida
counsel, Akerman, Senterfitt & Eidson, P.A., to prepare and deliver to
the Agent, the Lenders and the Issuing Banks, the opinions referred to
in such List of Closing Documents;
(ii) the Pro Forma and Projections, together with a business
plan for the Parent and its Subsidiaries for the period commencing on
the Closing Date and ending on the fourth anniversary thereof, each in
form and substance satisfactory to the Agent;
(iii) a solvency opinion relating to the Borrower and each
Guarantor rendered by Valuation Research Corporation, dated the Closing
Date and giving effect to the financing transactions contemplated
hereby, the Liquidations, Merger, Finance Affiliate Indebtedness, and
repayment of the Subordinated Debt and certain of the Indebtedness of
the Partnership under the 1994 Credit Agreement, supported by such
analyses, valuations, appraisals, reviews, projections and other
documentation as the Agent deems appropriate;
(iv) an Officer's Certificate executed and delivered on behalf
of the Borrower certifying that all conditions precedent have been met
and no Potential Event of Default or Event of Default has occurred or
is continuing;
(v) a Borrowing Base Certificate dated June 30, 1996
adequately supporting the Loans outstanding as of, and requested to be
made on, the Effective Date; and
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(vi) such additional documentation as the Agent
may reasonably request.
(b) PERFECTION OF LIENS; TITLE INSURANCE. Evidence that (i)
all financing statements (assignments of existing financing statements and
financing statements naming Borrower and Guarantors as debtor), leasehold
mortgages, and filings under the Federal Aviation Act relating to the Collateral
have been filed or recorded, (ii) title commitments for title insurance policies
or endorsements to existing title insurance policies in form and substance
satisfactory to the Agent with respect to (A) transfers to the Borrower of title
of Real Property and leasehold interests in Real Property which are part of the
Collateral and (B) leasehold mortgages of interests in Real Property which are
part of the Collateral (other than such Real Property located, as of the Closing
Date, at Ardmore, OK; and Van Nuys, CA) have been issued to the Agent, for the
benefit of the Agent, the Issuing Banks and the Lenders, and all title charges,
recording fees and filing taxes have been paid;
(c) THE LIQUIDATION AND MERGER. The Lenders shall be satisfied
in all material respects (i) with the terms, form and substance of the
Liquidations and Merger and the documentation related thereto, (ii) that the
parties to the Liquidations and Merger complied with all applicable laws and
regulatory approval requirements and all contractual approval and consent
requirements related thereto and to the underlying transfers of interests in
Property, and (iii) that all conditions precedent to the Liquidations and Merger
have been satisfied (or waived with the prior written consent of the Agent), no
breach of any term or provision of any Liquidation Document or Merger Document
has occurred and each Liquidation and the Merger have been consummated.
(d) OFFERING; REPAYMENT OF SUBORDINATED DEBT. The Lenders
shall be satisfied in all material respects (i) with the terms of the Offering
and the Offering Documents, (ii) that the Offering and Offering Documents
complied with all applicable laws and regulatory approval requirements, and
(iii) that all conditions precedent to the effectiveness of the Offering have
been satisfied (or waived with the prior written consent of the Agent); the net
proceeds of the Offering shall have exceeded $35,000,000; the Subordinated Debt
shall have been repaid in full from proceeds of the Finance Affiliate
Indebtedness, and Indebtedness of the Partnership under the 1994 Credit
Agreement with respect to "Revolving Loans" in the amount of $________ and "Term
Loans" in the amount of $____________ shall have been repaid with proceeds from
the Finance Affiliate Indebtedness.
(e) DUE DILIGENCE. The Agent and its counsel shall have
completed their due diligence review of the business, operations, assets,
liabilities and Contractual Obligations of the Partnership, Leasing LP, Borrower
and the Guarantors, the results of which shall have provided the Agent, each
Lender and
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each Issuing Bank with results and information which, in the judgment of such
Person, are satisfactory to permit the Agent, each Lender and each Issuing Bank
to enter into the financing transactions contemplated hereby.
(f) NO LEGAL IMPEDIMENTS. No law, regulation, order, judgment
or decree of any Governmental Authority shall, and the Agent shall not have
received any notice that litigation is pending or threatened which is likely to,
(i) enjoin, prohibit or restrain (A) the succession of the Borrower to the
obligations of the Partnership under the 1994 Credit Agreement or the making of
the Revolving Loans and/or the issuance of Letters of Credit requested to be
made or issued, as applicable, on the Effective Date or (B) the consummation of
the Liquidations, Merger, or Offering and related transfers of proceeds of the
Offering for the purposes set forth in CLAUSE (D) above, or (ii) result in a
Material Adverse Effect.
(g) LABOR RELATIONS; COMPENSATION PLANS. The Agent
shall be satisfied that (i) neither the Partnership nor Leasing
LP has encountered before the Closing Date nor will the Borrower
or Leasing Subsidiary encounter after the Closing Date any
adverse labor union organizing activity, employee strike, work
stoppage, shutdown or lockout and (ii) the Borrower has entered
into compensation agreements in form and substance satisfactory
to the Agent with Messrs. Dale S. Baker, Joseph E. Civiletto,
James D. Innella, Harold M. Woody, and Michael Saso.
(h) FINANCIAL STATEMENTS. The Lenders shall be satisfied with
the audited Financial Statements of the Partnership for its fiscal years ending
December 31, 1994 and December 31, 1995 and related reports and management
letters of the Partnership's independent certified public accountants, the
interim Financial Statements of the Partnership for the first fiscal quarter of
1996, and the financial information relating to the Partnership and Leasing LP
provided to the Agent and Lenders under the 1994 Credit Agreement.
(i) NO CHANGE IN CONDITION. No material adverse change shall
have occurred (as certified to the Agent and the Lenders by the respective chief
financial officers) in the business, assets, management, operations, financial
condition or prospects of the Partnership or Leasing LP since December 31, 1995.
The Lenders shall be satisfied that no such material adverse change shall result
from the consummation of the Liquidations, Merger, Offering, or transfers of
Property related thereto.
(j) INTERIM LIABILITIES AND EQUITY. Since December 31, 1995,
none of the Partnership, Leasing LP, the Borrower or any Guarantor shall have
(i) entered into any material (as determined in good faith by the Agent)
commitment or transaction, including, without limitation, transactions for
borrowings and capital expenditures, which are not in the ordinary course of
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such Person's business, except for the Liquidations, Merger, and other
transactions contemplated hereby, (ii) declared or paid any distribution or
dividend other than the distributions and dividends identified on SCHEDULE
6.01-J attached hereto, (iii) established or assumed any obligations with
respect to compensation or employee benefit plans other than plans with respect
to the Permitted Equity Securities Options and those plans identified on
SCHEDULE 6.01-J, or (iv) redeemed, repurchased, or issued any equity Securities,
except for the issuance of equity Securities in connection with the Offering or
the formation of such Person.
(k) NO LOSS OF MATERIAL AGREEMENTS AND LICENSES. Since
December 31, 1995, no Permit, agreement, lease, or license which, in the
judgment of the Agent, is material to the business, operations or employee
relations of the Partnership or Leasing LP shall have been terminated, modified,
revoked, breached, or declared to be in default, and each such Permit,
agreement, lease and license shall have been transferred to the Borrower or
Leasing Subsidiary, as applicable, without any breach of the Contractual
Obligation governing the same.
(l) NO DEFAULT. No Event of Default or Potential
Event of Default shall have occurred and be continuing unwaived
under the 1994 Credit Agreement.
(m) NO LITIGATION. Agent shall have reviewed all litigation
pending or threatened against the Partnership and/or Leasing LP and determined
to its satisfaction that no Material Adverse Effect will, or is reasonably
likely to, result from the existence thereof.
(n) ORGANIZATIONAL DOCUMENTS; CAPITAL STRUCTURE OF PARENT AND
ITS SUBSIDIARIES; FINANCE AFFILIATE INDEBTEDNESS. Agent shall have reviewed all
Organizational Documents, Liquidation Documents and Merger Documents and
determined them to be satisfactory in form and substance. The corporate and
capital structure of the Parent and its Subsidiaries, and the composition of
such Persons' Boards of Directors and corporate officers/senior management shall
conform to the description thereof included in the S-1 or otherwise be
satisfactory to the Lenders. The terms and conditions of the agreements and
instruments evidencing or relating to the Finance Affiliate Indebtedness shall
be in form and substance satisfactory to the Agent and Lenders.
(o) REPRESENTATIONS AND WARRANTIES. All of the repre
sentations and warranties contained in SECTION 7.01 and in any of the other Loan
Documents shall be true and correct in all material respects on and as of the
Effective Date.
(p) FEES AND EXPENSES PAID. There shall have been
paid to the Agent, for the accounts of (i) the lenders and
issuing bank under the 1994 Credit Agreement, as applicable, all
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fees and expenses accrued and payable through the Effective Date under the 1994
Credit Agreement and the 1994 Fee Letter and (ii) the Lenders, Issuing Banks,
and the Agent, as applicable, all fees and expenses due and payable on or before
the Effective Date, including, without limitation, fees payable in accordance
with the terms of the 1996 Fee Letter.
6.02. CONDITIONS PRECEDENT TO ALL SUBSEQUENT LOANS AND LETTERS
OF CREDIT. The obligation of each Lender to make any Loan requested to be made
by it on any Funding Date and the agreement of each Issuing Bank to issue any
Letter of Credit on any date is subject to the following conditions precedent as
of each such date, both before and after giving effect to the Loans to be made
and/or the Letter of Credit to be issued on such date:
(a) REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of the Borrower contained in SECTION 7.01 and in any other Loan
Document (other than representations and warranties which expressly speak as of
a different date) shall be true and correct in all material respects.
(b) NO DEFAULTS. No Event of Default or Potential Event of
Default shall have occurred and be continuing or would result from the making of
the requested Loan or issuance of the requested Letter of Credit.
(c) NO LEGAL IMPEDIMENTS. No law, regulation, order, judgment
or decree of any Governmental Authority shall, and the Agent shall not have
received from any Lender or Issuing Bank notice that, in the judgment of such
Lender or Issuing Bank, litigation is pending or threatened which is likely to,
enjoin, prohibit or restrain, or impose or result in the imposition of any
material adverse condition upon, (i) such Lender's making of the requested Loan
or participation in the requested Letter of Credit or (ii) such Issuing Bank's
issuance of the requested Letter of Credit.
(d) NO MATERIAL ADVERSE EFFECT. No event shall have
occurred since the date of this Agreement which has resulted, or
is reasonably likely to result, in a Material Adverse Effect.
Each submission by the Borrower to the Agent of a Notice of Borrowing with
respect to any Loan, each acceptance by the Borrower of the proceeds of each
Loan made hereunder, each submission by the Borrower to an Issuing Bank of a
request for issuance of a Letter of Credit and the issuance of such Letter of
Credit, shall constitute a representation and warranty by the Borrower as of the
Funding Date in respect of such Loan and the date of issuance of such Letter of
Credit, that all the conditions contained in this SECTION 6.02 have been
satisfied or waived in accordance with SECTION 15.07.
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6.03. ADDITIONAL CONDITIONS PRECEDENT TO ALL LOANS MADE UNDER
THE ACQUISITION SUBFACILITY. The obligation of each Revolving Lender to make any
Loan requested to be made by it under the Acquisition Subfacility is also
subject to an Officer's Certificate having been executed and delivered by the
president or treasurer of the Borrower to the Agent concurrent with the Notice
of Borrowing delivered in connection with such requested Borrowing stating that
the proceeds of such Loan shall be used solely to pay part or all of the
purchase price for a Permitted Acquisition and to pay fees and expenses
attendant thereto.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
7.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. In order
to induce the Lenders and the Issuing Banks to enter into this Agreement and to
make the Loans and the other financial accommodations to the Borrower and to
issue the Letters of Credit described herein, the Borrower hereby represents and
warrants to each Lender, each Issuing Bank and the Agent that the following
statements are true, correct and complete:
(a) LIQUIDATIONS; ORGANIZATION; POWERS. (i) The Partnership
has been liquidated into the Borrower, with the Borrower having become the owner
of all assets owned by the Partnership prior to the effectiveness of such
Liquidation and the obligor with respect to all liabilities and obligations of
the Partnership existing prior to the effectiveness of such Liquidation; and
Leasing LP has been liquidated into Leasing Subsidiary, with Leasing Subsidiary
having become the owner of all assets owned by Leasing LP prior to the
effectiveness of such Liquidation and the obligor with respect to all
liabilities and obligations of Leasing LP existing prior to the effectiveness of
such Liquidation, in each instance in accordance with all applicable
Requirements of Law.
(ii) The Borrower and each Guarantor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Borrower is duly qualified to do business and is in good standing
under the laws of the states of Texas, Florida, California, Oklahoma, and
Washington, and of each other jurisdiction in which failure to be so qualified
and in good standing will result, or is reasonably likely to result, in a
Material Adverse Effect. Leasing Subsidiary is duly qualified to do business and
is in good standing under the laws of the state of Florida and of each other
jurisdiction in which failure to be so qualified and in good standing will
result, or is reasonably likely to result, in a Material Adverse Effect. Parent
is duly qualified to do business and is in good standing under the laws of the
state of Florida and of each other jurisdiction in which failure to be so
qualified and in good standing will result, or is reasonably likely to result,
in a Material Adverse Effect. Finance Affiliate is duly qualified to do business
and is in good standing under the laws of each jurisdiction in which failure to
be so qualified and in good standing will result, or is reasonably likely to
result, in a Material Adverse Effect. Each of the Borrower and Guarantors (A)
has filed and maintained effective (unless exempt from the requirements for
filing) a current Business Activity Report with the appropriate Governmental
Authority in the states of Minnesota and New Jersey, (B) is a corporation for
federal income tax purposes, and (C) has all requisite corporate power and
authority to own, operate and encumber its Property and to conduct its business
as presently conducted and as proposed to be conducted
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in connection with and following the consummation of the
transactions contemplated by this Agreement. Leasing Subsidiary
is the sole Subsidiary of the Borrower.
(iii) True, correct and complete copies of the Organizational
Documents identified on SCHEDULE 7.01-A attached hereto have been delivered to
the Agent, each of which is in full force and effect, has not been modified or
amended except to the extent indicated therein or as may be permitted pursuant
to SECTION 10.14 and, to the best of the Borrower's knowledge, there are no
defaults under such Organizational Documents and no events which, with the
passage of time or giving of notice or both, would constitute a default under
such Organizational Documents.
(b) AUTHORITY. (i) The Borrower and each Guarantor has the
requisite power and authority (A) to execute, deliver and perform each of the
Loan Documents which are required to be executed on behalf of such Person as
required by this Agreement on or prior to the Effective Date and (B) to file or
record the Loan Documents which are required to be filed or recorded by it in
connection with the Liquidations, Merger and Offering or which have been filed
or recorded by it as required by this Agreement on or prior to the Effective
Date, with any Governmental Authority.
(ii) The execution, delivery, performance and filing or
recording, as the case may be, of each of the Transaction Documents which are
required to be executed, filed or recorded by or on behalf of the Borrower and
the Guarantors in connection with the Liquidations, Merger or Offering, or which
have been executed, filed or recorded by or on behalf of the Borrower or
Guarantors as required by this Agreement on or prior to the Effective Date and
to which the Borrower or any Guarantor is party and the consummation of the
transactions contemplated thereby are within such Person's, as applicable,
corporate powers, have been duly authorized by all necessary corporate action
and such authorization has not been rescinded. No other corporate action or
proceedings on the part of the Borrower or any Guarantor are necessary to
consummate such transactions.
(iii) Each of the Loan Documents to which the Borrower or any
Guarantor is a party (A) has been duly executed, delivered, filed or recorded,
as the case may be, on behalf of such Person, as applicable, (B) where
applicable, creates valid and perfected first Liens in the Collateral covered
thereby (except for Customary Permitted Liens which might be senior to the Liens
granted under the Loan Documents) securing the payment of all of the obligations
purported to be secured thereby, (C) constitutes such Person's, as applicable,
legal, valid and binding obligation, enforceable against such Person, as
applicable, in accordance with its terms, and (D) is in full force and effect
and no material term or condition thereof has been amended, modified or waived
from the terms and conditions contained therein as delivered to the Agent
without the prior
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written consent of the Lenders required to consent to such amendment,
modification or waiver. All parties to the Loan Documents have performed and
complied with all the terms, provisions, agreements and conditions set forth
therein and required to be performed or complied with by such parties on or
before the Effective Date, all filings and recordings and other actions which
are necessary or desirable to perfect and protect the Liens granted pursuant to
the Loan Documents and preserve their required priority have been duly taken,
and no Potential Event of Default, Event of Default or breach of any covenant by
any such party exists thereunder.
(c) CORPORATE AFFILIATES; OWNERSHIP OF EQUITY SECURITIES.
SCHEDULE 7.01-C attached hereto (i) contains a diagram indicating the corporate
structure of the Parent and each Person in which the Parent holds a direct or
indirect partnership, joint venture, or other equity interest and indicates the
nature of such interest with respect to each Person included in such diagram;
and (ii) accurately sets forth (A) the correct legal name of such Person, the
jurisdiction of its incorporation or organization and the jurisdictions in which
it is qualified to transact business as a foreign corporation or otherwise, and
(B) the authorized, issued and outstanding shares or interests of each class of
equity Securities of the Parent and each such Person, and, with respect to
Subsidiaries of the Parent, the owners of such shares or interests. None of such
issued and outstanding Securities is subject to any vesting, redemption, or
repurchase agreement, and there are no warrants or options (other than Permitted
Equity Securities Options) outstanding with respect to such Securities. The
outstanding Capital Stock of each Subsidiary of the Parent is duly authorized,
validly issued, fully paid and nonassessable and is not Margin Stock, are free
and clear of all Liens, except for Liens granted pursuant to the Loan Documents,
are not subject to any option or purchase rights, conversion or exchange rights,
call, commitment or claim of any right, title or interest therein or thereto,
and have been issued in compliance with all applicable Requirements of Law.
(d) NO CONFLICT. The execution, delivery and perfor mance of
each of the Loan Documents to which the Borrower or any Guarantor is a party do
not and will not (i) conflict with the Organizational Documents of such Person a
party thereto, (ii) to the best of Borrower's and each Guarantor's knowledge,
constitute a tortious interference with any Contractual Obligation of any Person
or conflict with, result in a breach of or constitute (with or without notice or
lapse of time or both) a default under any Requirement of Law or Contractual
Obligation of the Borrower or any Guarantor or require termination of any
Contractual Obligation, the consequences of which violation, breach, default or
termination, singly or in the aggregate, will result, or is reasonably likely to
result, in a Material Adverse Effect or may subject the Agent, any of the
Lenders or any of the Issuing Banks to any liability, (iii) result in or require
the creation or
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imposition of any Lien whatsoever upon any of the Property or assets of the
Borrower or such Guarantor, other than Liens contemplated by the Loan Documents,
or (iv) require any approval of the shareholders of such Person.
(e) GOVERNMENTAL CONSENTS. Except as set forth on SCHEDULE
7.01-E attached hereto, the execution, delivery and performance of each of the
Transaction Documents to which the Borrower or any Guarantor is a party do not
and will not require any registration with, consent or approval of, or notice
to, or other action to, with or by any Governmental Authority, except (i)
filings, consents or notices which have been made, obtained or given and (ii)
filings necessary to create or perfect security interests in the Collateral.
(f) GOVERNMENTAL REGULATION. Neither the Borrower nor any
Guarantor is subject to regulation under the Public Utility Holding Company Act
of 1935, the Federal Power Act, the Interstate Commerce Act, or the Investment
Company Act of 1940, or any other federal or state statute or regulation which
limits its ability to incur indebtedness or its ability to consummate the
transactions contemplated by the Transaction Documents.
(g) RESTRICTED JUNIOR PAYMENTS. During the period commencing
on their respective dates of incorporation and ending on the Effective Date,
neither the Borrower nor any Guarantor directly or indirectly declared, ordered,
paid or made, or set apart any sum or Property for, any payment or distribution
which would constitute a Restricted Junior Payment under this Agreement, or
agreed to do so, except as has been disclosed on SCHEDULE 6.01-J.
(h) FINANCIAL POSITION. Complete and accurate copies of the
following Financial Statements, materials and other information have been
delivered to the Agent: (i) the Pro Forma and Projections, (ii) the audited
financial statements of the Partnership for the Fiscal Years ended on December
31, 1994 and December 31, 1995, (iii) the Offering Documents, and (iv) all
financial reporting required during the period December 31, 1995 through the
Effective Date under the 1994 Credit Agreement. All financial statements
included in such materials were prepared in all material respects in conformity
with GAAP, except as otherwise noted therein, and fairly present in all material
respects the respective financial positions, and the results of operations and
cash flows for each of the periods covered thereby of the applicable Person as
at the respective dates thereof. Neither the Borrower nor any Guarantor has, as
of the Effective Date, any Accommodation Obligation, contingent liability or
liability for any taxes, long-term leases or commitments, not disclosed in
writing to the Agent and the Lenders prior to the Closing Date. No distributions
are required to be made to the partners of the Partnership and Leasing LP after
the Closing Date.
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(i) PRO FORMA FINANCIALS. The Pro Forma fairly presents on a
PRO FORMA basis the consolidated and consolidating financial condition of the
Parent and its Subsidiaries as of the Effective Date and reflects on a PRO FORMA
basis those liabilities reflected in the notes thereto and resulting from
consummation of the transactions contemplated by the Transaction Documents and
the payment or accrual of all Transaction Costs payable with respect to any of
the foregoing. The Projections and the assumptions expressed in the Pro Forma
are reasonable based on the information available to the Borrower at the time so
furnished.
(j) INDEBTEDNESS. SCHEDULE 1.01.5 sets forth all Indebtedness
for borrowed money of the Borrower and its respective Subsidiaries as of the
Effective Date; there are no defaults in the payment of principal or interest on
any Indebtedness of the Borrower or the Guarantors and no payments under such
Indebtedness have been deferred or extended beyond their stated maturity (except
as disclosed on such SCHEDULE).
(k) LITIGATION; ADVERSE EFFECTS. Except as set forth in
SCHEDULE 7.01-K attached hereto, there is no action, suit, proceeding, Claim,
investigation or arbitration before or by any Governmental Authority or private
arbitrator pending or, to the knowledge of the Borrower, threatened against the
Parent, the Borrower (whether as successor to the Partnership or otherwise), any
of its Subsidiaries (whether as successor to Leasing LP or otherwise), or the
Finance Affiliate or any of their respective Property (i) challenging the
validity or the enforceability of the Offering, Liquidations, Merger, or
Transaction Documents, (ii) which will, or is reasonably likely to, result in
any Material Adverse Effect, or (iii) under the Racketeering Influenced and
Corrupt Organizations Act or any similar federal or state statute or law under
any jurisdiction outside of the United States where such Person is a defendant
in a criminal indictment that provides for the forfeiture of assets to any
Governmental Authority as a criminal penalty. There is no material loss
contingency within the meaning of GAAP which has not been reflected in the
Financial Statements of the Partnership or the Parent and its Subsidiaries.
Neither the Borrower nor any Guarantor is subject to or in default with respect
to any final judgment, writ, injunction, restraining order or order of any
nature, decree, rule or regulation of any court or Governmental Authority which
will, or is reasonably likely to, result in a Material Adverse Effect.
(l) Intentionally omitted.
(m) NO MATERIAL ADVERSE EFFECT. Since December 31, 1995, there
has occurred no event with respect to the Partnership or Leasing LP or any
Affiliate thereof which has resulted, or is reasonably likely to result, in a
Material Adverse Effect. Since their respective dates of incorporation, there
has occurred no event with respect to the Borrower or any Guarantor which has
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resulted, or is reasonably likely to result, in a Material
Adverse Effect.
(n) PAYMENT OF TAXES. All tax returns and reports of each of
the Partnership and the general partner thereof, the Borrower, and each
Guarantor required to be filed have been timely filed, and all taxes,
assessments, fees and other charges of Governmental Authorities thereupon and
upon or relating to their respective Properties, assets, income and franchises
which are shown in such returns or reports to be due and payable have been paid,
except to the extent (i) such taxes, assessments, fees and other charges are
being contested in good faith by an appropriate proceeding diligently pursued as
permitted by the terms of SECTION 9.04 and (ii) non-payment of the amounts
thereof would not, individually or in the aggregate, result in a Material
Adverse Effect. The Borrower has no knowledge of any proposed tax assessment
against the Borrower or any Guarantor, or any Property of any of them, that
will, or is reasonably likely to, result in a Material Adverse Effect.
(o) PERFORMANCE. Neither the Borrower nor any Guarantor has
received any notice, citation, or allegation, nor has actual knowledge, that (i)
the Partnership, Leasing LP, or any of them is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any Contractual Obligation applicable to any of them, (ii) any of
the Property of any such Person is in violation of any Requirement of Law, or
(iii) any condition exists which, with the giving of notice or the lapse of time
or both, would constitute a default with respect to any such Contractual
Obligation, in each case, except where such default or defaults, if any, will
not, or is not reasonably likely to, result in a Material Adverse Effect.
(p) DISCLOSURE. The representations and warranties of the
Borrower contained in the Loan Documents, and all certificates and other
documents delivered to the Agent pursuant to the terms thereof, do not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained herein or therein, in light
of the circumstances under which they were made, not misleading. The Borrower
has not intentionally withheld any fact from the Agent, the Issuing Banks or the
Lenders in regard to any matter which will, or is reasonably likely to, result
in a Material Adverse Effect.
(q) REQUIREMENTS OF LAW. Each of the Borrower and respective
Guarantors is in compliance with all Requirements of Law applicable to it and
its respective business, in each case where the failure to so comply
individually or in the aggregate will, or is reasonably likely to, result in a
Material Adverse Effect.
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(r) ENVIRONMENTAL MATTERS. (i) Except as disclosed on
SCHEDULE 7.01-R attached hereto:
(A) the operations of the Borrower and each Guarantor and
their respective Properties comply in all material respects with all applicable
Environmental, Health or Safety Requirements of Law;
(B) the Borrower and each Guarantor has obtained all
environmental, health and safety Permits necessary for its respective operations
and Properties, and all such Permits are in good standing and the Borrower and
each Guarantor are currently in material compliance with all terms and
conditions of such Permits;
(C) neither the Borrower nor any Guarantor, nor any of their
present or past Property or operations, are subject to or the subject of any
judicial or administrative proceeding, order, judgment, decree, dispute,
negotiations, agreement, or settlement respecting (I) any Environmental, Health
or Safety Requirements of Law, (II) any Remedial Action, (III) any Claims or
Liabilities and Costs arising from the Release or threatened Release of a
Contaminant into the environment, or (IV) any violation of or liability under
any Environmental, Health or Safety Requirement of Law that the Borrower or such
Guarantor reasonably believes will result in an expenditure over $250,000;
(D) neither the Borrower nor any Guarantor has filed any
notice under any applicable Requirement of Law (I) reporting a Release of a
Contaminant, (II) under Section 103(c) of CERCLA, indicating past or present
treatment, storage or disposal of a hazardous waste, as that term is defined
under 40 C.F.R. Part 261 or any state equivalent; or (III) reporting a violation
of any applicable Environmental, Health or Safety Requirement of Law;
(E) none of the present or past Property of the Borrower or
any Guarantor is listed or proposed for listing on the National Priorities List
("NPL") pursuant to CERCLA or on the Comprehensive Environmental Response
Compensation Liability Information System List ("CERCLIS") or any similar state
list of sites requiring Remedial Action;
(F) neither the Borrower nor any Guarantor has sent or
directly arranged for the transport of any waste to any current or proposed NPL
site, CERCLIS or any similar state list of sites requiring Remedial Action;
(G) there is not now in connection with or resulting from
Borrower's or any Guarantor's operations, nor, to Borrower's knowledge, has
there ever been on or in any of the Property (I) any treatment, recycling,
storage or disposal of any hazardous waste requiring a Permit under 40 C.F.R.
Parts 264 and 265 or any state equivalent,(II) any landfill, waste pile,
underground storage tank or surface impoundment, (III) any
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asbestos-containing material; or (IV) a Release of any polychlorinated biphenyls
(PCB) used in hydraulic oils, electrical transformers or other Equipment;
(H) neither the Borrower nor any Guarantor has received any
notice or Claim to the effect that it is or may be liable to any Person as a
result of the Release or threatened Release of a Contaminant into the
environment;
(I) to the Borrower's knowledge, there have been no Releases
of any Contaminants to the environment from any Property except in compliance
with Environmental, Health or Safety Requirements of Law, or which have not been
corrected to the satisfaction of the appropriate Governmental Authorities;
(J) to the Borrower's knowledge, neither the Borrower nor any
Guarantor has any contingent liability in connection with any Release or
threatened Release of any Contaminants into the environment;
(K) no Environmental Lien has attached to any
Property; and
(L) none of the Property is subject to any Environmental
Property Transfer Act, or to the extent such acts are applicable to any such
Property, the Borrower (or the Partnership as its predecessor in interest) has
fully complied with the requirements of such acts.
(ii) the Borrower and each Guarantor is conducting and will
continue to conduct its respective business and operations in an environmentally
responsible manner in material compliance with Environmental, Health or Safety
Requirements of Law and neither the Borrower nor any Guarantor has been, nor has
any reason to believe that it will be, subject to Liabilities and Costs arising
out of or relating to environmental, health or safety matters that have or will
result in cash expenditures by the Borrower or Guarantor in excess of $250,000
in the aggregate for any calendar year ending after the Closing Date.
(s) ERISA. None of the Borrower, any Guarantor, or any ERISA
Affiliate maintains or contributes to any Benefit Plan or Multiemployer Plan
other than those listed on SCHEDULE 7.01-S attached hereto; the Plans identified
on SCHEDULE 7.01-S include all Plans of the Partnership and Leasing LP
transferred to and assumed by the Borrower and Leasing Subsidiary. Each Plan
which is intended to be qualified under Section 401(a) of the Internal Revenue
Code as currently in effect either (i) has received a favorable determination
letter from the IRS that the Plan is so qualified or (ii) an application for
determination of such tax-qualified status will be made to the IRS prior to the
end of the applicable remedial amendment period under Section 401(a) of the
Internal Revenue Code as currently in effect, and the Borrower, the Guarantors,
or an ERISA Affiliate shall diligently seek to
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obtain a determination letter with respect to such application. Except as
identified on SCHEDULE 7.01-S, neither the Borrower nor any Guarantor maintains
or contributes to any employee welfare benefit plan within the meaning of
Section 3(1) of ERISA which provides benefits to employees after termination of
employment other than as required by Section 601 of ERISA. The Borrower and each
of the Guarantors are in compliance in all material respects with the
responsibilities, obligations and duties imposed on it by ERISA and the Internal
Revenue Code with respect to all Plans. No Benefit Plan has incurred any
accumulated funding deficiency (as defined in Sections 302(a)(2) of ERISA and
412(a) of the Internal Revenue Code) whether or not waived. Neither the Borrower
nor any ERISA Affiliate nor any fiduciary of any Plan which is not a
Multiemployer Plan (i) has engaged in a nonexempt prohibited transaction
described in Sections 406 of ERISA or 4975 of the Internal Revenue Code or (ii)
has taken or failed to take any action which would constitute or result in a
Termination Event. Neither the Borrower nor any ERISA Affiliate has any
potential liability under Sections 4063, 4064, 4069, 4204 or 4212(c) of ERISA.
Neither the Borrower nor any ERISA Affiliate has incurred any liability to the
PBGC which remains outstanding other than the payment of premiums, and there are
no premium payments which have become due which are unpaid. Schedule B to the
most recent annual report filed with the IRS with respect to each Benefit Plan
and furnished to the Agent is complete and accurate in all material respects.
Since the date of each such Schedule B, there has been no material adverse
change in the funding status or financial condition of the Benefit Plan relating
to such Schedule B. Neither the Borrower nor any ERISA Affiliate has (i) failed
to make a required contribution or payment to a Multiemployer Plan or (ii) made
a complete or partial withdrawal under Sections 4203 or 4205 of ERISA from a
Multiemployer Plan. Neither the Borrower nor any ERISA Affiliate has failed to
make a required installment or any other required payment under Section 412 of
the Internal Revenue Code on or before the due date for such installment or
other payment. Neither the Borrower nor any ERISA Affiliate is required to
provide security to a Benefit Plan under Section 401(a)(29) of the Internal
Revenue Code due to a Benefit Plan amendment that results in an increase in
current liability for the plan year. Except as disclosed on SCHEDULE 7.01-S,
neither the Borrower nor any Guarantor, by reason of the transactions
contemplated hereby, has any obligation to make any payment to any employee
pursuant to any Plan or existing contract or arrangement. The Borrower has given
to the Agent copies of all of the following: each Benefit Plan and related trust
agreement (including all amendments to such Plan and trust) in existence or
committed to as of the Closing Date and in respect of which the Borrower or any
ERISA Affiliate is currently an "employer" as defined in section 3(5) of ERISA,
and the most recent summary plan description, actuarial report, determination
letter issued by the IRS and Form 5500 filed in respect of each such Benefit
Plan in existence; a listing of all of the Multiemployer Plans with the
aggregate amount of the most recent annual contributions required
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to be made by the Borrower and all ERISA Affiliates to each such Multiemployer
Plan, any information which has been provided to the Borrower or an ERISA
Affiliate regarding withdrawal liability under any Multiemployer Plan and the
collective bargaining agree ment pursuant to which such contribution is required
to be made; and as to each employee welfare benefit plan within the meaning of
Section 3(1) of ERISA which provides benefits to employees of the Borrower or
any Guarantor after termination of employment other than as required by Section
601 of ERISA, the most recent summary plan description for such plan and the
aggregate amount of the most recent annual payments made to terminated employees
under each such plan.
(t) LABOR MATTERS. Neither the Borrower nor any
Guarantor is a party to any collective bargaining agreement.
(u) SECURITIES ACTIVITIES. Neither the Borrower nor
any Guarantor is engaged in the business of extending credit for
the purpose of purchasing or carrying Margin Stock.
(v) SOLVENCY. After giving effect to this Agreement, the
Liquidations, Merger, Offering, and related transactions and transfers, the
incurrence of the Finance Affiliate Indebtedness, the Loans to be made and the
Letters of Credit to be issued on the Effective Date or such other date as Loans
requested hereunder are made or Letters of Credit requested hereunder are
issued, and the disbursement of the proceeds of such Loans pursuant to the
Borrower's instructions, the Borrower and each Guarantor is Solvent.
(w) PATENTS, TRADEMARKS, PERMITS, ETC.; GOVERNMENT APPROVALS.
(i) The Borrower and each Guarantor, as applicable, owns, is licensed or
otherwise has the lawful right to use, or has all Permits, patents, trademarks,
trade names, copyrights, technology, know-how, permits and processes used in or
necessary for the conduct of its respective business as currently conducted
which are material to its condition (financial or otherwise), operations,
performance and prospects. Except as set forth on SCHEDULE 7.01-W attached
hereto, no claims are pending or, to the best of Borrower's knowledge following
diligent inquiry, threatened that the Borrower or any Guarantor is infringing or
otherwise adversely affecting the rights of any Person with respect to such
Permits and other governmental approvals, patents, trademarks, trade names,
copyrights, technology, know-how, permits and processes, except for such claims
and infringements as do not, in the aggregate, give rise to any liability on the
part of the Borrower or any Guarantor which will, or is reasonably likely to,
result in a Material Adverse Effect.
(ii) The consummation of the Liquidations, the Merger, the
Offering, and the other transfers and transactions contemplated by the
Transaction Documents will not impair the ownership of or rights under (or the
license or other right to
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use, as the case may be) any Permits and governmental approvals, patents,
trademarks, trade names, copyrights, technology, know-how, permits or processes
by the Borrower or any Guarantor in any manner which will, or is reasonably
likely to, result in a Material Adverse Effect.
(x) ASSETS AND PROPERTIES. The Borrower and each Guarantor has
good and marketable title to all of the assets and Property (tangible and
intangible) owned by it (except insofar as marketability may be limited by any
laws or regulations of any Governmental Authority affecting such assets), and
all such assets and Property are free and clear of all Liens, except Liens
securing the Obligations and Liens permitted under SECTION 10.03. Substantially
all of the assets and Property owned by, leased to, or used by the Borrower
and/or the Guarantors is in adequate operating condition and repair, ordinary
wear and tear excepted (other than Inventory classified as "AR", "R", and
"BER"), is free and clear of any known defects except such defects as do not
substantially interfere with the continued use thereof in the conduct of normal
operations, and is able to serve the function for which they are currently being
used, except in each case where the failure of such asset to meet such
requirements would not, or is not reasonably likely to, result in a Material
Adverse Effect. Neither this Agreement nor any other Transaction Docu ment, nor
any transaction contemplated under any such agreement, will affect any right,
title or interest of the Borrower or any Guarantor in and to any of such assets
in a manner that would, or is reasonably likely to, result in a Material Adverse
Effect.
(y) INSURANCE. SCHEDULE 7.01-Y attached hereto accurately sets
forth as of the Closing Date all insurance policies and programs currently in
effect with respect to the respective Property and assets and business of the
Borrower and Guarantors, specifying for each such policy and program, (i) the
amount thereof, (ii) the risks insured against thereby, (iii) the name of the
insurer and each insured party thereunder, (iv) the policy or other
identification number thereof, (v) the expiration date thereof, (vi) the annual
premium with respect thereto, and (vii) a list of claims and awards made
thereunder during the immediately preceding three (3) calendar years. Borrower
has delivered to the Agent copies of all such insurance policies. Such insurance
policies and programs are currently in full force and effect, in compliance with
the requirements of SECTION 9.05 and are in amounts sufficient to cover the
replacement value of the respective Property and assets of the Borrower and
Guarantors.
(z) THE LIQUIDATIONS; MERGER; OFFERING. (i) All conditions
precedent to, and all consents necessary to permit, the Liquidations pursuant to
the related Liquidation Documents, the Merger pursuant to the related Merger
Documents and the Offering pursuant to the related Offering Documents have been
satisfied or delivered, or waived with the prior written consent of the Agent,
and no material breach of any term or provision of
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any Liquidation Document, Merger Document, or Offering Document has occurred and
no action has been taken by any competent authority which restrains, prevents or
imposes material adverse conditions upon, or seeks to restrain, prevent or
impose material adverse conditions upon, the Liquidations, the Merger or the
Offering, or the funding of any Loans and issuance of any Letters of Credit
hereunder. Borrower has acquired all of the assets of the Partnership and
Leasing Subsidiary has acquired all of the assets of Leasing LP pursuant to the
related Liquidation Documents and in compliance with all applicable Requirements
of Law. The Liquidations and Merger have become effective.
(ii) Net proceeds of the Offering in the amount of
$____________ have been received by Parent, have been contributed, in cash, to
the capital of Finance Affiliate, and have been used by Finance Affiliate to
make a loan in such amount to Borrower; $7,692,180.56 has been used by the
Borrower to repay the Subordinated Debt and all accrued and unpaid interest
thereon in full and $___________ has been used by the Borrower to repay
$___________ of Indebtedness incurred under the 1994 Credit Agreement. The
Borrower has been irrevocably released from all liability and Contractual
Obligations with respect to the Subordinated Debt.
(aa) PLEDGE OF SECURITIES. The grant and perfection of the
security interest in the equity Securities of Borrower, Borrower's Subsidiaries
and Finance Affiliate as contemplated by the Loan Documents is not made in
violation of any Requirement of Law.
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ARTICLE VIII
REPORTING COVENANTS
The Borrower covenants and agrees that so long as any
Commitments are outstanding and thereafter until payment in full of all of the
Obligations (other than indemnities not yet due), unless the Requisite Lenders
shall otherwise give their prior written consent thereto:
8.01. FINANCIAL STATEMENTS. The Borrower shall main tain, and
cause each of the Guarantors to maintain, a system of accounting established and
administered in accordance with sound business practices to permit preparation
of consolidated and consolidating Financial Statements in conformity with GAAP
and each of the Financial Statements described below shall be prepared from such
system and records. The Borrower shall deliver or cause to be delivered to the
Agent and the Lenders:
(a) MONTHLY REPORTS. From and after any written request
therefor by the Agent to the Borrower, as soon as practicable, and in any event
within thirty (30) days after the end of each calendar month, the consolidated
and consolidating balance sheets of the Parent and its Subsidiaries as at the
end of such period and the related consolidated and consolidating statements of
income, shareholders' equity and cash flow of the Parent and its Subsidiaries
for such calendar month, setting forth in each case in comparative form the
corresponding figures for the corresponding calendar month of the previous
Fiscal Year certified by the chief financial officer of the Borrower as fairly
presenting the consolidated and consolidating financial position of the Parent
and its Subsidiaries as at the dates indicated and the results of their
operations and cash flow for the calendar months indicated in accordance with
GAAP, subject to normal year end adjustments.
(b) QUARTERLY REPORTS. As soon as practicable, and in any
event within forty-five (45) days after the end of each fiscal quarter in each
Fiscal Year, the consolidated and consolidating balance sheets of the Parent and
its Subsidiaries as at the end of such period and the related consolidated and
consolidating statements of income, shareholders' equity and cash flow of the
Parent and its Subsidiaries for such fiscal quarter, the period commencing on
the Closing Date and ending on September 28, 1996, and thereafter for the period
from the beginning of the then current Fiscal Year to the end of such fiscal
quarter, setting forth in each case in comparative form the corresponding
figures for the corresponding periods of the previous Fiscal Year and the
corresponding figures from the financial forecast for the current Fiscal Year
delivered on the Closing Date or pursuant to SECTION 8.01(F), as applicable,
certified by the chief financial officer of the Borrower as fairly presenting
the consolidated and consolidating financial position of the Parent and its
Subsidiaries as at the dates indicated and the results of their
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operations and cash flow for the periods indicated in accordance with GAAP,
subject to normal year end adjustments. For purposes of SECTIONS 8.01(A),
8.01(B), and 8.01(C), comparisons required to be made during the period
commencing on the Closing Date and ending on December 31, 1996 shall be made to
the corresponding figures for the corresponding periods set forth in the
consolidating balance sheets of the Partnership delivered to the Agent and the
Lenders under the 1994 Credit Agreement. Notwithstanding the foregoing, in the
event (i) the filing of the Parent's Form 10-Q with the Commission with respect
to any fiscal quarter is delayed for any reason and Borrower has provided Agent
with written notice of such delay by the due date for the reports required for
such quarter under this CLAUSE (B) and (ii) Borrower shall deliver either the
required reports or interim good faith estimates of the information required to
be reported under this CLAUSE (B) within fifty-five (55) days after the end of
such fiscal quarter, upon delivery of such required reports or interim estimates
within such period the Borrower shall be deemed to have complied with the
requirements of this CLAUSE (B) with respect to such quarter PROVIDED THAT
Borrower delivers the required reporting substantially concurrently with
Parent's filing of its Form 10-Q with the Commission.
(c) ANNUAL REPORTS. As soon as practicable, and in any event
within ninety (90) days after the end of each Fiscal Year, (i) the consolidated
and consolidating balance sheets of the Parent and its Subsidiaries as at the
end of such Fiscal Year and the related consolidated and consolidating
statements of income, shareholders' equity and cash flow of the Parent and its
Subsidiaries for such Fiscal Year, setting forth in each case in comparative
form the corresponding figures for the previous Fiscal Year and the
corresponding figures from the financial forecast for the current Fiscal Year
delivered on the Closing Date or pursuant to SECTION 8.01(F), as applicable, and
(ii) a report thereon of Arthur Andersen LLP or other independent certified
public accountants acceptable to the Agent, which report shall be unqualified
and shall state that such Financial Statements fairly present the consolidated
and consolidating financial position of the Parent and its Subsidiaries as at
the dates indicated and the results of their operations and cash flow for the
periods indicated in conformity with GAAP applied on a basis consistent with
prior years (except for changes with which Arthur Andersen LLP or any such other
independent certified public accountants, if applicable, shall concur and which
shall have been disclosed in the notes to the Financial Statements) and that the
examination by such accountants in connection with such Financial Statements has
been made in accordance with generally accepted auditing standards.
Notwithstanding the foregoing, in the event (A) the filing of the Parent's
annual report with the Commission with respect to any Fiscal Year is delayed for
any reason and Borrower hsa provided Agent with written notice of such delay by
the due date for the reports required for such Fiscal Year under this CLAUSE (C)
and (B) Borrower shall deliver either the required reports or interim good faith
estimates of
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the information required to be reported under this CLAUSE (C) within one hundred
(100) days after the end of each Fiscal Year, upon delivery of such required
reports or interim estimates within such period the Borrower shall be deemed to
have complied with the requirements of this CLAUSE (C) with respect to such
Fiscal Year PROVIDED THAT Borrower delivers the required reporting substantially
concurrently with Parent's filing of its annual report with the Commission.
(d) OFFICER'S CERTIFICATE. Together with each delivery of any
Financial Statement pursuant to this SECTION 8.01, (i) an Officer's Certificate
on behalf of the Borrower substantially in the form of EXHIBIT J attached hereto
and made a part hereof, stating that the Person signatory thereto has reviewed
the terms of the Loan Documents, and has made, or caused to be made under
his/her supervision, a review in reasonable detail of the transactions and
financial condition of the Borrower and its Subsidiaries during the accounting
period covered by such Financial Statements, that such review has not disclosed
the existence during or at the end of such accounting period, and that such
Person does not have knowledge of the existence as at the date of such Officer's
Certificate, of any condition or event which constitutes an Event of Default or
Potential Event of Default, or, if any such condition or event existed or
exists, specifying the nature and period of existence thereof and what action
the Borrower or any Subsidiary of the Borrower has taken, is taking and proposes
to take with respect thereto; and (ii) a certificate (the "Compliance
Certificate"), signed by the Borrower's chief financial officer, setting forth
calculations (with such specificity as the Agent may reasonably request) for the
period then ended which demonstrate compliance, when applicable, with the
provisions of ARTICLE XI.
(e) ACCOUNTANT'S STATEMENT AND PRIVITY LETTER. Together with
each delivery of the Financial Statements referred to in SECTION 8.01(C), a
written statement, in form and substance satisfactory to the Agent, of the firm
of independent certified public accountants giving the report thereon (i)
stating that their audit examination has included a review of the terms of this
Agreement as it relates to accounting matters, (ii) stating whether, in
connection with their audit examination, any condition or event which
constitutes an Event of Default or Potential Event of Default has come to their
attention, and if such condition or event has come to their attention,
specifying the nature and period of existence thereof; PROVIDED THAT such
accountants shall not be liable by reason of any failure to obtain knowledge of
any such condition or event that would not be disclosed in the course of their
audit examination, and (iii) stating that based on their audit examination
nothing has come to their attention which causes them to believe that the
information contained in either or both of the certificates delivered therewith
pursuant to SECTION 8.01(D) (as the information contained in such certificates
relates to the covenants set forth in ARTICLE XI) is not correct or that the
matters set forth in
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the Compliance Certificate delivered therewith pursuant to SECTION 8.01(D)(II)
for the applicable Fiscal Year are not stated in accordance with the terms of
this Agreement. The statement referred to above shall be accompanied by (x) a
copy of the management letter or any similar report delivered to the Borrower or
to any officer or employee thereof by such accountants in connection with such
Financial Statements and (y) a letter in substantially the form of EXHIBIT K
attached hereto and made a part hereof from the Parent to such accountants
informing such accountants that the Lenders are relying upon the Financial
Statements audited by such accountants and delivered to the Agent and the
Lenders pursuant to SECTION 8.01(C) and that a primary intent of the Parent in
having such Financial Statements audited is to induce the Lenders to continue to
make Loans to the Borrower under this Agreement. The Agent and each Lender may,
with the written consent of the Borrower (which consent shall not be
unreasonably withheld or delayed), communicate directly with such accountants.
(f) BUDGETS; BUSINESS PLANS; FINANCIAL PROJECTIONS. As soon as
practicable and in any event not later than thirty (30) days prior to the
commencement of each Fiscal Year for each of the Fiscal Years ending in 1997 and
thereafter, (i) a quarterly budget for such Fiscal Year; (ii) an annual business
plan for such Fiscal Year, substantially in the form of the business plan
heretofore delivered to the Agent and the Lenders, accompanied by a report
reconciling all changes and departures from the business plan delivered to the
Agent and the Lenders for the preceding Fiscal Year; and (iii) a plan and
financial forecast, prepared in accordance with the Parent's and Borrower's
normal accounting procedures applied on a consistent basis, for each succeeding
Fiscal Year until the scheduled Revolving Credit Termination Date, including,
without limitation, (A) forecasted consolidated and consolidating balance sheets
and statements of cash flow of the Parent and its Subsidiaries for each Fiscal
Year, (B) forecasted consolidated and consolidating balance sheets, statements
of earnings and retained earnings, and cash flow of the Parent and its
Subsidiaries for and as of the end of each fiscal quarter of the immediately
succeeding Fiscal Year and for and as of the end of each such Fiscal Year
thereafter, (C) the amount of forecasted Capital Expenditures for such Fiscal
Year, and (D) forecasted compliance with the provisions of ARTICLE XI.
8.02. OPERATIONS REPORTS. From and after any written request
for the monthly reports described in SECTION 8.01(A) is made by the Agent, as
soon as practicable and in any event within thirty (30) days after the end of
each calendar month, the Borrower shall deliver to the Agent and the Lenders a
report detailing the operations of the Borrower and its Subsidiaries which
report shall include a management commentary with respect to the Borrower's and
its Subsidiaries' financial performance during such month, together with an
explanation of any material changes in the statements of income, partners'
equity and cash
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flow of the Borrower and its Subsidiaries for such calendar month from such
statements for the corresponding calendar month of the previous Fiscal Year; and
information regarding bailed, consigned and field warehoused Inventory of the
Borrower and its Subsidiaries in the form of EXHIBIT L attached hereto and made
a part hereof.
8.03. BORROWING BASE CERTIFICATE; APPRAISALS. (a) BORROWING
BASE CERTIFICATE. The Borrower shall provide the Agent and the Revolving Lenders
(i) on the Closing Date (dated June 15, 1996), and (ii) on the Monday closest to
the first and fifteenth day of each calendar month or, if such Monday is not a
Business Day, the immediately succeeding Business Day (and, with respect to
CLAUSE (II), more often if requested by the Agent or the Requisite Revolving
Lenders), with a Borrowing Base Certificate, together with a calculation of the
Texas Tax Reserve as of the date thereof if such Texas Tax Reserve exceeds
$200,000 and such supporting documents as the Agent deems desirable, all
certified as being true and correct by the chief financial officer, chief
executive officer, or controller of the Borrower. All Borrowing Base
Certificates shall set forth information regarding Receivables on a semi-monthly
basis and information regarding Inventory on a monthly basis.
(b) APPRAISALS. On each anniversary of the Closing Date, or
semi-annually if requested by the Agent or Requisite Lenders, Borrower shall
provide the Agent and the Lenders with an appraisal of Borrower's and Leasing
Subsidiary's Inventory prepared by an independent appraiser satisfactory to the
Agent
and on the same basis as the Appraisal.
8.04. EVENTS OF DEFAULT. Promptly upon any of the chief
executive officer, chief operating officer, chief financial officer, treasurer
or controller of the Borrower obtaining knowledge (a) of any condition or event
which constitutes an Event of Default or Potential Event of Default, or becoming
aware that any Lender or the Agent has given any notice with respect to a
claimed Event of Default or Potential Event of Default under this Agreement, (b)
that any Person has given any notice to the Borrower or any Subsidiary of the
Borrower or taken any other action with respect to a claimed default or event or
condition of the type referred to in SECTION 12.01(E), or (c) of any condition
or event which has resulted, or is reasonably likely to result, in a Material
Adverse Effect or affect the value of, or the Agent's interest in, the
Collateral in any material respect, the Borrower shall deliver to the Agent and
the Lenders an Officer's Certificate specifying (i) the nature and period of
existence of any such claimed default, Event of Default, Potential Event of
Default, condition or event, (ii) the notice given or action taken by such
Person in connection therewith, and (iii) what action the Borrower has taken, is
taking and proposes to take with respect thereto.
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8.05. LAWSUITS. (a) INSTITUTION OF PROCEEDINGS.
Promptly upon the Borrower obtaining knowledge of the institution
of, or written threat of, any action, suit, proceeding,
governmental investigation or arbitration against or affecting
the Borrower, any Guarantor, or any Property not previously
disclosed pursuant to SECTION 7.01(K), which action, suit,
proceeding, governmental investigation or arbitration exposes, or
in the case of multiple actions, suits, proceedings, governmental
investigations or arbitrations arising out of the same general
allegations or circumstances which expose, in the Borrower's
reasonable judgment, the Borrower and/or any Guarantor to
liability in an amount aggregating $1,000,000 or more (exclusive
of claims covered by insurance policies of the Borrower and
Guarantors unless the insurers of such claims have disclaimed
coverage or reserved the right to disclaim coverage on such
claims), the Borrower shall give written notice thereof to the
Agent and the Lenders and provide such other information as may
be reasonably available to enable each Lender and the Agent and
its counsel to evaluate such matters.
(b) QUARTERLY REPORTS. As soon as practicable and in any event
within forty-five (45) days after the end of each fiscal quarter of the
Borrower, the Borrower shall provide a written quarterly report to the Agent and
the Lenders covering the institution of, or written threat of, any action, suit,
proceeding, governmental investigation or arbitration (not previ ously reported)
against or affecting the Borrower, any Guarantor, or any Property not previously
disclosed by the Borrower to the Agent and the Lenders, and shall provide such
other information at such time as may be reasonably available to enable each
Lender and the Agent and its counsel to evaluate such matters.
(c) ADDITIONAL REPORTS UPON REQUEST. In addition to the
requirements set forth in CLAUSES (A) and (B) of this SEC TION 8.05, the
Borrower upon request of the Agent or the Requisite Lenders shall promptly give
written notice of the status of any action, suit, proceeding, governmental
investigation or arbitration covered by a report delivered pursuant to either of
such CLAUSES (A) or (B) and provide such other information as may be reasonably
available to it to enable each Lender and the Agent and its counsel to evaluate
such matters.
8.06. INSURANCE. As soon as practicable and in any event by
the last day of February in each calendar year, the Borrower shall deliver to
the Agent and the Lenders (a) a report in form and substance reasonably
satisfactory to the Agent and the Lenders outlining (i) all material insurance
coverage main tained as of the date of such report by the Borrower and
Guarantors and the duration of such coverage and (ii) the claims and awards, if
any, made under such insurance for the twelve (12) calendar month period then
ending and (b) evidence that all premiums with respect to such coverage have
been paid when due.
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8.07. ERISA NOTICES. The Borrower shall deliver or cause to be
delivered to the Agent and the Lenders, at the Borrower's expense, the following
information and notices as soon as reasonably possible, and in any event:
(a) within ten (10) Business Days after the Borrower or any
ERISA Affiliate knows or has reason to know that a Termination Event
has occurred, a written statement of the chief financial officer of the
Borrower describing such Termination Event and the action, if any,
which the Borrower or any ERISA Affiliate has taken, is taking or
proposes to take with respect thereto, and when known, any action taken
or threatened by the IRS, DOL or PBGC with respect thereto;
(b) within ten (10) Business Days after the Borrower knows or
has reason to know that an assessment of a prohibited transaction
excise tax under Section 4975 of the Internal Revenue Code has
occurred, a statement of the chief financial officer of the Borrower
describing such transaction and the action which the Borrower or any
ERISA Affiliate has taken, is taking or proposes to take with respect
thereto;
(c) within three (3) Business Days after the filing of the
same with the DOL, IRS or PBGC, copies of each annual report (form 5500
series), including Schedule B thereto, filed with respect to each
Benefit Plan;
(d) within three (3) Business Days after receipt by the
Borrower or any ERISA Affiliate of each actuarial report for any
Benefit Plan or Multiemployer Plan and each annual report for any
Multiemployer Plan, copies of each such report;
(e) within three (3) Business Days after the filing of the
same with the IRS, a copy of each funding waiver request filed with
respect to any Benefit Plan and all communications received by the
Borrower or any ERISA Affiliate with respect to such request;
(f) within three (3) Business Days after the occurrence any
material increase in the benefits of any existing Benefit Plan or the
establishment of any new Benefit Plan or the commencement of
contributions to any Benefit Plan to which the Borrower or any ERISA
Affiliate was not previously contributing, notification of such
increase, establishment or commencement;
(g) within three (3) Business Days after the Borrower or any
ERISA Affiliate receives notice of the PBGC's intention to terminate a
Benefit Plan or to have
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a trustee appointed to administer a Benefit Plan,
copies of each such notice;
(h) within three (3) Business Days after the Borrower or any
Guarantor receives notice of any unfavorable determination letter from
the IRS regarding the qualification of a Plan under Section 401(a) of
the Internal Revenue Code, copies of each such notice and letter;
(i) within three (3) Business Days after the Borrower or any
ERISA Affiliate receives notice from a Multiemployer Plan regarding the
imposition of with drawal liability, copies of each such notice;
(j) within three (3) Business Days after the Borrower or any
ERISA Affiliate fails to make a required installment or any other
required payment under Section 412 of the Internal Revenue Code on or
before the due date for such installment or payment, a notification of
such failure; and
(k) within three (3) Business Days after the Borrower or any
ERISA Affiliate knows (A) a Multiemployer Plan has been terminated, (B)
the administrator or plan sponsor of a Multiemployer Plan intends to
terminate a Multiemployer Plan, or (C) the PBGC has instituted or will
institute proceedings under Section 4042 of ERISA to terminate a
Multiemployer Plan.
For purposes of this SECTION 8.07, the Borrower and any ERISA Affiliate shall be
deemed to know all facts known by the Administrator of any Plan of which the
Borrower or any ERISA Affiliate is the plan sponsor.
8.08. ENVIRONMENTAL NOTICES. (a) The Borrower shall
notify the Agent and the Lenders in writing, promptly upon the
Borrower's learning thereof, of any:
(i) notice or claim to the effect that the Borrower or any
Guarantor is or may be liable to any Person as a result of the Release
or threatened Release of any Contaminant into the environment which
could reasonably result in an expenditure by the Borrower and/or any
Guarantor over $500,000;
(ii) notice that the Borrower or any Guarantor is subject to
investigation by any Governmental Authority evaluating whether any
Remedial Action is needed to respond to the Release or threatened
Release of any Contaminant into the environment which could reasonably
result in an expenditure by the Borrower and/or any Guarantor over
$500,000;
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(iii) notice that any Property is subject to an
Environmental Lien;
(iv) notice to the Borrower or any Guarantor of
any material violation of any Environmental, Health or
Safety Requirement of Law;
(v) condition which might reasonably result in a
material violation of any Environmental, Health or
Safety Requirement of Law;
(vi) commencement or threat of any judicial or administrative
proceeding alleging a material violation by the Borrower or any
Guarantor (or any predecessor in interest thereof) of any
Environmental, Health or Safety Requirement of Law;
(vii) new or proposed changes to any existing Environmental,
Health or Safety Requirement of Law that could result in a Material
Adverse Effect;
(viii) any proposed acquisition of stock, assets, real estate,
or leasing of property, or any other action by the Borrower or any
Guarantor that could subject the Borrower or any Guarantor to
environmental, health or safety Liabilities and Costs which could
reasonably result in an expenditure by the Borrower and/or any
Guarantor over $500,000; or
(ix) any filing or report made by the Borrower or any
Guarantor with any Governmental Authority with respect to any
unpermitted Release or threatened Release of a Contaminant which could
reasonably result in an expenditure by the Borrower and/or any
Guarantor over $500,000.
(b) Within ninety (90) days after the Closing Date, the
Borrower shall establish (and thereafter maintain) an environmental compliance
and monitoring policy and program and, within sixty (60) days after the end of
each Fiscal Year, the Borrower shall submit to the Agent and the Lenders a
report summarizing the status of environmental, health or safety compliance,
hazard or liability issues identified in notices required pursuant to SECTION
8.08(A), disclosed on SCHEDULE 7.01- S, or identified in any notice or report
required herein, which report shall include, with respect to any Real Property
leased or acquired during the period covered by such report, the results of an
annual inspection of the Property with respect to whether it contains any
asbestos-containing material and, in the event any Property does contain any
asbestos-containing material, what actions will be taken to eliminate or
remediate the same.
8.09. LABOR MATTERS. The Borrower shall notify the
Agent and the Lenders in writing, promptly upon the Borrower's
learning thereof, of (i) any material labor dispute to which the
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Borrower or any Guarantor may become a party, including, without limitation, any
strikes, lockouts or other grievances relating to Borrower's or any Guarantor's
plants and other facilities and (ii) any liability relating to its employees
incurred with respect to the closing of any plant or other facility of the
Borrower or any Guarantor.
8.10. SEC REPORTING. Promptly after the same are available,
the Borrower shall deliver to the Agent and the Lenders copies of all Financial
Statements, reports and notices, registration statements and proxy statements or
other filings, if any, sent or made available generally by the Borrower, Parent
and/or any other Guarantor to its respective Securities holders or filed with
the Commission or other securities exchange.
8.11. HEDGE AGREEMENTS. The Borrower shall provide to
the Agent, promptly upon the execution by the Borrower or Leasing
Subsidiary of any Hedge Agreement, written notice of the notional
amount thereof.
8.12. OTHER REPORTS. The Borrower shall deliver or cause to be
delivered to the Agent and the Lenders (a) the written notices described in
Section 6 of that certain Trademark Security Agreement dated as of December 2,
1994 and executed by the Partnership as and when described therein, (b) the
statement of collateral described in Section 2.02(b) of that certain Aircraft
Mortgage and Security Agreement dated as of the Closing Date and executed by the
Borrower and Agent as and when described therein, (c) copies of all press
releases made available generally by the Parent or any of its Subsidiaries to
the public concerning material developments in the business of such Person(s),
and (d) reports, if any, submitted to the Parent or any of its Subsidiaries or
their respective boards of directors by such Person's independent public
accountants, including, without limitation, any management report prepared in
connection with the annual audit.
8.13. OTHER INFORMATION. Promptly upon receiving a request
therefor from the Agent or the Requisite Lenders, the Borrower shall prepare and
deliver to the Agent and the Lenders such other information with respect to the
Borrower, the Guarantors, or the Collateral, including, without limitation,
schedules identifying and describing the Collateral and any dispositions
thereof, as from time to time may be reasonably requested by the Agent or the
Requisite Lenders.
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ARTICLE IX
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that so long as any Commitments
are outstanding and thereafter until payment in full of all of the Obligations
(other than indemnities not yet due), unless the Requisite Lenders shall
otherwise give prior written consent:
9.01. EXISTENCE, ETC. The Borrower shall at all times
maintain, and cause each of its Subsidiaries to maintain, its corporate
existence and preserve and keep, or cause to be preserved and kept, in full
force and effect their respective rights and franchises material to their
respective businesses.
9.02. CORPORATE POWERS; CONDUCT OF BUSINESS. The Borrower
shall, and shall cause each of its Subsidiaries to, qualify and remain qualified
to do business and maintain its good standing in each jurisdiction in which the
nature of its business and the ownership of its Property requires it to be so
qualified and in good standing.
9.03. COMPLIANCE WITH LAWS, ETC. The Borrower shall, and shall
cause each of its Subsidiaries to, (a) comply with all Requirements of Law and
all restrictive covenants affecting it or its business, Property, assets or
operations, and (b) obtain as needed all Permits necessary for its operations
and maintain such Permits in good standing, except in the case where
noncompliance with either CLAUSE (A) or (B) above is not reasonably likely to
result in a Material Adverse Effect.
9.04. PAYMENT OF TAXES AND CLAIMS. The Borrower shall, and
shall cause each of its Subsidiaries to, file all tax returns and reports as and
when required by the related Governmental Authority and pay (a) all taxes,
assessments and other governmental charges imposed upon it or on any of its
Property or assets or in respect of any of its franchises, business, income or
Property before any penalty or interest accrues thereon and (b) all Claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by law have or
may become a Lien (other than a Lien permitted by SECTION 10.03) upon any of the
Property or assets of the Borrower or any Subsidiary of the Borrower, prior to
the time when any penalty or fine shall be incurred with respect thereto;
PROVIDED, HOWEVER, that no such taxes, assessments and governmental charges
referred to in CLAUSE (A) above or Claims referred to in CLAUSE (B) above need
be paid if being contested in good faith by appropriate pro ceedings diligently
instituted and conducted and if such reserve or other appropriate provision, if
any, as shall be required in conformity with GAAP shall have been made therefor.
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9.05. INSURANCE. The Borrower shall maintain, or cause the
Parent to maintain, in full force and effect the insurance policies and programs
listed on SCHEDULE 7.01-Y or substantially similar policies and programs or
other policies and programs as are acceptable to the Agent. All such policies
and programs shall be maintained with insurers acceptable to the Agent. Each
certificate and policy relating to Property damage, boiler and machinery and/or
business interruption coverage shall contain an endorsement, in form and
substance acceptable to the Agent, showing loss payable to the Agent, for the
benefit of the Holders, and, if required by the Agent, naming the Agent as an
additional insured under such policy. Each certificate and policy relating to
coverage other than the foregoing shall, if required by the Agent, contain an
endorsement naming the Agent as an additional insured under such policy. Such
endorsement or an independent instrument furnished to the Agent shall provide
that the insurance companies will give the Agent at least thirty (30) days'
written notice before any such policy or policies of insurance shall be altered
adversely to the interests of the Holders or cancelled and that no act, whether
willful or negligent, or default of the Borrower or any other Person shall
affect the right of the Agent to recover under such policy or policies of
insurance in case of loss or damage. In the event the Borrower at any time or
times hereafter shall fail to obtain or maintain any of the policies or
insurance required herein or to pay any premium in whole or in part relating
thereto, then the Agent, without waiving or releasing any obligations or
resulting Event of Default hereunder, may at any time or times thereafter (but
shall be under no obligation to do so) obtain and maintain such policies of
insurance and pay such premiums and take any other action with respect thereto
which the Agent deems advisable. All sums so disbursed by the Agent shall
constitute Protective Advances hereunder and be part of the Obligations, payable
as provided in this Agreement.
9.06. INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS.
The Borrower shall permit, and shall cause each of its Subsidiaries to permit,
any authorized representative(s) designated by either the Agent or any Lender to
visit and inspect, whether by access to Borrower's or its Subsidiaries' MIS or
otherwise, any of the Property, to examine, audit, check and make copies of the
Borrower's and its Subsidiaries' financial and accounting records, books,
journals, orders, receipts and any correspondence (other than privileged
correspondence with legal counsel) and other data relating to their respective
businesses or the transactions contemplated hereby or referenced herein
(including, without limitation, in connection with environmental compliance,
hazard or liability), and to discuss their affairs, finances and accounts with
their management personnel and independent certified public accountants, all
upon reasonable written notice and at such reasonable times during normal
business hours, as often as may be reasonably requested. Each such visitation
and inspection (i) by or on behalf of any Lender shall be at such Lender's
expense and (ii) by or on behalf of the
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Agent shall be at the Borrower's expense. The Borrower shall keep and maintain,
and cause each of its Subsidiaries to keep and maintain, in all material
respects on its MIS and otherwise proper books of record and account in which
entries in conformity with GAAP shall be made of all dealings and transactions
in relation to its respective businesses and activities, including, without
limitation, transactions and other dealings with respect to the Collateral. If
an Event of Default has occurred and is continuing and the Obligations have been
accelerated pursuant to SECTION 12.02(A), the Borrower, upon the Agent's request
in connection with efforts to enforce the rights and remedies of the Agent, the
Lenders and the Issuing Banks under the Loan Documents, shall turn over, and
cause each of its Subsidiaries to turn over, any such records requested by the
Agent to the Agent or its representatives; PROVIDED, HOWEVER, that the Borrower
may, in its discretion, retain copies of such records.
9.07. REQUIRED HEDGE AGREEMENTS. The Borrower shall maintain
the Hedge Agreement identified on SCHEDULE 9.07 attached hereto in full force
and effect until its expiry on December 2, 1997. Thereafter, Hedge Agreements,
if any, shall contain terms reasonably acceptable to the Agent and shall be
purchased from a Lender, an Affiliate of a Lender or such other Person
reasonably acceptable as a credit matter to the Agent. The Borrower shall
determine to its own satisfaction whether such Hedge Agreements are sufficient
to provide protection and to meet its needs and none of the Agent, the Issuing
Banks or the Lenders shall have any obligation or accountability with respect
thereto or any obligation to propose, quote or enter into any Hedge Agreement.
9.08. INSURANCE AND CONDEMNATION PROCEEDS. The Borrower having
caused the Parent, and all Subsidiaries of the Parent, if applicable, to direct
all insurers under policies of Property damage, boiler and machinery and
business interruption insurance and payors of any condemnation claim or award
relating to the Property to pay all proceeds payable under such policies or with
respect to such claim or award directly to the Agent, for the benefit of the
Holders, the Borrower hereby agrees that, in no case shall such proceeds be
payable to the Borrower AND the Agent or to any Guarantor AND the Agent. The
Agent shall, upon receipt of such proceeds, apply all of the proceeds so
received in repayment of the Obligations in the manner set forth in SECTION
4.01(B)(VII)(B). Notwithstanding the foregoing, in the event proceeds of
insurance or condemnation claims or awards received by the Agent under property
damage, boiler and machinery policies or business interruption insurance
policies (i) is less than $500,000 or (ii) constitutes Replacement Proceeds,
Agent shall, upon receipt of such proceeds and PROVIDED THAT no Event of Default
or Potential Event of Default shall have occurred and continue unwaived, remit
the amount so received to the Borrower or a Guarantor, as applicable; PROVIDED,
HOWEVER, in the case of an insurance payment or condemnation award in an amount
greater than $1,000,000, if (i) the Agent receives notice from the Borrower that
it or a Guarantor, as applicable, does not intend
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to restore, rebuild or replace the Property subject to such insurance payment or
condemnation award, (ii) the Borrower or the applicable Guarantor fails to
replace or commence the restoration or rebuilding of such Property within six
months after the Agent's receipt of the proceeds of such insurance payment or
condemnation award, or (iii) upon completion of the restoration, rebuilding or
replacement of such Property, the unused proceeds from such insurance payment or
condemnation award exceed $500,000, then (x) upon the occurrence of either of
the events described in CLAUSES (I) or (II) above, all such proceeds, and (y)
upon the occurrence of either of the events described in CLAUSE (III) above,
such excess, shall constitute Net Cash Proceeds of Sale received by the Borrower
or a Guarantor and shall be applied to the Obligations pursuant to the terms of
SECTION 4.01(B).
9.09. ERISA COMPLIANCE. The Borrower shall, and shall cause
each of the Guarantors and its/their ERISA Affiliates to, establish, maintain
and operate all Plans to comply in all material respects with the provisions of
ERISA, the Internal Revenue Code, all other applicable laws, and the regulations
and interpretations thereunder and the respective requirements of the governing
documents for such Plans.
9.10. DEPOSIT ACCOUNTS; COLLECTION ACCOUNT AGREEMENTS. The
Borrower shall, and shall cause each of the Guarantors to, maintain in full
force and effect Collection Account Agreements with respect to each of their
respective depository accounts into which collections of Receivables and other
proceeds of Collateral are deposited.
9.11. MAINTENANCE OF PROPERTY. The Borrower shall, and shall
cause each of the Guarantors to, maintain in all material respects all of its
owned and leased Property in good, safe and insurable condition and repair, and
not permit, commit or suffer any waste or abandonment of any such Property and
from time to time shall make or cause to be made all material repairs, renewal
and replacements thereof, including, without limitation, any capital
improvements which may be required; PROVIDED, HOWEVER, that such Property may be
altered or renovated in the ordinary course of Borrower's or a Guarantor's
business.
9.12. CONDEMNATION. Immediately upon learning of the
institution of any proceeding for the condemnation or other tak ing of any of
the owned or leased Real Property of the Borrower or any Guarantor, the Borrower
shall notify the Agent of the pendency of such proceeding, and permit the Agent
to participate in any such proceeding, and from time to time will deliver to the
Agent all instruments reasonably requested by the Agent to permit such
participation.
9.13. FUTURE LIENS ON REAL PROPERTY. Upon the request
of the Agent, the Borrower shall, and shall cause the Guarantors
to, execute and deliver to the Agent, for the benefit of the
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Holders, immediately upon the acquisition or leasing by the Borrower or any
Guarantor of any Real Property on which any Inventory of the Borrower or any
Guarantor is located, a mortgage, deed of trust, assignment or other appropriate
instrument evidencing a Lien upon such Real Property, lease or interest,
together with such title insurance policies (mortgagee's form), certified
surveys, appraisals, and local counsel opinions with respect thereto and such
other agreements, documents and instruments which the Agent deems necessary or
desirable, the same to be in form and substance acceptable to the Agent and to
be subject only to (a) Liens permitted under SECTION 10.03 and (b) such other
Liens as the Agent and Lenders may reasonably approve, it being understood that
the granting of such additional security for the Obligations is a material
inducement to the execution and delivery of this Agreement by each Lender and
the Issuing Bank.
9.14. CONSIGNEE/BAILEE LETTERS; LANDLORD WAIVERS; FILINGS. The
Borrower shall, and shall cause each of the Guarantors to, obtain consignee or
bailee letters or landlord waivers (as applicable) substantially in the form
attached hereto as EXHIBIT M from each consignee or bailee of Inventory of the
Borrower and/or a Guarantor (separately or in the aggregate) having a minimum
value (at the lower of cost or market) of $500,000 and each landlord for
premises on which Inventory of the Borrower and/or Guarantors (separately or in
the aggregate) having a minimum value (at the lower of cost or market) of
$500,000, promptly upon delivery of such Inventory to such consignee, bailee or
premises, and (ii) cause to be executed and delivered to the Agent concurrently
with execution and delivery of such consignee or bailee letter, UCC financing
statements in form and substance satisfactory to the Agent with respect to such
Inventory located on the premises of such consignee or bailee.
9.15. DIVIDENDS, DISTRIBUTIONS AND PAYMENTS ON INTERCOMPANY
INDEBTEDNESS. The Borrower shall cause (a) each Subsidiary of Leasing Subsidiary
to timely perform its obligations (including, without limitation, payment
obligations) to Leasing Subsidiary under any intercompany Indebtedness owing by
such Subsidiary to Leasing Subsidiary and not to retain any cash or cash
equivalents which would otherwise be permitted under applicable Requirements of
Law to be paid to Leasing Subsidiary as a distribution or dividend on Leasing
Subsidiary's Investment in such Subsidiary and (b) Leasing Subsidiary to timely
perform its obligations (including, without limitation, payment obligations) to
Borrower under any intercompany Indebtedness owing by Leasing Subsidiary to
Borrower and not to retain any cash or cash equivalents which would otherwise be
permitted under applicable Requirments of Law to be paid to Borrower as a
distribution or dividend on Borrower's Investment in Leasing Subsidiary.
9.16. FUTURE PLEDGES OF EQUITY SECURITIES; OTHER
COLLATERAL DOCUMENTS. (a) The Borrower shall, and shall cause
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each of its Subsidiaries to, execute and deliver to the Agent concurrently with
the issuance of any equity Securities to the Borrower or any Subsidiary of the
Borrower (other than a Special Purpose Subsidiary) in connection with any
Investment made by such Person, or formation or acquisition of a Subsidiary a
pledge of (i) all of the equity Securities issued to or acquired by such Person,
if the Person formed, acquired or in which an Investment is made is not a
Foreign Subsidiary, and (ii) 65% of the equity Securities of any Foreign
Subsidiary.
(b) The Borrower shall, and shall cause Leasing Subsidiary to,
execute and deliver to the Agent an aircraft mortgage and security agreement
concurrently with the Borrower's or Leasing Subsidiary's, as applicable,
acquisition of any aircraft or aircraft engines registered with the Federal
Aviation Administration; and the Borrower cause all direct Subsidiaries of the
Borrower to execute and deliver to the Agent guarantees, security agreements and
other Loan Documents related to Collateral owned by such Subsidiaries
concurrently with such Persons' becoming direct Subsidiaries of the Borrower, in
each instance consistent with the Loan Documents executed and delivered on the
Closing Date.
(c) Notwithstanding the foregoing, nothing in this SECTION
9.16 shall permit the Borrower or any Subsidiary of the Borrower to make any
Investment not otherwise permitted by SECTION 10.04.
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ARTICLE X
NEGATIVE COVENANTS
Borrower covenants and agrees that it shall comply with the
following covenants so long as any Commitments are out standing and thereafter
until payment in full of all of the Obligations (other than indemnities not yet
due), unless the Requisite Lenders shall otherwise give prior written consent:
10.01. INDEBTEDNESS. The Borrower shall not, and
shall not permit any of its Subsidiaries to, directly or
indirectly create, incur, assume or otherwise become or remain
directly or indirectly liable with respect to any Indebtedness,
except:
(a) the Obligations;
(b) Indebtedness for trade payables, wages and other accrued
expenses incurred in the ordinary course of business, whether or not
evidenced by notes;
(c) Indebtedness of any Special Purpose
Subsidiary which is non-recourse to the Borrower and
the Guarantors and their respective Property and
interests in Property;
(d) Permitted Existing Indebtedness and any extensions,
renewals, refundings or replacements of Permitted Existing Indebtedness
(other than the Finance Affiliate Indebtedness), PROVIDED THAT any such
extension, renewal, refunding or replacement is in an aggregate
principal amount not greater than the principal amount of, and is on
terms no less favorable to the Borrower or Leasing Subsidiary than the
terms of, the Permitted Existing Indebtedness so extended, renewed,
refunded or replaced;
(e) to the extent permitted by ARTICLE XI and in any event in
an aggregate amount not to exceed $5,000,000 at any time, Indebtedness
with respect to Capital Leases and purchase money Indebtedness incurred
to finance the acquisition of fixed assets, and Indebtedness incurred
to refinance such Capital Leases and purchase money Indebtedness;
PROVIDED, HOWEVER, prior to incurring Capital Lease obligations owing
to any one lessor or group of affiliated or related lessors or purchase
money Indebtedness owing to any one holder or group of affiliated or
related holders thereof, which in either case aggregate(s) more than
$3,000,000, the Borrower shall obtain from such lessor(s) or holder(s)
a duly executed intercreditor agreement in form and substance
satisfactory to the Agent;
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(f) Indebtedness in respect of taxes, assess ments,
governmental charges and Claims for labor, materials or supplies, to
the extent that payment thereof is not required pursuant to SECTION
9.04;
(g) Indebtedness constituting Accommodation
Obligations permitted by SECTION 10.05;
(h) Indebtedness arising from intercompany loan made by
Leasing Subsidiary to a Special Purpose Subsidiary which, when combined
with all other investments made by Leasing Subsidiaries to Special
Purpose Subsidiaries, does not exceed $15,000,000 in aggregate.
(i) Indebtedness in respect of profit sharing
plans to the extent permitted under SECTION 10.04;
(j) Indebtedness in respect of the Hedge Agreements (i)
required or permitted under SECTION 9.07 and (ii) in respect of foreign
exchange contracts containing terms reasonably acceptable to the Agent
and purchased from a Lender, an Affiliate of a Lender or such other
Person as is reasonably acceptable as a credit matter to the Agent;
PROVIDED, HOWEVER, that the aggregate notional amount (as advised to
the Agent by the counterparty(ies) to Hedge Agreements and confirmed by
the Borrower) of all Hedge Agreements in respect of foreign exchange
contracts at any given time shall not exceed $25,000,000;
(k) Indebtedness with respect to reasonable warranties and
indemnities made under any agreements for asset sales permitted under
SECTION 10.02 and Contractual Obligations of the Borrower or Leasing
Subsidiary entered into in the ordinary course of its business;
(l) Indebtedness under appeal bonds in connection with
judgments which do not result in an Event of Default or a Potential
Event of Default or any other breach hereunder, PROVIDED that the
aggregate amount of all such Indebtedness does not exceed $2,000,000;
(m) Indebtedness arising from intercompany loans from
the Borrower to Leasing Subsidiary; and
(n) in addition to the Indebtedness permitted by CLAUSES (A)
through (M) above, other unsecured Indebtedness in an aggregate amount
not to exceed $2,000,000 at any time outstanding.
10.02. SALES OF ASSETS. The Borrower shall not, and shall not
permit any of its Subsidiaries to, sell, assign, transfer, lease, convey or
otherwise dispose of any of its Property, whether now owned or hereafter
acquired, or any income or profits therefrom, or enter into any agreement to do
so, except:
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(a) the sale of Property outside of the ordinary course of
such Person's business for consideration not less than the Fair Market
Value thereof so long as (i) any non-cash consideration resulting from
such sale shall be pledged or assigned to the Agent, for the benefit of
the Holders, pursuant to an instrument in form and substance acceptable
to the Agent and (ii) the Borrower complies with the mandatory
prepayment provisions set forth in SECTION 4.01(B) and the conditions
to the release of Collateral described in SECTION 13.09(C);
(b) the sale of Inventory in the ordinary course of
Borrower's, Leasing Subsidiary's or any Special Purpose Subsidiary's
respective businesses to Persons who are not Affiliates of such
Persons;
(c) the disposition of Equipment if (i) such Equipment is
obsolete or no longer useful in the ordinary course of the Borrower's
or Leasing Subsidiary's respective businesses, PROVIDED THAT the
aggregate Fair Market Value of all such Equipment disposed of in any
Fiscal Year shall not exceed $500,000, or (ii) within six (6) months
after such disposition, an amount equal to the proceeds therefrom is
either (A) used to finance the purchase of replacement Equipment and
the seller thereof delivers to the Agent evidence of such use and that
the replacement Equipment is free and clear of all Liens except those
created under the Loan Documents or (B) delivered to the Agent for
application to the repayment of the Obligations pursuant to the
mandatory prepayment provisions set forth in SECTION 4.01(B); and
(d) the sale of Investments in Cash Equivalents
permitted pursuant to SECTION 10.04(A).
Notwithstanding anything in this Agreement to the contrary, no Property of the
Borrower shall be sold, assigned, transferred, leased, or conveyed, directly or
indirectly, to any Subsidiary of Borrower without the prior written consent of
all Lenders and delivery to the Agent of a Borrowing Base Certificate reflecting
any adjustment to the Borrowing Base occasioned by such transfer, assignment,
transfer, lease, or conveyance.
10.03. LIENS. The Borrower shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly create,
incur, assume or permit to exist any Lien on or with respect to
any of their respective Property or assets except:
(a) Liens created pursuant to the Loan Documents;
(b) Permitted Existing Liens;
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(c) Customary Permitted Liens;
(d) purchase money Liens (including the interest of a lessor
under a Capital Lease or an Operating Lease having substantially the
same economic effect and Liens to which any Property is subject at the
time of the Borrower's or Leasing Subsidiary's purchase thereof) (i)
with respect to purchases of Inventory subject to lease securing an
amount not to exceed $10,000,000 in the aggregate at any time or from
time to time and (ii) with respect to purchases of any other property,
securing an amount not to exceed $1,000,000 in the aggregate at any
time or from time to time; PROVIDED THAT (A) such Liens shall not apply
to any Property other than that purchased or subject to such Capital
Lease and (B) with respect to Liens securing Capital Lease obligations
owing to any one lessor or group of affiliated or related lessors or
purchase money Indebtedness owing to any one holder or group of
affiliated or related holders thereof, which in either case
aggregate(s) more than $500,000, the Borrower shall obtain from such
lessor or holder a duly executed intercreditor agreement in form and
substance satisfactory to the Agent prior to granting any such Lien;
(e) purchase money Liens (including the interest of a lessor
under a Capital Lease or an Operating Lease having substantially the
same economic effect and Liens to which any Property is subject at the
time of any Special Purpose Subsidiary's purchase thereof) against
Property of Special Purpose Subsidiaries (i) with respect to any
Special Purpose Subsidiary's purchases or leases of Inventory securing
an amount not to exceed $100,000,000 in the aggregate at any time or
from time to time and (ii) with respect to all Special Purpose
Subsidiaries' purchases or leases of Inventory securing an amount not
to exceed $150,000,000 in the aggregate at any time or from time to
time; PROVIDED THAT (A) such Liens shall not apply to any Property
other than that purchased or subject to such lease and (B) no lessor or
group of affiliated or related lessors or holder of purchase money
Indebtedness or group of affiliated or related holders thereof shall
have any recourse to the Borrower or any Guarantor with respect to the
Indebtedness of any Special Purpose Subsidiary or any Property of the
Borrower or any Guarantor;
(f) federal tax Liens not resulting in an Event of
Default under SECTION 12.01(J)(II); and
(g) extensions, renewals, refundings and replacements of Liens
referred to in CLAUSES (A), (B), and (e) of this SECTION 10.03;
PROVIDED THAT any such extension, renewal, refunding or replacement of
a Lien referred to in CLAUSE (B)
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or (E) shall be limited to the Property covered by the Lien extended,
renewed, refunded or replaced and that the obligations secured by any
such extension, renewal, refunding or replacement Lien shall be in an
amount not greater than the amount of the obligations then secured by
the Lien extended, renewed, refunded or replaced.
10.04. INVESTMENTS. The Borrower shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly
make or own any Investment except:
(a) Investments in Cash Equivalents;
(b) Permitted Existing Investments;
(c) Investments in the form of advances to employees in the
ordinary course of business for moving, relocation and travel expenses;
and other loans to employees for any lawful purpose, PROVIDED THAT (i)
each loan permitted under this CLAUSE (C) shall be evidenced by a
promissory note, (ii) the aggregate principal amount of all such
advances and loans at any time outstanding shall not exceed $500,000,
and (iii) no such advances or loans outstanding at any time to any one
Person shall exceed $100,000;
(d) Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business;
(e) Investments pursuant to joint venture agreements to which
the Borrower or Leasing Subsidiary is a party in an aggregate amount
not to exceed $250,000 at any time;
(f) Investments pursuant to joint venture agreements
to which any Special Purpose Subsidiary is a party;
(g) Investments by the Borrower in Leasing Subsidiary;
(h) Investments by Leasing Subsidiary in Special
Purpose Subsidiaries in an aggregate amount not to exceed $15,000,000;
(i) Investments by the Borrower in Foreign Subsidiaries formed
for the sole purpose of distribution of Inventory of the Borrower
outside of the United States and which Foreign Subsidiaries own no
Inventory and retain cash and cash equivalents only to the extent
required to pay expenses associated with maintenance of an office and
related personnel engaged to conduct its business in the jurisdication
in which it is domiciled; and
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(j) to the extent they constitute Investments, contributions
to and payments of benefits under any Plan in existence as of the
Closing Date as required by the benefit commitments in such Plan as of
the Closing Date.
The Borrower shall not form any direct Subsidiary after the Closing Date or
permit any Subsidiary of the Borrower to form any Subsidiary except to the
extent Investments therein are permitted hereinabove.
10.05. ACCOMMODATION OBLIGATIONS. The Borrower shall
not, and shall not permit any of its Subsidiaries to, directly or
indirectly create or become or be liable with respect to any
Accommodation Obligation, except:
(a) recourse obligations resulting from endorse
ment of negotiable instruments for collection in the
ordinary course of its business;
(b) Permitted Existing Accommodation Obligations and any
extensions, renewals or replacements thereof, PROVIDED THAT the
aggregate Indebtedness under any such extension, renewal or replacement
is not greater than the Indebtedness under, and shall be on terms no
less favorable to the Borrower than the terms of, the Permitted
Existing Accommodation Obligation so extended, renewed or replaced;
(c) Accommodation Obligations (i) arising under
the Loan Documents or (ii) included in the Indebtedness
permitted under SECTION 10.01(A); and
(d) in addition to the Accommodation Obligations permitted by
CLAUSES (A) through (C) above, other unsecured Accommodation
Obligations in an aggregate amount not to exceed $1,000,000 at any time
outstanding.
10.06. RESTRICTED JUNIOR PAYMENTS. The Borrower shall
not, and shall not permit any of its Subsidiaries to, declare or
make any Restricted Junior Payment, except:
(a) interest payments in respect of the Finance
Affiliate Indebtedness;
(b) dividends and other distributions by Leasing
Subsidiary to the Borrower;
(c) payments in respect of loans made by the Borrower
to Leasing Subsidiary;
(d) dividends and other distributions by Special
Purpose Subsidiaries to Leasing Subsidiary and payments in
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respect of loans made by Leasing Subsidiary to Special
Purpose Subsidiaries; and
(e) fees and other remuneration paid to Parent, Finance
Affiliate, or any Subsidiary of the Borrower by the Borrower or any
Guarantor in the ordinary course of the Borrower's or such Guarantor's
business and otherwise permitted under this Agreement
PROVIDED, HOWEVER, the Restricted Junior Payments described in CLAUSES (A) and
(E) above shall not be permitted after the occurrence and during the continuance
of an Event of Default or a Potential Event of Default or if an Event of Default
or a Potential Event of Default would result therefrom.
10.07. CONDUCT OF BUSINESS. The Borrower shall not, and shall
not permit any of its Subsidiaries to, engage in any business other than (a) the
businesses engaged in by the Borrower and Leasing Subsidiary on the date hereof,
(b) any business or activities which are substantially similar, related or
incidental thereto, (c) the new parts distribution, parts manufacturing
authority, and/or aircraft leasing businesses.
10.08. TRANSACTIONS WITH AFFILIATES. The Borrower shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly enter
into or permit to exist any trans action (including, without limitation, the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of the Borrower, on terms that are less favorable to
the Borrower or such Subsidiary of the Borrower than those that might be
obtained in an arm's length transaction at the time from Persons who are not
such an Affiliate. Nothing contained in this SECTION 10.08 shall prohibit (a)
any transaction expressly permitted by SECTION 10.06; (b) increases in
compensation and benefits for officers and employees of the Borrower or its
Subsidiaries which are customary in the industry; PROVIDED THAT no Event of
Default or Potential Event of Default has occurred and is continuing; or (c)
payment of customary officers' and directors' indemnities.
10.09. RESTRICTION ON FUNDAMENTAL CHANGES. The Borrower shall
not (a) enter into any merger or consolidation except in connection with a
Permitted Acquisition, (b) permit any Foreign Subsidiary to enter into any
merger or consolidation, or (c) permit any of its other Subsidiaries to enter
into any merger or consolidation except in connection with (i) a Permitted
Acquisition or (ii) a merger or consolidation requiring no payment of cash or
incurrence of Indebtedness not otherwise permitted under SECTION 10.01. The
Borrower shall not liquidate, wind-up or dissolve (or suffer any liquidation or
dissolution), or convey, lease, sell, transfer or otherwise dispose of, in one
transaction or a series of transactions, all or substantially all of its
business or Property, whether now or hereafter acquired, except in connection
with transactions permitted under SECTION
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10.02 or permit any of its Subsidiaries, other than Special Purpose
Subsidiaries, to (a) liquidate, wind-up or dissolve (or suffer any liquidation
or dissolution) or (b) convey, lease, sell, transfer or otherwise dispose of, in
one transaction or a series of transactions, all or substantially all of their
respective businesses or Property, whether now or hereafter acquired, except in
connection with transactions permitted under SECTION 10.02.
10.10. SALES AND LEASEBACKS. The Borrower shall not, and shall
not permit any of its Subsidiaries to, become liable, directly, by assumption or
by Accommodation Obligation, with respect to any lease, whether an Operating
Lease or a Capital Lease, of any Property (whether real or personal or mixed)
which it (a) sold or transferred or is to sell or transfer to any other Person,
or (b) intends to use for substantially the same purposes as any other Property
which has been or is to be sold or trans ferred by it to any other Person, in
either instance, in connection with such lease.
10.11. MARGIN REGULATIONS; SECURITIES LAWS. The
Borrower shall not, and shall not permit any of its Subsidiaries
to, use all or any portion of the proceeds of any credit extended
under this Agreement to purchase or carry Margin Stock.
10.12. ERISA. The Borrower shall not:
(a) engage, or permit any of the Guarantors to engage, in any
prohibited transaction described in Sections 406 of ERISA or 4975 of
the Internal Revenue Code for which a statutory or class exemption is
not available or a private exemption has not been pre viously obtained
from the DOL;
(b) permit to exist any accumulated funding deficiency (as
defined in Sections 302 of ERISA and 412 of the Internal Revenue Code),
with respect to any Benefit Plan, whether or not waived;
(c) fail, or permit any ERISA Affiliate to fail, to pay timely
required contributions or annual install ments due with respect to any
waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any ERISA Affiliate to terminate, any
Benefit Plan which would result in any liability of Borrower or any
ERISA Affiliate under Title IV of ERISA;
(e) fail to make any contribution or payment to any
Multiemployer Plan which Borrower or any ERISA Affiliate may be
required to make under any agreement relating to such Multiemployer
Plan, or any law per taining thereto;
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(f) fail, or permit any ERISA Affiliate to fail, to pay any
required installment or any other payment required under Section 412 of
the Internal Revenue Code on or before the due date for such
installment or other payment; or
(g) amend, or permit any ERISA Affiliate to amend, a Benefit
Plan resulting in an increase in current liability for the plan year
such that the Borrower or any ERISA Affiliate is required to provide
security to such Plan under Section 401(a)(29) of the Internal Revenue
Code;
if such event results, either singly or in the aggregate, after taking into
account all other such events and any liabilities associated therewith, in an
aggregate liability in excess of $500,000.
10.13. ISSUANCE OF EQUITY SECURITIES. The Borrower
shall not issue any equity Securities; the Borrower shall not
permit Leasing Subsidiary to issue any equity Securities.
10.14. ORGANIZATIONAL DOCUMENTS. The Borrower shall not, and
shall not permit any of its Subsidiaries to, amend, modify or otherwise change
any of the terms or provisions in any of (a) its Organizational Documents as in
effect on the Closing Date, except amendments to effect a change of name of the
Borrower or a Subsidiary of the Borrower, written notice of which change of name
the Borrower shall have provided the Agent within sixty (60) days prior to the
effective date of any such name change or (b) the agreements and instruments
evidencing the Finance Affiliate Indebtedness as in effect on the Effective
Date.
10.15. BANK ACCOUNTS. The Borrower shall not, and shall not
permit any of the Guarantors to, establish or maintain any deposit account into
which collections of Receivables and proceeds of other Collateral are deposited
other than those identified as existing on the Closing Date and disclosed on
SCHEDULE 10.15 attached hereto, unless the Borrower gives the Agent prior
written notice of such establishment and delivers to the Agent an executed
Collection Account Agreement concurrently with such deposit account being
established.
10.16. FISCAL YEAR. The Borrower shall not, and shall
not permit any of its Subsidiaries to, change its fiscal year
from the Fiscal Year.
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ARTICLE XI
FINANCIAL COVENANTS
The Borrower covenants and agrees that so long as any
Commitments are outstanding and thereafter until payment in full of all of the
Obligations (other than indemnities not yet due):
11.01. INTEREST COVERAGE RATIO. The Borrower shall cause the
Parent to maintain an Interest Coverage Ratio, as determined as of the last day
of each fiscal quarter of the Parent, (a) in the case of the third and fourth
fiscal quarters ending in 1996 and the first fiscal quarter ending in 1997, on a
cumulative basis for the period commencing on June 30, 1996 and ending on such
date, and (b) for all other periods, for the four-fiscal-quarter period then
ending, of at least 4.0 to 1.0.
11.02. FIXED CHARGE COVERAGE RATIO. The Borrower shall cause
the Parent to maintain a Fixed Charge Coverage Ratio, as determined as of the
last day of each fiscal quarter of the Parent, (a) in the case of the third and
fourth fiscal quarters ending in 1996 and first fiscal quarter ending in 1997,
on a cumulative basis for the period commencing on June 30, 1996 and ending on
such date, and (b) for all other periods, for the four-fiscal-quarter period
then ending, of at least 1.35 to 1.00.
11.03. WORKING CAPITAL. Working Capital shall be
maintained, at all times during the term of this Agreement, at a
minimum amount of $50,000,000.
11.04. CAPITAL EXPENDITURES. The Borrower shall not (a) make
Capital Expenditures during (i) the period commencing on the Closing Date and
ending on the last day of the Fiscal Year ending in 1996 aggregating more than
$1,000,000 or (ii) any Fiscal Year ending after 1996 in excess of $500,000 (in
each instance, the "Maximum Amount"); PROVIDED, HOWEVER, to the extent the
Borrower and its Subsidiaries have not made Capital Expenditures in the amount
permitted above for a given period after 1996, Capital Expenditures in an amount
equal to 100% of the Maximum Amount of such Capital Expenditures permitted but
not made in such period may be made in the immediately next succeeding Fiscal
Year in addition to any amounts permitted above for such Fiscal Year; PROVIDED
THAT to the extent amounts carried forward from one period to the next
succeeding Fiscal Year are not expended in such Fiscal Year, such surplus may
not be carried forward to any other succeeding year; nor (b) permit any
Subsidiary of the Borrower or Guarantor to make any Capital Expenditures.
11.05. EXCESS BORROWING AVAILABILITY. The Borrower
shall, at all times during the term of this Agreement, maintain
Revolving Credit Availability which exceeds the Revolving Credit
Obligations by at least $2,000,000.
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11.06. LEVERAGE RATIO. (a) The Borrower shall cause the
Parent to maintain a ratio of Funded Debt (other than Funded Debt of Special
Purpose Subsidiaries) to EBITDA, determined as of the end of each fiscal quarter
of the Parent, for the four-fiscal-quarter period then ended, of not more than
2.5 to 1.0.
(b) The Borrower shall cause the Parent to maintain a ratio of
funded debt to EBITDA, determined as of the end of each fiscal quarter of the
Parent for the four-fiscal-quarter period then ended, of not more than [4.0] to
1.0.
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ARTICLE XII
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
12.01. EVENTS OF DEFAULT. Each of the following
occurrences shall constitute an Event of Default under this
Agreement:
(a) FAILURE TO MAKE PAYMENTS WHEN DUE. The Borrower shall fail
to pay (i) when due any principal on any Loan or any Reimbursement Obligation or
(ii) any interest on any Loan, fees due under the terms of this Agreement or the
1996 Fee Letter or other Obligations outstanding within two (2) Business Days
after the same become due in accordance with the terms of this Agreement or the
1996 Fee Letter.
(b) BREACH OF CERTAIN COVENANTS. The Borrower shall fail duly
and punctually to perform or observe any agreement, covenant or obligation
binding on such Person under SECTIONS 9.01 - 9.07, 9.10, 9.11, 9.13, and 9.14,
ARTICLE X or ARTICLE XI.
(c) BREACH OF REPRESENTATION OR WARRANTY. Any repre sentation
or warranty made or deemed made by the Borrower to the Agent, any Lender or any
Issuing Bank herein or by any Person in any of the other Loan Documents or in
any statement or certificate at any time given by any such Person pursuant to
any of the Loan Documents shall be false or misleading in any material respect
on the date as of which made (or deemed made).
(d) OTHER DEFAULTS. The Borrower shall default in the
performance of or compliance with any term contained in this Agreement (other
than as identified in CLAUSES (A), (B) or (C) of this SECTION 12.01) or any
default or event of default shall occur under any of the other Loan Documents,
and such default or event of default shall continue for thirty (30) days after
the occurrence thereof.
(e) DEFAULT AS TO OTHER INDEBTEDNESS; OPERATING LEASES. The
Borrower or any Guarantor shall fail to make any payment when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) with
respect to any Indebtedness (other than an Obligation) of such Persons, singly
or in the aggregate equal to or exceeding $250,000; or any breach, default or
event of default shall occur, or any other condition shall exist under any
instrument, agreement or indenture pertaining to any such Indebtedness, if the
effect thereof is to cause an acceleration, mandatory redemption or other
required repurchase of such Indebtedness, or permit the holder(s) of such
Indebtedness to accelerate the maturity of any such Indebtedness or require a
redemption or other repurchase of such Indebtedness; or any such Indebtedness
shall be otherwise declared to be due and payable (by acceleration or otherwise)
or required to be prepaid, redeemed or otherwise repurchased by the obligor
thereon (other than by a regularly scheduled required
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prepayment) prior to the stated maturity thereof; or any breach, default or
event of default on the part of the Borrower or any Guarantor shall occur under
any Operating Lease to which the Borrower or such Guarantor is a party which
breach, default or event of default shall materially adversely affect the rights
of the Borrower or such Guarantor with respect to the Property subject to any
Operating Lease on which the remaining payments exceed $1,000,000.
(ii) Any three (3) or more Special Purpose Subsidiaries shall
have failed to make any payment when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) with respect to any
Indebtedness of such Special Purpose Subsidiaries; or any breach, default or
event of default shall occur, or any other condition shall exist under any
instrument, agreement or indenture pertaining to any such Indebtedness, if the
effect thereof is to cause an acceleration, mandatory redemption or other
required repurchase of such Indebtedness, or permit the holder(s) of such
Indebtedness to accelerate the maturity of any such Indebtedness or require a
redemption or other repurchase of such Indebtedness; or any such Indebtedness
shall be otherwise declared to be due and payable (by acceleration or otherwise)
by the obligors thereon (other than by a regularly scheduled required
prepayment) prior to the stated maturity thereof.
(iii) Any Special Purpose Subsidiary/ies in which either
singly or in the aggregate, Leasing Subsidiary has made Investments aggregating
at least $5,000,000 shall have failed to make any payment when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) with
respect to any Indebtedness of such Special Purpose Subsidiary/ies; or any
breach, default or event of default shall occur, or any other condition shall
exist under any instrument, agreement or indenture pertaining to any such
Indebtedness, if the effect thereof is to cause an acceleration, mandatory
redemption or other required repurchase of such Indebtedness, or permit the
holder(s) of such Indebtedness to accelerate the maturity of any of such
Indebtedness or require a redemption or other repurchase of such Indebtedness;
or any such Indebtedness shall be otherwise declared to be due and payable (by
acceleration or otherwise) by the obligor(s) thereon (other than by a regularly
scheduled required prepayment) prior to the stated maturity thereof.
(f) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER,
ETC.
(i) An involuntary case shall be commenced against the
Borrower or any Guarantor and the petition shall not be dismissed, stayed,
bonded or discharged within thirty (30) days after commencement of the case; or
a court having jurisdiction in the premises shall enter a decree or order for
relief in respect of the Borrower or any Guarantor in an involuntary case, under
any applicable bankruptcy, insolvency or other similar law now or hereinafter in
effect; or any other similar relief shall be granted under any applicable
federal, state, local or foreign law;
(ii) A decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over the Borrower or any
Guarantor or over all or a substantial part of the Property shall be entered; or
an interim receiver, trustee or other custodian of the Borrower or any Guarantor
or of all or a substantial part of the Property shall be appointed or a warrant
of attachment, execution or similar process against any substantial part of the
Property shall be issued and any such event shall not be stayed, dismissed,
bonded or discharged within thirty (30) days after entry, appointment or
issuance.
(g) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. The
Borrower or any Guarantor shall have an order for relief entered with respect to
it or commence a voluntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or shall consent to the entry of
an order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or shall consent to
the appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its Property; or the Borrower or any
Guarantor shall make any assignment for the benefit of creditors or shall be
unable or fail, or admit in writing its inability, to pay its debts as such
debts become due; or the shareholders or board of directors (or equivalent) of
the Borrower or any Guarantor (or any committee thereof) adopts any resolution
or otherwise authorizes any action to approve any of the foregoing.
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(h) DISSOLUTION. Any order, judgment or decree shall be
entered against the Borrower or any Guarantor decreeing its involuntary
dissolution or split up and such order shall remain undischarged and unstayed
for a period in excess of thirty (30) days; or the Borrower or any Guarantor
shall otherwise dissolve, be dissolved, or cease to exist except as specifically
permitted by this Agreement.
(i) LOAN DOCUMENTS; FAILURE OF SECURITY. At any time, for any
reason, (i) any Loan Document ceases to be in full force and effect (other than
any Hedge Agreement not required to be maintained by the terms of this
Agreement) or the Borrower or any Guarantor seeks to repudiate its obligations
thereunder and the Liens intended to be created thereby against Property having
an aggregate Fair Market Value in excess of $100,000 are, or the Borrower or any
Guarantor seeks to render such Liens, invalid or unperfected, or (ii) Liens in
favor of the Agent for the benefit of the Holders contemplated by the Loan
Documents against Property having an aggregate Fair Market Value in excess of
$100,000 shall, at any time, for any reason, be invalidated or otherwise cease
to be in full force and effect, or such Liens shall be subordinated or shall not
have the priority contemplated by this Agreement or the Loan Documents.
(j) JUDGMENTS AND ATTACHMENTS. (i) Any money judgment (other
than a money judgment covered by insurance as to which the insurance company has
acknowledged coverage), writ or warrant of attachment, or similar process
against the Borrower or any Guarantor or any of their respective assets
involving in any case an amount in excess of $250,000 is entered and shall
remain undischarged, unvacated, unbonded or unstayed for a period of thirty (30)
days or in any event later than five (5) days prior to the date of any proposed
sale thereunder; PROVIDED, HOWEVER, if any such judgment, writ or warrant of
attachment or similar process is in excess of $5,000,000, the entry thereof
shall immediately constitute an Event of Default hereunder unless fully bonded
in a manner satisfactory to the Agent.
(ii) A federal tax Lien is filed against the Borrower or any
Guarantor or any of the Property which is not discharged of record, bonded over
or otherwise secured to the satisfaction of the Agent within forty-five (45)
days after the filing thereof or the date upon which the Agent receives actual
knowledge of the filing thereof for an amount which equals or exceeds
$1,000,000.
(iii) An Environmental Lien is filed against any of the
Property with respect to Claims in an amount which equals or exceeds $500,000.
(k) TERMINATION EVENT. Any Termination Event occurs
which could reasonably be expected to subject either the Borrower
or any ERISA Affiliate to liability in excess of $500,000.
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(l) WAIVER APPLICATION. The plan administrator of any Benefit
Plan applies under Section 412(d) of the Code for a waiver of the minimum
funding standards of Section 412(a) of the Internal Revenue Code and the Agent
believes that the substantial business hardship upon which the application for
the waiver is based could subject either the Borrower or any ERISA Affiliate to
liability in excess of $1,000,000.
(m) CHANGE IN CONTROL. A Change of Control shall
occur.
(n) MATERIAL ADVERSE EFFECT. An event shall occur
which results in a Material Adverse Effect.
(o) CERTAIN EVENTS PERTAINING TO THE PARENT. (i) The
Parent shall fail to (A) maintain its existence as a corporation
duly organized and existing and qualified and in good standing as
a corporation authorized to do business in the states of Delaware
and Florida and in each other jurisdiction in which failure to be
so qualified and in good standing will result, or is reasonably
likely to result, in a Material Adverse Effect, (B) comply in all
material respects with all Requirements of Law applicable to it,
(C) file all tax returns and reports required to be filed by it
with any Governmental Authority as and when required to be filed
or to pay taxes, assessments, fees or other governmental charges
upon it or its Property, assets, income or franchises which are
shown in such returns or reports to be due and payable as and
when due and payable, except for taxes, assessments, fees and
other governmental charges (I) that are being contested by it in
good faith by an appropriate proceeding diligently pursued, (II)
for which adequate reserves have been made on its books and
records, and (III) the amounts the non-payment of which would not
individually, or in the aggregate, result in a Material Adverse
Effect, or (D) within three (3) days days after its receipt of
any distribution, dividend or payment from Finance Affiliate,
make a capital contribution in the amount thereof (net of taxes
allocable to transfers under Requirements of Law) to Borrower.
(ii) The Parent shall (A) merge or liquidate with or into any
other Person and, as a result thereof and after giving effect thereto, the
Parent is not the surviving Person, (B) repurchase or redeem any of its Capital
Stock other than as required with respect to the Permitted Equity Securities
Options or expressly consented to in writing by the Requisite Lenders, (C)
engage in any business other than that of acting as a holding company for the
Borrower and Finance Affiliate, (D) make or maintain any Investments other than
its Investments in the Borrower and Finance Affiliate or Investments in Cash
Equivalents, or (E) incur any Indebtedness other than that identified on
SCHEDULE 12.01-O attached hereto.
An Event of Default shall be deemed "continuing" until cured
or waived in writing in accordance with SECTION 15.07.
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12.02. RIGHTS AND REMEDIES.
(a) ACCELERATION AND TERMINATION. Upon the occurrence of any
Event of Default described in SECTIONS 12.01(F) or 12.01(G) or 12.01(H), the
Revolving Lenders' respective obligations to make Revolving Loans under the
Revolving Credit Commitments shall automatically and immediately terminate and
the unpaid principal amount of, and any and all accrued interest on, the
Obligations and all accrued fees shall automatically become immediately due and
payable, without presentment, demand, or protest or other requirements of any
kind (including, without limitation, valuation and appraisement, diligence,
presentment, notice of intent to demand or accelerate and of acceleration), all
of which are hereby expressly waived by the Borrower; and upon the occurrence
and during the continuance of any other Event of Default, the Agent shall at the
request, or may with the consent, of the Requisite Lenders, by written notice to
the Borrower, (i) declare that the Revolving Lenders' respective obligations to
make Revolving Loans under the Revolving Credit Commitments are terminated,
whereupon such obligation of each Revolving Lender to make any Revolving Loan
hereunder and of each Revolving Lender or Issuing Bank to issue or participate
in any Letter of Credit not then issued shall immediately terminate, and/or (ii)
declare the unpaid principal amount of and any and all accrued and unpaid
interest on the Obligations to be, and the same shall thereupon be, immediately
due and payable, without presentment, demand, or protest or other requirements
of any kind (including, without limitation, valuation and appraisement,
diligence, presentment, notice of intent to demand or accelerate and of
acceleration), all of which are hereby expressly waived by the Borrower.
(b) DEPOSIT FOR LETTERS OF CREDIT. In addition, after the
occurrence and during the continuance of an Event of Default, the Borrower
shall, promptly upon demand by the Agent, deliver to the Agent, Cash Collateral
in such form as requested by the Agent for deposit in the Cash Collateral
Account, together with such endorsements, and execution and delivery of such
documents and instruments as the Agent may request in order to perfect or
protect the Agent's Lien with respect thereto, in an aggregate principal amount
equal to the then outstanding Letter of Credit Obligations.
(c) RESCISSION. If at any time after termination of the
Revolving Lenders' obligations to make Revolving Loans under the Revolving
Credit Commitments and/or acceleration of the maturity of the Loans, the
Borrower shall pay all arrears of interest and all payments on account of
principal of the Loans and Reimbursement Obligations which shall have become due
other wise than by acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates speci fied in this
Agreement) and all Events of Default and Potential Events of Default (other than
nonpayment of principal of and accrued interest on the Loans due and payable
solely by virtue of
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acceleration) shall be remedied or waived pursuant to SECTION 15.07, then upon
the written consent of the Requisite Lenders and Requisite Revolving Lenders and
written notice to the Borrower, the termination of Revolving Lenders' respective
obligations to make Revolving Loans under the Revolving Credit Commitments and
the respective Revolving Lenders' and Issuing Banks' obligations to participate
in or issue Letters of Credit and/or the aforesaid acceleration and its
consequences may be rescinded and annulled; but such action shall not affect any
subsequent Event of Default or Potential Event of Default or impair any right or
remedy consequent thereon. The provisions of the preceding sentence are intended
merely to bind the Revolving Lenders and the Issuing Banks to a decision which
may be made at the election of the Requisite Lenders and Requisite Revolving
Lenders; they are not intended to benefit the Borrower and do not give the
Borrower the right to require the Revolving Lenders to rescind or annul any
termination of the aforesaid obligations of the Revolving Lenders or Issuing
Banks or any acceleration hereunder, even if the conditions set forth herein are
met.
(d) ENFORCEMENT. The Borrower acknowledges that in the event
the Borrower or any Guarantor fails to perform, observe or discharge any of
their respective obligations or liabilities under this Agreement or any other
Loan Document, any remedy of law may prove to be inadequate relief to the Agent,
the Issuing Banks and the Lenders; therefore, the Borrower agrees that the
Agent, the Issuing Banks and the Lenders shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
12.03. POST-DEFAULT WITHDRAWALS FROM THE CONCENTRATION ACCOUNT
AND CASH COLLATERAL ACCOUNT. Notwithstanding any other provision of this
Agreement, from and after acceleration of the Obligations as described in
SECTION 12.02(A), neither the Borrower nor any Person or entity claiming on
behalf of or through the Borrower shall have any right to withdraw any of the
funds held in the Concentration Account until the Obligations have been paid in
full in cash. The Agent may, at any such time, sell or cause to be sold any Cash
Equivalents being held by the Agent in the Concentration Account or as Cash
Collateral at any broker's board or at public or private sale, in one or more
sales or lots, at such price as the Agent may deem best, without assumption of
any credit risk, and the purchaser of any or all such Cash Equivalents so sold
shall thereafter own the same, absolutely free from any claim, encumbrance or
right of any kind whatsoever. The Agent or any Holder may, in its own name or in
the name of a designee or nominee, buy such Cash Equivalents at any public sale
and, if permitted by applicable law, buy such Cash Equivalents at any private
sale. The Agent shall apply the proceeds of any such sale, net of any reasonable
expenses incurred in connection therewith, and any other funds deposited in the
Concentration Account or Cash Collateral Account to the payment of the
Obligations in accordance with SECTION 4.02(B)(II), other than amounts which are
being held as Cash
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Collateral for Reimbursement Obligations, which shall be applied to such
Reimbursement Obligations without regard to SECTION 4.02(B)(II). The Borrower
agrees that any sale of Cash Equivalents conducted in conformity with reasonable
commercial practices of banks, commercial finance companies, insurance companies
or other financial institutions disposing of property similar to such Cash
Equivalents shall be deemed to be commercially reasonable and any requirements
of reasonable notice shall be met if such notice is given by the Agent within a
commercially reasonable time prior to such disposition, the time of delivery of
which notice the parties hereto agree shall in no event be required to be
greater than five (5) Business Days before the date of the intended sale or
disposition. Any other requirement of notice, demand or advertisement for sale
is waived to the extent permitted by law. The Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor and such sale may, without further notice, be made at the time and
place to which it was so adjourned.
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ARTICLE XIII
THE AGENT
13.01. APPOINTMENT. (a) Each Lender and each Issuing Bank
hereby consents to the resignation of Citicorp Securities, Inc. as agent under
the 1994 Credit Agreement and designates and appoints Citicorp as the Agent of
such Lender or such Issuing Bank under this Agreement, and each Lender and each
Issuing Bank hereby irrevocably authorizes the Agent to take such action on its
behalf under the provisions of this Agreement and the Loan Documents and to
exercise such powers as are set forth herein or therein together with such other
powers as are reasonably incidental thereto. The Agent agrees to act as such on
the express conditions contained in this ARTICLE XIII.
(b) The provisions of this ARTICLE XIII are solely for the
benefit of the Agent, the Lenders and Issuing Banks, and neither the Borrower
nor any of its Affiliates shall have any right to rely on or enforce any of the
provisions hereof (other than as expressly set forth in SECTION 13.07). In
performing its functions and duties under this Agreement, the Agent shall act
solely as agent of the Lenders and the Issuing Banks and does not assume and
shall not be deemed to have assumed any obligation or relationship of agency,
trustee or fiduciary with or for the Borrower or any Affiliate of the Borrower
and the agency, trust and fiduciary relationship of the Agent hereunder with the
Lenders and Issuing Banks shall be strictly limited in scope to the specific
provisions of this Agreement. The Agent may perform any of its duties hereunder,
or under the other Loan Documents, by or through its agents or employees.
13.02. NATURE OF DUTIES. The Agent shall not have any duties
or responsibilities except those expressly set forth in this Agreement or in the
Loan Documents. The duties of the Agent shall be mechanical and administrative
in nature. The Agent shall not have by reason of this Agreement a fiduciary
relation ship in respect of any Holder. Nothing in this Agreement or any of the
other Loan Documents, expressed or implied, is intended to or shall be construed
to impose upon the Agent any obligations in respect of this Agreement or any of
the Loan Documents except as expressly set forth herein or therein. Each Lender
and each Issuing Bank shall make its own independent investigation of the
financial condition and affairs of the Borrower and its Affiliates in connection
with the making and the continuance of the Loans hereunder and with the issuance
of the Letters of Credit and shall make its own appraisal of the
creditworthiness of the Borrower, any Guarantor and any of their Affiliates
initially and on a continuing basis, and the Agent shall not have any duty or
responsibility, either initially or on a continuing basis, to provide any Holder
with any credit or other information with respect thereto (except for reports
required to be delivered by the Agent under the terms of this Agreement). If the
Agent seeks the consent or approval of the Lenders to the taking or
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refraining from taking of any action hereunder, the Agent shall send notice
thereof to each Lender. The Agent shall promptly notify each Lender at any time
that the Lenders so required hereunder have instructed the Agent to act or
refrain from acting pursuant hereto. As to any matters not expressly provided
for by this Agreement (including, without limitation, enforcement or collection
of the Notes or any amount payable under any provision of ARTICLE IV or ARTICLE
V when due) or the other Loan Documents, the Agent shall not be required to
exercise any discretion or take any action. Notwithstanding the foregoing, the
Agent shall be required to act or refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Requisite Lenders (unless the instructions or consent of certain affected or all
of the Lenders or the Requisite Revolving Lenders is required hereunder or
thereunder) and such instructions shall be binding upon all Lenders, Issuing
Banks and Holders of Notes; PROVIDED, HOWEVER, the Agent shall not be required
to take any action which (i) the Agent reasonably believes will expose it to
personal liability unless the Agent receives an indemnification satisfactory to
it from the Lenders with respect to such action or (ii) is contrary to this
Agreement, the other Loan Documents or applicable law.
13.03. RIGHTS, EXCULPATION, ETC. (a) LIABILITIES;
RESPONSIBILITIES. None of the Agent, any Affiliate of the Agent, or any of their
respective officers, directors, employees or agents shall be liable to any
Holder for any action taken or omitted by them hereunder or under any of the
Loan Documents, or in connection therewith, except that no Person shall be
relieved of any liability imposed by law for gross negligence or willful
misconduct. The Agent shall not be liable for any apportionment or distribution
of payments made by it in good faith pursuant to SECTION 4.02(B), and if any
such apportionment or distribution is subsequently determined to have been made
in error the sole recourse of any Holder to whom payment was due, but not made,
shall be to recover from other Holders any payment in excess of the amount to
which they are determined to have been entitled. The Agent shall not be
responsible to any Holder for any recitals, statements, representations or
warranties herein or for the execution, effectiveness, genuineness, validity,
legality, enforceability, collectibility, or sufficiency of this Agreement or
any of the other Transaction Documents or the transactions contemplated thereby,
or for the financial condition of the Borrower or any of its Affiliates. The
Agent shall not be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Agreement or any of the Loan Documents, the agreements and instruments executed
and delivered in connection with the Finance Affiliate Indebtedness, or the
financial condition of the Borrower or any of its Affiliates, or the existence
or possible existence of any Potential Event of Default or Event of Default.
(b) RIGHT TO REQUEST INSTRUCTIONS. The Agent may at
any time request instructions from the Lenders with respect to
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any actions or approvals which by the terms of any of the Loan Documents the
Agent is permitted or required to take or to grant, and the Agent shall be
absolutely entitled to refrain from taking any action or to withhold any
approval and shall not be under any liability whatsoever to any Person for
refraining from any action or withholding any approval under any of the Loan
Documents until it shall have received such instructions from those Lenders from
whom the Agent is required to obtain such instructions for the pertinent matter
in accordance with the Loan Documents. Without limiting the generality of the
foregoing, no Holder shall have any right of action whatsoever against the Agent
as a result of the Agent acting or refraining from acting under the Loan
Documents in accordance with the instructions of the Requisite Lenders or, where
required by the express terms of this Agree ment, a different or greater
proportion of the Lenders.
13.04. RELIANCE. The Agent shall be entitled to rely upon any
written notices, statements, certificates, orders or other documents or any
telephone message believed by it in good faith to be genuine and correct and to
have been signed, sent or made by the proper Person, and with respect to all
matters pertaining to this Agreement or any of the Loan Documents and its duties
hereunder or thereunder, upon advice of legal counsel (including counsel for the
Borrower), independent public accountants and other experts selected by it.
13.05. INDEMNIFICATION. To the extent that the Agent is
required to be reimbursed and indemnified by the Borrower but is not reimbursed
and indemnified by the Borrower, the Lenders will reimburse and indemnify the
Agent for and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or asserted
against it in any way relating to or arising out of the Loan Documents or any
action taken or omitted by the Agent under the Loan Documents, in proportion to
each Lender's Pro Rata Share. The obligations of the Lenders under this SECTION
13.05 shall survive the payment in full of the Loans, the Reimbursement
Obligations and all other Obligations and the termination of this Agreement.
13.06. AGENT INDIVIDUALLY. With respect to its Pro Rata Share
of the Commitments hereunder, if any, and the Loans made by it, if any, the
Agent shall have and may exercise the same rights and powers hereunder and is
subject to the same obligations and liabilities as and to the extent set forth
herein for any other Lender. The terms "Lenders", "Requisite Lenders",
"Requisite Revolving Lenders" or any similar terms shall, unless the context
clearly otherwise indicates, include the Agent in its individual capacity, if
applicable, as a Lender or one of the Requisite Lenders or Requisite Revolving
Lenders. The Agent and its Affiliates may accept deposits from, lend money to,
and generally engage in any kind of banking, trust or other business
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with the Borrower or any of its Affiliates as if it were not
acting as the Agent pursuant hereto.
13.07. SUCCESSOR AGENTS. (a) RESIGNATION. The Agent
may resign from the performance of all its functions and duties
hereunder at any time by giving at least thirty (30) Business
Days' prior written notice to the Borrower and the Lenders. Such
resignation shall take effect upon the acceptance by a successor
Agent of appointment pursuant to this SECTION 13.07.
(b) APPOINTMENT BY AGENT. Upon any such notice of resignation,
the Agent shall have the right to appoint a successor Agent selected from among
the Lenders, which appointment shall be subject to the prior written approval of
the Borrower (which may not be unreasonably withheld or delayed, and shall not
be required upon the occurrence and during the continuance of an Event of
Default) and the concurrence of the Lender proposed for such appointment.
(c) RIGHTS OF THE SUCCESSOR AND RETIRING AGENTS. Upon
the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and
duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Agreement
and the other Loan Documents. After any retiring Agent's
resignation hereunder as Agent, the provisions of this ARTICLE
XIII shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was the Agent under this
Agreement.
13.08. RELATIONS AMONG LENDERS. Each Lender and each Issuing
Bank agrees (except as provided in SECTION 15.05) that it will not take any
legal action, nor institute any actions or proceedings, against the Borrower or
any other obligor hereunder or with respect to any Collateral, without the prior
written consent of the Requisite Lenders. Without limiting the generality of the
foregoing, no Lender may accelerate or otherwise enforce its portion of the
Obligations, or unilaterally terminate its Commitments, except in accordance
with SECTION 12.02(A).
13.09. CONCERNING THE COLLATERAL AND THE LOAN
DOCUMENTS. (a) PROTECTIVE ADVANCES. The Agent may from time to
time, (i) before or after the occurrence of an Event of Default,
make such disbursements and advances pursuant to the Loan
Documents which the Agent, in its sole discretion, deems
necessary or desirable to preserve or protect the Collateral or
any portion thereof and (ii) after the occurrence of an Event of
Default which is continuing unwaived, to enhance the likelihood
or maximize the amount of repayment of the Loans and other
Obligations ("Protective Advances"); PROVIDED, HOWEVER, that
Agent shall obtain the prior written consent of the Requisite
Revolving Lenders with respect to the making of any Protective
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Advance which, when combined with other Protective Advances not then reimbursed
by the Borrower, would exceed $3,000,000. The Agent shall notify the Borrower
and each Revolving Lender in writing of each such Protective Advance, which
notice shall include a description of the purpose of such Protective Advance.
The Borrower agrees to pay the Agent, upon demand, the principal amount of all
outstanding Protective Advances, together with interest thereon at the rate from
time to time applicable pursuant to SECTION 5.01 from the date of such
Protective Advance until the outstanding principal balance thereof is paid in
full. If the Borrower fails to make payment in respect of any Protective Advance
within one (1) Business Day after the date the Borrower receives written demand
therefor from the Agent, the Agent shall promptly notify each Revolving Lender
and each Revolving Lender agrees that it shall thereupon make available to the
Agent, in Dollars in immediately available funds, the amount equal to such
Revolving Lender's Revolving Loan Pro Rata Share of such Protective Advance;
PROVIDED, HOWEVER, that no Revolving Lender shall be required to make any such
payment in excess of its then unfunded Revolving Credit Commitment. If such
funds are not made available to the Agent by any Revolving Lender within one (1)
Business Day after the Agent's demand therefor, the Agent will be entitled to
recover any such amount from such Revolving Lender together with interest
thereon at the Federal Funds Rate for each day during the period commencing on
the date of such demand and ending on the date such amount is received. The
failure of any Revolving Lender to make available to the Agent its Revolving
Loan Pro Rata Share of any such Protective Advance shall neither relieve any
other Revolving Lender of its obligation hereunder to make available to the
Agent such other Revolving Lender's Pro Rata Share of such Protective Advance on
the date such payment is to be made nor increase the obligation of any other
Revolving Lender to make such payment to the Agent. All outstanding principal
of, and interest on, Protective Advances shall constitute Obligations secured by
the Collateral until paid in full by the Borrower.
(b) AUTHORITY. Each Lender and each Issuing Bank authorizes
and directs the Agent to enter into the Loan Documents relating to the
Collateral for the benefit of the Lenders and the Issuing Banks. Each Lender and
each Issuing Bank agrees that any action taken by the Agent or the Requisite
Lenders (or, where required by the express terms of this Agreement, a different
or greater proportion of the Lenders) in accordance with the provisions of this
Agreement or the other Loan Documents, and the exercise by the Agent or the
Requisite Lenders (or, where so required, such greater or different proportion
of the Lenders) of the powers set forth herein or therein, together with such
other powers as are reasonably incidental thereto, shall be authorized and
binding upon all of the Lenders and Issuing Banks. Without limiting the
generality of the foregoing, the Agent shall have the sole and exclusive right
and authority to (i) act as the disbursing and collecting agent for the Lenders
and the Issuing Banks with respect to all payments and collections arising in
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connection with this Agreement and the Loan Documents relating to the
Collateral; (ii) execute and deliver each Loan Document relating to the
Collateral and accept delivery of each such agreement delivered by the Borrower
or any Guarantor a party thereto; (iii) act as collateral agent for the Lenders
and the Issuing Banks for purposes of the perfection of all security interests
and Liens created by such agreements and all other purposes stated therein;
PROVIDED, HOWEVER, the Agent hereby appoints, authorizes and directs the Lenders
and the Issuing Banks to act as collateral sub-agent for the Agent, the Lenders
and the Issuing Banks for purposes of the perfection of all security interests
and Liens with respect to the Property at any time in the possession of such
Lender or such Issuing Bank, including, without limitation, deposit accounts
maintained with, and cash and Cash Equivalents held by, such Lender or such
Issuing Bank; (iv) manage, supervise and otherwise deal with the Collateral; (v)
take such action as is necessary or desirable to maintain the perfection and
priority of the security interests and liens created or purported to be created
by the Loan Documents; and (vi) except as may be otherwise specifically
restricted by the terms of this Agreement or any other Loan Document, exercise
all remedies given to the Agent, the Lenders or the Issuing Banks with respect
to the Collateral under the Loan Documents relating thereto, applicable law or
otherwise.
(c) RELEASE OF COLLATERAL. (i) Each Lender and each
Issuing Bank hereby directs, in accordance with the terms of this
Agreement, the Agent to release any Lien held by the Agent for
the benefit of the Holders:
(A) against all of the Collateral, upon final and
indefeasible payment in full of the Obligations and
termination of this Agreement;
(B) against any part of the Collateral sold or disposed of by
the Borrower or any of its Subsidiaries, if such sale or disposition is
permitted by SECTION 10.02, as certified to the Agent by the Borrower
in an Officer's Certificate, or is otherwise consented to by the
Requisite Lenders; and/or
(C) against any part of the Collateral consisting of a
promissory note, upon final and indefeasible payment in full of the
Indebtedness evidenced thereby.
(ii) Each Lender and each Issuing Bank hereby directs the
Agent to execute and deliver or file such termination and partial release
statements and do such other things as are necessary to release Liens to be
released pursuant to this SECTION 13.09(C) promptly upon the effectiveness of
any such release.
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ARTICLE XIV
YIELD PROTECTION
14.01. TAXES. (a) PAYMENT OF TAXES. Any and all payments by
the Borrower hereunder or under any Note or other document evidencing any
Obligations shall be made, in accordance with SECTION 4.02, free and clear of
and without reduction for any and all present or future taxes, levies, imposts,
deductions, charges, withholdings, and all stamp or documentary taxes, excise
taxes, ad valorem taxes and other taxes imposed on the value of the Property,
charges or levies which arise from the execution, delivery or registration, or
from payment or performance under, or otherwise with respect to, any of the Loan
Documents or the Commitments and all other liabilities with respect thereto
excluding, in the case of each Lender, each Issuing Bank and the Agent, taxes
imposed on or measured by net income or overall gross receipts and capital and
franchise taxes imposed on it by (i) the United States, (ii) the Governmental
Authority of the jurisdiction in which such Lender's Domestic Lending Office is
located or any political subdivision thereof or (iii) the Governmental Authority
in which such Person is organized, managed and controlled or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges and withholdings being hereinafter referred to as "Taxes"). If the
Borrower shall be required by law to withhold or deduct any Taxes from or in
respect of any sum payable hereunder or under any such Note or document to any
Lender, any Issuing Bank or the Agent, (x) the sum payable to such Lender,
Issuing Bank, or the Agent shall be increased as may be necessary so that after
making all required withholding or deductions (including withholding or
deductions applicable to additional sums payable under this SECTION 14.01) such
Lender, such Issuing Bank or the Agent (as the case may be) receives an amount
equal to the sum it would have received had no such withholding or deductions
been made, (y) the Borrower shall make such withholding or deductions, and (z)
the Borrower shall pay the full amount withheld or deducted to the relevant
taxation authority or other authority in accordance with applicable law.
(b) INDEMNIFICATION. The Borrower will indemnify each Lender,
each Issuing Bank and the Agent against, and reimburse each on demand for, the
full amount of all Taxes (including, without limitation, any Taxes imposed by
any Governmental Authority on amounts payable under this SECTION 14.01 and any
additional income or franchise taxes resulting therefrom) incurred or paid by
such Lender, such Issuing Bank or the Agent (as the case may be) or any of their
respective Affiliates and any liability (including penalties, interest, and
out-of-pocket expenses paid to third parties) arising therefrom or with respect
thereto, whether or not such Taxes were lawfully payable. A certificate as to
any additional amount payable to any Person under this SECTION 14.01 submitted
by it to the Borrower shall, absent manifest error, be final, conclusive and
binding upon all
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parties hereto. Each Lender and each Issuing Bank agrees, within a reasonable
time after receiving a written request from the Borrower, to provide the
Borrower and the Agent with such certificates as are reasonably required, and
take such other actions as are reasonably necessary to claim such exemptions as
such Lender or such Issuing Bank may be entitled to claim in respect of all or a
portion of any Taxes which are otherwise required to be paid or deducted or
withheld pursuant to this SECTION 14.01 in respect of any payments under this
Agreement or under the Notes.
(c) RECEIPTS. Within thirty (30) days after the date of any
payment of Taxes by the Borrower, it will furnish to the Agent, at its address
referred to in SECTION 15.08, the original or a certified copy of a receipt
evidencing payment thereof.
(d) FOREIGN BANK CERTIFICATIONS. (i) Each Lender that is not
created or organized under the laws of the United States or a political
subdivision thereof shall deliver to the Borrower and the Agent on the Closing
Date or the date on which such Lender becomes a Lender pursuant to SECTION 15.01
hereof a true and accurate certificate executed in duplicate by a duly
authorized officer of such Lender to the effect that such Lender is eligible to
receive payments hereunder and under the Notes without deduction or withholding
of United States federal income tax (I) under the provisions of an applicable
tax treaty concluded by the United States (in which case the certificate shall
be accompanied by two duly completed copies of IRS Form 1001 (or any successor
or substitute form or forms)), (II) under Sections 1442(c)(1) and 1442(a) of the
Internal Revenue Code (in which case the certificate shall be accompanied by two
duly completed copies of IRS Form 4224 (or any successor or substitute form or
forms)), or (III) due to such Lender's not being a "bank" as such term is used
in Section 881(c)(3)(A) of the Internal Revenue Code (in which case, the
certificate shall be accompanied by two accurate and complete original signed
copies of IRS Form W-8 (or any successor or substitute form or forms)).
(ii) Each Lender further agrees to deliver to the Bor rower
and the Agent from time to time, a true and accurate certificate executed in
duplicate by a duly authorized officer of such Lender before or promptly upon
the occurrence of any event requiring a change in the most recent certificate
previously delivered by it to the Borrower and the Agent pursuant to this
SECTION 14.01(D). Each certificate required to be delivered pursuant to this
SECTION 4.01(D)(II) shall certify as to one of the following:
(A) that such Lender can continue to receive payments
hereunder and under the Notes without deduction or withholding of
United States federal income tax;
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(B) that such Lender cannot continue to receive payments
hereunder and under the Notes without deduction or withholding of
United States federal income tax as specified therein but does not
require additional payments pursuant to SECTION 14.01(A) because it is
entitled to recover the full amount of any such deduction or
withholding from a source other than the Borrower; or
(C) that such Lender is no longer capable of receiving
payments hereunder and under the Notes without deduction or withholding
of United States federal income tax as specified therein and that it is
not capable of recovering the full amount of the same from a source
other than the Borrower.
Each Lender agrees to deliver to the Borrower and the Agent further duly
completed copies of the above-mentioned IRS forms on or before the earlier of
(x) the date that any such form expires or becomes obsolete or otherwise is
required to be resubmitted as a condition to obtaining an exemption from
withholding from United States federal income tax and (y) fifteen (15) days
after the occurrence of any event requiring a change in the most recent form
previously delivered by such Lender to the Borrower and Agent, unless any change
in treaty, law, regulation, or official interpretation thereof which would
render such form inapplicable or which would prevent the Lender from duly
completing and delivering such form has occurred prior to the date on which any
such delivery would otherwise be required and the Lender promptly advises the
Borrower that it is not capable of receiving payments hereunder and under the
Notes without any deduction or withholding of United States federal income tax.
14.02. INCREASED CAPITAL. If after the date hereof any Lender
or Issuing Bank determines that (i) the adoption or implementation of or any
change in or in the interpretation or administration of any law or regulation or
any guideline or request from any central bank or other Governmental Authority
or quasi-governmental authority exercising jurisdiction, power or control over
any Lender, Issuing Bank or banks or financial institutions generally (whether
or not having the force of law), compliance with which affects or would affect
the amount of capital required or expected to be maintained by such Lender or
Issuing Bank or any corporation controlling such Lender or Issuing Bank and (ii)
the amount of such capital is increased by or based upon (A) the making or
maintenance by any Lender of its participation in or obligation to participate
in Letters of Credit or (B) the issuance or maintenance by any Issuing Bank of,
or the existence of any Issuing Bank's obligation to issue, Letters of Credit,
then, in any such case, upon written demand by such Lender or Issuing Bank (with
a copy of such demand to the Agent), the Borrower shall immediately pay to the
Agent for the account of such Lender or Issuing Bank, from time to time as
specified by such Lender or Issuing Bank, additional amounts
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sufficient to compensate such Lender or Issuing Bank or such corporation
therefor. Such demand shall be accompanied by a statement as to the amount of
such compensation and include a brief summary of the basis for such demand. Such
statement shall be conclusive and binding for all purposes, absent manifest
error.
14.03. CHANGES; LEGAL RESTRICTIONS. If after the date hereof
any Lender or Issuing Bank determines that the adoption or implementation of or
any change in or in the interpretation or administration of any law or
regulation or any guideline or request from any central bank or other
Governmental Authority or quasi-governmental authority exercising jurisdiction,
power or control over any Lender, Issuing Bank or over banks or financial
institutions generally (whether or not having the force of law), compliance with
which:
(a) does or will subject a Lender or an Issuing Bank to
charges (other than taxes) of any kind which such Lender or Issuing
Bank reasonably determines to be applicable to the Commitments of the
Lenders and/or the Issuing Banks to issue and/or participate in Letters
of Credit or change the basis of taxation of payments to that Lender or
Issuing Bank of fees, interest, or any other amount payable hereunder
with respect to Letters of Credit; or
(b) does or will impose, modify, or hold appli cable, in the
determination of a Lender or an Issuing Bank, any reserve, special
deposit, compulsory loan, FDIC insurance or similar requirement against
assets held by, or deposits or other liabilities (including those
pertaining to Letters of Credit) in or for the account of, advances or
loans by, commitments made, or other credit extended by, or any other
acquisition of funds by, a Lender or an Issuing Bank;
and the result of any of the foregoing is to increase the cost to that Lender or
Issuing Bank of making, renewing or maintaining its Commitments with respect to,
or issuing or participating in, the Letters of Credit or to reduce any amount
receivable thereunder; then, in any such case, upon written demand by such
Lender or Issuing Bank (with a copy of such demand to the Agent), the Borrower
shall immediately pay to the Agent for the account of such Lender or Issuing
Bank, from time to time as specified by such Lender or Issuing Bank, such amount
or amounts as may be necessary to compensate such Lender or Issuing Bank for any
such additional cost incurred or reduced amount received. Such demand shall be
accompanied by a statement as to the amount of such compensation and include a
brief summary of the basis for such demand. Such statement shall be conclusive
and binding for all purposes, absent manifest error.
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14.04. LIMITATION ON ADDITIONAL AMOUNTS PAYABLE BY THE
BORROWER. Notwithstanding the provisions of SECTION 14.01(A), the Borrower shall
not be required to pay any additional amounts thereunder to a Lender if (a) the
obligation to pay such additional amounts would not have arisen but for a
failure by the Lender to comply with the requirements described in SECTION 14.01
or (b) the Lender shall not have furnished the Borrower with such forms or shall
not have taken such other action as reasonably may be available to it under
applicable tax laws and any applicable tax treaty to obtain an exemption from,
or reduction (to the lowest applicable rate) of withholding of such United
States federal income tax; PROVIDED, HOWEVER, the Borrower's obligation to pay
such additional amounts shall be reinstated upon receipt of such forms or
evidence that action with respect to obtaining such exemption or reduction has
been taken.
14.05. CHANGE IN LENDING OFFICE. Any Lender claiming any
additional amounts payable pursuant to SECTION 14.01 shall use reasonable
efforts (consistent with its internal policy and legal and regulatory
restrictions) to change the Domestic Lending Office designated by it for
purposes of this Agreement to a Domestic Lending Office in another jurisdiction,
if the making of such a change would avoid the need for, or reduce the amount
of, any such additional amounts which may thereafter accrue and would not, in
the judgment of such Lender, be otherwise disadvantageous to such Lender.
14.06. ILLEGALITY. (a) If at any time any Lender determines
(which determination shall, absent manifest error, be final and conclusive and
binding upon all parties) that the making or continuation of any Eurodollar Rate
Loan has become unlawful or impermissible by compliance by that Lender with any
law, governmental rule, regulation or order of any Governmental Authority
(whether or not having the force of law and whether or not failure to comply
therewith would be unlawful or would result in costs or penalties), then, and in
any such event, such Lender may give notice of that determination, in writing,
to the Borrower and the Agent, and the Agent shall promptly transmit the notice
to each other Lender.
(b) When notice is given by a Lender under SECTION 14.06(A),
(i) the Borrower's right to request from such Lender and such Lender's
obligation, if any, to make Eurodollar Rate Loans shall be immediately
suspended, and such Lender shall make a Base Rate Loan as part of any requested
Borrowing of Eurodollar Rate Loans and (ii) if the affected Eurodollar Rate Loan
or Loans are then outstanding, the Borrower shall immediately, or if permitted
by applicable law, no later than the date permitted thereby, upon at least one
(1) Business Day's prior written notice to the Agent and the affected Lender,
convert each such Loan into a Base Rate Loan.
(c) If at any time after a Lender gives notice under SECTION
14.06(A) such Lender determines that it may lawfully make
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Eurodollar Rate Loans, such Lender shall promptly give notice of that
determination, in writing, to the Borrower and the Agent, and the Agent shall
promptly transmit the notice to each other Lender. The Borrower's right to
request, and such Lender's obligation, if any, to make, Eurodollar Rate Loans
shall thereupon be restored.
14.07. COMPENSATION. In addition to all amounts required to be
paid by the Borrower pursuant to SECTION 5.01, the Borrower shall compensate
each Lender, upon demand, for all losses, expenses and liabilities (including,
without limitation, any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund or
maintain such Lender's Eurodollar Rate Loans to the Borrower but excluding any
loss of the then applicable Eurodollar Rate Margin on the relevant Loans) which
that Lender may sustain (a) if for any reason a Borrowing, conversion into or
continuation of Eurodollar Rate Loans does not occur on a date specified
therefor in a Notice of Borrowing or a Notice of Conversion/Continuation given
by the Borrower or in a telephonic request by it for borrowing or
conversion/continuation or a successive Eurodollar Interest Period does not
commence after notice therefor is given pursuant to SECTION 5.01(E), including,
without limitation, pursuant to SECTION 5.03(D), (b) if for any reason any
Eurodollar Rate Loan is prepaid or converted (including, without limitation,
mandatorily pursuant to SECTION 4.01 or SECTION 14.06(B)) on a date which is not
the last day of the applicable Eurodollar Interest Period, (c) as a consequence
of a required conversion of a Eurodollar Rate Loan to a Base Rate Loan as a
result of any of the events indicated in SECTION 5.03(D) or SECTION 14.06(B), or
(d) as a consequence of any failure by the Borrower to repay Eurodollar Rate
Loans when required by the terms of this Agreement. The Lender making demand for
such compensation shall deliver to the Borrower concurrently with such demand a
written statement in reasonable detail as to such losses, expenses and
liabilities, and this statement shall be conclusive as to the amount of
compensation due to that Lender, absent manifest error.
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ARTICLE XV
MISCELLANEOUS
15.01. ASSIGNMENTS AND PARTICIPATIONS. (a) ASSIGN MENTS. No
assignments or participations of any Lender's rights or obligations under this
Agreement shall be made except in accordance with this SECTION 15.01. Each
Lender may assign to one or more Eligible Assignees all or a portion of its
rights and obligations under this Agreement (including all of its rights and
obligations with respect to the Term Loans, the Revolving Loans, and the Letters
of Credit) in accordance with the provisions of this SECTION 15.01.
(b) LIMITATIONS ON ASSIGNMENTS. Each assignment shall be
subject to the following conditions: (i) each such assignment may be on a
non-pro-rata basis, but shall be of a constant, and not a varying, ratable
percentage of all of the assigning Lender's rights and obligations under this
Agreement which are subject to such assignment and, in the case of (A) a partial
assignment, shall be in a minimum principal amount of $5,000,000 or (B) an
assignment of a Lender's Revolving Credit Commitment or outstanding Term Loans,
shall be in a minimum principal amount of the lesser of $5,000,000 or such
Lender's Revolving Credit Commitment or outstanding balance of such Lender's
Term Loans being assigned, (ii) each such assignment shall be to an Eligible
Assignee, and (iii) the parties to each such assignment shall execute and
deliver to the Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance. Upon such execution, delivery, acceptance and
recording in the Register, from and after the effective date specified in each
Assignment and Acceptance and agreed to by the Agent, (A) the assignee
thereunder shall, in addition to any rights and obligations hereunder held by it
immediately prior to such effective date, if any, have the rights and
obligations hereunder that have been assigned to it pursuant to such Assignment
and Acceptance and shall, to the fullest extent permitted by law, have the same
rights and benefits hereunder as if it were an original Lender hereunder, (B)
the assigning Lender shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the remaining portion
of such assigning Lender's rights and obligations under this Agreement, the
assigning Lender shall cease to be a party hereto), and (C) the Borrower shall
execute and deliver to the assignee thereunder one or more Notes, as applicable,
evidencing its obligations to such assignee and the adjusted obligations to such
assignor with respect to the Loans in substitution for the Note(s) previously
held by the assignor.
(c) THE REGISTER. The Agent shall maintain at its
address referred to in SECTION 15.08 a copy of each Assignment
and Acceptance delivered to and accepted by it and a register
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(the "Register") for the recordation of the names and addresses of the Lenders
and the Commitment under each Loan of, and prin cipal amount of the Loans under
each facility owing to, each Lender from time to time and whether such Lender is
an original Lender or the assignee of another Lender pursuant to an Assignment
and Acceptance. The entries in the Register shall be conclusive and binding for
all purposes, absent manifest error, and the Borrower and each of its
Subsidiaries, the Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(d) FEE. Upon its receipt of an Assignment and Accep tance
executed by the assigning Lender and an Eligible Assignee and a processing and
recordation fee of $2,500 (payable by the assigning Lender or the assignee, as
shall be agreed between them), the Agent shall, if such Assignment and
Acceptance has been completed and is in compliance with this Agreement and in
substantially the form of EXHIBIT A, (i) accept such Assignment and Acceptance,
(ii) record the information contained therein in the Register and (iii) give
prompt notice thereof to the Borrower and the other Lenders.
(e) PARTICIPATIONS. Each Lender may sell partici pations to
one or more other financial institutions in or to all or a portion of its rights
and obligations under and in respect of any and all facilities under this
Agreement (including, with out limitation, all or a portion of any or all of its
Commitments hereunder and the Loans owing to it and its undivided interest in
the Letters of Credit); PROVIDED, HOWEVER, that (i) such Lender's obligations
under this Agreement (including, without limitation, its Commitments hereunder)
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) the Bor
rower, the Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and (iv) such participant's rights to agree or
to restrict such Lender's ability to agree to the modification, waiver or
release of any of the terms of the Loan Documents or to the release of any
Collateral covered by the Loan Documents, to consent to any action or failure to
act by any party to any of the Loan Documents or any of their respective
Affiliates, or to exercise or refrain from exercising any powers or rights which
any Lender may have under or in respect of the Loan Documents or any Collateral,
shall be limited to the right to consent to (A) increase in the Commitment of
the Lender from whom such participant purchased a participation, (B) reduction
of the principal of, or rate or amount of interest on the Loans(s) subject to
such participation (other than by the payment or prepayment thereof), (C)
postponement of any date fixed for any payment of principal of, or interest on,
the Loan(s) subject to
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such participation and (D) release of any Guarantor or all or a substantial
portion of the Collateral except as provided in SECTION 13.09(C).
(f) INFORMATION REGARDING THE BORROWER. Any Lender may, in
connection with any assignment or participation or pro posed assignment or
participation pursuant to this SECTION 15.01, disclose to the assignee or
participant or proposed assignee or participant, any information relating to the
Borrower or its Subsidiaries furnished to such Lender by the Agent or by or on
behalf of the Borrower; PROVIDED that, prior to any such disclosure, such
assignee or participant, or proposed assignee or participant, shall agree to
preserve in accordance with SECTION 15.20 the confidentiality of any
confidential information described therein.
(g) PAYMENT TO PARTICIPANTS. Anything in this Agree ment to
the contrary notwithstanding, in the case of any participation, all amounts
payable by the Borrower under the Loan Documents shall be calculated and made in
the manner and to the parties required hereby as if no such participation had
been sold.
(h) LENDERS' CREATION OF SECURITY INTERESTS. Notwithstanding
any other provision set forth in this Agreement, any Lender may at any time
create a security interest in all or any portion of its rights under this
Agreement (including, without limitation, Obligations owing to it and any Notes
held by it) in favor of any Federal Reserve bank in accordance with Regulation A
of the Federal Reserve Board.
(i) ASSIGNMENTS BY AGENT. If Agent ceases to be a Lender under
this Agreement by virtue of any assignment made pursuant to this SECTION 15.01,
then, as of the effective date of such cessation, Citibank's obligations to
issue Letters of Credit pursuant to SECTION 3.01 shall terminate and Citibank
shall be an Issuing Bank hereunder only with respect to outstanding Letters of
Credit issued prior to such date.
15.02. EXPENSES.
(a) GENERALLY. The Borrower agrees upon demand to pay, or
reimburse the Agent for, all of the Agent's reasonable internal and external
audit, legal, appraisal, valuation, filing, document duplication and
reproduction and investigation expenses and for all other out-of-pocket costs
and expenses of every type and nature (including, without limitation, the
reasonable fees, expenses and disbursements of Sidley & Austin, local legal
counsel, auditors, accountants, appraisers, printers, insurance and
environmental advisers, and other consultants and agents) incurred by the Agent
in connection with (i) the Agent's review and investigation of the Borrower and
its Affiliates and the Collateral in connection with the preparation,
negotiation, and execution of the Loan Documents and the Agent's periodic
reviews
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and audits of the Borrower; (ii) the preparation, negotiation, execution and
interpretation of this Agreement (including, without limitation, the
satisfaction or attempted satisfaction of any of the conditions set forth in
ARTICLE VI) and the other Loan Documents and the making of the Loans hereunder;
(iii) the cre ation, perfection or protection of the Liens under the Loan
Documents (including, without limitation, any reasonable fees and expenses for
local counsel in various jurisdictions); (iv) the ongoing administration of this
Agreement, the other Loan Documents and the Loans, including consultation with
attorneys in connection therewith and with respect to the Agent's rights and
responsibilities under this Agreement and the other Loan Documents; (v) the
protection, collection or enforcement of any of the Obligations or the
enforcement of any of the Loan Documents; (vi) the commencement, defense or
intervention in any court proceeding relating in any way to the Obligations, the
Property, the Borrower, any Guarantor, any of Borrower's Subsidiaries, this
Agreement or any of the other Loan Documents; (vii) the response to, and
preparation for, any subpoena or request for document production with which the
Agent is served or deposition or other proceeding in which the Agent is called
to testify, in each case, relating in any way to the Obligations, the Property,
the Borrower, any Guarantor, any of Borrower's Subsidiaries, this Agreement or
any of the other Loan Documents; and (viii) any amendments, consents, waivers,
assignments, restatements, or supplements to any of the Loan Documents and the
preparation, negotiation, and execution of the same.
(b) AFTER DEFAULT. The Borrower further agrees to pay or
reimburse the Agent, the Issuing Banks and the Lenders upon demand for all
out-of-pocket costs and expenses, including, without limitation, reasonable
attorneys' fees (including allocated costs of internal counsel and costs of
settlement) incurred by the Agent, any Issuing Bank or any Lender after the
occurrence of an Event of Default (i) in enforcing any Loan Document or
Obligation or any security therefor or exercising or enforcing any other right
or remedy available by reason of such Event of Default; (ii) in connection with
any refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a "work-out" or in any insolvency or bankruptcy
proceeding; (iii) in commencing, defending or inter vening in any litigation or
in filing a petition, complaint, answer, motion or other pleadings in any legal
proceeding relat ing to the Obligations, the Property, the Borrower, any
Guarantor, or any of Borrower's Subsidiaries and related to or arising out of
the transactions contemplated hereby or by any of the other Transaction
Documents; and (iv) in taking any other action in or with respect to any suit or
proceeding (bankruptcy or otherwise) described in CLAUSES (I) through (III)
above.
15.03. INDEMNITY. The Borrower further agrees (a) to
indemnify and hold harmless the Agent and each and all of the
Lenders and Issuing Banks and each of their respective officers,
directors, employees, attorneys and agents (including, without
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limitation, those retained in connection with the satisfaction or attempted
satisfaction of any of the conditions set forth in ARTICLE VI) (collectively,
the "Indemnitees") from and against any and all liabilities, obligations, losses
(other than loss of profits), damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature what soever
(excluding any taxes (other than specifically provided for in ARTICLE XIV) and
including, without limitation, the fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding, whether or not such Indemnitees shall be designated a party
thereto), imposed on, incurred by, or asserted against such Indemnitees in any
manner relating to or arising out of (i) this Agreement or the other Loan
Documents, or any act, event or transaction related or attendant thereto or to
the Liquidations, Merger, Offering, or Finance Affiliate Indebtedness, the
making of the Loans and the issuance of and participation in Letters of Credit
hereunder, the management of such Loans or Letters of Credit, the use or
intended use of the proceeds of the Loans or Letters of Credit hereunder, or any
of the other transactions contemplated by any of the Transaction Documents, or
(ii) any Liabilities and Costs relating to any violation by the Borrower or any
Guarantor, or their respective predecessors-in-interest, of any Environmental,
Health or Safety Requirements of Law, the past, present or future operations of
the Borrower or any Guarantor, or any of their respective
predecessors-in-interest, or, the past, present or future environmental, health
or safety condition of any respective past, present or future Property, the
presence of asbestos-containing materials at any respective past, present or
future Property, or the Release or threatened Release of any Contaminant into
the environment by the Borrower or any Guarantor, or their respective
predecessors-in-interest, or the Release or threatened Release of any
Contaminant into the environment from or at any facility to which the Borrower
or any Guarantor, or their respective predecessors-in-interest, sent or directly
arranged the transport of any Contaminant (collectively, the "Indemnified
Matters"); PROVIDED, HOWEVER, the Borrower shall have no obligation to an
Indemnitee hereunder with respect to Indemnified Matters caused by or resulting
from the willful misconduct or gross negligence of such Indemnitee, as
determined by a final, non-appealable order of a court of competent jurisdiction
and (b) not to assert any claim against any of the Indemnified Parties on any
theory of liability for special, indirect, consequential or punitive damages
arising out of, or in any way in connection with, the Commitments, the
Obligations or any other matters governed by this Agreement and/or the other
Loan Documents. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, the Borrower shall contribute the maximum
portion which it is permitted to pay and satisfy under applicable law, to the
payment and satisfaction of all Indemnified Matters incurred by the Indemnitees.
The Agent, Lenders and the Issuing Banks agree to notify the Borrower of the
institution or assertion of any
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Indemnified Matter, but the parties hereto hereby agree that the failure to so
notify the Borrower shall not release the Borrower from its obligations
hereunder, except to the extent of any material increase in the liabilities of
the Borrower under this SECTION 15.03 directly resulting from such failure to
receive notice from such Indemnitees.
15.04. CHANGE IN ACCOUNTING PRINCIPLES. If any change in the
accounting principles used in the preparation of the most recent Financial
Statements referred to in SECTION 8.01 are hereafter required or permitted by
the rules, regulations, pronouncements and opinions of the Financial Accounting
Standards Board or the American Institute of Certified Public Accountants (or
successors thereto or agencies with similar functions) and are adopted by the
Borrower with the agreement of its independent certified public accountants and
such changes result in a change in the method of calculation of any of the
covenants, standards or terms found in ARTICLE IX, ARTICLE X, and ARTICLE XI,
the parties hereto agree to enter into negotiations in order to amend such
provisions so as to equitably reflect such changes with the desired result that
the criteria for evaluating compliance with such covenants, standards and terms
by the Borrower shall be the same after such changes as if such changes had not
been made; PROVIDED, HOWEVER, no change in GAAP that would affect the method of
calculation of any of the covenants, standards or terms shall be given effect in
such calculations until such provisions are amended, in a manner satisfactory to
the Requisite Lenders and the Borrower, to so reflect such change in accounting
principles.
15.05. SETOFF. In addition to any Liens granted under the Loan
Documents and any rights now or hereafter granted under applicable law, upon the
occurrence and during the continuance of any Event of Default, each Lender, each
Issuing Bank and any Lender Affiliate is hereby authorized by the Borrower at
any time or from time to time, without notice to any Person (any such notice
being hereby expressly waived) to set off and to appropriate and to apply any
and all deposits (general or special, including, but not limited to,
indebtedness evidenced by certificates of deposit, whether matured or unmatured
(but not including trust accounts)) and any other Indebtedness at any time held
or owing by such Lender, Issuing Bank or any Lender Affiliate to or for the
credit or the account of the Borrower against and on account of the Obligations
of the Borrower to such Lender, Issuing Bank or any Lender Affiliate, including,
but not limited to, all Loans and Letters of Credit and all claims of any nature
or description arising out of or in connection with this Agreement, irrespective
of whether or not (i) such Lender or Issuing Bank shall have made any demand
hereunder or (ii) the Agent, at the request or with the consent of the Requisite
Lenders, shall have declared the principal of and interest on the Loans and
other amounts due hereunder to be due and payable as permitted by ARTICLE XII
and even though such Obligations may be contingent or unmatured. Each Lender and
each Issuing Bank agrees that it shall not, without the express consent of the
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Requisite Lenders, and that it shall, to the extent it is lawfully entitled to
do so, upon the request of the Requisite Lenders, exercise its setoff rights
hereunder against any accounts of the Borrower or any Guarantor now or hereafter
maintained with such Lender, Issuing Bank or any Lender Affiliate of either of
them. Any Lender whose Lender Affiliate has exercised any such right of set-off
agrees to provide the Agent and Borrower with written notice thereof promptly
after the occurrence thereof.
15.06. RATABLE SHARING. The Lenders agree among them selves
that (i) with respect to all amounts received by them which are applicable to
the payment of the Obligations (excluding the fees described in SECTIONS
3.01(G), 5.02 and ARTICLE XIV), equitable adjustment will be made so that, in
effect, all such amounts will be shared among them ratably in accordance with
their Pro Rata Shares, whether received by voluntary payment, by the exercise of
the right of setoff or banker's lien, by counterclaim or cross-action or by the
enforcement of any or all of the Obligations (excluding the fees described in
SECTIONS 3.01(G), 5.02 and ARTICLE XIV) or the Collateral, (ii) if any of them
shall by voluntary payment or by the exercise of any right of counterclaim,
setoff, banker's lien or otherwise, receive payment of a proportion of the
aggregate amount of the Obliga tions held by it, which is greater than the
amount which such Lender is entitled to receive hereunder, the Lender receiving
such excess payment shall purchase, without recourse or warranty, an undivided
interest and participation (which it shall be deemed to have done simultaneously
upon the receipt of such payment) in such Obligations owed to the others so that
all such recoveries with respect to such Obligations shall be applied ratably in
accordance with their Pro Rata Shares; PROVIDED, HOWEVER, that if all or part of
such excess payment received by the purchasing party is thereafter recovered
from it, those purchases shall be rescinded and the purchase prices paid for
such participations shall be returned to such party to the extent necessary to
adjust for such recovery, but without interest except to the extent the
purchasing party is required to pay interest in connection with such recovery.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this SECTION 15.06 may, to the fullest extent permitted by
law, exercise all its rights of payment (including, subject to SECTION 15.05,
the right of setoff) with respect to such participation as fully as if such
Lender were the direct creditor of the Borrower in the amount of such
participation.
15.07. AMENDMENTS AND WAIVERS. (a) GENERAL
PROVISIONS. Unless otherwise provided for or required in this
Agreement, no amendment or modification of any provision of this
Agreement or any of the other Loan Documents shall be effective
without the written agreement of the Requisite Lenders (which the
Requisite Lenders shall have the right to grant or withhold in
their sole discretion) and the Borrower or Guarantor parties
thereto, as applicable. No termination or waiver of any provision
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of this Agreement or any of the other Loan Documents, or consent to any
departure by the Borrower or any Guarantor therefrom, shall be effective without
the written concurrence of the Requisite Lenders, which the Requisite Lenders
shall have the right to grant or withhold in their sole discretion. All
amendments, modifications, waivers and consents not specifically reserved to
Lenders, Issuing Banks, and the Agent in SECTION 15.07(B), SECTION 15.07(C) and
in other provisions of this Agreement or the other Loan Documents shall require
only the approval of the Requisite Lenders. Any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given. No notice to or demand on the Borrower in any case shall entitle
the Borrower to any other or further notice or demand in similar or other
circumstances.
(b) AMENDMENTS, CONSENTS AND WAIVERS BY AFFECTED LENDERS. Any
amendment, modification, termination, waiver or consent with respect to any of
the following provisions of this Agreement shall be effective only by a written
agreement, signed by each Lender or Issuing Bank affected thereby as described
below:
(i) waiver of any of the conditions specified in SECTIONS 6.01 and 6.02
(except with respect to a condition based upon another provision of
this Agreement, the waiver of which requires only the concurrence of
the Requisite Lenders),
(ii) increase in the amount of any of the Commitments of
such Lender,
(iii) reduction of the principal of, rate or amount of interest on the
Loans, the Reimbursement Obligations, or any fees or other amounts
payable to such Lender (other than by the payment or prepayment
thereof),
(iv) postponement of the Revolving Credit Termination Date, the Term
Loan Termination Date, the Acquisition Subfacility Termination Date, or
any date fixed for any payment of principal of, or interest on, the
Loans, the Reimbursement Obligations or any fees or other amounts
payable to such Lender,
(v) the orders of priority set forth in SECTION 4.01, in
SECTION 4.02(B)(I), or in CLAUSES (D) through (I) of SECTION
4.02(B)(II), and
(vi) change in the definitions of Revolving Credit
Commitments, Term Loan Commitments, Requisite Revolving
Lenders or Acquisition Subfacility.
(c) AMENDMENTS, CONSENTS AND WAIVERS BY ALL LENDERS.
Any amendment, modification, termination, waiver or consent with
respect to any of the following provisions of this Agreement
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shall be effective only by a written agreement, signed by each
Lender:
(i) release of any Guarantor or all or a substantial
portion of the Collateral (except as provided in SECTION
13.09(C)),
(ii) change in the definitions of Borrowing Base, Borrowing Base
Certificate, or Requisite Lenders, or change in any component of the
Borrowing Base or Borrowing Base Certificate (other than by inclusion
of Eligibility Reserves established by the Agent or Requisite Revolving
Lenders),
(iii) amendment of SECTION 15.01 or this SECTION 15.07,
(iv) assignment of any right or interest in or under this
Agreement or any of the other Loan Documents by the
Borrower, and
(v) waiver of any Event of Default described in SECTIONS 12.01(A), (F),
(G), (H), and (M).
(d) AGENT AUTHORITY. The Agent may, but shall have no
obligation to, with the written concurrence of any Lender, exe cute amendments,
modifications, waivers or consents on behalf of that Lender. Notwithstanding
anything to the contrary contained in this SECTION 15.07, no amendment,
modification, waiver or consent shall affect the rights or duties of the Agent
under this Agreement or the other Loan Documents, unless made in writing and
signed by the Agent in addition to the Lenders required above to take such
action; and the order of priority set forth in CLAUSES (A) through (C) of
SECTION 4.02(B)(II) may be changed only with the prior written consent of the
Agent. Notwithstanding anything herein to the contrary, in the event that the
Borrower shall have requested, in a writing delivered to the Agent and the
Lenders, that any Lender agree to an amendment, modification, waiver or consent
with respect to any particular provision or provisions of this Agreement or the
other Loan Documents, and such Lender shall have failed to state, in writing,
that it either agrees or disagrees (in full or in part) with all such requests
(in the case of its statement of agreement, subject to satisfactory
documentation and such other conditions it may specify) within thirty (30) days
after such request, then such Lender hereby irrevocably authorizes the Agent to
agree or disagree, in full or in part, and in the Agent's sole discretion, to
such requests on behalf of such Lender as such Lender's attorney-in-fact and to
execute and deliver any writing approved by the Agent which evidences such
agreement as such Lender's duly authorized agent for such purposes.
15.08. NOTICES. Unless otherwise specifically pro
vided herein, any notice or other communication herein required
or permitted to be given shall be in writing and may be
personally served, sent by facsimile transmission or courier
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service or United States certified mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a facsimile
transmission, or four (4) Business Days after deposit in the United States mail
with postage prepaid and properly addressed. Notices to the Agent pursuant to
ARTICLES II, IV or XIII shall not be effective until received by the Agent. For
the purposes hereof, the addresses of the parties hereto (until notice of a
change thereof is delivered as provided in this SECTION 15.08) shall be as set
forth below each party's name on the signature pages hereof or the signature
page of any applicable Assignment and Acceptance, or, as to each party, at such
other address as may be designated by such party in a written notice to all of
the other parties to this Agreement.
15.09. SURVIVAL OF WARRANTIES AND AGREEMENTS. All
representations and warranties made herein and all obligations of the Borrower
in respect of taxes, indemnification and expense reimbursement shall survive the
execution and delivery of this Agreement and the other Loan Documents, the
making and repayment of the Loans, the issuance and discharge of Letters of
Credit hereunder and the termination of this Agreement and shall not be limited
in any way by the passage of time or occurrence of any event and shall expressly
cover time periods when the Agent, any of the Issuing Banks or any of the
Lenders may have come into possession or control of any of the Property.
15.10. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of the Agent, any Lender or any Issuing Bank in
the exercise of any power, right or privilege under any of the Loan Documents
shall impair such power, right or privilege or be construed to be a waiver of
any default or acquiescence therein, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privi lege. All rights and remedies existing under
the Loan Documents are cumulative with and not exclusive of any rights or
remedies otherwise available.
15.11. MARSHALLING; PAYMENTS SET ASIDE. None of the Agent, any
Lender or any Issuing Bank shall be under any obliga tion to marshall any assets
in favor of the Borrower or any other Person or against or in payment of any or
all of the Obligations. To the extent that the Borrower makes a payment or
payments to the Agent, the Lenders or the Issuing Banks or any of such Persons
receives payment from the proceeds of the Collateral or exercises its rights of
setoff, and such payment or payments or the proceeds of such enforcement or
setoff or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party, then to the extent of such recovery, the obligation
or part thereof originally intended to be satisfied, and all Liens, rights and
remedies therefor, shall be revived and continued in full force and effect as if
such payment had not been made or such enforcement or setoff had not occurred.
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15.12. SEVERABILITY. In case any provision in or obligation
under this Agreement or the other Loan Documents shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
15.13. HEADINGS. Section headings in this Agreement
are included herein for convenience of reference only and shall
not constitute a part of this Agreement or be given any substan
tive effect.
15.14. GOVERNING LAW. THIS AGREEMENT SHALL BE
INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO
DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
15.15. LIMITATION OF LIABILITY. No claim may be made by the
Borrower, any Lender, any Issuing Bank, the Agent or any other Person against
the Agent, any other Issuing Bank or any other Lender or the Affiliates,
directors, officers, employees, attorneys or agents of any of them for any
special, consequential or punitive damages in respect of any claim for breach of
contract or any other theory of liability arising out of or related to the
transactions contemplated by this Agreement, or any act, omission or event
occurring in connection therewith; and the Borrower, each Lender, each Issuing
Bank and the Agent hereby waives, releases and agrees not to sue upon any such
claim for any such damages, whether or not accrued and whether or not known or
suspected to exist in its favor.
15.16. SUCCESSORS AND ASSIGNS. This Agreement and the other
Loan Documents shall be binding upon the parties hereto and their respective
successors and assigns and shall inure to the benefit of the parties hereto and
the successors and permitted assigns of the Lenders and the Issuing Banks. The
rights hereunder of the Borrower, or any interest therein, may not be assigned
without the written consent of all Lenders as provided in SECTION 15.07(C)(IV).
15.17. CERTAIN CONSENTS AND WAIVERS OF THE BORROWER.
(a) PERSONAL JURISDICTION. (i) EACH OF THE AGENT, THE LENDERS,
THE ISSUING BANKS AND THE BORROWER IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR
ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE
COURT OR FEDERAL COURT SITTING IN NEW YORK, NEW YORK, AND ANY COURT HAVING
JURISDICTION OVER APPEALS OF MATTERS HEARD IN SUCH COURTS, IN ANY ACTION OR
PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR
FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL
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CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.
THE BORROWER IRREVOCABLY DESIGNATES AND APPOINTS CT CORPORATION SYSTEM, INC.,
1633 BROADWAY, NEW YORK, NEW YORK 10019 AS ITS AGENT (THE "PROCESS AGENT") FOR
SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT, SUCH SERVICE
BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.
EACH OF THE AGENT, THE LENDERS, THE ISSUING BANKS AND THE BORROWER AGREES THAT A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW. THE BORROWER WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY
HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(ii) THE BORROWER AGREES THAT THE AGENT SHALL HAVE THE RIGHT
TO PROCEED AGAINST THE BORROWER OR ITS PROPERTY IN A COURT IN ANY LOCATION TO
ENABLE THE AGENT, THE ISSUING BANKS AND THE LENDERS TO REALIZE ON THE COLLATERAL
OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER ENTERED IN FAVOR OF THE AGENT, ANY ISSUING BANK OR ANY LENDER. THE
BORROWER AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY
PROCEEDING BROUGHT BY THE AGENT, ANY LENDER OR ANY ISSUING BANK TO REALIZE ON
THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE AGENT, ANY LENDER OR ANY ISSUING
BANK. THE BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE
COURT IN WHICH THE AGENT, ANY ISSUING BANK OR ANY LENDER MAY COMMENCE A
PROCEEDING DESCRIBED IN THIS SECTION.
(b) SERVICE OF PROCESS. THE BORROWER IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE BORROWER'S NOTICE ADDRESS SPECIFIED
BELOW, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. THE
BORROWER IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF
THE AGENT TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER
JURISDICTION.
(C) WAIVER OF JURY TRIAL. EACH OF THE AGENT, THE LENDERS, THE
ISSUING BANKS AND THE BORROWER IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. ANY OF THE
BORROWER, THE AGENT, LENDERS, OR ISSUING BANKS MAY FILE AN ORIGINAL COUNTERPART
OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF
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THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
15.18. COUNTERPARTS; EFFECTIVENESS; INCONSISTENCIES. This
Agreement and any amendments, waivers, consents, or supple ments hereto may be
executed in counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument. Subject to the provisions of SECTION 6.01, this
Agreement shall become effective against the Borrower, each Lender, each Issuing
Bank and the Agent on the Effective Date. This Agreement and each of the other
Loan Documents shall be construed to the extent reasonable to be consistent one
with the other, but to the extent that the terms and conditions of this
Agreement are actually inconsistent with the terms and conditions of any other
Loan Document, this Agreement shall govern.
15.19. LIMITATION ON AGREEMENTS. All agreements
between the Borrower, the Agent, each Lender and each Issuing
Bank in the Loan Documents are hereby expressly limited so that
in no event shall any of the Loans or other amounts payable by
the Borrower under any of the Loan Documents be directly or
indirectly secured (within the meaning of Regulation U) by Margin
Stock.
15.20. CONFIDENTIALITY. Subject to SECTION 15.01(F), the
Agent, the Lenders and the Issuing Banks shall hold all nonpublic information
obtained pursuant to the requirements of this Agreement in accordance with the
Agent's, such Lender's or such Issuing Bank's customary procedures for handling
confidential information of this nature and in accordance with safe and sound
banking practices and in any event may make disclosure (a) reasonably required
by a bona fide offeree, transferee or participant in connection with the
contemplated transfer or participation and shall require any such offeree,
transferee or participant to agree (and require any of its offerees, transferees
or participants to agree) in writing to comply with this SECTION 15.20 or (b) as
required or requested by any Governmental Authority or representative thereof or
pursuant to legal process and, unless prohibited by any Requirement of Law, use
its best efforts to inform the Borrower of such request or legal process prior
to its compliance therewith. In no event shall the Agent, any Lender or any
Issuing Bank be obligated or required to return any materials furnished by the
Borrower; PROVIDED, HOWEVER, each offeree shall be required to agree that if it
does not become a transferee or participant it shall return all materials
furnished to it by the Borrower in connection with this Agreement. Any and all
confidentiality agreements entered into between the Agent, any Lender or any
Issuing Bank and the Borrower shall survive the execution of this Agreement.
15.21. ENTIRE AGREEMENT. This Agreement, taken
together with all of the other Loan Documents, embodies the
entire agreement and understanding among the parties hereto and
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supersedes all prior agreements and understandings, written and oral, relating
to the subject matter hereof.
15.22. ADVICE OF COUNSEL. The Borrower and each Lender and
Issuing Bank understand that the Agent's counsel represents only the Agent's and
its Affiliates' interests and that the Borrower, other Lenders and other Issuing
Banks are advised to obtain their own counsel. The Borrower represents and
warrants to the Agent and the other Holders that it has discussed this Agreement
with its counsel.
15.23. AMENDMENT AND RESTATEMENT OF 1994 CREDIT AGREEMENT; NO
NOVATION. Upon this Agreement becoming effective, the terms and provisions of
the 1994 Credit Agreement shall be and hereby are amended, superseded and
restated in their entirety by the terms and provisions of this Agreement. This
Agreement shall not constitute a novation.
IN WITNESS WHEREOF, this Agreement has been duly executed as
of the date first above written.
BORROWER: AVIATION SALES OPERATING COMPANY
By_________________________________
Name: Dale S. Baker
Title: President
Notice Address:
6905 N.W. 25th Street
Miami, Florida 33122-1898
Attn: Chief Financial Officer
Telecopier No. (305) 599-6610
with a copy to:
Boyar, Simon & Miller
4265 San Felipe, Suite 1200
Houston, Texas 77027
Attn: J. William Boyar
Telecopier No. (713) 552-1758
<PAGE>
AGENT: CITICORP USA, INC., as Agent
By_____________________________
Name:
Title: Vice President
Notice Address:
Citicorp USA, Inc.
399 Park Avenue
New York, New York 10043
Attn: Shapleigh B. Smith
Telecopier No. (212) 793-1290
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attn: DeVerille A. Huston
Telecopier No. (312) 853-7036
ISSUING BANK: CITIBANK, N.A.
By_____________________________
Name:
Title: Vice President
Notice Address:
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Attn: Shapleigh B. Smith
Telecopier No. (212) 793-1290
<PAGE>
LENDER: CITICORP USA, INC.
By_____________________________
Name:
Title: Vice President
Notice Address, Domestic Lending
Office and Eurodollar Lending
Office or Eurodollar Affiliate:
Citicorp USA, Inc.
399 Park Avenue
New York, New York 10043
Attn: Shapleigh B. Smith
Telecopier No. (212) 793-1290
Pro Rata Share: 28.571429%
Term Loan
Pro Rata Share: 28.571429%
Revolving Credit Commitment: $14,285,714.29
Revolving Loan Pro
Rata Share: 28.571429%
<PAGE>
HELLER FINANCIAL, INC.
By____________________________
Name:
Title:
Notice Address:
Heller Financial, Inc.
101 Park Avenue
New York, New York 10178
Attn: Tara Hopkins
Telecopier No. (212) 880-7002
Domestic Lending Office, Eurodollar
Lending Office or Eurodollar Affiliate:
Heller Financial, Inc.
500 West Monroe Street
Chicago, Illinois 60661
Attn: Vicky Geist
Telecopier No. (312) 441-6969
Pro Rata Share: 22.857143%
Term Loan
Pro Rata Share: 22.857143%
Revolving Credit
Commitment: $11,428,571.43
Revolving Loan Pro
Rata Share: 22.857143%
<PAGE>
CONGRESS FINANCIAL CORPORATION
By____________________________
Name:
Title:
Notice Address, Domestic Lending Office
Eurodollar Lending Office and
Eurodollar Affiliate:
Congress Financial Corporation
1133 Avenue of the Americas
New York, New York 10036
Attn: Larry Forte
Telecopier No. (212) 545-6259
Pro Rata Share: 22.857143%
Term Loan
Pro Rata Share: 22.857143%
Revolving Credit
Commitment: $11,428,571.43
Revolving Loan Pro
Rata Share: 22.857143%
<PAGE>
THE SUMITOMO BANK, LIMITED
By____________________________
Name:
Title:
By____________________________
Name:
Title:
Notice Address:
The Sumitomo Bank, Limited
One Biscayne Tower, Suite 3300
2 South Biscayne Blvd.
Miami, Florida 33131
Attn: Ana C. Bolduc
Telecopier No. (305) 530-2260
Domestic Lending Office
Eurodollar Lending Office and
Eurodollar Affiliate:
The Sumitomo Bank, Limited
233 South Wacker Drive
Suite 5400
Chicago, Illinois 60606
Attn: Sandra Manske
Telecopier No. (312) 876-1995
Pro Rata Share: 11.428571%
Term Loan
Pro Rata Share: 11.428571%
Revolving Credit
Commitment: $5,714,285.71
Revolving Loan Pro
Rata Share: 11.428571%
<PAGE>
NATIONAL CITY COMMERCIAL FINANCE, INC.
By_________________________
Name:
Title:
Notice Address, Domestic Lending
Office, Eurodollar Lending Office
and Eurodollar Affiliate:
National City Commercial Finance, Inc.
1966 East Sixth Street, Suite 400
Cleveland, Ohio 44114
Attn: Lee K. Mosby
Fax: (216) 575-9555
Pro Rata Share: 14.285714%
Term Loan
Pro Rata Share: 14.285714%
Revolving Credit
Commitment: $7,142,857.14
Revolving Loan Pro
Rata Share: 14.285714%
<PAGE>
EXHIBITS
Exhibit A -- Form of Assignment and Acceptance
Exhibit B -- Form of Borrowing Base Certificate
Exhibit C -- Form of Collection Account Agreement
Exhibit D -- Forms of Notes
Exhibit E -- Form of Notice of Borrowing
Exhibit F -- Form of Notice of Conversion/Continuation
Exhibit G -- Pro Forma Financial Statements
Exhibit H -- Projections
Exhibit I -- List of Closing Documents
Exhibit J -- Form of Officer's Certificate to Accompany Reports
Exhibit K -- Form of Letter to Accountants
Exhibit L -- Form of Off-Premises Inventory Report
Exhibit M -- Forms of Consignee/Bailee Letters and Landlord
Waivers
<PAGE>
SCHEDULES
Schedule 1.01.1 -- Aircraft Parts Lease Agreements
Schedule 1.01.2 -- Certain Account Debtors and Foreign
Jurisdictions
Schedule 1.01.3 -- Permitted Equity Securities Options
Schedule 1.01.4 -- Permitted Existing Accommodation
Obligations
Schedule 1.01.5 -- Permitted Existing Indebtedness
Schedule 1.01.6 -- Permitted Existing Investments
Schedule 1.01.7 -- Permitted Existing Liens
Schedule 1.01.8 -- Term Loan Commitments
Schedule 2.01-C -- 1994 Commitment Assignments & Adjustments
Schedule 3.03 -- Letters of Credit Outstanding on Effective
Date
Schedule 6.01-J -- Distributions and Dividends;
Employee Compensation and Benefit Plans
Schedule 7.01-A -- Organizational Documents
Schedule 7.01-C -- Organizational Structure
Schedule 7.01-E -- Governmental Consents
Schedule 7.01-K -- Pending Actions
Schedule 7.01-R -- Environmental Matters
Schedule 7.01-S -- ERISA Matters
Schedule 7.01-W -- Permit Claims
Schedule 7.01-Y -- Insurance
Schedule 9.07 -- Hedge Agreement
Schedule 10.15 -- Collection Accounts
Schedule 12.01-O -- Permitted Parent Indebtedness
