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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED MARCH 31, 1999
Commission File 0-20889
AVTEAM, INC.
(Exact name of Registrant as specified in its charter)
FLORIDA 65-0313187
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3230 Executive Way 33025
Miramar, Florida (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (954) 431-2359
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes __X__ No ____
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of May 17, 1999, 11,015,739 shares of Class A Common Stock, par value
$.01 per share, of the Registrant were outstanding and 439,544 shares of Class B
Common Stock, par value $.01 per share, of the Registrant were outstanding.
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<PAGE>
AVTEAM, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements.....................1-6
Condensed Consolidated Balance Sheets
as of March 31, 1999 and December 31, 1998....................... 1
Condensed Consolidated Statements of Income
for the Three Months Ended
March 31, 1999 and 1998.......................................... 2
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended
March 31, 1999 and 1998.......................................... 3
Notes to Condensed Consolidated Financial Statements.............4-8
Item 2. Management's Discussion and Analysis Of Financial Condition
and Results of Operations........................................8-11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................................11
SIGNATURES .........................................................12
EXHIBIT INDEX..............................................................13
<PAGE>
AVTEAM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------- ---------
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents..................................$ 729 $ 1,745
Trade accounts receivable, net ............................ 18,448 12,823
Inventory ................................................. 84,181 84,057
Prepaid expenses .......................................... 1,304 1,382
Deposits .................................................. 806 935
Deferred tax asset ........................................ 195 427
--------- ---------
Total current assets ............................................. 105,663 101,369
Revenue producing equipment, at cost ............................. 11,007 9,284
Accumulated depreciation .................................. (931) (705)
--------- ---------
10,076 8,579
Property and equipment, at cost .................................. 6,121 5,602
Accumulated depreciation .................................. (1,461) (1,169)
--------- ---------
4,660 4,433
Goodwill, net .................................................... 26,631 26,739
Other assets ..................................................... 670 694
--------- ---------
Total assets ............................................$ 147,700 $ 141,814
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to bank .....................................$ 64,450 $ 60,800
Accounts payable .......................................... 14,168 12,280
Accrued expenses .......................................... 2,332 3,016
Customer deposits ......................................... 1,604 2,513
Current portion of notes payable-lease financing .......... 309 318
Current portion of capital lease obligations .............. 98 106
--------- ---------
Total current liabilities ........................................ 82,961 79,033
Capital lease obligations, net of current portion ................ 73 81
Notes payable - lease financing .................................. 3,290 3,348
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value,
20,000,000 shares authorized, no shares
issued or outstanding ............................... -- --
Class A Common Stock, $.01 par value,
77,000,000 shares authorized,
11,015,739 shares issued and
outstanding ......................................... 110 110
Class B Common Stock, $.01 par value,
3,000,000 shares authorized, 439,644
shares issued and outstanding ....................... 4 4
Additional paid-in capital ................................ 49,177 49,177
Retained earnings ......................................... 12,085 10,061
--------- ---------
Total shareholders' equity ........................... 61,376 59,352
--------- ---------
Total liabilities and shareholders' equity ...........$ 147,700 $ 141,814
========= =========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
Page 1
<PAGE>
AVTEAM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
1999 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
Net sales .................................................. $ 29,292 $ 13,117
Cost of sales .............................................. 20,640 9,232
------------ ------------
Gross profit ............................................... 8,652 3,885
Operating expenses ......................................... 4,078 1,689
------------ ------------
Income from operations ..................................... 4,574 2,196
Interest expense, net ...................................... 1,381 50
------------ ------------
Income before provision (credit) for income taxes .......... 3,193 2,146
Provision (credit) for income taxes:
Current ........................................... 937 816
Deferred .......................................... 232 (22)
------------ ------------
1,169 794
------------ ------------
Net income ................................................. $ 2,024 $ 1,352
============ ============
Net income per common share - basic ........................ $ 0.18 $ 0.12
============ ============
Weighted average number of common shares outstanding - basic 11,455,383 11,105,383
============ ============
Net income per common equivalent share - diluted ........... $ 0.18 $ 0.12
============ ============
Weighted average number of
common equivalent shares outstanding - diluted ........... 11,462,191 11,135,631
============ ============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
Page 2
<PAGE>
AVTEAM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1999 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net income .................................................................. $ 2,024 $ 1,352
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization ..................................... 742 352
Bad debt expense .................................................. 23 47
Deferred tax expense (credit) ..................................... 232 (22)
Changes in operating assets and liabilities:
Trade accounts receivable .................................. (5,648) (2,407)
Inventory .................................................. (124) (14,853)
Prepaid expenses and deposits .............................. 207 (6,444)
Other assets ............................................... 24 239
Accounts payable ........................................... 1,888 6,264
Accrued expenses/customer deposits ......................... (1,593) 2,866
-------- --------
Net cash used in operating activities ............. (2,225) (12,606)
-------- --------
INVESTING ACTIVITIES
Purchases of revenue producing equipment .................................... (1,723) (4,985)
Purchases of property and equipment ......................................... (519) (240)
Additional investment in M&M Aircraft Services, Inc. ........................ (116) --
-------- --------
Net cash used in investing activities ............. (2,358) (5,225)
-------- --------
FINANCING ACTIVITIES
Payments on capital leases .................................................. (16) (31)
Net payments on notes payable ............................................... (67) (12)
Net proceeds from short-term line of credit ................................. 3,650 --
-------- --------
Net cash (used in) provided by financing activities 3,567 (43)
-------- --------
Net decrease in cash and cash equivalents .......... (1,016) (17,874)
Cash and cash equivalents at beginning of period ... 1,745 18,676
-------- --------
Cash and cash equivalents at end of year ........... $ 729 $ 802
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid ............................................................... $ 1,246 $ 50
======== ========
Income taxes paid ........................................................... $ 100 $ 31
======== ========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
Page 3
<PAGE>
AVTEAM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
1. GENERAL
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three-month periods
ended March 31, 1999, are not necessarily indicative of the results that may be
expected for the year ended December 31, 1999. For further information, refer to
the financial statements and footnotes thereto included in the Company's 1998
Annual Report on Form 10-K for the year ended December 31, 1998.
The Company has in the past and may in the future experience
substantial fluctuations in its results of operations as a result of seasonal
effects. The Company believes that demand for aircraft engines, engine parts and
airframe components ("Engines and Components") is seasonal, with increased
demand during the summer months. This seasonality exists because aircraft engine
performance is directly related to ambient temperature (as temperatures rise it
is more difficult for aircraft engines to perform properly). As a result,
certain aircraft are removed from service during the summer months due to the
failure of those particular aircraft engines to comply with certain exhaust gas
temperature limitations. Aircraft engines of the same type and model can have
different performance capabilities. The summer months also include peak travel
periods during which aircraft utilization levels are high. In addition, the
timing of whole aircraft engine sales, at greater unit purchase prices than the
installed parts and components, may cause significant fluctuations in the
Company's quarterly results of operations.
2. BUSINESS
AVTEAM, Inc. was incorporated in Florida in 1991 and is a global
supplier of aftermarket aircraft engines, engine parts and airframe components.
AVTEAM, Inc. supplies its products to other aftermarket suppliers, independent
repair facilities, aircraft operators and original equipment manufacturers.
Beginning in April 1997, AVTEAM, Inc., throug its wholly owned subsidiary,
AVTEAM Aviation Field Services, Inc. ("AAFS"), began providing certain on-wing
maintenance and repair and borescope services. On December 15, 1998, AVTEAM,
Inc., through its wholly owned subsidiary, AVTEAM Engine Repair Corp., a Florida
corporation, completed its acquisition (the "Acquisition") of substantially all
of the assets and the assumption of certain liabilities of M&M Aircraft
Services, Inc., a Florida corporation, an FAA licensed aircraft engine
maintenance, repair and overhaul facility. The accompanying consolidated
financial statements as of March 31, 1999 and for the year then ended include
the accounts of AVTEAM, Inc., AVTEAM Engine Repair Corp. ("M&M") and AAFS,
collectively (the "Company") after elimination of intercompany accounts and
transactions.
3. SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company classifies as cash equivalents all highly liquid
investments with a maturity of three months or less at the time of purchase.
INVENTORY
Inventory of aircraft engines is stated at the lower of specific cost
(including overhaul costs) or market. Initially, cost of sales of engine parts
from disassembled engines are recognized based on margins realized from recently
sold, similar groups of engine parts. Once the remaining parts have been fully
inspected and their condition has been determined, the cost of subsequent sales
of engine parts from that engine are determined using the relationship of the
remaining costs of that engine to estimated sales. Cost of sales for individual
parts purchased for resale are reflected based on the specific identification
method. Cost of sales of airframe components are recognized using margins based
on the relationship of cost to revenue estimates as determined by the Company
through the analysis of the market price of such airframe components.
M&M's inventories are valued at the lower of cost or market, based on
the specific identification method and by the first-in, first-out method. Parts
received as a result of a customer exchange are valued at the lower of cost or
market based on the relationship of the historical cost of similar parts and
estimated sales price.
Page 4
<PAGE>
AVTEAM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)
Inventory consists of the following:
<TABLE>
<CAPTION>
IN THOUSANDS AS OF
----------------------------------
MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
<S> <C> <C>
Parts and Whole Engines & Aircraft $80,830 $ 79,897
Work in Process 3,173 3,924
Other 178 236
--------- ---------
$ 84,181 $ 84,057
========= =========
</TABLE>
REVENUE RECOGNITION
Revenues from the sale of engine parts and airframe components are
recognized when shipped.
Revenues from the sale of aircraft engines are recognized when title
and risk of ownership are transferred to the customer, which generally is upon
shipment or customer pick-up. In certain instances prior to shipment or customer
pick-up, certain customers request the Company to hold aircraft engines until
the customer determines the most economical means of taking possession. The
Company records revenues under such circumstances only if: (1) payment is
received or is receivable within 30 days; (2) title and risk of ownership is
transferred to the customer; (3) the customer's request that the transaction be
on a bill-and-hold basis is in writing; (4) there is a fixed schedule for
delivery of the engines that is within 30 days of the sale; (5) the Company does
not have any specific performance obligations; (6) the engines are segregated
from other engines and are not subject to being used to meet other customer's
needs and (7) the engines are ready for shipment.
Revenues from engine overhaul and repair services are recognized at the
time of performance test acceptance of engines and completion of services.
WARRANTIES AND PRODUCT RETURNS
The Company, other than for services performed by M&M, does not provide
service warranties in addition to those provided by overhaul facilities and as a
result does not record accruals for warranties. The Company has established
programs which, under specific conditions, enable its customers to return
inventory. The effect of these returns is estimated based on a percentage of
sales and historical experience and sales are recorded net of a provision for
estimated returns. M&M's warranty costs are accrued based on management's
estimates of such costs and historical sales percentages.
ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
The Company buys inventory from certain of its customers and
periodically offsets amounts owed to customers for inventory purchases against
the accounts receivable for sales to such customers. For the three months ended
March 31, 1999, accounts payable totaling approximately $430,000, were offset
against accounts receivable.
PROPERTY AND EQUIPMENT
Property and equipment (including assets under capital leases) is
carried at cost and is depreciated using accelerated and straight-line methods
over the lesser of the lease terms or the estimated useful lives of the assets.
The lives used are as follows:
Office furniture and equipment............ 3-7 years
Warehouse and transport equipment......... 5-7 years
Leasehold improvements.................... 3-10 years
Page 5
<PAGE>
AVTEAM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REVENUE PRODUCING EQUIPMENT
Revenue producing equipment is comprised of engines and aircraft leased
to users on a short-term basis. Such engines and aircraft are carried at cost
and are depreciated using the straight-line method over periods between five and
ten years. Four of such engines are the subject of a sale/leaseback arrangement.
The proceeds under the arrangement are recorded as a financing obligation and
will be reduced by payments under the lease over its five-year term. The lease
agreement provides the Company with an option to terminate the lease and to
repurchase the engines at any time after one year at varying rates based on the
original sales price.
LONG-LIVED ASSETS
The Company accounts for long-lived assets pursuant to Statement of
Financial Accounting Standards ("SFAS") No. 121, "ACCOUNTING FOR THE IMPAIRMENT
OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF", which
requires impairment losses to be recorded on long-lived assets used in
operations when events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Management reviews long-lived assets
and the related intangible assets for impairment whenever events or changes in
circumstances indicate the assets may be impaired.
GOODWILL
Goodwill represents the excess of the purchase price over the fair
value of assets acquired and is amortized on the straight-line basis over 30
years. The carrying value of goodwill is reviewed if facts and circumstances
suggest that it may be impaired. If this review indicates that goodwill will not
be recoverable, the carrying value will be adjusted accordingly. At March 31,
1999, accumulated amortization of goodwill was approximately $261,000.
CONCENTRATION OF CREDIT RISK
Accounts receivable are primarily from domestic and foreign passenger
airlines, freight and package carriers, charter airlines, aircraft leasing
companies and service providers to such companies. The Company performs ongoing
evaluations of its trade accounts receivable customers, monitors its exposure
for credit losses and sales returns and does not require collateral.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
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 period. Actual results could differ from those estimates.
NET INCOME PER COMMON SHARE
The following table sets forth the computation of basic and diluted net
income and net income per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1999 1998
----------- -----------
<S> <C> <C>
Numerator:
Net income ........................................... $ 2,024,000 $ 1,352,000
=========== ===========
Denominator:
Denominator for basic net income per share - weighted
average shares 11,455,383 11,105,383
Effect of dilutive securities
Employee stock options .............................. 6,808 30,248
----------- -----------
Dilutive potential common shares ............................ 6,808 30,248
----------- -----------
Denominator for diluted earnings per share - adjusted
weighted - average shares and assumed conversions 11,462,191 11,135,631
=========== ===========
Net income per common share - basic ......................... $ 0.18 $ 0.12
=========== ===========
Net income per common share - diluted ....................... $ 0.18 $ 0.12
=========== ===========
</TABLE>
DEPOSITS AND CUSTOMER DEPOSITS
The Company has entered into various contracts for the purchase and
sale of whole engines. Occasionally, these contracts require a substantial
down-payment to fix the consideration of such engines and to allow the time to
perform due diligence work. These deposits are refundable.
Page 6
<PAGE>
AVTEAM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEGMENT FINANCIAL DATA
The Company operates in various segments of the aviation services
industry. The Company's operations have been aggregated primarily on the basis
of products or services into three reportable segments:
AVTEAM sells whole engines, whole aircraft, engine parts and airframe
components.
AVTEAM Aviation Field Services (AAFS) provides on-wing maintenance and
repairs including hush-kit installation and engine borescoping.
AVTEAM Engine Repair Corp. (d/b/a M&M Aircraft Services) performs
maintenance, repair and overhaul services for certain aircraft engines.
The Company evaluates performance based on several factors, of which
income before provision for income taxes is the primary financial measure.
The following tables present the Company's operating segment information:
<TABLE>
<CAPTION>
TOTAL REVENUES
THREE MONTHS ENDED MARCH 31
---------------------------
IN THOUSANDS 1999 1998
-------- -------
<S> <C> <C>
AVTEAM .............................................. $ 17,038 $12,469
AAFS ................................................ 1,140 805
M & M ............................................... 13,643 --
Eliminations ........................................ (2,529) (157)
-------- -------
Consolidated ........................................ $ 29,292 $13,117
======== =======
</TABLE>
<TABLE>
<CAPTION>
INCOME BEFORE PROVISION
FOR INCOME TAXES
THREE MONTHS ENDED MARCH 31
---------------------------
IN THOUSANDS 1999 1998
-------- -------
<S> <C> <C>
AVTEAM(a) ........................................... $ 829 $ 2,028
AAFS ................................................ 116 118
M & M ............................................... 2,525 --
Eliminations ........................................ (277) --
-------- -------
Consolidated ........................................ $ 3,193 $ 2,146
======== =======
</TABLE>
-------------
(a) Corporate overhead and interest expense are included in AVTEAM and
are not allocated.
<TABLE>
<CAPTION>
TOTAL ASSETS
---------------------------
IN THOUSANDS MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
<S> <C> <C>
AVTEAM .............................................. $136,863 $132,540
AAFS ................................................ 1,446 1,396
M & M ............................................... 23,517 19.295
Eliminations ........................................ (14,126) (11,417)
-------- --------
Consolidated ........................................ $147,700 $141,814
======== ========
</TABLE>
Page 7
<PAGE>
AVTEAM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. NOTES PAYABLE TO BANK
On April 30, 1998, the Company, as borrower, and AAFS, as guarantor,
entered into a new Credit Agreement (the "Credit Agreement") with a syndicate of
lenders led by Bank of America, N.A., as administrative agent (the "Lenders"),
pursuant to which the Lenders agreed to make available to the Company a
revolving credit facility (the "Revolving Credit Facility") in the maximum
aggregate principal amount of up to $70.0 million. The Revolving Credit Facility
consists of (i) a working capital revolving loan facility (the "Working Capital
Revolving Loan Facility") in the aggregate principal amount of up to $45.0
million and (ii) an acquisition revolving loan facility (the "Acquisition
Revolving Loan Facility") in the aggregate principal amount of up to $25.0
million. The Working Capital Revolving Loan Facility is being used by the
Company to finance working capital, capital expenditures and general corporate
purposes. The Acquisition Revolving Loan Facility was used by the Company to
finance the acquisition of M&M. Borrowings under the Credit Agreement are
secured by a senior security interest in all of the assets of the Company. The
Company may borrow, repay and re-borrow funds under the Credit Agreement until
April 30, 2001. The Credit Agreement requires the Company to make certain
mandatory prepayments of principal and interest. The Credit Agreement contains
certain restrictions, including restrictions on (i) incurring debt, (ii)
declaring or paying any dividend or other distribution on account of any class
of stock of the Company, (iii) creating liens on the Company's properties or
assets, (iv) entering into a merger or other business combination or (v) a
change in control (as defined in the Credit Agreement). As of March 31, 1999,
the Company has drawn an aggregate of $39.45 million under the Working Capital
Revolving Loan Facility and $25.0 million was drawn under the Acquisition
Revolving Loan Facility. At March 31, 1999, the Company had additional
availability of approximately $5.55 million under the Working Capital Revolving
Loan Facility. Interest rates under the Company's Credit Agreement ranged from
7.69% to 9.25% as of March 31, 1999.
PART I
FINANCIAL INFORMATION
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
OVERVIEW
AVTEAM is a global supplier of aftermarket commercial aircraft engines,
engine parts and aircraft components ("Engines and Components") serving over 700
customers, including other aftermarket suppliers, independent repair facilities,
aircraft operators and original equipment manufacturers ("OEMs"). The Company
has historically focused on the Pratt & Whitney JT8D series of engines, which
are the most widely used jet aircraft engines in the world and power
approximately 33% of the world's commercial aircraft. In 1997, AVTEAM expanded
its product line to include the CFM56 series of engines manufactured by CFM
International and DC9 airframe parts. The CFM56 series of engines had the
highest production volume of any engine series in 1998 and power nearly 40% of
all single-aisle, narrow-body aircraft ordered since 1987. In 1998, the Company
acquired its first widebody, DC10 aircraft which was disassembled and is being
sold as airframe parts and whole CF6 engines. The Company works with its
worldwide network of industry contacts to identify and evaluate Engines and
Components and surplus aircraft for potential acquisition. Engines and
Components are either made available for immediate resale or repaired by
FAA-licensed repair facilities and then resold. Surplus aircraft are purchased
for eventual disassembly and sold as parts by the Company. The Company resells
Engines and Components to other aftermarket suppliers, independent repair
facilities, aircraft operators and OEMs.
On December 15, 1998, the Company, through its wholly-owned subsidiary,
AVTEAM Engine Repair Corp. completed the acquisition of substantially all of the
assets and the assumption of certain liabilities of M&M Aircraft Services, Inc.
("M&M"). The Company believes that M&M was one of the largest privately held
independent aircraft engine maintenance, repair and overhaul ("MRO") operations
in the world. As a result of this acquisition, the Company believes that it will
be able to realize synergies between its Engines and Components business and its
engine MRO business, including bringing to market on a more timely basis engines
and engine parts held for resale.
Page 8
<PAGE>
AVTEAM, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain items
contained in the Company's statements of operations expressed as a percentage of
net sales:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
--------------------------------
1999 1998
---- ----
<S> <C> <C>
Net sales...................................................... 100% 100%
Cost of sales.................................................. 70 70
-------------- -------------
Gross profit................................................... 30 30
Operating expenses............................................. 14 13
-------------- -------------
Income from operations......................................... 16 17
Interest expense, net.......................................... 5 1
-------------- -------------
Income before income taxes..................................... 11 16
Provision (credit) for income taxes............................ 4 6
============== =============
Net income..................................................... 7% 10%
============== =============
</TABLE>
FIRST QUARTER 1999 COMPARED TO FIRST QUARTER 1998
NET SALES. Net sales increased 123.3% to $29.3 million in 1999 from
$13.1 million in 1998. This increase is primarily due to the MRO revenue of
approximately $13.0 million contributed by AVTEAM Engine Repair Corp. which was
acquired in December 1998. In addition, revenue from whole engine sales
increased by 43.0% to $6.2 million from $4.3 million.
GROSS PROFIT. Gross profit increased 122.7% to $8.7 million for the
first quarter of 1999, compared with $3.9 million for the same period last year,
and the gross profit margin for the 1999 first quarter was 29.5 percent,
compared to 29.6 percent for the 1998 first quarter. Gross profit margins
generated by the MRO operation was relatively consistent with the margin
generated by the distribution business.
OPERATING EXPENSES. Operating expenses increased 141.4% to $4.1 million
in 1999 from $1.7 million in 1998. As a percentage of net sales, such expense
increased to 13.9% in 1999 from 12.9% in 1998. The expense increase is primarily
attributable to the operating expenses of AVTEAM Engine Repair Corp of $1.3
million, the amortization of goodwill of $224,000 and increased personnel
expense of $350,000 resulting from additional staffing in the Florida
headquarters office.
NET INTEREST EXPENSE. Net interest expense increased significantly to
$1.4 million in 1999 from $50,000 in 1998. The increased interest expense is a
result of higher borrowing levels to finance the acquisition of M&M and to build
inventory to its present level.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's primary sources of liquidity has been from
financing activities and cash flow generated by operations and, to a lesser
extent, from consignment sales. During the first three months of 1999, the
Company used approximately $2.2 million in operating activities. Net cash
provided by financing activities, derived primarily from borrowing on the credit
agreement mentioned below, was $3.6 million in the first quarter of 1999.
Page 9
<PAGE>
AVTEAM, INC. AND SUBSIDIARIES
On April 30, 1998, the Company, as borrower, and AAFS and AVTEAM Engine
Repair Corp., as guarantors, entered into a Credit Agreement (the "Credit
Agreement") with a syndicate of lenders led by Bank of America, N.A., as
administrative agent (the "Lenders"), pursuant to which the Lenders agreed to
make available to the Company a revolving credit facility in the maximum
aggregate principal amount of up to $70.0 million. The Credit Facility consists
of (i) a working capital revolving loan facility (the "Working Capital Revolving
Loan Facility") in the aggregate principal amount of up to $45.0 million and
(ii) an acquisition revolving loan facility (the "Acquisition Revolving Loan
Facility") in the aggregate principal amount of up to $25.0 million. The Working
Capital Revolving Loan Facility is being used by the Company to finance working
capital, capital expenditures and general corporate purposes. The Acquisition
Revolving Loan Facility was used by the Company to finance the M&M acquisition.
Borrowings under the Credit Agreement are secured by a senior security interest
in all of the assets of the Company. The Company may borrow, repay and re-borrow
funds under the Credit Agreement until April 30, 2001. The Credit Agreement
requires the Company to make certain mandatory prepayments of principal and
interest. The Credit Agreement contains certain restrictions, including
restrictions on (i) incurring debt, (ii) declaring or paying any dividend or
other distribution on account of any class of stock of the Company, (iii)
creating liens on the Company's properties or assets, (iv) entering into a
merger or other business combination or (v) a change in control (as defined in
the Credit Agreement). As of March 31, 1999, the Company has drawn an aggregate
of $39.45 million under the Working Capital Revolving Loan Facility and $25.0
million was drawn under the Acquisition Revolving Loan Facility. At March 31,
1999, the Company had additional availability of approximately $5.55 million
under the Working Capital Revolving Loan Facility and no availability under the
Acquisition Revolving Loan Facility.
On December 15, 1998, the Company, through its wholly-owned subsidiary,
AVTEAM Engine Repair Corp., completed its acquisition of substantially all of
the assets and the assumption of certain liabilities of M&M for an aggregate
purchase price of $30 million and the issuance of 350,000 shares of Class A
Common Stock. Concurrent with the Acquisition, the Company made a debt repayment
of $3.4 million to M&M's lender. The Acquisition was financed from available
cash and AVTEAM's existing credit facility with Bank of America, N.A. AVTEAM
utilized substantially all of its available borrowings under the acquisition
portion of the Credit Facility for the Acquisition, and had additional
availability of approximately $9.2 million under the Credit Facility at December
31, 1998. AVTEAM is considering a number of options to provide additional
capital for its business activities after the Acquisition, including refinancing
the Credit Facility, pursuing strategic partnerships with other aviation related
companies and raising additional capital through the offering of debt or equity
securities. Until additional capital is provided, AVTEAM may forego the purchase
of certain aircraft engines, engine parts and airframe material for resale. As a
result, its business, financial condition and results of operations could be
materially adversely affected during such period.
SEASONALITY
The Company believes that demand for Engines and Components is
seasonal, with increased demand during the summer months. This seasonality
exists because aircraft engine performance is directly related to ambient
temperature (as temperatures rise it is more difficult for aircraft engines to
perform properly). As a result, certain aircraft engines are removed from
service during the summer months due to the failure of those particular aircraft
engines to comply with exhaust gas temperature limitations. Aircraft engines of
the same type and model can have different performance capabilities. The summer
months also include peak travel periods during which aircraft utilization levels
are high. In addition, the timing of whole aircraft engines sold, which have a
substantially greater purchase price than the installed parts and components,
may cause significant fluctuations in the Company's quarterly operating results.
The Company has in the past and may in the future experience substantial
quarterly fluctuations in sales as a result of these seasonal effects.
Page 10
<PAGE>
AVTEAM, INC. AND SUBSIDIARIES
IMPACT OF YEAR 2000
The Company believes that it has prepared its computer systems and
related software to accommodate data sensitive information relating to the Year
2000. The Company expects that any additional costs related to ensuring such
systems and software to be Year 2000-ready will not be material to the
financial condition or results of operations of the Company. In addition, the
Company is discussing with its vendors and customers the possibility of any
difficulties which may affect the Company as a result of its vendors and
customers ensuring that their computer systems and software are Year
2000-ready. To date, no significant concerns have been identified. However,
there can be no assurance that no Year 2000-related computer operating problems
or expenses will arise with the Company's computer systems and software or in
the computer systems and software of the Company's vendors and customers.
RISKS RELATING TO FORWARD -LOOKING STATEMENTS
Except for the historical information contained in this report on Form
10-Q, the matters discussed in this report on Form 10-Q are "forward-looking
statements" within the meaning of the federal securities law and are not
guarantees of future performance. For a variety of reasons, the Company's actual
results could differ materially from any forward-looking statements made in this
report on Form 10-Q. Among the factors that could cause actual results to differ
from predicted or expected results are the following: the Company's ability to
effectively integrate acquired companies and the effects of increased
indebtedness as a result of the Company's acquisitions; a decline in the demand
for aftermarket aircraft engines, engine parts and airframe components, which
could materially adversely affect the Company's revenues; the availability of
aircraft engines, engines parts and airframe components for resale, which could
hamper the Company's ability to maintain adequate levels of inventory and meet
customer demand; the possibility that regulatory changes and unforeseen events
could impact the Company's ability to provide products and services to its
customers; existing competition from national and regional competitors and the
condition of the airline industry, which could result in pricing, supply and
demand, and other pressures on profitability and market share; and other risks
and uncertainties set forth in the Company's filings with the Securities and
Exchange Commission, including but not limited to the Company's annual report on
Form 10-K for the year ended December, 31, 1998. Consequently, the reader is
cautioned to consider all forward-looking statements in light of the risks to
which they are subject.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Indemnification Agreement between the Company and James McLellan
effective as of December 1998.
10.2 Employment Agreement dated as of June 1, 1998 between the Company and
Mark S. Koondel.
27.1 Financial Data Schedule for the period ended March 31, 1999
(b) Reports on Form 8-K
The registrant did not file any reports on Form 8-K for the period
ended March 31, 1999
Page 11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AVTEAM, Inc.
By:
/s/ DONALD A GRAW
Date: May 17, 1999 _______________________________________
Donald A. Graw
Chairman of the Board, President
and Chief Executive Officer
(Principal Executive Officer)
/s/ MARK S. KOONDEL
Date: May 17, 1999 ________________________________________
Mark S. Koondel
Chief Financial Officer, Treasurer,
and Assistant Secretary
(Principal Financial and Accounting Officer)
Page 12
<PAGE>
AVTEAM, INC. AND SUBSIDIARIES
EXHIBIT INDEX
EXHIBIT INDEX DESCRIPTION
- ------------- -----------
10.1 Indemnification Agreement between the Company and James
McLellan effective as of December 1998.
10.2 Employment Agreement dated as of June 1, 1998 between the
Company and Mark S. Koondel.
27.1 Financial Data Schedule for the period ended March 31, 1999
Page 13
EXHIBIT 10.1
[LOGO OMITTED]
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") is effective as of
December 1998 between AVTEAM, INC., a Florida corporation (the "Company"), and
JAMES McLELLAN (the "Indemnitee").
WITNESSETH:
WHEREAS, it is essential to the Company to retain and attract as
directors and officers the most capable persons available;
WHEREAS Indemnitee is an officer of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk
of litigation and other claims being asserted against directors and officers of
public companies in today's environment; and
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability in order to enhance Indemnitee's continued service to
the Company in an effective manner and in part to provide Indemnitee with
specific contractual assurance that the indemnification protection provided by
the Articles of Incorporation of the Company, as amended (the "Articles of
Incorporation"), and Amended and Restated Bylaws of the Company (the "Bylaws")
will be available to Indemnitee (regardless of, among other things, any
amendment to or revocation of such Articles of Incorporation and Bylaws or any
change in the composition of the Company's Board of Directors or acquisition
transaction relating to the Company), and in order to induce Indemnitee to
continue to provide services to the Company as an officer thereof, the Company
wishes to provide in this Agreement for the indemnification of and the advancing
of expenses to Indemnitee to the fullest extent (whether partial or complete)
permitted by law and as set forth in this Agreement, and, to the extent
insurance is maintained, for the continued coverage of Indemnitee under the
Company's directors and officers' liability insurance policies.
NOW, THEREFORE, in consideration of the premises and of Indemnitee
continuing to serve the Company directly or, at its request, another enterprise,
and intending to be legally bound hereby, the parties agree as follows:
1. CERTAIN DEFINITIONS
a) CHANGE IN CONTROL: shall be deemed to have occurred if (I) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or a
corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly of securities of the Company representing twenty percent
(20%) or more of the total voting power represented
<PAGE>
by the Company's then outstanding Voting Securities, or (ii) during any period
of two (2) consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Company and any new director whose
election by the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof, or (iii) the stockholders
of the Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
Voting Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least eighty percent (80%) of
the total voting power represented by the Voting Securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company (in one transaction or a series of transactions) of all or substantially
all the Company's assets.
(b) CLAIM: any threatened, pending or completed action, suit,
proceeding or alternate dispute resolution mechanism, or any inquiry, hearing or
investigation, whether conducted by the Company or any other party, that
Indemnitee in good faith believes might lead to the institution of any such
action, suit, proceeding or alternate dispute resolution mechanism, whether
civil, criminal, administrative, investigative or other.
(c) EXPENSES: include attorneys' fees and all other costs, travel
expenses, fees of experts, transcript costs, filing fees, witness fees,
telephone charges, postage, delivery service fees, expenses and obligations of
any nature whatsoever paid or incurred in connection with investigating,
defending, being a witness in or participating in (including on appeal), or
preparing to defend, be a witness in or participate in any Claim relating to any
Indemnifiable Event.
(d) INDEMNIFIABLE EVENT: any event or occurrence that takes place
either prior to or after the execution of this Agreement related to the fact
that Indemnitee is or was a director, officer, employee, agent or fiduciary of
the Company, or is or was serving at the request of the Company as a director,
officer, employee, trustee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust or other enterprise, or
by reason of anything done or not done by Indemnitee in any such capacity.
(e) POTENTIAL CHANGE IN CONTROL: shall be deemed to have occurred if
(i) the Company enters into an agreement or arrangement, the consummation of
which would result in the occurrence of a Change in Control; (ii) any person
(including the Company) publicly announces an intention to take or to consider
taking actions which if consummated would constitute a Change in Control; (iii)
any person, other than a trustee or other fiduciary holding securities
- 2 -
<PAGE>
under an employee benefit plan of the Company acting in such capacity or a
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
who is or becomes the beneficial owner, directly or indirectly, of securities of
the Company representing ten percent (10%) or more of the combined voting power
of the Company's then outstanding Voting Securities, increases his beneficial
ownership of such securities by five percent (5 %) or more over the percentage
so owned by such person on the date hereof; or (iv) the Board of Directors
adopts a resolution to the effect that, for purposes of this Agreement, a
Potential Change in Control has occurred.
(f) REVIEWING PARTY: any appropriate person or body consisting of a
member or members of the Company's Board of Directors or any other person or
body appointed by the Board who is not a party to the particular Claim for which
Indemnitee is seeking indemnification, or Independent Legal Counsel.
(g) INDEPENDENT LEGAL COUNSEL: Independent Legal Counsel shall refer
to an attorney, selected in accordance with the provisions of SECTION 3 hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last five years (other than in connection with seeking
indemnification under this Agreement). Independent Legal Counsel shall not be
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or Indemnitee in an action to determine Indemnitee's rights under this
Agreement, nor shall Independent Legal Counsel be any person who has been
sanctioned or censured for ethical violations of applicable standards of
professional conduct.
(h) VOTING SECURITIES: any securities of the Company which vote
generally in the election of directors.
2. BASIC INDEMNIFICATION ARRANGEMENT.
(a) In the event Indemnitee was, is or becomes a party to or witness or
other participant in, or is threatened to be made a party to or witness or other
participant in, a Claim by reasons of (or arising in part out of) an
Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest
extent permitted by law as soon as practicable but in any event no later than
thirty (30) days after written demand is presented to the Company, against any
and all Expenses, judgments, fines, penalties and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such Expenses, judgments, fines, penalties or
amounts paid in settlement) of such Claim and any federal, state, local or
foreign taxes imposed on the Indemnitee as a result of the actual or deemed
receipt of any payments under this Agreement (including the creation of the
trust referred to in SECTION 4 hereof). If so requested by Indemnitee, the
Company shall advance (within five (5) business days of such request) any and
all Expenses to Indemnitee (an "Expense Advance"). Notwithstanding
- 3 -
<PAGE>
anything in this Agreement to the contrary and except as provided in Section 5,
prior to a Change in Control Indemnitee shall not be entitled to indemnification
pursuant to this Agreement in connection with any Claim initiated by Indemnitee
against the Company or any director or officer of the Company unless the Company
has joined in or consented to the initiation of such Claim.
(b) Notwithstanding the foregoing, (i) the obligations of the Company
under SECTION 2(A) shall be subject to the condition that the Reviewing Party
shall not have determined (in a written opinion, in any case in which the
Independent Legal Counsel referred to in SECTION 3 hereof is involved) that
Indemnitee would not be permitted to be indemnified under applicable law, and
(ii) the obligation of the Company to make an Expense Advance pursuant to
SECTION 2(A) shall be subject to the condition that, if, when and to the extent
that the Reviewing Party determines that Indemnitee would not be permitted to be
so indemnified under applicable law, the Company shall be entitled to be
reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all
such amounts theretofore paid; provided, however, that if Indemnitee has
commenced legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under applicable law, any
determination made by the Reviewing Party that Indemnitee would not be permitted
to be indemnified under applicable law shall not be binding and Indemnitee shall
not be required to reimburse the Company for any Expense Advance until a final
judicial determination is made with respect thereto (as to which all rights of
appeal therefrom have been exhausted or lapsed). Indemnitee's obligation to
reimburse the Company for Expense Advances shall be unsecured and no interest
shall be charged thereon. If there has not been a Change in Control, the
Reviewing Party shall be selected by the Board of Directors, and if there has
been such a Change in Control, (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control) the Reviewing Party shall be the
Independent Legal Counsel referred to in SECTION 3 hereof. If there has been no
determination by the Reviewing Party or if the Reviewing Party determines that
Indemnitee substantively would not be permitted to be indemnified in whole or in
part under applicable law, Indemnitee shall have the right to commence
litigation in any court in the State of Florida having subject matter
jurisdiction thereof and in which venue is proper seeking an initial
determination by the court or challenging any such determination by the
Reviewing Party or any aspect thereof, or the legal or factual bases therefor
and the Company hereby consents to service of process and to appear in any such
proceeding. Any determination by the Reviewing Party otherwise shall be
conclusive and binding on the Company and Indemnitee.
3. CHANGE IN CONTROL. The Company agrees that if there is a Change in
Control of the Company (other than a Change in Control which has been approved
by a majority of the Company's Board of Directors who were directors immediately
prior to such Change in Control) then Independent Legal Counsel shall be
selected by Indemnitee and approved by the Company (which approval shall not be
unreasonably withheld) and such Independent Legal Counsel shall determine
whether the officer or director is entitled to indemnity payments and
- 4 -
<PAGE>
Expense Advances under this Agreement or any other agreement of Articles of
Incorporation or Bylaws of the Company now or hereafter in effect relating to
Claims for Indemnifiable Events. Such Independent Legal Counsel, among other
things, shall render its written opinion of the Company and Indemnitee as to
whether and to what extent the Indemnitee will be permitted to be indemnified.
The Company agrees to pay the reasonable fees of the Independent Legal Counsel
and to indemnify fully such Independent Legal Counsel against any and all
expenses (including attorneys' fees), claims, liabilities and damages arising
out of or relating to this Agreement or the engagement of Independent Legal
Counsel pursuant hereto.
4. ESTABLISHMENT OF TRUST. In the event of a Potential Change in
Control, the Company shall, upon written request by Indemnitee, create a trust
for the benefit of Indemnitee and from time to time upon written request of
Indemnitee shall fund such trust in an amount sufficient to satisfy any and all
Expenses reasonably anticipated at the time of each such request to be incurred
in connection with investigating, preparing for and defending any Claim relating
to an Indemnifiable Event, and any and all judgments, fines, penalties and
settlement amounts of any and all Claims relating to an Indemnifiable Event from
time to time actually paid or claimed, reasonably anticipated or proposed to be
paid. The amount or amounts to be deposited in the trust pursuant to the
foregoing funding obligation shall be determined by the Reviewing Party, in any
case in which the Independent Legal Counsel referred to above is involved. The
terms of the trust shall provide that upon a Change in Control (i) the trust
shall not be revoked or the principal thereof invaded, without the written
consent of Indemnitee, (ii) the trustee shall advance, within five (5) business
days of a request by Indemnitee, any and all Expenses to indemnitee (and
Indemnitee hereby agrees to reimburse the trust under the circumstances under
which Indemnitee would be required to reimburse the Company under SECTION 2(B)
of this Agreement), (iii) the trust shall continue to be funded by the Company
in accordance with the funding obligation set forth above, (iv) the trustee
shall promptly pay to Indemnitee all amounts for which Indemnitee shall be
entitled to indemnification pursuant to this Agreement or otherwise, and (v) all
unexpended funds in such trust shall revert to the Company upon a final
determination by the Reviewing Party or a court of competent jurisdiction, as
the case may be, that Indemnitee has been fully indemnified under the terms of
this Agreement. The trustee shall be chosen by Indemnitee. Nothing in this
SECTION 4 shall relieve the Company of any of its obligations under this
Agreement. All income earned on the assets held in the trust shall be reported
as income by the Company for federal, state, local and foreign tax purposes.
5. INDEMNIFICATION FOR ADDITIONAL EXPENSES. The Company shall indemnify
Indemnitee against any and all expenses (including attorneys' fees) and, if
requested by Indemnitee, shall (within five business days of such request)
advance such expenses to Indemnitee, which are incurred by Indemnitee in
connection with any claim asserted against or in connection with any action
brought by Indemnitee for (i) indemnification or advance payment of Expenses by
the Company under this Agreement or any other agreement or Certificate of
Incorporation or Bylaws of the Company now or hereafter in effect relating to
Claims for
- 5 -
<PAGE>
Indemifiable Events and/or (ii) recovery under any directors' and officers'
liability insurance policies maintained by the Company, regardless of whether
Indemnitee ultimately is determined to be entitled to such indemnification,
advance expense payment or insurance recovery, as the case may be.
6. PARTIAL INDEMNITY, ETC. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the Expenses, judgment, fines, penalties and amounts paid in
settlement of a Claim but not, however, for all of the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion thereof to which
Indemnitee is entitled. Moreover, notwithstanding any other provision of this
Agreement, to the extent that Indemnitee has been successful on the merits or
otherwise in defense of any or all Claims relating in whole or in party an
Indemnifiable Event or in defense of any issue or matter therein, including
dismissal without prejudice, Indemnitee shall be indermiffied against all
Expenses incurred in connection therewith.
7. DEFENSE TO INDEMNIFICATION, BURDEN OF PROOF AND PRESUMPTIONS. It
shall be a defense to any action brought by the Indemnitee against the Company
to enforce this Agreement (other than an action brought to enforce a claim for
expenses incurred in defending a claim in advance of its final disposition where
the required undertaking has been tendered to the Company) that the Indemnitee
has not met the standards of conduct that make it permissible under the Florida
Business Corporation Act for the Company to indemnify the Indemnitee for the
amount claimed. In connection with any determination by the Reviewing Party or
otherwise as to whether the Indemnitee is entitled to be indemnified hereunder,
the burden of providing such a defense shall be on the Company. Neither the
failure of the Company (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action by the Indemnitee that Indemnification of the
claimant is proper under the circumstances because he or she has met the
applicable standard of conduct set forth in the Florida Business Corporation
Act, nor an actual determination by the Company (including its Board of
Directors, independent legal counsel, or its stockholders) that the Indemnitee
had not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the Indemnitee has not mete the applicable
standard of conduct. For purposes of this Agreement, the termination of any
claim, action, suit or proceeding, by judgment, order, settlement (whether with
or without court approval) or conviction, or upon a plea of nolo contendere, or
its equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by applicable law.
8. NON-EXCLUSIVITY, ETC. The rights of Indemnitee hereunder shall be in
addition to any other rights Indemnitee may have under the Certificate of
Incorporation or Bylaws of the Company or the Florida Business Corporation Act
or otherwise. To the extent that a change in the Florida Business Corporation
Act (whether by statute or judicial decision)
- 6 -
<PAGE>
permits greater indemnification by agreement than would be afforded currently
under the Certificate of Incorporation and Bylaws of the Company and this
Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by
this Agreement the greater benefits so afforded by such change.
9. NO CONSTRUCTION AS EMPLOYMENT AGREEMENT. Nothing contained herein
shall be construed as giving Indemnitee any right to be retained in the employ
of the Company or any of its subsidiaries.
10. LIABILITY INSURANCE. To the extent the Company maintains an
insurance policy or policies providing directors' and officers' liability
insurance, Indemnitee shall be covered by such policy or policies, in accordance
with its or their terms, to the maximum extent of the coverage available for any
Company director or officer.
11. PERIOD OF LIMITATIONS. No legal action shall be brought and no
cause of action shall be asserted by or in the right of the Company or any
affiliate of the Company against Indemnitee, Indemnitee's spouse, heirs,
executors, administrators or personal or legal representatives after the
expiration of two years from the date of accrual of such cause of action, and
any claim or cause of action of the Company or its affiliate shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two-year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of action such
shorter period shall govern.
12. AMENDMENTS, ETC. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by both of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver.
13. SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit to
enforce such rights.
14. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under
this Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, Articles of Incorporation or Bylaws of the Company
or otherwise) of the amounts otherwise indemnifiable hereunder.
- 7 -
<PAGE>
15. BINDING EFFECT, ETC. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and their respective
successors, assigns, including any direct or indirect successor by purchase,
merger, consolidation or otherwise to all or substantially all of the business
and/or assets of the Company, spouses, heirs, and personal and legal
representatives. The Company shall require and cause any successor (whether
direct or indirect by purchase, merger, consolidation or otherwise) to all,
substantially all, or a substantial part, of the business and/or assets of the
Company, by written agreement in form and substance satisfactory to Indemnitee,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform if no such
succession had taken place. This Agreement shall continue in effect regardless
of whether Indemnitee continues to serve as a director or officer of the Company
or of any other enterprise at the Company's request.
16. SEVERABILITY. The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including any provision within a
single section, paragraph of sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
17. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida applicable to contracts made
and to be performed in such state without giving effect to the principles of
conflicts of laws.
IN WITNESS WHEREOF, The parties hereto have duly executed and
delivered this Agreement as of December 1998.
AVTEAM, Inc., a Florida corporation
By: /s/ Donald A. Graw
------------------------------------
Donald A. Graw
Chairman, President and CEO
/s/ James McLellan
------------------------------------
Indemnitee
- 8 -
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement is made and effective this 1st day of June of
1998 between AVTEAM, Inc., a Florida corporation ("Company"), and Mark Koondel
("Employee").
AGREEMENTS
In consideration of the mutual covenants contained herein, and for
other good and valuable consideration, receipt of which is acknowledged by the
parties, the Company and Employee agree as follows:
1. TERM OF EMPLOYMENT: The Company employs Employee and Employee
accepts employment with the Company for a period of three (3)
years beginning on the Effective Date of this Agreement as set
forth above ("Initial Employment Term"). This Agreement shall be
renewed automatically for an additional one-year period on the
third anniversary date and on each subsequent one-year
anniversary date unless the Company notifies Employee in writing
or Employee notifies the Company in writing that such renewal
shall not take place. Said notice shall be given not less than
ninety (90) days prior to any such anniversary date.
In the event of any extension of this Agreement for one or more
consecutive one (1) year terms, the terms of this Agreement shall
be deemed to continue in effect for the term of such extension
("Extended Employment Term"). The Initial Employment Term and the
Extended Employment Term will be collectively referred to as the
"Employment Term", unless otherwise specified by the Company. Any
Extended Employment Term must be in writing, signed by the
President of the Company.
2. DUTIES OF EMPLOYEE: Employee shall currently serve as the Chief
Financial Officer, Treasurer, and Assistant Secretary and be
responsible for overseeing the preparation of financial
statements, budgets, forecasts, and external filings. Employee
will coordinate reviews/audits, assist in company strategic
planning, establish and monitor internal controls, coordinate
banking matters, and perform other duties consistent with this
position.
3. EXCLUSIVE SERVICES: Employee's services shall be exclusive to
the Company, and Employee shall devote such portion of his
productive time and attention to the business of the Company
as shall be reasonably necessary to carry out his duties
during the Employment Term. Employee shall not engage in any
other businesses, duties, or pursuits whatsoever, or directly
or indirectly render any services of a business, commercial,
or professional nature to any other person or organization,
whether for compensation or otherwise, unless such activity is
fully disclosed to the Company and approved by the Company's
President. This Agreement shall not be interpreted to prohibit
Employee from making passive personal investments or
conducting private business affairs if such activities do not
materially interfere with the services required under this
Agreement.
1
<PAGE>
4. NON-COMPETITION: To induce the Company to enter into this
Agreement, Employee agrees that:
A. DEFINED TERMS: The principal business of the Company
is value-added reselling of aftermarket jet engines,
jet engine components and new and used aircraft
material to other suppliers of aftermarket engines
and components, aircraft engine and component
manufacturers and their affiliates, overhaul
facilities, international and regional air carriers
and operators, and leasing companies (the
"Business"). Employee's employment with the Company
will bring Employee into close contact with the
members and other customers of the Company and with
the trade secrets and other confidential affairs of
the Company. The Company has a significant interest
in protecting its proprietary interest in, and the
goodwill associated with, the foregoing. As used in
this Section 4, the term "Restricted Period" means
the period of one (1) year following termination of
Employee's employment with the Company if Employee
resigns during the term hereof or nine (9) months
following termination of Employees employment with
the Company if Employer terminates Employee during
the term hereof.
B. PERIOD OF EMPLOYMENT: During the term of Employee's
employment hereunder, Employee shall not, directly or
indirectly, either as an employee, employer,
consultant, agent, principal, partner, stockholder,
corporate officer, director, or in any other
individual or representative capacity, engage or
participate in or acquire, hold, or retain any
interest in any business which is competitive with
the Business of the Company in any location, or any
business selling to or doing business with the
Company, unless such participation or interest is
fully disclosed to the Company and approved by a
majority of the Company's President. The foregoing
notwithstanding, Employee may acquire, hold or retain
equity ownership of any publicly held company,
provided that such equity ownership does not exceed
five (5%) of the issued and outstanding shares of the
voting stock of such company.
C. RESTRICTED PERIOD: During the Restricted Period,
unless the Company and Employee shall otherwise agree
in writing, Employee shall not, (i) compete directly
with the Company, (ii) enter into the employ of, or
render any services to, as an independent contractor
or otherwise, any person or entity engaged in the
Business (or any aspect thereof) in competition with
the Company, (iii) become interested, as an
individual, partner, co-venturer, shareholder,
officer, director, employee, principal, agent,
trustee or in any other relationship or capacity, in
any person or entity engaged in the Business (or any
aspect thereof) in competition with the Company; or
(iv) on his own behalf or on behalf of or as an
employee or agent of any other person or business,
contact or approach any person or business wherever
located, with a view to selling or assisting others
to sell products or services substantially competing
with the Business.
D. ENFORCEABILITY: If any portion of Section 4 is held
to be illegal, unenforceable, void, or voidable, the
remainder shall remain in full force and effect, and
Section 4 shall be deemed altered and amended to the
minimum extent necessary to bring it within the legal
requirements of enforceability.
2
<PAGE>
5. UNIQUE SERVICES: Employee hereby represents and agrees that the
services to be performed under the terms of this Agreement are of
a special, unique, unusual, extraordinary, and intellectual
character that gives them a peculiar value, the loss of which
cannot be reasonably or adequately compensated in damages in any
action at law. Employee, therefore, expressly agrees that the
Company, in addition to any rights or remedies that the Company
might posses, shall be entitled to injunctive and other equitable
relief to prevent or remedy a breach of this Agreement by
Employee.
6. INDEMNIFICATION: The Company shall defend Employee against all
claims made against Employee, and it shall indemnify Employee
for all losses sustained by Employee, in direct consequence of
the discharge of Employee's duties on the Company's behalf,
including any claim brought against, or any loss sustained by,
Employee in his role as an officer or employee of the Company
based on a claim that any of the Company's products or
services infringe a third party patent, copyright or trade
secret; provided, that Employee promptly notifies the Company
in writing of any such claim, gives the Company full authority
for the conduct of such defense and participates in and aids
the Company's counsel by giving whatever time, information,
expertise and assistance is reasonably requested for such
defense. Employee agrees to indemnify and hold the Company and
its shareholders harmless, individually and collectively, from
and against any liabilities, claims, costs, or expenses
(including shareholders) as a result of actions by Employee in
excess of his authority as set forth herein.
7. CONFIDENTIAL INFORMATION: Employee acknowledges that in his
employment hereunder, and during prior period of employment
with the Company, he has occupied and will continue to occupy
a position of trust and confidence. During the period of
Employee's employment hereunder and the Restricted Period
thereafter, Employee shall not, except as may be required to
perform his duties hereunder or as required by applicable law,
without limitation in time or until such information shall
have become public other than by Employee's unauthorized
disclosure, disclose to others or use, whether directly or
indirectly, any Confidential Information regarding the
Company. "Company Information" shall mean information about
the Company, and its respective clients and customers that is
not disclosed by the Company that was learned by Employee in
the course of his employment by the Company, including
(without limitation) any proprietary knowledge, trade secrets,
data, formulae, information and client and customer lists,
pricing policies, suppliers, market strategies, product
development concepts and all papers, resumes, and records
(including computer records) of the documents containing such
Confidential Information. Employee acknowledges that such
Confidential Information is specialized, unique in nature and
of great value to the Company, and that such information gives
the Company a competitive advantage. The Employee agrees to
deliver or return to the Company, at the Company's request at
any time or upon termination or expiration of his employment
or as soon thereafter as possible, all documents, computer
tapes and disks, records, lists, data, drawings, prints, notes
and written information (and all copies thereof) furnished by
the Company or prepared by the Employee during the term of his
employment by the Company.
3
<PAGE>
8. COMPENSATION:
A. SALARY: The Company shall pay Employee an annual base salary
of $130,000 ("Salary"), payable in accordance with the normal
payroll procedures of the Company or at such other time or
times as Employee and the Company shall agree. Except as
otherwise provided herein, the Company's obligation to pay
Employee's salary under this Agreement shall cease as of the
date of termination of Employee's employment. Employer shall
review performance of Employee on or about each annual
anniversary of this agreement and in conjunction with the
overall Employee's performance evaluation, Employer shall
modify the compensation to reflect industry pay for other
comparable positions of publicly held aftermarket companies.
B. INCENTIVE COMPENSATION: Employee shall be eligible to
participate in the Company's Executive Incentive Compensation
Plan for each year of the term of this agreement.
9. TAX WITHHOLDING: The Company shall have the right to deduct or
withhold from the compensation due to Employee hereunder any and
all sums required for any and all federal, social security, state
and local taxes, assessments or charges now applicable or that
may be enacted and become applicable in the future.
10. EMPLOYEE BENEFITS:
A. VACATION TIME AND SICK LEAVE: Employee shall be entitled to
three (3) weeks of vacation and six (6) days of sick leave
without loss of compensation each year during the Employment
Term. For the purposes of this paragraph, a year shall begin
on the effective date of this Agreement as set forth above.
In the event that Employee takes vacation time or sick leave
in excess of the minimum numbers set forth in this paragraph,
the President shall determine whether or not Employee shall
receive compensation for such excess days. Unless otherwise
established by the Company's President, in the event that
Employee does not for any reason take the total amount of
vacation time authorized during any year, he shall be deemed
to have waived any entitlement to vacation time for that
year. Sick days may not be accumulated.
B. ADDITIONAL BENEFITS: Employee shall be entitled to all
employment benefits made available to other employees of the
Company. Such benefits shall include, but are not limited to,
health insurance, dental insurance, disability insurance,
life insurance, stock options, and retirement plan. Employee
shall also be reimbursed for professional memberships and CPE
course requirements to maintain his CPA license.
11. TERMINATION OF AGREEMENT:
A. TERMINATION FOR CAUSE: The Company may terminate Employee's
employment under this Agreement for "Cause", at any time, but
only in the event of (a) Employee's conviction of a felony
(provided, however, that following indictment for a felony,
and prior to conviction, the Company may, without limiting or
modifying in any other way its obligations under this
Agreement, suspend Employee from the performance of his
duties
4
<PAGE>
hereunder), or (b) a determination by the Company's
President, acting reasonably and in good faith, that Employee
has (1) neglected his material duties or performed his
material duties in an incompetent manner, (2) committed
fraudulent or dishonest actions, or (3) deliberately injured
or attempted to injure the Company; provided, however, that
Employee shall not be deemed to have been terminated for
Cause unless and until there shall have been delivered to him
a copy of a resolution duly adopted by the affirmative vote
of not less than a majority of the entire membership of the
President of the Company, finding that, in the good faith
opinion of such board, he was guilty of or had engaged in
conduct constituting Cause as set forth herein and specifying
the particulars thereof in detail.
B. EFFECT OF TERMINATION FOR CAUSE: In the event of
termination of Employee for cause as set forth in
Subsection 11.A., or a voluntary termination by
Employee in breach of this Agreement without the
consent of the Company, Employee shall have no right to
any bonuses, salaries, benefits or entitlements other
than those required by law or specifically provided
under the terms of the applicable plan document.
Payment of any further bonuses or other salaries
claimed by Employee will be in the sole and absolute
discretion of the Company, and Employee shall have no
entitlement thereto.
C. DISABILITY AND DEATH: If, during the Employment Term,
Employee should die or suffer any physical or mental
illness that renders him incapable of fulfilling his
obligation under this Agreement; and such incapacity
exists or may reasonably be expected to exist for more
than forty-five (45) calendar days in the aggregate,
the Company may, upon five (5) calendar days written
notice to Employee, terminate this Agreement. The
determination of the Company that Employee is incapable
of fulfilling his obligations under this Agreement
shall be final and binding.
D. VOLUNTARY TERMINATION BY EMPLOYEE AT THE END OF THE
EMPLOYMENT TERM: In the event of voluntary termination
by Employee at the end of the Initial Employment Term,
or any Extended Employment Term, Employee shall be
entitled only to those amounts that have accrued to the
date of termination or are expressly payable under the
terms of the Company's applicable benefit plans or are
required by applicable law. The Company may, in its
sole and absolute discretion, confer such other
benefits or payments as it determines, but Employee
shall have not entitlement thereto.
E. TERMINATION BY EMPLOYER AT THE END OF THE EMPLOYMENT
TERM: In the event that Employee's employment is
terminated by the Company at the end of the Initial
Employment Term or any Extended Employment Term as a
result of the Company's notice specified in Section 1
above, Employee shall be treated as in Subsection 11.D.
F. TERMINATION BY EMPLOYER DURING THE EMPLOYMENT TERM: In
the event of termination by the Employer other than at
the end of the Initial Employment Term or Extended
Employment Term, other than for cause under Subsection
11.A., Employee shall be entitled to nine (9) months
base salary (at Employee's then current base) plus
COBRA premiums for nine (9) months payable in bi-weekly
installments similar to if Employee had continued
employment with the Company.
5
<PAGE>
G. CONFIDENTIALITY. Nothing in this Section 11 shall
affect the rights of the parties under Section 4 above.
12. ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS:
A. DEFINITION OF "INVENTIONS": As used herein, the term
"Inventions" shall mean all inventions, discoveries,
improvements, trade secrets, formulas, techniques,
data, programs, systems, specifications,
documentation, algorithms, flow charts, logic
diagrams, source codes, processes, and other
information, including works-in-progress, whether or
not subject to patent, trademark, copyright, trade
secret, or mast work protection, and whether or not
reduced to practice, which are made, created,
authored, conceived or reduced to practice by
Employee, either alone or jointly with others, during
the period of employment with the Company and for one
year following the termination of Employee's
employment with the Company which (1) relate to the
actual or anticipated business, activities, research,
or investigations of the Company, or (2) result from
or is suggested by work performed by Employee for the
Company (whether or not made or conceived during
normal working hours or on the premises of the
Company), or (3) which result, to any extent, from
use of the Company's premises or property.
B. WORK FOR HIRE: Employee expressly acknowledges that
all copyrightable aspects of the Inventions are to be
considered "works made for hire" within the meaning
the Copyright Act of 1976, as amended (the "Act"),
and that the Company is to be "author" within the
meaning of such Act for all purposes. All such
copyrightable works, as well as all copies of such
works in whatever medium fixed or embodied, shall be
owned exclusively by the Company as of its creation,
and Employee hereby expressly disclaims any and all
interest in any of such copyrightable works and
waives any right of DROIT MORALE or similar rights.
C. ASSIGNMENT: Employee acknowledges and agrees that all
Inventions constitute trade secrets of the Company or
the member of the Company, as applicable, and shall
be the sole property of the Company, as applicable or
any other entity designated by the Company. In the
event that title to any or all of the Inventions or
any part or element thereof, may not, by operation of
law, vest in the Company, as applicable, or such
Inventions may be found as a matter of law not to be
"works made for hire" within the meaning of the Act,
Employee hereby conveys and irrevocably assigns to
the Company, as applicable, without further
consideration, all his right, title and interest
throughout the universe and in perpetuity, in all
Inventions and all copies of them, in whatever medium
fixed or embodied, and in all written records,
graphics, diagrams, notes, or reports relating
thereto in Employee's possession or under his
control, including, with respect to any of the
foregoing, all rights of copyright, patent,
trademark, trade secret, mask work, and any and all
other proprietary rights therein, the right to modify
and create derivative works, the right to invoke the
benefit of any priority under any international
convention and all rights to register and renew same.
6
<PAGE>
D. PROPRIETARY NOTICES; NO FILINGS; WAIVER OF MORAL
RIGHTS: Employee acknowledges that all Inventions shall
at the sole option of the Company bear the Company's
patent, copyright, trademark, trade secret, and mask
work notices. Employee agrees not to file any patent,
copyright, or trademark applications relating to any
Invention, except with prior written consent of an
authorized representative of the Company. Employee
hereby expressly disclaims any and all interest in any
Inventions and waives any right of DROIT MORALE or
similar rights, such as rights of integrity or the
right to be attributed as the creator of the Invention.
E. FURTHER ASSURANCE: Employee agrees to assist the
Company, or any party designated by the Company,
promptly on the Company's request, whether before or
after the termination of employment, however such
termination may occur, in perfecting, registering,
maintaining, and enforcing, in any jurisdiction, the
Company's rights in the Inventions by performing all
acts and executing all documents and instruments deemed
necessary or convenient by the Company, including, by
way of illustration and not limitation:
1. Executing assignments, applications, and other
documents and instruments in connection with (a)
obtaining patents, copyrights, trademarks, mask
works, or other proprietary protections for the
Inventions and (b) confirming the assignment to the
Company of all right, title, and interest in the
Inventions or otherwise establishing the Company's
exclusive ownership rights therein.
2. Cooperating in the prosecution of patent,
copyright, trademark and mask work applications, as
well as in the enforcement of the Company's rights
in the Inventions, including, but not limited to,
testifying in court or before any patent,
copyright, trademark or mask work registry office,
or any other administrative body.
Employee will be reimbursed for all out-of-pocket
costs incurred in connection with the foregoing, if
such assistance is requested by the Company after
the termination of employment. In addition, to the
extent that, after the termination of employment
for whatever reason, Employee's technical expertise
shall be required in connection with the
fulfillment of the aforementioned obligations, the
Company will compensate Employee at a reasonable
rate for the time actually spent by Employee at the
Company's request rendering such assistance.
F. POWER OF ATTORNEY: Employee hereby irrevocably appoints
the Company to be his Attorney-in-Fact in his name and
on his behalf to execute any document and to take any
action and generally to use his name for the purpose of
giving to the Company the full benefit of the
assignment provisions set forth above.
7
<PAGE>
G. CONSENT TO USE OF NAME: The Company reserves the right
(but shall not have the obligation) to publicize
Employee's name and background in connection with the
marketing of the Inventions or the enforcement of the
Company's rights therein. Employee is responsible for
supplying to the Company his resume or curriculum vitae
for such purposes. Employee agrees that the Company
shall have the sole control over the type style, type
size, or placement of his name on any materials, or
over the final content of any biography used in said
material.
H. DISCLOSURE OF INVENTIONS: Employee will make full and
prompt disclosure to the Company of all Inventions
subject to assignment to the Company, and all
information relating thereto in Employee's possession
or under his control as to possible applications and
use thereof.
I. NO VIOLATION OF THIRD PARTY RIGHTS: Employee
represents, warrants, and covenants that he:
1. will not, in the course of employment, infringe
upon or violate any proprietary rights of any third
party (including, without limitation, any third
party confidential relationships, patents,
copyrights, mask works, trade secrets, or other
proprietary rights);
2. is not a party to any conflicting agreements with
third parties which will prevent him from
fulfilling the terms of employment and the
obligations of this Agreement;
3. does not have in his possession any confidential or
proprietary information or documents belonging to
others and will not disclose to the Company, use,
or induce the Company to use, any confidential or
proprietary information or documents of others; and
4. agrees to respect any and all valid obligations
which he may now have to prior employers or to
others relating to confidential information,
inventions, or discoveries which are the property
of those prior employers or others, as the case may
be.
Employee has supplied or shall promptly supply to
the Company a copy of each written agreement to
which Employee is subject (other than any agreement
to which the Company is a party) which includes any
obligation of confidentiality, assignment of
Inventions, or non-competition.
Employee agrees to indemnify and save harmless the
Company from any loss, claim, damage, costs or
expenses of any kind (including without limitation,
reasonable attorney's fees) to which the Company
may be subjected by virtue of a breach by Employee
of the foregoing representations, warranties, and
covenants.
8
<PAGE>
J. OBLIGATIONS UPON TERMINATION: In the event of any
termination of his employment, for whatever reason,
Employee will promptly (1) deliver to the Company all
physical property, discs, documents, notes,
printouts, and all copies thereof and other materials
in Employee's possession or under Employee's control
pertaining to the business of the Company, including,
but not limited to, those embodying or relating to
the Inventions and the Confidential Information (as
defined in Sections 7 and 12.A. herein), (2) deliver
to the Company all notebooks and other data relating
to research or experiments or other work conducted by
Employee in the scope of employment or any Inventions
made, created, authored, conceived, or reduced to
practice by Employee, either alone or jointly with
others, and (3) make full disclosure relating to any
Inventions.
If Employee would like to keep certain property, such
as material relating to professional societies or
other non-confidential material, upon the termination
of employment with the Company, he agrees to discuss
such issues with the Company. Where such a request
does not put Confidential Information of the Company
at risk, the Company will customarily grant the
request.
Upon termination of employment with the Company,
Employee's obligations under this Section 12 shall
survive and the Employee shall, if requested by the
Company, reaffirm Employee's recognition of the
importance of maintaining the confidentiality of the
Company's Confidential Information and reaffirm all
of the Employee's obligations set forth in this
Section 12.
13. LIFE INSURANCE: The Company may, in its sole discretion, purchase
such life insurance policies as it deems necessary or
appropriate, naming Employee as the insured and the Company as
beneficiary. Employee hereby agrees to submit to any reasonable
medical examination required for the purchase of such insurance.
14. NOTICES: Any notices to be given hereunder by either party to the
other shall be in writing and may be transmitted by personal
delivery or by certified mail, return receipt requested. Mailed
notices shall be addressed to the parties as follows:
If notice is to the Company, to:
AVTEAM, Inc.
Miramar Park of Commerce
3230 Executive Way
Miramar, Florida 33025
Attention: President
9
<PAGE>
with copy to:
Baker & McKenzie
701 Brickell Avenue, Suite 1600
Miami, Florida 33131
Attention: Noel H. Nation, Esq.
If notice is to Employee, to:
Mark Koondel
12435 N.W. 19th Place
Coral Springs, Florida 33071
Either party may change its address by written notice in
accordance with this Section 14. Notices delivered personally
shall be deemed communicated as of the dates of actual receipt;
mailed notices shall be deemed communicated as of forty-eight
(48) hours after the date of mailing.
15. ARBITRATION: Any controversy between the parties involving the
construction or application of any of the terms, provisions or
conditions of this Agreement or in any way connected with
Employee's employment with the Company, including, but not
limited to, breach of this Agreement, termination or discharge,
claims of age, gender, race or disability discrimination, sexual
harassment or civil rights violations shall, within thirty (30)
days of the written notice to the other party, be submitted to
final and binding arbitration as follows:
A. The arbitration shall be held in Miami, Florida
B. The arbitration shall be conducted by one arbitrator, who is
a member of the American Arbitration Association ("AAA") and
in accordance with the rules of the AAA then in effect,
subject to the specific exceptions set out in Subsection
15.C., unless both parties agree otherwise. The arbitrator
shall be chosen from a panel of persons with knowledge of an
experience in employment and employment law issues.
C. Notwithstanding any rule of the AAA to the contrary, (1) the
parties shall be entitled to conduct discovery (i.e.,
investigation of facts through deposition and other means)
which shall be governed by the Florida Rules of Civil
Procedure then in effect; (2) the arbitrator shall have all
power and authority relating to such discovery as are allowed
under the Florida Rules of Civil (3) the arbitrator shall
apply Florida substantive law; (4) at the election and at the
expense of either party, a Court Reporter may record the
hearing and such recording will be the official record of the
proceeding; and (5) the arbitrator shall specify the basis
for, and the type of damage award, if any, entered.
10
<PAGE>
D. The arbitrator's authority to order discovery and enter
judgement shall be final and binding. It may be enforced
through an order of a court of competent jurisdiction. Such
judgement may be reviewed by a court only on the grounds of
bias, improper conduct of the arbitrator, abuse of
discretion, or violation of public policy.
Notwithstanding the foregoing agreement to arbitrate, either
party may apply to any court of competent jurisdiction for
temporary restraining orders, preliminary injunctions,
permanent injunctions, or other extraordinary relief, to
remedy any actual or threatened unauthorized disclosure of
confidential information or unauthorized use, copying,
marketing, or distribution of confidential information. Such
application shall be made before the arbitrator is appointed
and assumes his or her responsibilities. The seeking of
injunctive relief shall not operate to prejudice the rights
of the parties to arbitrate their disputes.
16. ATTORNEYS' FEES AND COSTS: If either party fails to perform its
respective obligations under this Agreement, and the other party
is thereby required to incur attorneys' fees or other fees or
costs, including but not limited to the costs of arbitration, the
party so incurring such fees and costs shall be entitled to the
payment of those fees and costs by the breaching party.
17. ENTIRE AGREEMENT: This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto
with respect to the employment of Employee by the Company and
contains all of the covenants and agreements between the parties
with respect to that employment in any manner whatsoever. Each
party to this Agreement acknowledges that no representations,
inducements, promises, or agreements, oral or written, have been
made by any party, or anyone acting on behalf of any party, which
are not embodied herein, and that no other agreement, statement,
or promise not contained in this Agreement shall be valid or
binding on either party.
18. MODIFICATIONS: Any modification of this Agreement shall be
effective only if it is in writing and signed by both parties.
19. EFFECT OF WAIVER: The failure of either party to insist on strict
compliance with any of the terms, covenants, or conditions of
this Agreement by the other party shall not be deemed a waiver of
that term, covenant, or condition, nor shall any waiver or
relinquishment of any right or power at any one time or times be
deemed a waiver or relinquishment of that right or power for all
or any other times.
20. PARTIAL INVALIDITY: If any provision of this Agreement is held by
a court of competent jurisdiction to be invalid, void, or
unenforceable, the remaining provisions shall nevertheless
continue in full force without being impaired or invalidated in
any way, unless such partial invalidity materially affects the
intent of the parties.
21. GOVERNING LAW: This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
11
<PAGE>
22. ASSIGNABILITY: The rights and duties of either party hereunder
shall not be assignable by either party, except that this
Agreement and all rights and obligations hereunder may be
assigned by the Company to, and be assumed by, any corporation or
other business entity which succeeds to all or substantially all
of the assets and business of the Company through merger,
consolidation, acquisition of assets, or other corporate
reorganization.
23. SURVIVAL: The covenants, agreements, representations and
warranties contained in or made pursuant to this Agreement shall
survive Employee's termination of employment irrespective of any
investigation made by or on behalf of any party.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the day and year first above written.
AVTEAM, INC.
By: /s/ Donald A. Graw
-----------------------------------------
Name: Donald A. Graw
Title: President and Chief Executive Officer
EMPLOYEE:
By: /s/ Mark Koondel
-----------------------------------------
Name: Mark Koondel
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<PERIOD-START> JAN-01-1999
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0
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