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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1998 Commission file number 001-04021
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TRISTAR AEROSPACE CO.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 75-2665751
(State of Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2527 Willowbrook Road 75220
Suite 200 (Zip Code)
Dallas, Texas 75220
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (214) 366-5000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name Of Each Exchange
Title Of Each Class On Which Registered
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Common Stock $.01 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K.
Aggregate market value of the voting stock held by nonaffiliates of the
registrant based on the closing price at which stock was sold on the New York
Stock Exchange on December 10, 1998, was approximately $74,759 million.
The number of shares outstanding of each of the registrant's classes of
commons shares as of December 10, 1998, is as follows:
<TABLE>
<CAPTION>
Shares Outstanding
Title Of Class As of December 10, 1998
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<S> <C>
Common Stock 17,044,742
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Registrant intends to file with the Securities and Exchange Commission a
definitive Proxy Statement for the 1998 Annual Meeting of Stockholders to be
held on January 22, 1998, pursuant to Regulation 14A of the Securities Exchange
Act of 1934 within 120 days of the close of its fiscal year ended September 30,
1998, portions of which document are incorporated by reference in Part III
hereof.
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TABLE OF CONTENTS
<TABLE>
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ITEM PAGE
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<C> <S> <C>
PART I
1. Business........................................................................ 3
2. Properties...................................................................... 9
3. Legal Proceedings............................................................... 9
4. Submission of Matters to a Vote of Security Holders............................. 10
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters........... 10
6. Selected Financial Data......................................................... 11
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations...................................................................... 13
7A. Quantitative and Quantitative Disclosures About Market Risk..................... 18
8. Financial Statements and Supplementary Data..................................... 19
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure...................................................................... 45
PART III
10 Director of Executive Officers of the Registrant............................... 45
11 Executive Compensation.......................................................... 45
12 Security Ownership of Certain Beneficial Owners and Management.................. 45
13 Certain Relationships and Related Transactions.................................. 45
PART IV
14 Exhibits, Financial Statements, Schedules, and Reports on Form 8-K.............. 45
Signatures...................................................................... 50
</TABLE>
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STATEMENTS AND INFORMATION PRESENTED WITHIN THIS FORM 10-K FOR TRISTAR
AEROSPACE CO.( THE "COMPANY") CONTAIN "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
THESE FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF PREDICTIVE,
FUTURE-TENSE OR FORWARD-LOOKING TERMINOLOGY, SUCH AS "BELIEVES,"
"ANTICIPATES," "EXPECTS," "ESTIMATES," "MAY," "WILL" OR SIMILAR TERMS.
FORWARD-LOOKING STATEMENTS ALSO INCLUDE PROJECTIONS CONCERNING ANY
ASSUMPTIONS RELATING TO THE FOREGOING. CERTAIN IMPORTANT FACTORS WHICH MAY
CAUSE ACTUAL RESULTS TO VARY MATERIALLY FROM THESE FORWARD-LOOKING STATEMENTS
ACCOMPANY SUCH STATEMENTS AND APPEAR ELSEWHERE IN THIS REPORT, INCLUDING
WITHOUT LIMITATION, THE FACTORS DISCLOSED UNDER "RISK FACTORS". ALL
SUBSEQUENT WRITTEN OR ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE
COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED BY THESE
FACTORS.
PART I
ITEM 1. BUSINESS
Unless the context otherwise requires, reference to the "Company" in this
form 10-K includes TriStar Aerospace Co. and its subsidiaries.
GENERAL
The Company is both a leading distributor of aerospace fasteners,
fastening systems and related hardware (collectively, "aerospace hardware")
and a leading provider of customized inventory management services to
original equipment manufacturers ("OEMs") of aircraft and aircraft
components, to commercial airlines and to aircraft maintenance, repair and
overhaul ("MRO") facilities, based on annual sales by the Company and its
competitors in the aerospace hardware industry. While approximately 57% of
the Company's revenues for fiscal 1998 were derived from traditional
distribution sales and services ("conventional sales"), a substantial and
growing percentage of the Company's revenues are derived from sales of
aerospace hardware pursuant to long-term inventory management agreements
under which TriStar performs a wide variety of value-added services (commonly
referred to as "JIT services"). For fiscal 1998, JIT revenues represented
approximately 43% of the Company's total revenues. The Company's JIT services
are provided through comprehensive and flexible outsourcing programs under
which the Company provides some or all of the material management functions
necessary to procure and manage aerospace hardware for its customers. The
Company derives income from its JIT services principally through margins
earned on products sold under its JIT agreements. The Company believes that
it was a pioneer of JIT services in the aerospace hardware industry and that
today the Company is a leading provider of inventory management services to
this industry. TriStar currently provides JIT services under long-term
agreements to a number of leading aerospace and aircraft-related companies
including, among others, Boeing (including former McDonnell Douglas and
Rockwell International facilities), Northrop Grumman, Bell Helicopter,
Raytheon Aircraft Company, Aerospatiale, Lockheed Martin, Gulfstream, United
Airlines, British Airways and Federal Express. Through its JIT programs and
conventional sales, the Company processed over 1,000,000 transactions
involving over 89,000 stock keeping units ("SKUs") in fiscal 1998, resulting
in approximately $185.9 million of sales to over 2,700 customers.
HISTORY OF THE COMPANY
The Company was incorporated under the name "Maple Leaf Aerospace, Inc."
in Delaware on August 21, 1996, by Odyssey Partners, L.P. ("Odyssey") to
acquire the outstanding stock of Tri-Star Aerospace, Inc. (the "Predecessor")
and certain net assets of the Aviall Aerospace business unit of Aviall
Services, Inc. and of Aviall (Canada) Ltd. (together "Aviall Aerospace").
Founded in 1973, the Predecessor was a leading distributor of aerospace
hardware products and a pioneer of JIT services in the aerospace hardware
industry. The annual revenues of the Predecessor increased from $14.3 million
in 1985 to
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$65.6 million in 1995. In addition, as a result of its JIT programs, the
Predecessor experienced revenue growth each year from 1990 through 1995,
despite an economic downturn in the aerospace industry. Aviall Aerospace was
a distributor of aerospace hardware to commercial and military aircraft OEMs.
The acquisition of Aviall Aerospace provided the Company an expanded product
line and access to a larger customer base. On February 24, 1998, the Company
changed its name to "TriStar Aerospace Co."
On May 5, 1998, the Company completed an initial public offering (the
"Offering") of 13,276,858 shares of its common stock at a price of $16.00 per
share. In addition, 224,776 shares were sold by certain shareholders pursuant
to an over-allotment option in connection with the Offering. All of the
shares offered were sold by certain shareholders of the Company. The Company
did not receive any of the proceeds from the Offering.
AEROSPACE HARDWARE DISTRIBUTION SERVICES
The Company's business can be separated into two broad categories: JIT
services and conventional sales, as discussed below.
JIT SERVICES
Under the terms of its JIT agreements, the Company's personnel,
processes and management information systems enable customers to outsource
all or a portion of the planning, purchasing, receiving, documentation,
inspection, storage, shipment and quality assurance functions associated with
the procurement and management of aerospace hardware. The Company's
substantial experience in developing and implementing JIT services enables it
to create programs specifically tailored to the needs of its customers. In
many cases, the Company assigns its own trained personnel to work on-site at
the customer's facilities to place orders, monitor inventory bins and manage
receipts. Under a typical JIT program, TriStar first analyzes the historical
and projected usage patterns of the aerospace hardware parts included in the
JIT agreement. The Company then establishes bar-coded inventory bins at the
customer's manufacturing facility located at strategic points along the
production line. If needed, the Company will establish a forward stocking
location ("FSL ") near the customer's manufacturing facility which is stocked
with the required aerospace hardware. TriStar representatives inspect the
floor bins on a regular basis and scan those bins requiring replenishment
using bar-code technology. This information is transferred via electronic
data interchange ("EDI") to the Company's management information systems to
determine restocking needs, update usage rates, assess adequacy of available
stocks and calculate optimal reorder points. The Company's systems then
create a replenishment order at the customer's FSL that results in delivery
of the needed product to the customer's bins, usually within one working day.
JIT agreements are either fixed price or fixed mark-up agreements and
typically have a term of between three and five years. The Company's JIT
sales were $79.5 million in fiscal 1998 or approximately 43% of total sales.
CONVENTIONAL SALES
Conventional sales consist of providing customers with high-quality
aerospace hardware at reasonable prices on an as-ordered basis. TriStar
typically receives thousands of bid requests each month from large and small
OEMs, airlines and MRO facilities. The key competitive factors which have an
impact on conventional sales are: (i) availability of inventory, (ii) price
and (iii) reputation for quality and reliability. Demand for conventional
sales is generated by the inability of hardware manufacturers to quickly
respond to changing customer demand due to their own capacity constraints and
pricing strategies. Specifically, many manufacturers require long lead times
(typically, 8-52 weeks) to provide products, even though the actual required
production time is much shorter, due to queuing requirements and capacity
issues. In addition, many manufacturers enforce minimum order quantities and
set prices based on volume of purchases due to the efficiencies associated
with long production runs. Therefore, unplanned demand or a long-term
requirement for low volumes of a specific part make it advantageous for
customers to purchase through distributors. The Company's strategically
located facilities and the quality of its customer usage
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information are key competitive advantages in the conventional sales market.
These strengths allow the Company to place significant orders for products at
advantageous prices and schedule deliveries to correspond with market demand.
As a result, the Company can provide its customers with aerospace hardware on
an as-ordered basis at prices generally below what they would pay by ordering
small quantities directly from manufacturers. The Company's conventional
sales were $106.4 million in fiscal 1998, or approximately 57% of total sales.
FOREIGN OPERATIONS
The Company's operations are located primarily in North America and
Europe. Export sales are made by U.S. businesses to customers in non-U.S.
countries, whereas foreign sales are made by the Company's non-U.S.
subsidiaries. For the Company's sales results by foreign sales and export
sales, see Note 2 of the Company's Consolidated Financial Statements included
in Item 8, Financial Statements and Supplementary Data.
CUSTOMERS
The Company has over 2,700 customers, which include OEMs of aircraft and
aircraft components, commercial airlines and MRO facilities. During fiscal
1998, the Company's top ten customers accounted for approximately 58.3% of
total sales, with Boeing (including former McDonnell Douglas and Rockwell
International facilities) and Northrop Grumman accounting for approximately
23.2% and 14.5% of total sales, respectively.
PRODUCTS
TriStar stocks a wide variety of aerospace hardware ranging from small,
commodity hardware items such as washers and pins to larger, structural
fasteners and close-tolerance engineered fastening systems used throughout an
aircraft and its undercarriage. These products require sophisticated technology
and extensive testing to assure that they can endure the high speed stress loads
of the aircraft. The Company's major products include:
- High strength structural bolts and nuts.
- High strength/heat resistant engine bolts and nuts made from specialty
materials.
- Screws and nut plates.
- Rivets (solid and blind).
- Specialty fasteners.
- Other products, including bearings, valves and safety hardware.
The Company typically stocks approximately 100,000 SKUs to support its
customers' diverse aerospace hardware requirements.
SUPPLIERS
TriStar purchases fastener products from a variety of manufacturers and is
an Authorized Distributor for over 65 suppliers, including Fairchild, Huck,
Kaynar, SPS and Hi-Shear. TriStar believes it is one of the largest customers of
most of these manufacturers. The Company's top 10 suppliers accounted for $43.6
million of TriStar's purchases in fiscal 1998, representing approximately 29% of
total purchases of $150.9 million.
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COMPETITION
The aerospace hardware industry is fragmented, with numerous companies
which manufacture and/or distribute fasteners, fastening systems and related
components that compete with the products the Company distributes.
Competition is generally based on product quality, including documentation,
availability of inventory, reliability and price. Certain of these
competitors have greater financial and other resources than the Company.
EMPLOYEES
As of September 30, 1998, the Company employed 428 full-time employees.
The Company is not a party to any collective bargaining agreements and
management considers its employee relations to be good. None of the Company's
employees are subject to a collective bargaining agreement.
ENVIRONMENTAL MATTERS
There are no material expenditures anticipated for environmental control
for fiscal 1999 and thereafter.
RISK FACTORS
IN ADDITION TO OTHER INFORMATION IN THIS REPORT, THE FOLLOWING RISK
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS
BUSINESS. THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS
AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SET FORTH IN THE FOLLOWING RISK FACTORS AND
ELSEWHERE IN THIS REPORT.
DEPENDENCE ON COMMERCIAL AIRCRAFT INDUSTRY. The worldwide commercial
aircraft industry is the primary market for the products distributed and
services provided by the Company. Historically, demand from this industry has
been subject to cyclical fluctuations, with orders from OEMs and other
customers for aerospace hardware typically increasing or decreasing in
advance of corresponding changes in the deliveries of new aircraft. The
demand for new aircraft historically has been closely related to the
financial performance of airlines, which in turn has been closely related to
general economic conditions and changes in business cycles. Changes in the
commercial airline market resulting in a reduction in the rate of future
aircraft deliveries, including cancellations or deferrals of scheduled
deliveries, could have a material adverse effect on the Company's results of
operations and financial condition.
CUSTOMER CONCENTRATION; DEPENDENCE ON JIT AGREEMENTS. A significant
portion of the Company's business is dependent upon a limited number of large
manufacturers of commercial aircraft and defense products. Direct sales to
Boeing and Northrop Grumman, for example, accounted for approximately 23.2%
(including 11.3% from former McDonnell Douglas facilities and 7.6% from
former Rockwell International facilities) and 14.5% of the Company's fiscal
1998 net sales, respectively. In addition, under the terms of several of the
Company's JIT agreements, the customer may terminate the agreement, subject
to prior notice and/or other provisions, before the expiration of such
agreement. The termination or renegotiation of any such agreement or the loss
of one or more significant customers for any reason could have a material
adverse effect on the Company's results of operations and financial
condition. Furthermore, because of the relatively small number of customers
for certain of the Company's products, such customers may be able to
influence the Company's prices and other terms of sale with respect to such
products.
AVAILABILITY OF HARDWARE. As is customary in the aerospace hardware
industry, the Company does not currently have long-term contracts with any of
its suppliers. Any material disruption in the Company's sources of supply,
particularly of the most commonly sold items, could have a material adverse
effect upon the Company's results of operations and financial condition.
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GROWTH STRATEGY IMPLEMENTATION; ABILITY TO MANAGE GROWTH. The Company's
growth strategy includes (i) expanding its JIT services, (ii) expanding its
presence in non-OEM segments of the marketplace, (iii) increasing its
international business, (iv) further implementing supply chain management
initiatives, and (v) exploring acquisition opportunities. The Company's
ability to execute its growth strategy will depend on a number of factors,
including existing and emerging competition, the ability to maintain profit
margins in the face of competitive pressures, the continued recruitment,
training and retention of employees, the strength of demand for its services
and the availability of capital to support its growth.
Conducting business outside of the United States is subject to various
risks, including changing economic and political conditions in the United
States and abroad, major work stoppages, currency fluctuations, armed
conflicts and unexpected changes in United States and foreign laws relating
to tariffs, exchange controls, trade restrictions, transportation
regulations, foreign investments and taxation. The Company has no control
over most of these risks and may be unable to anticipate changes in
international economic and political conditions and, therefore, may be unable
to alter its business practices in time to avoid the adverse effect of any
such changes.
From time to time, the Company may evaluate or pursue opportunistic
acquisitions of all or portions of other independent aerospace hardware and
service providers whose assets or product lines would complement or expand
the Company's existing operations. There can be no assurance that the Company
will succeed in identifying appropriate acquisition candidates, arranging
financing for acquisitions, consummating acquisitions on satisfactory terms
or efficiently integrating acquired businesses.
To manage anticipated growth, the Company must continuously evaluate the
adequacy of its existing resources, systems and processes, including, among
others, its management resources, management information systems and
financial and accounting systems. There can be no assurance that management
will adequately anticipate all of the changing demands that growth will
impose on the Company's resources, systems and processes. Any failure to
adequately anticipate and respond to such changing demands could have a
material adverse effect on the Company's growth strategy. Any such adverse
effect could result in the Company's growth and anticipated results of
operations being less than management's expectations.
FLUCTUATIONS IN OPERATING RESULTS. The Company's operating results are
affected by many factors, including the timing of orders from large
customers, the timing of expenditures for employees hired in anticipation of
future sales and the mix of customers purchasing products in a particular
period. Any of these factors, or any cancellations, reductions or delays in
orders by a significant customer or group of customers, could have a material
adverse effect on the Company's results of operations and financial condition.
DEPENDENCE ON KEY PERSONNEL. The continued success of the Company is
dependent to a significant degree upon the services of its executive officers
and upon the Company's ability to attract and retain qualified personnel
experienced in the various phases of the Company's business. Loss of the
services of such employees, particularly Quentin Bourjeaurd, President and
Chief Executive Officer of the Company, Charles Balchunas, Chief Operating
Officer of the Company, Doug Childress, Chief Financial Officer of the
Company, Trevor Wright, Executive Vice President of Sales and Marketing and
Denny Barge, Vice President of Operations and Strategic Planning, could
adversely affect the operations of the Company. The Company has entered into
executive employment agreements with a number of its key personnel, including
Messrs. Bourjeaurd, Balchunas, Childress, Wright and Barge. See "Compensation
of Executive Officers-Employment Agreements" set forth in the Company's
definitive Proxy statement to be filed in connection with the 1999 Annual
Meeting to be held on January 22, 1999 and which is incorporated herein by
reference. The Company does not maintain key man life insurance on the lives
of any of its executive officers or key employees.
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COMPETITION. Numerous companies manufacture and/or distribute fasteners,
fastening systems and related components that compete with the products the
Company distributes. Certain of these competitors have greater financial
resources than the Company. There can be no assurance that competitive
pressures in any of the markets to which the Company distributes products
will not have a material adverse effect on the Company's results of
operations and financial condition. See "Business-Competition."
DEPENDENCE ON MANAGEMENT INFORMATION SYSTEMS; YEAR 2000 COMPLIANCE. The
Company believes that the successful operation of the Company's business is
dependent in part on its computerized inventory management, order processing
and distribution systems and other computer software programs and operating
systems. These systems will require modification, improvement or replacement
as the Company grows. The Company may, from time to time, experience delays,
complications or expenses in integrating and operating these systems, any of
which could have a material adverse effect upon the Company's results of
operations and financial condition.
The Company has evaluated its primary computer software programs and
operating systems used for business processes to identify any as to which
there may be a "Year 2000" issue and is currently taking steps to modify or
replace its systems that are not Year 2000 compliant. While the Company
believes that it will be able to achieve such Year 2000 compliance through a
combination of modification and/or replacement of its existing programs and
systems, no assurance can be given that these efforts will be successful or
that such efforts will be completed on a timely basis. The failure to
successfully complete such implementation on a timely basis and the failure
of third parties who have a significant relationship with the Company to
timely complete Year 2000 changes may cause interruptions in operations which
could have a material adverse effect on the Company's results of operations
and financial condition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Year 2000 Compliance."
PRODUCT LIABILITY; CLAIMS EXPOSURE. The nature of the products
distributed by the Company exposes it to potential liabilities resulting from
the failure of an airframe, aircraft engine or other aircraft part
manufactured with aerospace hardware supplied by the Company. The Company
maintains product liability insurance to protect it from such liabilities;
however, no assurance can be given that claims will not arise in the future
or that such insurance coverage will be adequate. Additionally, there can be
no assurance that insurance coverage can be maintained in the future at an
acceptable cost. Any such liability not covered by insurance, or for which
third party indemnification is not available, could have a material adverse
effect on the Company's results of operations and financial condition. See
"Business-Legal Proceedings."
GOVERNMENT REGULATION. While the Company's business is not currently
regulated, the aerospace hardware it distributes must be accompanied by
documentation which enables its customers to comply with applicable
regulatory requirements. There can be no assurance that new and more
stringent government regulations will not be adopted in the future or that
any such new regulations, if enacted, would not have a material adverse
effect on the Company's results of operations and financial condition.
EMPLOYEE RELATIONS. Although none of the Company's employees is subject
to a collective bargaining agreement, the Company may be subject to future
unionization efforts. The unionization of the Company's workforce could
result in higher employee compensation and working condition demands that
could increase the Company's operating costs or constrain its operating
flexibility. See "Business-Employees."
CERTAIN CHARTER, BYLAW AND STATUTORY ANTI-TAKEOVER PROVISIONS. The
Company's Amended and Restated Certificate of Incorporation (the
"Certificate") and Bylaws provide for a classified Board of Directors,
restrict the ability of stockholders to call special meetings or take
stockholder action by written consent, and contain advance notice
requirements for stockholder proposals and nominations and special voting
requirements for the amendment of the Certificate and Bylaws. These
provisions could delay or hinder the removal of incumbent directors and could
discourage or make more difficult a proposed merger,
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tender offer or proxy contest involving the Company or may otherwise have an
adverse effect on the market price of the common stock of the Company. The
Company also will be subject to provisions of Delaware corporate law that
will restrict the Company from engaging in certain business combinations with
an interested stockholder, unless certain conditions are met or the business
combination is approved by the Company's Board of Directors and/or
stockholders in a prescribed manner. These provisions also could render more
difficult or discourage a merger, tender offer or other similar transaction.
The Certificate authorizes the issuance of 10,000,000 shares of
preferred stock, none of which is currently outstanding. Shares of preferred
stock may be issued on such terms as the Company's Board of Directors may
determine. The rights of the holders of the Company's common stock will be
subject to, and may be adversely affected by, any preferred stock that may be
issued in the future. The issuance of preferred stock, while providing
desirable flexibility in connection with possible acquisitions, financings
and other corporate transactions, could have the effect of discouraging, or
making more difficult, a third party's acquisition of a majority of the
Company's outstanding voting stock. The Company has no plans to issue any
shares of preferred stock.
ITEM 2. PROPERTIES
The Company's executive offices are located in Dallas, Texas. The
Company considers its properties to be well-maintained and adequate for its
current operations. All of the Company's properties are leased.
The following table identifies the principal properties utilized by the
Company.
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SQUARE EXPIRATION
FACILITY DESCRIPTION LOCATION FOOTAGE DATE
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<S> <C> <C> <C>
Corporate Headquarters and Central
Warehouse Dallas, TX 77,554 9-30-1999
Sales Office and Central Warehouse Tulsa, OK 53,588 8-31-2000
Sales Office and Warehouse Deerfield Beach, FL 20,520 12-31-1999
Sales Office and Warehouse Long Beach, CA 19,878 4-30-2000
Warehouse Bridgeton, MO 16,500 2-29-2000
Warehouse Augusta, KS 10,000 12-14-1998
Sales Office and Warehouse Mississauga, Ontario 7,871 4-30-2003
Warehouse Greenville, SC 5,000 8-31-1999
Sales Office and Warehouse Toulouse, France 10,764 6-14-2007
Sales Office and Warehouse Lachine, Quebec 4,268 7-31-1998
Sales Office and Warehouse London, England 3,906 12-31-2010
Sales Office and Warehouse Macon, GA 3,750 3-31-2001
Sales Office Auburn, WA 2,640 4-30-2002
Sales Office Fort Worth, TX 2,250 3-31-2000
Sales Office Sherman Oaks, CA 1,776 10-15-2003
Sales Office Cornwall, NY 1,300 2-2-2000
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Company currently provides no express warranties as to the
performance of the products it distributes pursuant to its conventional
sales. Although the Company's JIT agreements typically provide express
warranties that the products sold thereunder are free from defects, comply
with applicable specifications and are fit for the use intended, the Company
has not, to date, experienced material claims with respect to such
warranties. However, the nature of the Company's business exposes it to
possible
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claims for personal injury or death which may result from a failure of
aerospace hardware distributed by it. The Company maintains what it believes
is adequate product liability insurance to protect it from such claims.
The Company is not presently involved in any material legal proceedings.
From time to time the Company may be named as a defendant in suits for product
defects, breach of implied warranty of merchantability, or other actions
relating to products which it distributes which are manufactured by others. The
Company believes that this exposure is adequately covered by its product
liability insurance and/or third party indemnification.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK
The Company's common stock trades on the New York Stock Exchange ("NYSE")
under the symbol "TSX". The following table sets forth the quarterly high and
low sales prices as reported by the NYSE composite transactions for the third
and fourth quarters for fiscal 1998, which ended subsequent to the Company's
Offering.
<TABLE>
<CAPTION>
FISCAL 1998
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QUARTERS ENDED HIGH LOW
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<S> <C> <C>
June 30, 1998 $17 15/16 $14
September 30, 1998 $16 5/16 $6
</TABLE>
At September 30, 1998, the Company had a total of 17,044,742 shares of
common stock outstanding. As of September 30, 1998, the Company had not issued
any of the 10,000,000 authorized shares of its preferred stock.
DIVIDENDS
It is the Company's current policy to retain earnings to support the
growth of its present operations and to reduce its outstanding debt. Any
future determination as to the payment of cash dividends on the Company's
common stock will be at the discretion of the Company's Board of Directors
and will depend on the Company's financial condition, results of operations
and capital requirements, restrictive covenants in the credit agreement that
limit the payment of dividends in any fiscal year (refer to Note 3 in the
notes to consolidated financial statements) and such other factors as the
Board of Directors deems relevant. No dividends were declared in fiscal 1998
on the Company's common stock.
HOLDERS OF RECORD
The Company had approximately 470 holders of record at December 10, 1998.
SALES OF UNREGISTERED SECURITIES
In Fiscal 1998, the Company did not sell any unregistered securities.
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ITEM 6. SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
(In Thousands, Except Per Share Data)
THE COMPANY AND THE PREDECESSOR(1)
The following table sets forth selected historical financial data for
the Company and the Predecessor. The selected financial data for the
Predecessor and the Company were derived from the financial statements
included elsewhere in this report and from other financial information not
appearing herein.
The selected consolidated financial and operating information set forth
below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the historical
financial statements and notes thereto of the Company and the Predecessor and
other financial information included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
PREDECESSOR(2) COMPANY
------------------------------------------ -----------------------------------------------
PERIOD PERIOD YEAR YEAR
YEAR END ENDED ENDED ENDED ENDED
DECEMBER 31, SEPT. 19, SEPT. 30, SEPT. 30, SEPT. 30,
1994 1995 1996 1996 (3) 1997(4) 1998
--------- ----------- ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ..................... $ 50,725 $ 65,579 $ 55,186 $ 3,555 $140,719 $185,945
Gross profit ................. 14,905 18,816 15,696 1,113 44,326 59,573
Selling, general and
administrative .......... 10,785 12,488 8,897 463 21,048 27,944
Compensation expense of stock
options ................ - - - - - 1,486
Operating income ............. 4,120 6,328 6,799 650 23,278 30,143
Interest expense ............. 2,017 2,251 1,512 184 5,263 5,475
Provision for income
taxes(5) ............... - - - 177 6,559 9,048
Net income ................... 2,200 4,104 5,306 289 11,603 15,783
Earnings per share:
Basic ..................... $ .02 $ 0.73 $ 0.94
Diluted ................... .02 0.70 0.88
Weighted average shares
Outstanding:
Basic ..................... 15,118 15,897 16,741
Diluted ................... 15,118 16,509 18,011
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR(2) COMPANY
------------------------------ ----------------------------------------------
DECEMBER 31, SEPTEMBER 30,
------------------------------ ----------------------------------------------
1994 1995 1996(6) 1997(4) 1998
------------ ------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets ............. $ 50,376 $ 58,962 $ 86,611 $ 99,680 $141,915
Total assets ............... 51,504 59,970 97,216 110,235 155,758
Current liabilities ........ 10,078 33,548 22,308 28,076 27,219
Long-term debt, less
current maturities ... 16,929 - 55,500 49,000 75,000
Stockholders' equity ....... 23,103 25,027 19,408 33,159 53,539
</TABLE>
(1) The financial information for the Company is not comparable to the
financial information of the Predecessor due to the acquisition of Aviall
Aerospace, the impact of applying the purchase method of accounting to the
acquisitions of Predecessor and Aviall Aerospace and the change in tax
status of the Predecessor from a Subchapter S corporation to a C
corporation.
(2) Tri-Star Aerospace, Inc. and subsidiary and affiliate.
Page 11
<PAGE>
(3) Reflects the results of operations for the 11-day period ended September
30, 1996.
(4) Following the acquisitions of the Predecessor and Aviall Aerospace, the
Company changed the fiscal year-end of the Predecessor from December 31 to
September 30.
(5) The Predecessor's stockholders elected to be taxed under the provisions of
Subchapter S of the Internal Revenue Code of 1986, as amended. As a
Subchapter S corporation, the earnings of the Predecessor were taxable to
the individual stockholders, and therefore, the Predecessor did not record
a provision for income taxes.
(6) The amounts shown as of September 30, 1996, reflect the consolidated
balance sheet of the Company following the acquisitions of the Predecessor
and Aviall Aerospace. The acquisitions have been accounted for under the
purchase method of accounting and, accordingly, the consolidated balance
sheet reflects the results of combined operations from the acquisition
date.
AVIALL AEROSPACE
The following table sets forth selected historical financial data for
Aviall Aerospace, a business unit of Aviall Services, Inc. The selected
financial data for Aviall Aerospace were derived from the financial statements
of Aviall Aerospace included elsewhere in this report and other financial
information not appearing herein. The selected financial information set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the historical financial
statements and notes thereto of Aviall Aerospace and other financial information
included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD ENDED
------------------------------ SEPT. 19,
1994 1995 1996(1)
----------- ----------- -------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ..................................... $ 17,229 $ 25,580 $ 23,085
Gross profit ................................. 2,945 5,802 5,035
Selling, general and administrative(2) ....... 5,654 5,884 4,730
Operating income (loss) ...................... (2,709) (82) 305
BALANCE SHEET DATA:
Current assets ............................... $ 6,680 $ 17,022 $ 20,528
Total assets ................................. 8,011 18,345 21,790
Current liabilities .......................... 2,778 5,145 3,195
Long-term debt ............................... - - -
Intercompany debt ............................ 5,233 13,200 18,595
</TABLE>
(1) Aviall Aerospace was acquired by the Company on September 19, 1996, and,
accordingly, the operating results of Aviall Aerospace have been included
in the Company's results of operations since September 20, 1996.
(2) During the periods presented, Aviall Aerospace was not operated or
accounted for as a separate entity. As a result, intercompany allocations
of certain expense items from Aviall Services, Inc., including corporate
overhead, were reflected in the financial statements of Aviall Aerospace.
Page 12
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES THERETO INCLUDED ELSEWHERE
IN THIS FORM 10-K.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-K under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" may constitute
"forward-looking statements" within the meaning of Section 21E of the Securities
and Exchange Act of 1934, as amended. These forward-looking statements can be
identified by the use of predictive, future-tense or forward-looking
terminology, such as "believes", "anticipates", "expects", "estimates", "may",
"will" or similar terms. Forward-looking statements also include projections
concerning any assumptions relating to the forgoing. Certain important factors
may cause actual results to vary materially from these forward-looking
statements accompany such statements and appear under the heading "Risk Factors"
in this Form 10-K. All subsequent written or oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified by these factors.
GENERAL
The Company was formed on August 21, 1996, and began operations on
September 19, 1996, when it acquired the Predecessor and certain net assets of
Aviall Aerospace through simultaneous transactions. The acquisitions were
accounted for under the purchase method of accounting and, accordingly, the
operating results beginning September 20, 1996, reflect combined operations.
Following consummation of the acquisitions, the Company changed the fiscal year
end of the Predecessor from December 31 to September 30.
The Company is both a leading distributor of aerospace hardware and a
leading provider of customized inventory management services to original
equipment manufacturers of aircraft and aircraft components, to commercial
airlines and aircraft maintenance, repair and overhaul facilities. In fiscal
year 1998 approximately 57% of the Company's revenues were derived from
conventional sales and approximately 43% of the Company's revenues were derived
from sales resulting from the Company's JIT services. For the fiscal year 1997,
conventional sales and JIT services represented 59% and 41% of revenues,
respectively.
MATTERS AFFECTING COMPARABILITY
For the years ended September 30, 1998 and 1997, the financial statements
of the Company include the combined results of the Predecessor and Aviall
Aerospace. The period from January 1, 1996, to September 19, 1996, for the
Predecessor represents the stand-alone operations for less than a full year of
operations. Due to the differences in the length of the various periods and the
acquisition of the Predecessor and Aviall Aerospace by the Company, comparison
of periods may not be meaningful and are not necessarily indicative of future
results.
THE COMPANY
The year ended September 30, 1998, compared to the year ended September 30,
1997:
REVENUES - Revenues increased $45.2 million, or 32.1%, to $185.9 million
for the year ended September 30, 1998, compared to $140.7 million in 1997. The
Company's revenues have increased primarily due to an expansion of service
levels under certain existing JIT agreements, new JIT agreements and growth in
customer demand resulting from increased commercial aircraft build rates.
Page 13
<PAGE>
GROSS PROFIT - Gross profit increased $15.3 million, or 34.5%, to $59.6
million for the year ended September 30, 1998, compared to $44.3 million in
1997. The increase in gross profit was primarily due to an increase in revenues,
as discussed above. Gross margin as a percentage of sales increased to 32.0% for
the year ended September 30, 1998, compared to 31.5% for the same period in
1997. The increase in gross margin as a percentage of sales was due mainly to
lower freight cost and more efficient inventory management, coupled with normal
product mix changes.
SELLING, GENERAL AND ADMINISTRATIVE - Selling, general and administrative
expenses increased $6.9 million, or 32.9%, to $27.9 million for the year ended
September 30, 1998, compared to $21.0 million in 1997. The increase was
primarily due to personnel costs related to building the management team and
providing support for initiatives to improve the efficiency and effectiveness of
operations and administration necessary to support the growth in revenues.
COMPENSATION EXPENSE OF STOCK OPTIONS - On December 8, 1997, the Company
issued options to purchase 158,000 shares of the Company's common stock to an
executive at a discount from the fair market value at the date of grant. The
Company recorded additional nonrecurring compensation expense of $1.5 million
during the year ended September 30, 1998, as a result of these options.
INTEREST EXPENSE - Interest expense increased 0.2 million, or 3.8%, to $5.5
million for the year ended September 30, 1998, compared to $5.3 million in 1997.
The increase in interest expense was due to higher debt levels somewhat offset
by reduced interest rates on outstanding borrowings. The increase in debt levels
resulted from increased working capital requirements to support the growth in
revenues.
NET INCOME - Net income increased $4.2 million, or 36.2%, to $15.8 million,
or $0.88 per diluted share, for the year ended September 30, 1998, as compared
to $11.6 million, or $0.70 per diluted share, in 1997. Excluding the $1.5
million nonrecurring pretax charge related to the vesting of certain stock
options, net income increased $5.1 million, or 44.0%, to $16.7 million, or $0.93
per diluted share compared to 1997. The increase in net income was primarily due
to an increase in revenues and an increase in gross margin.
THE COMPANY AND THE PREDECESSOR
The Company's year ended September 30, 1997, compared to the Predecessor's
period beginning January 1, 1996, and ended September 19, 1996:
REVENUES - Revenues increased $85.5 million, or 154.9%, to $140.7 million
for the year ended September 30, 1997, compared to $55.2 million for the
Predecessor's period ended September 19, 1996. The increase was primarily due to
the acquisition of Aviall Aerospace, the 1997 amount representing a full year of
operations and growth in customer demand resulting from increased commercial
aircraft build rates, as well as the expansion of SKUs sold under JIT agreements
with six of the Company's major customers resulting from their increased
acceptance of the Company's JIT services.
GROSS PROFIT - Gross profit increased $28.6 million, or 182.2%, to $44.3
million for the year ended September 30, 1997, compared to $15.7 million for the
Predecessor's period ended September 19, 1996. The increase was due primarily to
the increase in revenues, as discussed above. In addition, the gross margin
increased 3.1% to 31.5% for the year ended September 30, 1997, compared to 28.4%
for the Predecessor's period ended September 19, 1996. The increase was
primarily a result of a lower provision for excess and obsolete inventory during
1997 versus 1996, due to the Company's ability to better manage inventory
turnover and the general economic upturn in the aerospace industry, as well as a
retroactive price increase collected from a major JIT customer in December 1996,
and a general improvement in pricing.
Page 14
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE - Selling, general and administrative
expenses increased $12.1 million, or 136.0%, to $21.0 million for the year ended
September 30, 1997, compared to $8.9 million for the Predecessor's period ended
September 19, 1996. The increase was primarily due to the acquisition of Aviall
Aerospace, the 1997 amount representing a full year of operations and growth in
revenues. Selling, general and administrative expenses as a percentage of
revenues decreased 1.1% to 15.0% for the year ended September 30, 1997, compared
to 16.1% for the period ended September 19, 1996, primarily due to overhead
efficiencies resulting from the acquisitions of the Predecessor and Aviall
Aerospace.
INTEREST EXPENSES - Interest expense increased $3.8 million, or 253.3%, to
$5.3 million for the year ended September 30, 1997, compared to $1.5 million for
the Predecessor's period ended September 19, 1996. The increase was primarily
due to the effect of the financing required to complete the acquisitions of the
Predecessor and Aviall Aerospace and the 1997 amount representing a full year of
operations. See "Liquidity and Capital Resources."
PROVISION FOR INCOME TAXES -The provision for income taxes for the year
ended September 30, 1997, increased $6.6 million over the Predecessor's period
ended September 19, 1996. This increase was due to the results of operations for
the period ended September 19, 1996, including only the operations of the
Predecessor, which elected to be treated under the provisions of Subchapter S of
the Internal Revenue Code of 1986, as amended. As a Subchapter S corporation,
the earnings of the Predecessor were taxable to the stockholders of the
Predecessor and, therefore, the Predecessor did not record a provision for
income taxes. During 1997, the Company was subject to corporate income taxes.
NET INCOME - Net income increased $6.3 million, or 118.9%, to $11.6 million
for the year ended September 30, 1997, compared to $5.3 million for the
Predecessor's period ended September 19, 1996. The increase was primarily due to
the acquisition of Aviall Aerospace, the 1997 amount representing a full year of
operations and the growth of revenues, offset by the effects of the Company
being subject to income taxes which were not applicable to the Predecessor as a
Subchapter S corporation.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements consist primarily of working capital
needs, capital expenditures and scheduled payments of principal and interest on
its indebtedness under the Credit Agreement (defined below). The Company funds
its liquidity requirements through cash flows from operations and a revolving
credit facility under the Credit Agreement (defined below). The Company's
working capital increased $43.1 million, or 60.2%, to $114.7 million as of
September 30, 1998, compared to $71.6 million as of September 30, 1997. The
Company's working capital requirements have increased primarily as a result of
higher accounts receivable and inventory levels needed to support its growth in
revenues.
In connection with the acquisitions of the Predecessor and Aviall
Aerospace, on September 19, 1996, the Company entered into a credit agreement
with a syndicate of lenders (as amended, the "Credit Agreement"). Simultaneously
with the execution of the Credit Agreement, the Company executed term notes (the
"Term Notes") in the aggregate amount of $50.0 million. The Term Notes require
quarterly interest payments based on a specified "Base Rate" or the Eurodollar
rate plus a spread and annual principal payments of $500,000 due September 1997
through 2002 with the remaining principal balance due September 30, 2003.
The Company has a $30.0 million revolving credit facility (the "Revolver").
As of September 30, 1998, the Company had borrowings of $26.5 million
outstanding under the Revolver. Interest on borrowings under the Revolver is
payable quarterly based upon the Base Rate or the Eurodollar rate plus a spread.
The commitments under the Revolver must be reduced by $15.0 million in September
2000 and 2001.
Page 15
<PAGE>
The Term Notes and Revolver provide for borrowings of up to $80.0 million
of which the Company had total borrowings of $75.5 million at November 17, 1998.
The Company's debt is collateralized by substantially all the assets of the
Company and its subsidiaries and is subject to certain financial covenants.
For the year ended September 30, 1998, net cash used in operating
activities was $22.4 million. The cash flows from operations for fiscal 1998,
consisted primarily of net income of $15.8 million and noncash charges of $4.3
million, less changes in working capital items of $42.5 million. The principal
components of the change in working capital were increases in inventories of
$28.2 million and increases in accounts receivable of $11.1 million necessary to
support the Company's sales growth.
For the year ended September 30, 1997, net cash provided by operating
activities was $9.6 million. The cash flows from operations for fiscal 1997
consisted primarily of net income of $11.6 million and noncash charges of $2.5
million, less changes in working capital items of $4.5 million. The principal
components of the change in working capital were increases in inventories of
$2.9 million and increases in accounts receivable of $8.4 million offset by an
increase in accounts payable of $5.5 million. These increases were a result of
the Company's sales growth.
The Company's capital expenditures increased to $3.2 million for the year
ended September 30, 1998, from $1.0 million in 1997. This increase in capital
expenditures was a result of computer system expenditures and costs associated
with expansion of the corporate headquarters to consolidate the Company's
corporate functions in Dallas, Texas. The Company's net cash provided by
financing activities in fiscal 1998 was $29.1 million, consisting principally of
borrowings from the Revolver. The Company's net cash used in financing
activities in fiscal 1997 was $5.4 million, consisting primarily of payments
made on the Revolver.
The Company expects to spend approximately $3.8 million for capital
expenditures in fiscal 1999. These capital expenditures will relate principally
to computer system (both software and hardware) upgrades, conversion and
implementation costs.
The Company believes that internally generated cash flow and amounts that
may be available under the Revolver will provide adequate funds to meet its
working capital needs, planned capital expenditures and debt service
obligations.
YEAR 2000 COMPLIANCE
The year 2000 issue is a result of computer programs being written with two
digits (rather than four) to define the applicable year, resulting in incorrect
calculations for the year 2000 and beyond.
The Company has evaluated all of its primary computer software programs and
operating systems used for business processes to identify year 2000 issues.
Based upon this review, the Company has determined that its primary legacy
systems are not year 2000 compliant. These legacy systems currently handle the
following functions: purchasing; sales order entry; warehouse inventory
management and distribution; invoicing and accounts receivable; and accounts
payable.
The Company is currently developing a plan to evaluate year 2000 compliance
for all non-information technology systems such as telephone systems, fax
machines, security systems, etc. The Company does not have any imbedded
microprocessors that will affect its internal systems. This evaluation and
remediation of noncompliant, noninformation technology systems should be
completed by mid-year 1999.
Page 16
<PAGE>
In 1998, the Company made the decision to replace its year 2000
noncompliant legacy systems and install two new replacement systems. The first
of these new systems, a distribution system, will perform the functions of
inventory management and distribution as well as sales order entry and
purchasing. The second replacement system is a financial software package that
will perform the functions of invoicing and accounts receivable, accounts
payable and general ledger. Both systems are currently in the implementation
phase and should be fully installed by March of 1999, but in no event will the
systems be installed any later than mid-year 1999.
The majority of the cost incurred by the Company to become year 2000
compliant is related to the purchase and installation of the two new systems
described above. Through the end of fiscal year 1998, the Company spent an
estimated $.7 million on development and implementation of these systems. The
remaining system implementation costs will be incurred in fiscal year 1999 and
are estimated at approximately $2.2 million. Approximately 60% of the Company's
fiscal year 1999 capital expenditure budget will be spent to complete
implementation of the new systems. There are no significant information systems
projects pending as a result of year 2000 compliance work. No independent
verification of year 2000 risk or cost estimates has been performed by outside
third parties.
The Company believes that it has identified all internal year 2000 issues
and has developed a plan to ensure that all systems will be compliant before the
year 2000. However, the Company cannot ensure that all third parties significant
to the Company's operations will be compliant in time. The Company believes that
the most likely worst-case scenario would be the effect on the Company of
noncompliance by third-party vendors or customers which do not become year 2000
compliant and have a significant business relationship with the Company. Major
noncompliant customers or vendors could have an adverse impact on the Company in
the areas of revenue collection, disbursements and communications as well as the
scheduling and delivery of inventory. To mitigate these problems, the Company
intends to develop a plan to survey all significant third parties about
readiness efforts. In addition, a review of all electronic data interchange
("EDI") linkages and data transmission between the Company and significant third
parties will be performed. Third-party surveys and data transmission tests
should be completed by mid-year 1999. Currently, the Company has no contingency
plan for the most likely worst-case scenario. If it appears that any significant
third party will not be compliant, the Company will develop contingency plans,
if possible, to mitigate the impact of noncompliance.
EFFECTS OF INFLATION
The Company does not believe that inflation has had a significant impact on
its results of operations in recent years. However, there can be no assurance
that the Company's business will not be affected by inflation in the future.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 132 ("SFAS 132") "Employers'
Disclosures about Pensions and Other Post-retirement Benefits". SFAS 132 revises
and improves the effectiveness of current note disclosure requirements for
employers' pensions and other retiree benefits by requiring additional
information to facilitate financial analysis and eliminating certain disclosures
which are no longer useful. SFAS 132 does not address recognition or measurement
issues. The Company will adopt SFAS 132 in fiscal 1999. Adoption of SFAS 132
will not have a significant impact on the Company.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133 ("SFAS 133") "Accounting for Derivative Instruments and Hedging
Activities". SFAS 133 establishes accounting and reporting standards requiring
that every derivative instrument be recorded in the balance sheet as either an
asset or liability at its fair value. The Company will adopt SFAS 133 in fiscal
2000.
Page 17
<PAGE>
The Company has determined that the adoption of this statement will have no
effect on its financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
Market risks relating to the Company's operations result primarily from
changes in interest rates on outstanding borrowings under the Company's Credit
Agreement. Foreign currency and commodity risks have each been assessed by the
Company as immaterial. The Company has not engaged in hedging activity to limit
its interest rate exposures. Additionally, the Company does not use financial
instruments for trading purposes and is not a party to any leveraged
derivatives.
INTEREST RATE RISKS
The following table provides information about the Company's financial
instruments that are sensitive to changes in interest rates. The table presents
the Company's debt obligations, principal cash flows and related
weighted-average interest rates by expected maturity dates. As interest rates
are variable, the stated values of market-sensitive instruments are equivalent
to fair value.
INTEREST RATE SENSITIVITY
PRINCIPAL AMOUNT BY EXPECTED MATURITY
(dollars in millions)
<TABLE>
<CAPTION>
FOR FISCAL YEAR ENDED SEPTEMBER 30,
-------------------------------------
1999 2000 2001 2002 2003
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Bank Term Note, matures September 30, 2003, interest payable
quarterly at the Eurodollar rate plus a spread of 2.0%
- scheduled principal payments ............................ $ 0.5 $ 0.5 $ 0.5 $ 0.5 $ 47.0
- variable rate fixed every six months in November
and May .................................................... 7.75% 7.75% 7.75% 7.75% 7.75%
Bank Revolver of $30 million, matures September 19, 2001,
interest payable quarterly, principally at the Eurodollar
rate plus a spread of 1.0% with .5% on unused portion of
Revolver
- scheduled principal payments ............................ $ - $ 15.0 $ 11.5 $ - $ -
- variable rate fixed each month (averaged) ............... 7.81% 7.81% 7.81% N/A N/A
</TABLE>
Page 18
<PAGE>
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
TRISTAR AEROSPACE CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................................................. $8,202 $4,764
Accounts receivable, net of allowances of $1,072 and $549 (Note 2)............... 34,479 24,305
Inventories, net of reserves of $4,921 and $2,332 (Note 2)....................... 94,980 69,085
Prepaid expenses................................................................. 970 149
Deferred tax asset (Note 4)..................................................... 3,284 1,377
-------- --------
Total current assets..................................................... 141,915 99,680
PROPERTY AND EQUIPMENT, net of depreciation of $1,413 and $483...................... 3,932 1,623
INTANGIBLES AND OTHER ASSETS, net (Note 2).......................................... 9,911 8,932
-------- --------
$155,758 $110,235
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt............................................. $500 $500
Accounts payable................................................................. 21,272 18,308
Income taxes payable............................................................. 645 1,573
Accrued liabilities.............................................................. 4,802 7,695
-------- --------
Total current liabilities................................................ 27,219 28,076
-------- --------
LONG-TERM DEBT, less current maturities............................................. 75,000 49,000
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY, per accompanying statements:
Preferred stock, $.01 par value, 10,000,000 shares authorized.................... - -
Common stock, $.01 par value, 40,000,000 shares authorized....................... 170 166
Additional paid-in capital....................................................... 25,694 21,101
Retained earnings................................................................ 27,675 11,892
-------- --------
Total stockholders' equity............................................... 53,539 33,159
-------- --------
$155,758 $110,235
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Page 19
<PAGE>
TRISTAR AEROSPACE CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Product sales ............................. $ 184,512 $ 139,260 $ 3,488
Inventory management service fees ......... 1,433 1,459 67
--------- --------- ---------
185,945 140,719 3,555
COST OF GOODS SOLD 126,372 96,393 2,442
--------- --------- ---------
Gross profit .............................. 59,573 44,326 1,113
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES ................................. 27,944 21,048 463
COMPENSATION EXPENSE OF STOCK OPTIONS ........ 1,486 - -
--------- --------- ---------
Operating income .......................... 30,143 23,278 650
INTEREST AND OTHER:
Interest expense .......................... 5,475 5,263 184
Other income .............................. (163) (147) -
--------- --------- ---------
INCOME BEFORE TAXES .......................... 24,831 18,162 466
PROVISION FOR INCOME TAXES ................... 9,048 6,559 177
--------- --------- ---------
NET INCOME $ 15,783 $ 11,603 $ 289
--------- --------- ---------
--------- --------- ---------
EARNINGS PER SHARE:
Basic .................................... $ 0.94 $ 0.73 $ 0.02
--------- --------- ---------
--------- --------- ---------
Diluted .................................. $ 0.88 $ 0.70 $ 0.02
--------- --------- ---------
--------- --------- ---------
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic .................................... 16,741 15,897 15,118
--------- --------- ---------
--------- --------- ---------
Diluted .................................. 18,011 16,509 15,118
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Page 20
<PAGE>
TRISTAR AEROSPACE CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
---------------------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
---------- ------------ ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C>
INCEPTION, August 21, 1996 ............... - $ - $ - $ - $ -
Initial contribution of capital .......... 14,328 143 20,108 - 20,251
Equity transaction expenses .............. - - (1,132) - (1,132)
Stock issued for services ................ 790 8 (8) - -
Net income ............................... - - - 289 289
-------- -------- -------- -------- --------
BALANCE, September 30, 1996 .............. 15,118 151 18,968 289 19,408
Issuance of stock ........................ 797 8 1,160 - 1,168
Conversion of note payable ............... 682 7 993 - 1,000
Purchase of stock ........................ (14) - (20) - (20)
Net income ............................... - - - 11,603 11,603
-------- -------- -------- -------- --------
BALANCE, September 30, 1997 .............. 16,583 166 21,101 11,892 33,159
Issuance of stock ........................ 462 4 1,032 - 1,036
Compensation expenses for stock
options ................................ - - 1,486 - 1,486
Stock option income tax benefits ......... - - 2,075 - 2,075
Net income ............................... - - - 15,783 15,783
-------- -------- -------- -------- --------
BALANCE, September 30, 1998 .............. 17,045 $ 170 $ 25,694 $ 27,675 $ 53,539
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Page 21
<PAGE>
TRISTAR AEROSPACE CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1996
------------ ------------ ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ......................................................... $ 15,783 $ 11,603 $ 289
Adjustments to reconcile net income to net cash provided by
(used in) operating activities, net of acquisitions:
Depreciation and amortization ................................... 1,505 1,031 27
Provision for doubtful accounts ................................. 892 549 -
Provision for excess and obsolete inventories ................... 2,589 2,338 -
Deferred income taxes ........................................... (1,907) (1,377) -
Compensation expense of stock options ........................... 1,486 - -
Changes in operating assets and liabilities:
Increase in accounts receivable ................................. (11,066) (8,384) (1,375)
Increase in inventories ......................................... (28,484) (2,902) (330)
(Increase) decrease in prepaid expenses/other ................... (2,377) (60) 169
Increase (decrease) in accounts payable ......................... 2,964 5,489 (304)
Increase (decrease) in income taxes payable ..................... (928) 1,395 177
Decrease in accrued liabilities ................................. (2,893) (116) (872)
-------- -------- --------
Net cash provided by (used in) operating activities ........ (22,436) 9,566 (2,219)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................................ (3,237) (972) (3)
Acquisitions, net of cash acquired .............................. - - (70,066)
-------- -------- --------
Net cash used in investing activities ......................... (3,237) (972) (70,069)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of stock ............................................... 1,036 1,168 20,251
Stock option income tax benefits ................................ 2,075 - -
Equity transaction expenses ..................................... - - (1,132)
Loan acquisition costs .......................................... - - (2,309)
Proceeds from initial borrowings ................................ - - 55,000
Borrowings on revolving facility ................................ 27,000 11,700 2,000
Payments on revolving facility .................................. (500) (17,700) -
Payments on term note borrowings ................................ (500) (500) -
Purchase of stock - (20) -
-------- -------- --------
Net cash provided by (used in) financing activities ........... 29,111 (5,352) 73,810
-------- -------- --------
NET INCREASE IN CASH ............................................... 3,438 3,242 1,522
CASH, beginning of period .......................................... 4,764 1,522 -
-------- -------- --------
CASH, end of period ................................................ $ 8,202 $ 4,764 $ 1,522
-------- -------- --------
-------- -------- --------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest .......................................... $ 5,160 $ 4,385 $ 174
Cash paid for income taxes ...................................... 8,710 6,539 -
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Page 22
<PAGE>
TRISTAR AEROSPACE CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS:
TriStar Aerospace Co. (formerly Maple Leaf Aerospace, Inc.) and
subsidiaries (the "Company") is both a leading distributor of aerospace
fasteners, fastening systems and related hardware and a leading provider of
customized inventory management services ("JIT services"). Both lines of
business serve original equipment manufacturers ("OEMs"), commercial airlines
and other aerospace companies.
The Company was formed on August 21, 1996, and began operations on
September 19, 1996, when it acquired Tri-Star Aerospace, Inc. (the
"Predecessor") and certain net assets of the Aviall Aerospace business unit of
Aviall Services, Inc., and Aviall (Canada) Ltd. (together "Aviall Aerospace").
The Company acquired the outstanding stock of the Predecessor for $31.8 million,
including together $3 million of contingent consideration and assumption of
$20.6 million of Predecessor debt. The contingent consideration was placed in
escrow and is payable to the former shareholders of Predecessor on September 19,
1999, to the extent that such amount is not due the Company to satisfy certain
indemnifications given the Company by the former Predecessor shareholders (see
Note 5). Simultaneous with the acquisition of Predecessor, the Company acquired
the assets of Aviall Aerospace for cash of $18.6 million and assumption of $3.2
million of accounts payable.
The acquisitions have been accounted for under the purchase method of
accounting and, accordingly, the purchase prices have been allocated to assets
acquired and liabilities assumed based on the fair-market values at the date of
acquisition. The excess of purchase price over the fair-market values of the net
assets acquired has been recorded as goodwill.
On May 5, 1998, the Company completed an initial public offering (the
"Offering") which initially involved the sale of 13,276,858 shares of the
Company's common stock. In addition, 224,776 shares were sold by certain
shareholders pursuant to an over-allotment option in connection with the
Offering. The price offered to the public was $16.00 per share. The net
proceeds of the Offering went to the selling stockholders.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying consolidated financial statements are prepared in
accordance with generally accepted accounting principles and include the
accounts of the Company and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
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.
Page 23
<PAGE>
ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1998 1997
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Accounts receivable ....................................... $35,551 $24,854
Less--allowance for doubtful accounts ..................... 1,072 549
--------- ----------
$34,479 $24,305
--------- ----------
--------- ----------
</TABLE>
The Company serves the aerospace industry and grants unsecured credit to
its customers. Management's periodic evaluation of the adequacy of the allowance
for doubtful accounts is based on management's estimates of the creditworthiness
of its customers, the Company's past loss experience, known and inherent risks
in the customer base, adverse situations that may affect the customer's ability
to repay and current economic conditions. These estimates are reviewed
periodically and as adjustments become necessary, they are reported in earnings
in the periods in which they become known.
INVENTORIES
Inventories are stated at the lower of cost (specific identification
method) or market and consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1998 1997
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Inventories ............................................... $99,901 $71,417
Less--allowance for excess and obsolete inventories ....... 4,921 2,332
------- -------
$94,980 $69,085
------- -------
------- -------
</TABLE>
Adjustments to the allowance for excess and obsolete inventories consist of
the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1998 1997
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Balance, beginning of period .............................. $ 2,332 $ -
Provision for excess and obsolete inventories ............. 2,589 2,338
Inventories written off ................................... - (6)
------- -------
Balance, end of period .................................... $ 4,921 $ 2,332
------- -------
------- -------
</TABLE>
The Company provides a reserve for potentially excess and obsolete
inventory. This reserve is based on management's estimates of future sales
projections in the aerospace industry and its place in the industry, sales
price, available customers and age of the inventory. This reserve is reviewed
periodically and as adjustments become necessary, they are reported in earnings
in the periods in which they become known.
Page 24
<PAGE>
PROPERTIES AND DEPRECIATION
Property and equipment are stated at cost and consist of leasehold
improvements, computer hardware and software, furniture and fixtures, machinery,
equipment and automobiles. Maintenance, repairs and betterments, including
replacement of minor items of physical properties, are charged to expense; major
additions to physical properties are capitalized. Property and equipment are
depreciated using the straight-line method over the estimated useful lives
ranging from three to 15 years.
INTANGIBLES AND OTHER ASSETS
Intangibles and other assets are stated at cost net of amortization
computed on the straight-line and effective interest methods. Components and
useful lives of intangibles and other assets are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Goodwill (30 years) ....................................... $ 7,111 $ 7,111
Loan acquisition costs (7 years) .......................... 2,309 2,309
Other ..................................................... 1,643 87
------- -------
11,063 9,507
Less accumulated amortization ............................. 1,152 575
------- -------
$ 9,911 $ 8,932
------- -------
------- -------
</TABLE>
SEGMENT INFORMATION
The Company's revenues by type are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------
1998 1997
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Domestic revenues ......................................... $161,975 $121,480
Export revenues ........................................... 21,207 12,098
Foreign operations revenues ............................... 2,763 7,141
-------- --------
Total revenues ............................................ $185,945 $140,719
-------- --------
-------- --------
</TABLE>
EARNINGS PER SHARE
The Company adopted Statements of Financial Accounting Standards No. 128
("SFAS 128") "Earnings Per Share," effective December 31, 1997, and all earnings
per share amounts disclosed herein have been calculated under the provisions of
SFAS 128. Basic earnings per common share were computed by dividing net income
by the weighted average number of shares of common stock outstanding during the
reporting period.
Page 25
<PAGE>
A reconciliation of net income and weighted average shares used in computing
basic and diluted earnings per share is as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1996
------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Basic earnings per share:
Net income .......................................... $15,783 $11,603 $ 289
------- ------- -------
------- ------- -------
Weighted average common shares ...................... 16,741 15,897 15,118
------- ------- -------
------- ------- -------
Basic earnings per common share ..................... $ 0.94 $ 0.73 $ 0.02
------- ------- -------
------- ------- -------
Diluted earnings per share:
Net income ...................................... $15,783 $11,603 $ 289
------- ------- -------
------- ------- -------
Weighted average common shares ...................... 16,741 15,897 15,118
Dilutive effect of stock options .................... 1,270 612 -
------- ------- -------
Weighted average common shares,
assuming dilutive effect of stock options ....... 18,011 16,509 15,118
------- ------- -------
------- ------- -------
Diluted earnings per common share ................... $ 0.88 $ 0.70 $ 0.02
------- ------- -------
------- ------- -------
</TABLE>
Options to purchase 137,820 shares of common stock at an exercise price of
$12.75 were outstanding during the period ended September 30, 1998. These
options were not included in the computation of diluted earnings per share
because inclusion of such stock options in such computation would be
antidilutive.
On February 11, 1998, the Company declared a 158-for-one stock split. The
earnings per share and share amounts in the consolidated financial settlements
and the notes thereto have been restated to reflect the stock split.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 132 ("SFAS 132"),
"Employers' Disclosures about Pensions and Other Post-retirement Benefits".
SFAS 132 revises and improves the effectiveness of current note disclosure
requirements for employers' pensions and other retiree benefits by requiring
additional information to facilitate financial analysis and eliminating
certain disclosures which are no longer useful. SFAS 132 does not address
recognition or measurement issues. The Company will adopt SFAS 132 in fiscal
year 1999. Adoption of SFAS 132 will not have a significant impact on the
Company.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
Activities". SFAS 133 establishes accounting and reporting standards
requiring that every derivative instrument be recorded in the balance sheet as
either an asset or liability at its fair value. The Company will adopt SFAS 133
in fiscal 2000. The Company has determined that the adoption of SFAS 133
will have no effect on its financial statements.
Page 26
<PAGE>
3. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------------
1998 1997
----------- -----------
<S> <C> <C>
(IN THOUSANDS)
$30 million revolving credit facility, matures September 19, 2001, interest
payable quarterly, principally at the Eurodollar rate plus a spread (7.5625%
and 10.00% at September 30, 1998 and 1997, respectively), mandatory principal
reductions of $15 million in September 2000 and 2001 ............................ $26,500 $ -
Bank term note, matures September 30, 2003, interest payable quarterly at the
Eurodollar rate plus a spread (7.75% and 9.00% at September 30, 1998 and
1997, respectively), principal payments of $0.5 million due annually September
1999 through 2002 with the balance due at maturity .............................. 49,000 49,500
------- -------
75,500 49,500
Current maturities of long-term debt ............................................... 500 500
------- -------
$75,000 $49,000
------- -------
------- -------
</TABLE>
Future maturities of long-term debt at September 30, 1998 were as follows
(in thousands):
<TABLE>
<S> <C>
1999..................................................... $500
2000..................................................... 15,500
2001..................................................... 12,000
2002..................................................... 500
2003..................................................... 47,000
-------
$75,500
-------
-------
</TABLE>
The Company's revolving credit facility (the "Revolver") and term note
provide for borrowings up to $80 million under the Company's credit agreement
which it entered into on September 19, 1996, with a syndicate of lenders (as
amended, the "Credit Agreement"). All of the Company's debt is borrowed by an
operating subsidiary and is collateralized by substantially all assets of the
operating subsidiaries of the Company. The debt is subject to certain financial
covenants and restricts dividends or loans by the operating subsidiaries to the
holding company. At September 30, 1998, the Company was in compliance with the
covenants.
During 1997, the majority shareholder converted a $1 million
noninterest-bearing note into 682,244 shares of Company stock. The conversion
was treated as a non-cash transaction for purposes of the consolidated statement
of cash flows.
During 1998, the Credit Agreement was amended to adjust certain
financial covenants and reduce the interest rate spreads applicable to each
of the facilities that vary, depending on the Company's leverage ratio.
Based on the borrowing rates currently available to the Company for bank
loans with similar terms and average maturities, the fair value of the long-term
debt approximates the carrying value.
Page 27
<PAGE>
4. INCOME TAXES:
The provision for income taxes includes the following components for the
periods ended September 30:
<TABLE>
<CAPTION>
1998 1997 1996
-------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Current ....................................................... $10,955 $ 7,936 $ 177
Deferred ...................................................... (1,907) (1,377) -
------- ------- -------
.............................................................. $ 9,048 $ 6,559 $ 177
------- ------- -------
------- ------- -------
</TABLE>
The provision for income taxes was at an effective rate of 36% for 1998 and
1997, and 38% for 1996. The following reconciles the provision for income taxes
included in the consolidated statements of income with the provision which would
result from the application of the statutory federal tax rate to pretax federal
income rate:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Expected provision at federal statutory rate of 35% for
1998 and 1997, and 34% for 1996 ........................... $ 8,691 $ 6,357 $ 159
Increase (decrease) resulting from:
State income taxes, net of federal income tax benefit ........ 804 726 18
Issuance of stock as consideration ........................... - (452) -
Other ........................................................ (447) (72) -
------- ------- -------
Provision for income taxes ................................... $ 9,048 $ 6,559 $ 177
------- ------- -------
------- ------- -------
</TABLE>
The Company's net deferred tax asset was as follows at September 30, 1998
and 1997:
<TABLE>
<CAPTION>
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Inventories ......................................... $2,405 $1,050
Stock options ....................................... 361 -
Accounts receivable valuation reserves .............. 215 182
Accrued professional fees ........................... - 76
Other ............................................... 303 69
------ ------
Net deferred tax asset .............................. $3,284 $1,377
------ ------
------ ------
</TABLE>
Page 28
<PAGE>
5. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES
The Company leases office and warehouse facilities and certain computer
equipment under operating leases expiring from December 1998 to August 2008.
Future minimum annual lease commitments at September 30, 1998, are as follows
(in thousands):
<TABLE>
<S> <C>
Fiscal 1999................................................... $813
Fiscal 2000................................................... 385
Fiscal 2001................................................... 146
Fiscal 2002................................................... 114
Fiscal 2003 .................................................. 42
Thereafter ................................................... 106
------
Total ........................................................ $1,606
------
------
</TABLE>
SALES AND PURCHASE CONTRACTS
The Company is a party to various sales contracts with airlines that
require the Company to provide certain parts at fixed prices. The contracts
typically have a three to five year life. Generally, vendor purchases are made
under distributorship agreements which are cancelable upon 30-days' notice.
EMPLOYEE BENEFIT PLAN
The Company sponsors a defined contribution profit sharing and 401(k)
savings plan which covers all employees with at least three months of service.
The Company matches 50 percent of employee contributions to the extent that the
employee's contributions do not exceed five percent of defined compensation.
Additional contributions may be made to the plan at the discretion of the Board
of Directors of the Company (the "Board").
LITIGATION
The Company has been a defendant in two separate lawsuits for purchase of a
former Predecessor employee's stock in Predecessor and the rescission of a
certificate for stock in Predecessor. As discussed in Note 1, $3 million of the
purchase price of Predecessor was placed in escrow as indemnification to the
Company by the former shareholders of Predecessor to satisfy the liability, if
any, that the Company must pay. During the fiscal year ended September 30, 1998,
one of the two original lawsuits was discharged. While the amount claimed in the
remaining lawsuit is significant in the aggregate, management believes that the
Company's ultimate liability in excess of the indemnification, if any, will not
be material to the consolidated financial position or results of operations of
the Company.
Various other lawsuits, claims and proceedings have been or may be
instituted or asserted against the Company. While the amounts claimed may be
substantial, the ultimate liability cannot now be determined because of the
considerable uncertainties that exist. Therefore, it is possible that results of
operations or liquidity in a particular period could be materially affected by
certain contingencies. However, based on facts currently available, management
believes it is remote that the matters pending or asserted will have a
materially adverse effect on the financial position of the Company.
Page 29
<PAGE>
6. SALES TO SIGNIFICANT CUSTOMERS:
During the year ended September 30, 1998, the Company had two customers
that accounted for 23.2 percent and 14.5 percent of consolidated revenues,
respectively. During the year ended September 30, 1997, the Company had two
customers that accounted for 24.8 percent and 11.7 percent of consolidated
revenues, respectively.
7. RELATED PARTY TRANSACTIONS:
In conjunction with the acquisitions, an officer of the Company was issued
790,000 shares of the Company's common stock as consideration for services
rendered in connection with securing the equity to complete the transaction. The
stock issuance is recorded as a reduction in additional paid-in capital for the
par value of the shares issued in the consolidated statements of stockholders'
equity. This transaction was accounted for as a noncash financing activity and,
therefore, is not included in the consolidated statement of cash flows.
As compensation for services rendered in coordinating, structuring and
consummating the simultaneous acquisitions of the Predecessor and Aviall
Aerospace, the Company agreed to pay an officer a fee of $2,560,000. The fee was
accrued as part of the purchase price accounting and was included in the
allocation of costs to the fair-market-value of assets acquired at September 19,
1996. As of September 30, 1997, the Company had paid $51,370. The remaining
balance was paid during fiscal 1998.
8. EMPLOYEE STOCK PLANS:
STOCK PURCHASE PLAN
The Company adopted an employee stock purchase plan which reserved 790,000
shares of common stock for issuance to any employee, officer or director at the
discretion of the Board. During the year ended September 30, 1997, 660,598
shares were issued under the plan at prices that approximated the
fair-market-value of the Company's stock on the date of commitment to issuance.
1996 STOCK OPTION PLAN
The Company adopted the 1996 Stock Option Plan (the "1996 Plan") that
allowed for the issuance of 3,950,000 options to key employees of the Company.
The options become available in equal annual portions through fiscal 2001 based
on the attainment of certain financial performance measures. Once available, 25
percent become vested immediately, and the remaining options were to vest
ratably over the following three years. At the Offering date, options not yet
vested became vested, generally at 80% of the original options granted with the
remaining 20% of unvested options being forfeited. Under the 1996 Plan, options
were to be granted with an exercise price equal to or greater than the
fair-market-value of the Company's common stock at the date of grant. In
December 1997, 158,000 options were issued to one employee at a discount from
the fair value at the date of grant. Of these shares, 20% became immediately
exercisable and 80% of the remaining options become exercisable upon the
completion of the Offering. The Company has recorded compensation of $1,486,464
in the year ended September 30, 1998, for the discount from the fair value for
the shares exercisable at the grant dates. All options expire in September 2006.
The Company applies fixed plan accounting to the 1996 Plan, as both the number
of options and the exercise price of the options are known at the grant date. A
summary of the 1996 Plan activity follows:
Page 30
<PAGE>
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES UNDER PRICE PER
OPTION OPTION
------------- -----------
<S> <C> <C>
Outstanding, August 21, 1996 ............................................................ $ - $ -
Granted, exercise price equal to market price ........................................ 2,214,845 1.47
Granted, exercise price exceeds market price ......................................... 361,820 7.60
-----------
Outstanding, September 30, 1996 ......................................................... 2,576,665 2.33
Granted, exercise price equal to market price ........................................ 571,960 1.71
Granted, exercise price exceeds market price ......................................... 500,545 7.60
-----------
Outstanding, September 30, 1997 ......................................................... 3,649,170 2.96
Granted, market price exceeds exercise price ......................................... 158,000 3.80
Forfeited ............................................................................ (644,250) 3.19
Exercised ............................................................................ (461,536)
----------- 2.24
Outstanding, September 30, 1998 ......................................................... 2,701,384 3.07
-----------
-----------
</TABLE>
The following is a summary of stock options outstanding as of September 30,
1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------- -------------------------------
OPTION REMAINING EXERCISE
OPTIONS EXERCISE CONTRACTUAL OPTIONS PRICE PER
OUTSTANDING PRICE LIFE EXERCISABLE SHARE
------------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
1,952,029 $1.47 8.00 1,952,029 $1.47
93,102 2.91 8.00 93,102 2.91
60,825 3.37 8.00 60,825 3.37
82,720 3.80 8.00 82,720 3.80
99,248 5.09 8.00 99,248 5.09
137,820 7.34 8.00 137,820 7.34
137,820 9.93 8.00 137,820 9.93
137,820 12.75 8.00 137,820 12.75
---------- ---- ---------
2,701,384 8.00 2,701,384
---------- ---- ---------
---------- ---- ---------
</TABLE>
The Company applies the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation". Accordingly, no compensation cost has been recognized for the
1996 Plan. However, pursuant to the requirements of SFAS 123, the following
disclosures are presented to reflect the Company's pro forma net income for the
year ended September 30, 1998 and 1997, and the period ended September 30, 1996,
as if the fair value method of accounting prescribed by SFAS 123 had been used.
Had compensation cost for the Company's 1996 Plan been determined consistent
with the provisions of SFAS 123, the Company's net income and earnings per share
would have been reduced to the pro forma amounts indicated below:
Page 31
<PAGE>
<TABLE>
<CAPTION>
NET INCOME (in thousands): 1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
As reported.......................................................... $15,783 $11,603 $289
Pro forma............................................................ 14,303 11,474 289
BASIC EARNINGS PER SHARE:
As reported.......................................................... $0.94 $0.73 $0.02
Pro forma............................................................ 0.85 0.72 0.02
DILUTED EARNINGS PER SHARE:
As reported.......................................................... $0.88 $0.70 $0.02
Pro forma............................................................ 0.79 0.70 0.02
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the minimum value method with the following assumptions: dividend yield of 0
percent, weighted-average risk-free interest rate for 1998, 1997 and 1996 of
5.96 percent, 6.50 percent and 6.63 percent, respectively, and expected lives of
ten years.
1998 STOCK OPTION PLAN
The Company's 1998 Stock Option Plan (the "1998 Plan") authorizes the
issuance of up to 2,000,000 shares of common stock of the Company pursuant to
stock options granted to key employees, nonemployee directors and consultants
of the Company. The 1998 Plan does not provide for stock appreciation rights.
The 1998 Plan will expire on April 1, 2008 unless earlier terminated by the
Board. No options were granted or outstanding under the 1998 Plan at September
30, 1998.
On October 13, 1998, the Company granted 1,045,300 common stock options
under the 1998 Plan with an exercise price of $8.38 which was the closing market
price at that date. Twenty percent of these stock options vest and become
exercisable six months subsequent to the date of grant. The remaining options
will vest and become exercisable in equal increments of twenty percent on the
first, second, third and fourth anniversary of the grant date if certain Company
financial targets are met for each fiscal year as set by the Compensation
Committee of the Board; however, all options not previously vested will become
fully vested and exercisable no later than six months after the fourth
anniversary of the date of grant. The Company will apply fixed cost accounting
to these options and no compensation cost will be recognized under the
provisions of SFAS 123, "Accounting for Stock-Based Compensation".
9. SUBSEQUENT EVENT:
The Company executed a sixth amendment to its Credit Agreement dated
December 4, 1998. The most significant provisions of this amendment are the
expansion of the Company's Revolver from $30 million to $50 million, a provision
for the Company to use up to $20 million of the Revolver to repurchase the
Company's outstanding common stock and a provision which allows the Company's
French subsidiary, TriStar Aerospace SARL, to borrow up to $5 million under the
Revolver. Additionally, mandatory principal pay downs of outstanding borrowings
under the Revolver are $15 million in 2000 and $35 million in 2001. Certain
conditions precedent to the effectiveness of this amendment have not been
completed.
Page 32
<PAGE>
10. QUARTERLY FINANCIAL DATA (UNAUDITED):
The following quarterly financial data has been prepared from the financial
records of the Company without audit, and reflects all adjustments which, in the
opinion of management, were of a normal recurring nature and necessary for a
fair presentation of the results of operations for the interim periods presented
(in thousands, except per share amounts):
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------
DEC. 31, MARCH 30, JUNE 30, SEP. 30,
1997 1998 1998 1998
--------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Net sales ............................... $42,635 $45,768 $49,158 $48,384
Gross profit ............................ 13,219 14,770 15,702 15,882
Operating income ........................ 6,825 7,663 7,211 8,444
Net income .............................. 3,522 3,975 3,571 4,715
Basic earnings per common share ......... $ 0.21 $ 0.24 $ 0.21 $ 0.28
Diluted earnings per common share ....... $ 0.19 $ 0.22 $ 0.20 $ 0.26
</TABLE>
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------
DEC. 31, MARCH 30, JUNE 30, SEP. 30,
1996 1997 1997 1997
--------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Net sales ............................... $30,966 $34,531 $36,238 $38,984
Gross profit ............................ 9,958 10,731 11,659 11,978
Operating income ........................ 5,511 5,708 6,159 5,900
Net income .............................. 2,444 2,748 3,056 3,355
Basic earnings per common share ......... $ 0.16 $ 0.18 $ 0.19 $ 0.20
Diluted earnings per common share ....... $ 0.16 $ 0.18 $ 0.19 $ 0.19
</TABLE>
Page 33
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of TriStar Aerospace Co.:
We have audited the accompanying consolidated balance sheets of TriStar
Aerospace Co. (a Delaware corporation) and subsidiaries as of September 30, 1998
and 1997, and the related consolidated statements of operations, stockholders'
equity and cash flows for the years ended September 30, 1998 and 1997, and the
period from inception (August 21, 1996) to September 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of TriStar Aerospace Co. and
subsidiaries as of September 30, 1998 and 1997, and the results of their
operations and their cash flows for the years ended September 30, 1998 and 1997,
and the period from inception to September 30, 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
November 17, 1998
Page 34
<PAGE>
TRI-STAR AEROSPACE, INC. AND SUBSIDIARY
COMBINED STATEMENT OF OPERATIONS
(In Thousands)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, TO
SEPTEMBER 19,
1996
--------------
<S> <C>
REVENUES....................................................... $55,186
COST OF GOODS SOLD............................................. 39,490
-------
Gross profit................................................ 15,696
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................... 8,897
-------
Operating income............................................ 6,799
INTEREST EXPENSE............................................... 1,512
OTHER INCOME................................................... (19)
-------
Net income.................................................. $5,306
-------
-------
</TABLE>
The accompanying notes are an integral part of this statement.
Page 35
<PAGE>
TRI-STAR AEROSPACE, INC. AND SUBSIDIARY
COMBINED STATEMENT OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, TO
SEPTEMBER 19,
1996
--------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................................................. $5,306
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization........................................................ 356
Provision for excess and obsolete inventories........................................ 1,961
Payment of dividends to minority interest owners..................................... (272)
Changes in operating assets and liabilities:
Increase in accounts receivable...................................................... (499)
Increase in inventories.............................................................. (541)
Increase in prepaid expenses and other............................................... (163)
Increase in trade accounts payable................................................... 1,991
Increase in integrated supply program contract payable............................... 625
Increase in accrued liabilities...................................................... 292
-------
Net cash provided by operating activities....................................... 9,056
-------
CASH FLOWS FROM INVESTING ACTIVITIES:
Repayment of notes receivable........................................................... 121
Capital expenditures.................................................................... (190)
-------
Net cash used in investing activities........................................... (69)
-------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings................................................................ 18,754
Payments on debt........................................................................ (23,294)
Distributions to stockholders........................................................... (3,832)
-------
Net cash used in financing activities........................................... (8,372)
-------
NET INCREASE IN CASH................................................................... 615
CASH, beginning of period............................................................... 131
-------
CASH, end of period..................................................................... $746
-------
-------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest.................................................................. $1,646
</TABLE>
The accompanying notes are an integral part of this statement.
Page 36
<PAGE>
TRI-STAR AEROSPACE, INC. AND SUBSIDIARY
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS:
Tri-Star Aerospace, Inc. and subsidiary (the "Company") is a single-source
distributor of aerospace fasteners, fittings, and other related hardware. The
Company's major products include fasteners (bolts, nuts, pins, washers, screws,
rivets), fluid and hydraulic systems parts (fittings, couplings, valves),
bearings and related aerospace hardware. The Company has over 2,000 customers
which include original equipment manufacturers of aircraft and aircraft
components, commercial airlines and aircraft maintenance, repair and overhaul
facilities.
The Company owns 73.8 percent of Tri-Star International, Inc. (an inactive
Interest Charge Domestic International Sales Corporation). Included in the
combined financial statements of the Company is Tri-Star Inventory Management
Services, Inc. (TIMS), a company under the common ownership and control of the
Company's stockholders.
The Company's central distribution facility is located in Tulsa,
Oklahoma. The Company has eight additional sales offices and six regional
warehouses located within the United States, Canada and the United Kingdom.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The combined financial statements include accounts of Tri-Star Aerospace,
Inc., Tri-Star International, Inc. and Tri-Star Inventory Management Services,
Inc. Intercompany transactions have been eliminated.
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.
REVENUE RECOGNITION
Revenues are recognized at the time of shipment.
INCOME TAXES
The Company's stockholders have elected to be taxed under the S corporation
provisions of the Internal Revenue Code of 1986, as amended. As an S
corporation, the earnings of the Company are taxable to the individual
stockholders. Therefore, the Company does not record deferred tax assets or
liabilities or income tax expense.
Page 37
<PAGE>
3. CONCENTRATION OF BUSINESS RISK:
The Company serves the aerospace industry and grants unsecured credit to
its customers. Management's periodic evaluation of the adequacy of the allowance
for doubtful accounts is based on management's estimates of the creditworthiness
of its customers, the Company's past loss experience, known and inherent risks
in the customer base, adverse situations that may affect the customer's ability
to repay and current economic conditions. These estimates are reviewed
periodically and as adjustments become necessary, they are reported in earnings
in the periods in which they become known.
The Company also provides a reserve for potentially excess and obsolete
inventory. This reserve is based on management's estimates of future sales
projections in the aerospace industry and its place in the industry, sales
price, available customers and age of the inventory. This reserve is reviewed
periodically and as adjustments become necessary, they are reported in earnings
in the periods in which they become known.
During the period from January 1 to September 19, 1996, the Company had
three customers that individually accounted for more than ten percent of
revenues.
4. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES
The Company leases office and warehouse facilities and certain computer
equipment under operating leases expiring from September 1996, to November 2000.
Future minimum annual lease commitments (September 30 year-end) at September 19,
1996, are approximately as follows (in thousands):
<TABLE>
<S> <C>
1997.................................................... $617
1998.................................................... 611
1999.................................................... 411
2000.................................................... 171
2001.................................................... 14
------
$1,824
------
------
</TABLE>
SALES AND PURCHASE CONTRACTS
The Company is a party to various sales contracts with airlines that
require the Company to provide certain parts at fixed prices. The contracts
generally have a two-year life. Generally, vendor purchases are made under
distributorship agreements which are cancelable upon 30 days' notice.
EMPLOYEE BENEFIT PLANS
The Company has an employee savings and investment plan (the "Plan") which
is qualified under Section 401(k) of the Internal Revenue Code. The Plan is a
defined contribution plan covering all employees of the Company. All employees
hired as of the first day of the year may contribute, on a pre-tax basis, up to
the maximum amount allowable by law. The Company may, at the discretion of the
Board of Directors, make a contribution to the Plan up to 10 percent of the
employee's base earnings. Only employees who worked a minimum of 1,000 hours in
the previous year are eligible for the Company's contribution. The Company
expensed $45,000 in 1996, related to the Company's contributions.
Page 38
<PAGE>
The Company has an employees' welfare benefit plan which is subject to the
provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The
Plan provides death benefits covering substantially all employees of the
Company. The Plan requires the Company to contribute to the trust such amounts
as the Board of Directors determines necessary to properly fund the benefits
payable under the Plan.
LITIGATION
The Company is the defendant in two separate lawsuits for purchase of a
former employee's stock in the Company and the rescission of a certificate for
stock in the Company. While the amount of the lawsuits is significant in the
aggregate, management believes that the Company's ultimate liability, if any,
will not be material to its combined financial position or results of combined
operations. The stockholders of the Company have indemnified TriStar Aerospace
Co. by accepting contingent consideration for a portion of the sales price (see
Note 5).
5. SUBSEQUENT EVENT:
On September 19, 1996, the Company was acquired by TriStar Aerospace Co.
("TriStar," formerly Maple Leaf Aerospace, Inc.) through a series of
transactions for approximately $31.8 million, including $3 million of
contingent consideration and assumption of $20.6 million in debt. Such
contingent consideration was placed in escrow and is payable to the former
shareholders of the Company on September 19, 1999, to the extent that such
amount is not due TriStar to satisfy certain indemnifications given TriStar
by the former shareholders.
Page 39
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of TriStar Aerospace Co.:
We have audited the accompanying combined statement of operations and cash
flows of Tri-Star Aerospace, Inc. (a Florida corporation) and subsidiary and
affiliate for the period from January 1, 1996, to September 19, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Tri-Star
Aerospace, Inc. and subsidiary and affiliate for the period from January 1,
1996, to September 19, 1996, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
January 24, 1997
Page 40
<PAGE>
AVIALL AEROSPACE BUSINESS UNIT OF AVIALL, INC.
STATEMENT OF OPERATING INCOME
(In Thousands)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, TO
SEPTEMBER 19,
1996
----------------
<S> <C>
REVENUES.................................................................................. $23,085
COST OF GOODS SOLD........................................................................ 18,050
-------
Gross profit........................................................................... 5,035
-------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Third-party expenses................................................................... 3,541
Intercompany allocations............................................................... 1,189
-------
4,730
-------
Operating income ......................................................................... $305
-------
-------
</TABLE>
The accompanying notes are an integral part of this statement.
AVIALL AEROSPACE BUSINESS UNIT OF AVIALL, INC.
STATEMENT OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, TO
SEPTEMBER 19,
1996
--------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Operating income ................................................................... $305
Adjustments to reconcile operating income (loss) to net cash used in operating
activities:
Depreciation........................................................................ 304
Loss on sale of fixed assets........................................................ 2
Provision for excess and obsolete inventories....................................... 1,072
Changes in assets and liabilities:
Decrease in accounts receivable.............................................. 607
Increase in inventories...................................................... (5,164)
Increase in prepaid expenses and other....................................... (21)
Decrease in accounts payable................................................. (1,947)
Decrease in accrued liabilities.............................................. (3)
------
Net cash used in operating activities................................... (4,845)
------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................................... (245)
------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net intercompany borrowings........................................................ 5,090
------
NET INCREASE IN CASH..................................................................... -
CASH, beginning of period................................................................ 22
------
CASH, end of period...................................................................... $22
------
------
</TABLE>
The accompanying notes are an integral part of this statement.
Page 41
<PAGE>
AVIALL AEROSPACE BUSINESS UNIT OF AVIALL, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS:
Aviall, Inc.'s ("Aviall") aerospace business unit ("Aviall Aerospace")
is engaged in the distribution of aerospace fasteners to major aircraft
original equipment manufacturers and their subcontractors, primarily in the
United States and Canada. Aviall Aerospace's principal location is a facility
in Dallas, Texas, with additional stocking locations in Toronto, Montreal,
Long Beach and St. Louis. Prior to the sale of Aviall Aerospace, discussed in
Note 6, the U.S. operations were a portion of Aviall Services, Inc., a U.S.
wholly owned subsidiary of Aviall, and the stocking locations in Toronto and
Montreal, Canada were a portion of Aviall Ltd., a wholly owned foreign
subsidiary of Aviall.
2. BASIS OF PRESENTATION:
The accompanying statement of operating income is intended to present the
results of Aviall Aerospace including allocations for corporate level expenses
(see Note 5) incurred by Aviall and allocated to Aviall Aerospace. The statement
is not intended to be a complete presentation of Aviall Aerospace's results of
operations. The results of Aviall Aerospace were included in Aviall's
consolidated corporate tax return. No provision for income taxes has been
recorded in the statement of operating income.
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.
3. CONCENTRATION OF BUSINESS RISK:
Aviall Aerospace serves the aerospace industry and grants unsecured credit
to its customers. Management's periodic evaluation of the adequacy of the
allowance for doubtful accounts is based on management's estimates of the
creditworthiness of its customers, Aviall Aerospace's past loss experience,
known and inherent risks in the customer base, adverse situations that may
affect the customer's ability to repay and current economic conditions. These
estimates are reviewed periodically and as adjustments become necessary, they
are reported in earnings in the periods in which they become known.
Aviall Aerospace also provides a reserve for potentially excess or obsolete
inventory. This reserve is based on management's estimates of future sales
projections in the aerospace industry and its place in the industry, sales
price, available customers and age of the inventory. This reserve is reviewed
periodically and as adjustments become necessary, they are reported in earnings
in the periods in which they become known.
During the period from January 1, to September 19, 1996, Aviall Aerospace
had two customers that individually accounted for more than ten percent of
revenues.
4. COMMITMENTS:
Aviall Aerospace is a party to various sales contracts with airlines that
require Aviall Aerospace to provide certain parts at fixed prices. The contracts
generally have a two-year life. Generally, vendor purchases are made under
distributorship agreements that are cancelable upon 30 days' notice.
Page 42
<PAGE>
5. TRANSACTIONS WITH AFFILIATES:
Aviall Aerospace had sales of $1,254,000 in 1996, to Aviall affiliates.
Corporate level expenses of $1,189,000 were allocated to Aviall Aerospace in
1996. These corporate allocations include general corporate expenses such as
telephone, rent, utilities, maintenance, supplies, accounting, management
salaries and marketing.
6. SUBSEQUENT EVENT:
On September 19, 1996, certain net assets of Aviall Aerospace were
purchased by TriStar Aerospace Co. (formerly Maple Leaf Aerospace, Inc.) for
approximately $18.6 million and assumption of $3.2 million of accounts payable.
Page 43
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of TriStar Aerospace Co.:
We have audited the accompanying statements of operating income and cash
flows of the Aviall Aerospace Business Unit of Aviall, Inc. (a Delaware
corporation) for the period from January 1, 1996, to September 19, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of the Aviall
Aerospace Business Unit of Aviall, Inc. for the period from January 1, 1996, to
September 19, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
May 9, 1997
Page 44
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS EXECUTIVE OFFICERS OF THE RESTRAINT
The information set forth under the captions "Management" and "Section
16(a) Beneficial Ownership Reporting Compliance" in the Company's definitive
Proxy Statement to be filed in connection with the 1999 Annual Meeting of the
Stockholders to be held on January 22, 1999 is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Compensation of Executive
Officers" in the Company's definitive Proxy Statement to be filed in connection
with the 1999 Annual Meeting of the Stockholders to be held on January 22, 1999
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Company's definitive Proxy Statement to
be filed in connection with the 1999 Annual Meeting of the Stockholders to be
held on January 22, 1999 is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Certain Related Party
Transactions" in the Company's definitive proxy Statement to be filed in
connection with the 1999 Annual Meeting of the Stockholders to be held on
January 22, 1999 is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
NUMBER
<C> <S>
2.1 Agreement and Plan of Merger, dated as of August 28, 1996,
by and among Maple Leaf Aerospace, Inc., Aerospace
Acquisition Corp., Aerospace Merger Sub I, Inc., Tri-Star
Aerospace Inc., and certain stockholders is incorporated
herein by reference to Exhibit 2.1 included in the
Registration Statement Number 333-46335 on Form S-1
effective April 29, 1998.
2.2 Asset Purchase Agreement, dated September 5, 1996, by and
among Aviall (Canada) Ltd., Aviall Services, Inc. and Maple
Leaf Aerospace, Inc. is incorporated herein by reference to
Exhibit 2.2 included in the
Page 45
<PAGE>
Registration Statement Number 333-46335 on Form S-1
effective April 29, 1998.
3.1 Certificate of Amended and Restated Incorporation of the
Company, filed May 5, 1998 (1).
3.2 Amended and Restated Bylaws of the Company approved
February 11, 1998 (1)
4.1 Form of Common Stock Certificate is incorporated herein by
reference to Exhibit 4.1 included in the Registration
Statement Number 333-463356 on Form S-1 effective April 29,
1998.
10.1 Credit Agreement, dated as of September 19, 1998, among the
Company and Bankers Trust Company, as agent, is incorporated
herein by reference to Exhibit 10.1 included in the
Registration Statement Number 333-463335 on Form S-1
effective April 29, 1998.
10.2 First Amendment to Credit Agreement, dated as of April,
1997, among the Company and Bankers Trust Company, as agent,
is incorporated herein by reference to Exhibit 10.2 included
in the Registration Statement Number 333-46335 on Form S-1
effective April 29, 1998.
10.3 Second Amendment to the Credit Agreement, dated as of August
4, 1997, among the Company and Bankers Trust Company, as
agent, is incorporated herein by reference to Exhibit 10.3
included in the Registration Statement Number 333-46335 on
Form S-1 effective April 29, 1998.
10.4 Third Amendment to the Credit Agreement, dated as of
November 7, 1997, among the Company and Bankers Trust
Company, as agent, is incorporated herein by reference to
Exhibit 10.4 included in the Registration Statement Number
333-46335 on Form S-1 effective April 29, 1998.
10.5 Fourth Amendment to the Credit Agreement, dated as of
February 9, 1998, among the Company and Bankers Trust
Company, as agent, is incorporated herein by reference to
Exhibit 10.33 included in the quarterly report on Form 10-Q
dated June 12, 1998.
10.6 Fifth Amendment to the Credit Agreement, dated as of June
30, 1998, among the Company and Bankers Trust Company, as
agent, is incorporated herein by reference to Exhibit 10.34
included in the quarterly report on Form 10-Q dated August
13, 1998.
10.7 Form of Sixth Amendment to the Credit Agreement, dated as of
December 4, 1998, among the Company and Bankers Trust
Company, as agent. (1)
10.8 Security Agreement, dated as of September 19, 1996, among
the Company and Bankers Trust Company, as agent, is
incorporated herein by reference to Exhibit 10.5 included in
the Registration Statement Number 333-46335 on Form S-1
effective April 29, 1998.
Page 46
<PAGE>
10.9 Pledge Agreement, dated as of September 19, 1996, among the
Company and Bankers Trust Company, as agent, is incorporated
herein by reference to Exhibit 10.6 included in the
Registration Statement Number 333-46335 on Form S-1
effective April 29, 1998.
10.10 Lease Agreement, dated as of July 12, 1990, among the
Company and Robert L. Zeligson Trust, is incorporated herein
by reference to Exhibit 10.7 included in the Registration
Statement Number 333-46335 on Form S-1 effective April 29,
1998.
10.11 Lease Agreement, dated as of December 4, 1990, among the
Company and Robert L. Zeligson Trust, is incorporated herein
by reference to Exhibit 10.8 included in the Registration
Statement Number 333-46335 on Form S-1 effective April 29,
1998.
10.12 Lease Agreement, dated as of May 31, 1991, among the Company
and Robert L. Zeligson Trust, is incorporated herein by
reference to Exhibit 10.9 included in the Registration
Statement Number 333-46335 on Form S-1 effective April 29,
1998.
10.13 Build and Lease Agreement, dated as of April 30, 1993, among
the Company and Robert L. Zeligson Trust, is incorporated
herein by reference to Exhibit 10.10 included in the
Registration Statement Number 333-46335 on Form S-1
effective April 29, 1998.
10.14 Sublease, dated as of September 19, 1996, among the Company
and Aviall Services, Inc., together with First Amendment to
Sublease, dated as of September 19, 1996, among the Company
and Aviall Services, Inc., is incorporated herein by
reference to Exhibit 10.11 included in the Registration
Statement Number 333-46335 on Form S-1 effective April 29,
1998.
10.15 Lease Agreement, dated as of January 28, 1997, among the
Company and Robert L. Zeligson Trust, is incorporated herein
by reference to Exhibit 10.12 included in the Registration
Statement Number 333-46335 on Form S-1 effective April 29,
1998.
10.16 Lease Agreement, dated as of September 16, 1997, among the
Company and William Weinberg, is incorporated herein by
reference to Exhibit 10.13 included in the Registration
Statement Number 333-46335 on Form S-1 effective April 29,
1998.
10.17 Amended and Restated Management Stockholders' and
Optionholders' Agreement, dated as of May 15, 1997, among
the Company, Odyssey Partners, L.P., B.T. Investment
Partners, Inc. and certain Stockholders, is incorporated
herein by reference to Exhibit 10.15 included in the
Registration Statement Number 333-46335 on Form S-1
effective April 29, 1998.
10.18 Maple Leaf Aerospace, Inc. 1996 Stock Option Plan, is
incorporated herein by reference to Exhibit 10.16 included
in the Registration Statement Number 333-46335 on Form S-1
effective April 29, 1998.
Page 47
<PAGE>
10.19 Employment Agreement, dated as of September 19, 1996,
between the Company and Quentin Bourjeaurd, is incorporated
herein by reference to Exhibit 10.18 included in the
Registration Statement Number 333-46335 on Form S-1
effective April 29, 1998.
10.20 Employment Agreement, dated as of February 1, 1997, between
the Company and Charles Balchunas, is incorporated herein by
reference to Exhibit 10.19 included in the Registration
Statement Number 333-46335 on Form S-1 effective April 29,
1998.
10.21 Employment Agreement, dated as of January 15, 1998, between
the Company and Douglas E. Childress. (1)
10.22 Employment Agreement, dated as of December 8, 1997, between
the Company and Denny Barge. (1)
10.23 Employment Agreement, dated as of August 1, 1998, between
the Company and Trevor Wright. (1)
10.24 Letter Agreement, dated as of May 15, 1997, between the
Company and John R. King, Jr. (1)
10.25 Promissory Note, dated as of September 19, 1996, from
Quentin Bourjeaurd in favor of the Company, is incorporated
herein by reference to Exhibit 10.22 included in the
Registration Statement Number 333-46335 on Form S-1
effective April 29, 1998.
10.26 Promissory Note, dated as of April 15, 1996, from Quentin
Bourjeaurd in favor of the Company, is incorporated herein
by reference to Exhibit 10.23 included in the Registration
Statement Number 333-46335 on Form S-1 effective April 29,
1998.
10.27 Promissory Note, dated as of May 30, 1997, from Charles
Balchunas in favor of the Company, is incorporated herein by
reference to Exhibit 10.24 included in the Registration
Statement Number 333-46335 on Form S-1 effective April 29,
1998.
10.28 TriStar Aerospace Co. 1998 Stock Option Plan, is
incorporated herein by reference to Exhibit 10.26 included
in the Registration Statement Number 333-46335 on Form S-1
effective April 29, 1998.
10.29 TriStar Aerospace Co. Executive and Key Employee Incentive
Plan, is incorporated herein by reference to Exhibit 10.27
included in the Registration Statement Number 333-46335 on
Form S-1 effective April 29, 1998.
10.30 Letter Agreement, dated as of September 19, 1996, between
the Company and Quentin Bourjeaurd, is incorporated herein
by reference to Exhibit 10.28 included in the Registration
Statement Number 333-46335 on Form S-1 effective April 29,
1998.
Page 48
<PAGE>
10.31 Amended and Restated Maple Leaf Aerospace, Inc. 1996 Stock
Option Plan, is incorporated herein by reference to Exhibit
10.31 included in the Registration Statement Number
333-46335 on Form S-1 effective April 29, 1998.
21.1 Subsidiaries of the Registrant. (1)
23.1 Consent of Arthur Andersen LLP. (1)
24.1 Powers of Attorney of directors and officers of the
Registrant (included on page 50).
27.1 Financial Data Schedule.
</TABLE>
(1) Filed herewith.
(b) Financial Statement Schedules
Financial Statement Schedules have been omitted because the required
information is not applicable or because such information is included
in the financial statements and notes thereto included in this Annual
Report filed on Form 10-K.
(c) Reports on Form 8-K
No Reports on Form 8-K were filed during the fiscal year ended September
30, 1998.
Page 49
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: December 10, 1998 TRISTAR AEROSPACE CO.
By: /s/ DOUGLAS E. CHILDRESS
------------------------------------
Douglas E. Childress
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
By: /s/ P. QUENTIN BOURJEAURD Chairman, President and Chief Date: December 10, 1998
-------------------------- Executive Officer
P. Quentin Bourjeaurd (Principal Executive Officer)
By: /s/ DOUGLAS E. CHILDRESS Executive Vice President, Chief Date: December 10, 1998
-------------------------- Financial Officer, and Director
Douglas E. Childress (Principal Financial Officer)
By: /s/ CHARLES BALCHUNAS Executive Vice President, Chief Date: December 10, 1998
-------------------------- Operating Officer and Director
Charles Balchunas
By: /s/ BRIAN E. BARENTS Director Date: December 10, 1998
--------------------------
Brian E. Barents
By: /s/ CINDY B. BROWN Director Date: December 10, 1998
--------------------------
Cindy B. Brown
By: /s/ JAMES L. HERSMA Director Date: December 10, 1998
--------------------------
James L. Hersma
</TABLE>
Page 50
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
TRISTAR AEROSPACE CO.
The undersigned Executive Vice President and Secretary of TriStar
Aerospace Co., a Delaware corporation (the "Corporation"), hereby certifies
the following:
1. (a) The name of the Corporation is TriStar Aerospace Co.
(b) The date of filing of the original Certificate of
Incorporation of the Corporation (the "Certificate of Incorporation") was
August 21, 1996. An amendment to the Certificate of Incorporation was filed
on February 24, 1998, which changed the name of the Corporation from Maple
Leaf Aerospace, Inc. to TriStar Aerospace Co.
2. This Amended and Restated Certificate of Incorporation amends
and restates the Certificate of Incorporation, as amended.
3. This Amended and Restated Certificate of Incorporation has
been duly adopted by the directors of the Corporation on February 11, 1998
and by the written consent of the stockholders of the Corporation entitled to
vote thereon in accordance with the provisions of Sections 242 and 245 of the
General Corporation Law of the State of Delaware ("DGCL").
4. The Certificate of Incorporation, as amended and restated
hereby, shall upon its filing with the Secretary of State of the State of
Delaware, read in its entirety as follows:
ARTICLE I
The name of the Corporation is TriStar Aerospace Co.
ARTICLE II
The registered office of the Corporation in the State of Delaware is
located at Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of the registered agent of the
Corporation at such address is The Corporation Trust Company.
ARTICLE III
The purpose for which the Corporation is organized is to engage in
any and all lawful acts and activity for which corporations may be organized
under the DGCL. The Corporation will have perpetual existence.
<PAGE>
ARTICLE IV
The total number of shares of capital stock which the Corporation
shall have authority to issue is 50,000,000 shares, consisting of:
(i) 10,000,000 shares of preferred stock, par value $.01
per share ("Preferred Stock"); and
(ii) 40,000,000 shares of common stock, par value $.01 per
share ("Common Stock").
The designations and the powers, preferences, rights, qualifications,
limitations, and restrictions of the Preferred Stock and the Common Stock are
as follows:
1. Provisions Relating to the Preferred Stock.
(a) The Preferred Stock may be issued from time to time in one or
more classes or series, the shares of each class or series to have such
designations and powers, preferences, and rights, and qualifications,
limitations, and restrictions thereof, as are stated and expressed herein and
in the resolution or resolutions providing for the issue of such class or
series adopted by the board of directors of the Corporation as hereafter
prescribed.
(b) Authority is hereby expressly granted to and vested in the
board of directors of the Corporation to authorize the issuance of the
Preferred Stock from time to time in one or more classes or series, and with
respect to each class or series of the Preferred Stock, to fix and state by
the resolution or resolutions from time to time adopted providing for the
issuance thereof the following:
(i) whether or not the class or series is to have
voting rights, full, special, or limited, or is to be
without voting rights, and whether or not such class or
series is to be entitled to vote as a separate class either
alone or together with the holders of one or more other
classes or series of stock;
(ii) the number of shares to constitute the class
or series and the designations thereof;
(iii) the preferences, and relative, participating,
optional, or other special rights, if any, and the
qualifications, limitations, or restrictions thereof, if
any, with respect to any class or series;
(iv) whether or not the shares of any class or
series shall be redeemable at the option of the Corporation
or the holders thereof or upon the happening of any
specified event, and, if redeemable, the redemption price or
prices (which may be payable in the form of cash, notes,
securities, or other property), and the time or times at
which, and the terms
2
<PAGE>
and conditions upon which, such shares shall be redeemable
and the manner of redemption;
(v) whether or not the shares of a class or
series shall be subject to the operation of retirement or
sinking funds to be applied to the purchase or redemption of
such shares for retirement, and, if such retirement or
sinking fund or funds are to be established, the annual
amount thereof, and the terms and provisions relative to the
operation thereof;
(vi) the dividend rate, whether dividends are
payable in cash, stock of the Corporation, or other
property, the conditions upon which and the times when such
dividends are payable, the preference to or the relation to
the payment of dividends payable on any other class or
classes or series of stock, whether or not such dividends
shall be cumulative or noncumulative, and if cumulative, the
date or dates from which such dividends shall accumulate;
(vii) the preferences, if any, and the amounts
thereof which the holders of any class or series thereof
shall be entitled to receive upon the voluntary or
involuntary dissolution of, or upon any distribution of the
assets of, the Corporation;
(viii) whether or not the shares of any class or
series, at the option of the Corporation or the holder
thereof or upon the happening of any specified event, shall
be convertible into or exchangeable for, the shares of any
other class or classes or of any other series of the same or
any other class or classes of stock, securities, or other
property of the Corporation and the conversion price or
prices or ratio or ratios or the rate or rates at which such
exchange may be made, with such adjustments, if any, as
shall be stated and expressed or provided for in such
resolution or resolutions; and
(ix) such other special rights and protective
provisions with respect to any class or series as may to the
board of directors of the Corporation seem advisable.
(c) The shares of each class or series of the Preferred Stock may
vary from the shares of any other class or series thereof in any or all of
the foregoing respects. The board of directors of the Corporation may
increase the number of shares of the Preferred Stock designated for any
existing class or series by a resolution adding to such class or series
authorized and unissued shares of the Preferred Stock not designated for any
other class or series. The board of directors of the Corporation may
decrease the number of shares of the Preferred Stock designated for any
existing class or series by a resolution subtracting from such class or
series authorized and unissued shares of the Preferred Stock designated for
such existing class or series, and the shares so subtracted shall become
authorized, unissued, and undesignated shares of the Preferred Stock.
3
<PAGE>
2. Provisions Relating to the Common Stock.
(a) Each share of Common Stock of the Corporation shall
have identical rights and privileges in every respect. The holders of shares
of Common Stock shall be entitled to vote upon all matters submitted to a
vote of the stockholders of the Corporation and shall be entitled to one vote
for each share of Common Stock held.
(b) Subject to the prior rights and preferences, if any,
applicable to shares of the Preferred Stock or any series thereof, the
holders of shares of the Common Stock shall be entitled to receive such
dividends (payable in cash, stock, or otherwise) as may be declared thereon
by the board of directors at any time and from time to time out of any funds
of the Corporation legally available therefor.
(c) In the event of any voluntary or involuntary
liquidation, dissolution, or winding-up of the Corporation, after
distribution in full of the preferential amounts, if any, to be distributed
to the holders of shares of the Preferred Stock or any series thereof, the
holders of shares of the Common Stock shall be entitled to receive all of the
remaining assets of the Corporation available for distribution to its
stockholders, ratably in proportion to the number of shares of the Common
Stock held by them. A liquidation, dissolution, or winding-up of the
Corporation, as such terms are used in this Paragraph (c), shall not be
deemed to be occasioned by or to include any consolidation or merger of the
Corporation with or into any other corporation or corporations or other
entity or a sale, lease, exchange, or conveyance of all or a part of the
assets of the Corporation.
3. General.
(a) Subject to the foregoing provisions of this
Certificate of Incorporation, the Corporation may issue shares of its
Preferred Stock and Common Stock from time to time for such consideration
(not less than the par value thereof) as may be fixed by the board of
directors of the Corporation, which is expressly authorized to fix the same
in its absolute and uncontrolled discretion subject to the foregoing
conditions. Shares so issued for which the consideration shall have been
paid or delivered to the Corporation shall be deemed fully paid stock and
shall not be liable to any further call or assessment thereon, and the
holders of such shares shall not be liable for any further payments in
respect of such shares.
(b) The Corporation shall have authority to create and
issue rights and options entitling their holders to purchase shares of the
Corporation's capital stock of any class or series or other securities of the
Corporation, and such rights and options shall be evidenced by instruments
approved by the board of directors of the Corporation. The board of
directors of the Corporation shall be empowered to set the exercise price,
duration, times for exercise, and other terms of such options or rights;
PROVIDED, HOWEVER, that the consideration to be received for any shares of
capital stock subject thereto shall not be less than the par value thereof.
4
<PAGE>
ARTICLE V
For the management of the business and for the conduct of the affairs
of the Corporation, and for further definition, limitation and regulation of
the powers of the Corporation and its directors and stockholders:
1. Except as otherwise fixed by or pursuant to provisions
hereof relating to the rights of the holders of any class or series of
stock having a preference over common stock as to dividends or upon
liquidation to elect additional directors under specified
circumstances, the number of directors of the Corporation shall be
between six (6) and twelve (12) directors, the exact number fixed from
time to time by affirmative vote of a majority of the directors then
in office. The directors, other than those who may be elected by the
holders of any classes or series of stock having a preference over the
common stock as to dividends or upon liquidation, shall be classified,
with respect to the time for which they severally hold office, into
three classes, as nearly equal in number as possible, as shall be
provided in the manner specified in the Bylaws of the Corporation, one
class to be originally elected for a term expiring at the annual
meeting of stockholders to be held in 1999, another class to be
originally elected for a term expiring at the annual meeting of
stockholders to be held in 2000, and another class to be originally
elected for a term expiring at the annual meeting of stockholders to
be held in 2001, with each class to hold office until its successor is
elected and qualified. At each annual meeting of the stockholders of
the Corporation after fiscal year 1998, the successors of the class of
Directors whose term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders held
in the third year following the year of their election.
2. Except as otherwise fixed by or pursuant to provisions
hereof relating to the rights of the holders of any class or series of
stock having a preference over common stock as to dividends or upon
liquidation to elect additional directors under specified
circumstances, newly created directorships resulting from any increase
in the number of directors and any vacancies on the board of directors
resulting from death, resignation, disqualification, removal or other
cause shall be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of
the board of directors. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full
term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor
shall have been elected and qualified. No decrease in the number of
directors constituting the board of directors shall shorten the term
of any incumbent director.
ARTICLE VI
The board of directors of the Corporation may adopt, amend, and
repeal the Bylaws of the Corporation by the affirmative vote of a majority of
the directors then holding office. The holders of the outstanding Common
Stock and any outstanding shares of Preferred Stock entitled to vote on
matters presented to a vote of stockholders, voting together as a class, may
adopt, amend and repeal any provision of the Bylaws upon the affirmative vote
of at least seventy-five percent (75%) of such shares; provided
5
<PAGE>
however, that at least fifty percent (50%) of such shares may adopt, amend or
repeal any provision of the Bylaws which has been submitted for a vote to the
holders of such shares upon the recommendation by the board of directors that
such adoption, amendment or repeal be approved.
ARTICLE VII
No contract or transaction between the Corporation and one or more of
its directors, officers, or stockholders or between the Corporation and any
person (as used herein "person" means other corporation, partnership,
association, firm, trust, joint venture, political subdivision, or
instrumentality) or other organization in which one or more of its directors,
officers, or stockholders are directors, officers, or stockholders, or have a
financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the board or committee which authorizes the contract or
transaction, or solely because his, her, or their votes are counted for such
purpose, if: (i) the material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or are known to
the board of directors or the committee, and the board of directors or
committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; or (ii) the material facts
as to his or her relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good
faith by vote of the stockholders; or (iii) the contract or transaction is
fair as to the Corporation as of the time it is authorized, approved, or
ratified by the board of directors, a committee thereof, or the stockholders.
Common or interested directors may be counted in determining the presence of
a quorum at a meeting of the board of directors or of a committee which
authorizes the contract or transaction.
ARTICLE VIII
The Corporation shall indemnify any person who was, is, or is
threatened to be made a party to a proceeding (as hereinafter defined) by
reason of the fact that he or she (i) is or was a director or officer of the
Corporation or (ii) while a director or officer of the Corporation, is or was
serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise, to the
fullest extent permitted under the DGCL, as the same exists or may hereafter
be amended (but, if permitted by applicable law, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment) or any other applicable laws
as presently or hereafter in effect; provided however, that the Corporation
shall indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the board of directors or is a proceeding
to enforce such person's claim to indemnification pursuant to the rights
granted by this Article VIII. Such right shall be a
6
<PAGE>
contract right and as such shall run to the benefit of any director or
officer who is elected and accepts the position of director or officer of the
Corporation or elects to continue to serve as a director or officer of the
Corporation while this Article VIII is in effect. Any repeal or amendment of
this Article VIII shall be prospective only and shall not limit the rights of
any such director or officer or the obligations of the Corporation with
respect to any claim arising from or related to the services of such director
or officer in any of the foregoing capacities prior to any such repeal or
amendment to this Article VIII. Such right shall include the right to be
paid by the Corporation expenses (including legal fees) incurred in defending
any such proceeding in advance of its final disposition to the maximum extent
permitted under the DGCL, as the same exists or may hereafter be amended. If
a claim for indemnification or advancement of expenses hereunder is not paid
in full by the Corporation within sixty (60) days after a written claim has
been received by the Corporation, the claimant may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim,
and if successful in whole or in part, the claimant shall also be entitled to
be paid the expenses of prosecuting such claim. It shall be a defense to any
such action that such indemnification or advancement of costs of defense are
not permitted under the DGCL, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its
board of directors or any committee thereof, independent legal counsel, or
stockholders) to have made its determination prior to the commencement of
such action that indemnification of, or advancement of costs of defense to,
the claimant is permissible in the circumstances nor an actual determination
by the Corporation (including its board of directors or any committee
thereof, independent legal counsel, or stockholders) that such
indemnification or advancement is not permissible shall be a defense to the
action or create a presumption that such indemnification or advancement is
not permissible. In the event of the death of any person having a right of
indemnification under the foregoing provisions, such right shall inure to the
benefit of his or her heirs, executors, administrators, and personal
representatives. The rights conferred above shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
bylaw, resolution of stockholders or directors, agreement, or otherwise.
The Corporation may additionally indemnify any employee or agent of
the Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means any threatened, pending,
or completed action, suit, or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative, any appeal in such an action,
suit, or proceeding, and any inquiry or investigation that could lead to such
an action, suit, or proceeding.
ARTICLE IX
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit. Any
repeal
7
<PAGE>
or amendment of this Article IX by the stockholders of the Corporation shall
be prospective only, and shall not adversely affect any limitation on the
personal liability of a director of the Corporation arising from an act or
omission occurring prior to the time of such repeal or amendment. In
addition to the circumstances in which a director of the Corporation is not
personally liable as set forth in the foregoing provisions of this Article
IX, a director shall not be liable to the Corporation or its stockholders to
such further extent as permitted by any law hereafter enacted, including
without limitation any subsequent amendment to the DGCL.
ARTICLE X
Any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting
of such holders and may not be effected by written consent. At any annual
meeting or special meeting of stockholders of the Corporation, only such
business shall be conducted as shall have been brought before such meeting in
the manner provided by the Bylaws of the Corporation.
ARTICLE XI
This Restated Certificate of Incorporation may only be amended upon
the approval and recommendation of the board of directors and the subsequent
approval by a majority of the shares of outstanding Common Stock and any
outstanding shares of Preferred Stock entitled to vote on matters presented
to a vote of stockholders, voting together as a class; provided however, that
at least seventy-five percent (75%) of the shares of outstanding Common Stock
and any outstanding shares of Preferred Stock entitled to vote on matters
presented to a vote of stockholders, voting together as a class, shall be
required to amend or repeal the provisions contained in Articles V, VI, X or
this Article XI, or to adopt any provisions inconsistent with such Articles.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation to be signed by its Secretary on the
___ day of April, 1998.
/s/ DOUGLAS CHILDRESS
--------------------------------------
Douglas Childress
Executive Vice President and Secretary
9
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
TRISTAR AEROSPACE CO.
A Delaware Corporation
<PAGE>
<TABLE>
<S> <C> <C> <C>
ARTICLE ONE: OFFICES
1.1 Registered Office and Agent . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 Voting List . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6 Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.7 Required Vote; Withdrawal of Quorum . . . . . . . . . . . . . . . . 2
2.8 Method of Voting; Proxies . . . . . . . . . . . . . . . . . . . . . 3
2.9 Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 Conduct of Meeting. . . . . . . . . . . . . . . . . . . . . . . . . 3
2.11 Inspectors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 Notice of Stockholder Business and Nominations. . . . . . . . . . . 4
ARTICLE THREE: DIRECTORS
3.1 Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Number; Qualification; Election; Term . . . . . . . . . . . . . . . 6
3.3 Change in Number. . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.6 Meetings of Directors . . . . . . . . . . . . . . . . . . . . . . . 7
3.7 First Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.8 Election of Officers. . . . . . . . . . . . . . . . . . . . . . . . 7
3.9 Regular Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.10 Special Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.11 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.12 Quorum; Majority Vote . . . . . . . . . . . . . . . . . . . . . . . 8
3.13 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.14 Presumption of Assent . . . . . . . . . . . . . . . . . . . . . . . 8
3.15 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE FOUR: COMMITTEES
4.1 Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Number; Qualification; Term . . . . . . . . . . . . . . . . . . . . 8
4.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 Committee Changes . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.5 Alternate Members of Committees . . . . . . . . . . . . . . . . . . 9
4.6 Regular Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.7 Special Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 Quorum; Majority Vote . . . . . . . . . . . . . . . . . . . . . . . 9
4.9 Minutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.10 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.11 Responsibility. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
ARTICLE FIVE: NOTICE
5.1 Method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.2 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE SIX: OFFICERS
6.1 Number; Titles; Term of Office. . . . . . . . . . . . . . . . . . . 10
6.2 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.3 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.4 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.5 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.6 Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . 11
6.7 President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.8 Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.9 Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.10 Assistant Treasurers. . . . . . . . . . . . . . . . . . . . . . . . 12
6.11 Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.12 Assistant Secretaries . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS
7.1 Certificates for Shares . . . . . . . . . . . . . . . . . . . . . . 12
7.2 Replacement of Lost or Destroyed Certificates . . . . . . . . . . . 12
7.3 Transfer of Shares. . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 Registered Stockholders . . . . . . . . . . . . . . . . . . . . . . 13
7.5 Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.2 Reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.3 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.4 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.5 Seal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.6 Resignations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.7 Securities of Other Corporations. . . . . . . . . . . . . . . . . . 14
8.8 Action Without a Meeting. . . . . . . . . . . . . . . . . . . . . . 14
8.9 Invalid Provisions. . . . . . . . . . . . . . . . . . . . . . . . . 14
8.10 Mortgages, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.11 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.12 References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.13 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
TRISTAR AEROSPACE CO.
A Delaware Corporation
PREAMBLE
These bylaws are subject to, and governed by, the General Corporation
Law of the State of Delaware (the "Delaware General Corporation Law") and the
certificate of incorporation of TriStar Aerospace Co., a Delaware corporation
(the "Corporation"). In the event of a direct conflict between the
provisions of these bylaws and the mandatory provisions of the Delaware
General Corporation Law or the provisions of the certificate of incorporation
of the Corporation, such provisions of the Delaware General Corporation Law
or the certificate of incorporation of the Corporation, as the case may be,
shall be controlling.
ARTICLE ONE: OFFICES
1.1 REGISTERED OFFICE AND AGENT. The registered office and registered
agent of the Corporation shall be as designated from time to time by the
appropriate filing by the Corporation in the office of the Secretary of State
of the State of Delaware.
1.2 OTHER OFFICES. The Corporation may also have offices at such
other places, both within and without the State of Delaware, as the board of
directors may from time to time determine or as the business of the
Corporation may require.
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 ANNUAL MEETING. An annual meeting of stockholders of the
Corporation shall be held each calendar year on such date and at such time as
shall be designated from time to time by the board of directors and stated in
the notice of the meeting. At such meeting, the stockholders shall elect
directors and transact such other business as may properly be brought before
the meeting in accordance with Section 2.12.
2.2 SPECIAL MEETING. A special meeting of the stockholders may be
called at any time by the Chairman of the Board, the President or the
majority of directors then in office. A special meeting shall be held on
such date and at such time as shall be designated by the person(s) calling
the meeting and stated in the notice of the meeting. Only such business
shall be transacted at a special meeting as may be stated or indicated in the
notice of such meeting in accordance with Section 2.12.
2.3 PLACE OF MEETINGS. An annual meeting of stockholders may be held
at any place within or without the State of Delaware designated by the board
of directors. A special meeting
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of stockholders may be held at any place within or without the State of
Delaware designated in the notice of the meeting. Meetings of stockholders
shall be held at the principal office of the Corporation unless another place
is designated for meetings in the manner provided herein.
2.4 NOTICE. Written or printed notice stating the place, day, and time
of each meeting of the stockholders and, in case of a special meeting, the
purpose or purposes for which the meeting is called shall be delivered not
less than ten (10) days nor more than sixty (60) days before the date of the
meeting, either personally or by mail, by or at the direction of the
President, the Secretary, or the Chairman of the Board, to each stockholder
of record entitled to vote at such meeting. If such notice is to be sent by
mail, it shall be directed to such stockholder at his address as it appears
on the records of the Corporation, unless he shall have filed with the
Secretary of the Corporation a written request that notices to him be mailed
to some other address, in which case it shall be directed to him at such
other address. Notice of any meeting of stockholders shall not be required
to be given to any stockholder who shall attend such meeting in person or by
proxy and shall not, at the beginning of such meeting, object to the
transaction of any business because the meeting is not lawfully called or
convened, or who shall, either before or after the meeting, submit a signed
waiver of notice, in person or by proxy.
2.5 VOTING LIST. At least ten (10) days before each meeting of
stockholders, the Secretary or other officer of the Corporation who has
charge of the Corporation's stock ledger, either directly or through another
officer appointed by him or through a transfer agent appointed by the board
of directors, shall prepare a complete list of stockholders entitled to vote,
arranged in alphabetical order and showing the address of each stockholder
and number of shares registered in the name of each stockholder. For a
period of ten days prior to such meeting, such list shall be kept on file at
a place within the city where the meeting is to be held, which place shall be
specified in the notice of meeting or, if not so specified, at the place
where the meeting is to be held and shall be open to examination by any
stockholder during ordinary business hours. Such list shall be produced at
such meeting and kept at the meeting at all times during such meeting and may
be inspected by any stockholder who is present.
2.6 QUORUM. The holders of a majority of the outstanding shares
entitled to vote on a matter, present in person or by proxy, shall constitute
a quorum at any meeting of stockholders, except as otherwise provided by law,
the certificate of incorporation of the Corporation, or these bylaws. If a
quorum shall not be present, in person or by proxy, at any meeting of
stockholders, the stockholders entitled to vote who are present, in person or
by proxy, or, if no stockholder entitled to vote is present, any officer of
the Corporation may adjourn the meeting from time to time, without notice
other than announcement at the meeting (unless the board of directors, after
such adjournment, fixes a new record date for the adjourned meeting), until a
quorum shall be present, in person or by proxy. At any adjourned meeting at
which a quorum shall be present, in person or by proxy, any business may be
transacted which may have been transacted at the original meeting had a
quorum been present; provided that, if the adjournment is for more than 30
days or, if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the adjourned meeting.
2.7 REQUIRED VOTE; WITHDRAWAL OF QUORUM. When a quorum is present at
any meeting, the vote of the holders of at least a majority of the
outstanding shares entitled to vote
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who are present, in person or by proxy, shall decide any question brought
before such meeting, unless the question is one on which, by express
provision of statute, the certificate of incorporation of the Corporation, or
these bylaws, a different vote is required, in which case such express
provision shall govern and control the decision of such question. The
stockholders present at a duly constituted meeting may continue to transact
business until adjournment, notwithstanding the prior withdrawal of enough
holders of shares such that the remaining shares, represented in person or by
proxy, no longer constitute a quorum.
2.8 METHOD OF VOTING; PROXIES. Except as otherwise provided in the
certificate of incorporation of the Corporation or by law, each outstanding
share, regardless of class, shall be entitled to one vote on each matter
submitted to a vote at a meeting of stockholders. Elections of directors
need not be by written ballot. At any meeting of stockholders, every
stockholder having the right to vote may vote either in person or by a proxy
executed in writing by the stockholder or by his duly authorized
attorney-in-fact. Each such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid
after three years from the date of its execution, unless otherwise provided
in the proxy. If no date is stated in a proxy, such proxy shall be presumed
to have been executed on the date of the meeting at which it is to be voted.
Each proxy shall be revocable unless expressly provided therein to be
irrevocable and coupled with an interest sufficient in law to support an
irrevocable power or unless otherwise made irrevocable by law.
2.9 RECORD DATE. For the purpose of determining stockholders entitled
to notice of or to vote at any meeting of stockholders, or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion, or exchange of stock or for the purpose of any other
lawful action, the board of directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record
date is adopted by the board of directors, for any such determination of
stockholders, such date in any case to be not more than sixty (60) days and
not less than ten (10) days prior to such meeting. If no record date is
fixed:
(i) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given.
(ii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
(iii) A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the board of directors
may fix a new record date for the adjourned meeting.
2.10 CONDUCT OF MEETING. The Chairman of the Board, if such office has
been filled, and, if not or if the Chairman of the Board is absent or
otherwise unable to act, the President shall preside at all meetings of
stockholders. The Secretary shall keep the records of each meeting of
stockholders. In the absence, or inability to act, of any such officer, such
officer's
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duties shall be performed by the officer given the authority to act for such
absent or non-acting officer under these bylaws or by some person appointed
by the meeting.
2.11 INSPECTORS. The board of directors may, in advance of any meeting
of stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If any of the inspectors so appointed shall fail to
appear or act, the chairman of the meeting shall, or if inspectors shall not
have been appointed, the chairman of the meeting may, appoint one or more
inspectors. Each inspector, before entering upon the discharge of his
duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best
of his ability. The inspectors shall determine the number of shares of
capital stock of the Corporation outstanding and the voting power of each,
the number of shares represented at the meeting, the existence of a quorum,
and the validity and effect of proxies and shall receive votes, ballots, or
consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots, or
consents, determine the results, and do such acts as are proper to conduct
the election or vote with fairness to all stockholders. On request of the
chairman of the meeting, the inspectors shall make a report in writing of any
challenge, request, or matter determined by them and shall execute a
certificate of any fact found by them. No director or candidate for the
office of director shall act as an inspector of an election of directors.
Inspectors need not be stockholders.
2.12 NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.
(a) ANNUAL MEETINGS OF STOCKHOLDERS.
(i) Nominations of persons for election to the Board and the proposal
of business to be considered by the stockholders may be made at an annual
meeting of stockholders (A) pursuant to the Corporation's notice of meeting,
(B) by or at the direction of the Board or (C) by any stockholder of the
Corporation who was a stockholder of record at the time of giving of notice
provided for in this bylaw, who is entitled to vote at the meeting and who
complies with the notice procedures set forth in this bylaw.
(ii) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (C) of paragraph (a)(i) of
this bylaw, the stockholder must have given timely notice thereof in writing
to the Secretary of the Corporation and such other business must otherwise be
a proper matter for stockholder action. To be timely, a stockholder's notice
shall be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 60th day nor earlier
than the close of business on the 90th day prior to the first anniversary of
the preceding year's annual meeting, provided, however, that in the event
that the date of the annual meeting is more than 30 days before or more than
60 days after such anniversary date, notice by the stockholder to be timely
must be so delivered not earlier than the close of business on the 90th day
prior to such annual meeting and not later than the close of business on the
later of (a) the 60th day prior to such annual meeting, or (b) the 10th day
following the day on which public announcement of the date of such meeting is
first made by the Corporation. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the giving
of a stockholder's notice as described above. Such stockholder's notice shall
set forth (A) as to each person whom the stockholder proposes to nominate for
election or re-election as a director all
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information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election contest, or
is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule
14a-11 thereunder (including such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if elected);
(B) as to any other business that the stockholder proposes to bring before
the meeting, a brief description of the business desired to be brought before
the meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and the beneficial
owner, if any, on whose behalf the proposal is made; and (C) as to the
stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (1) the name and address of such
stockholder, as they appear on the Corporation's books, and of such
beneficial owner and (2) the class and number of shares of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner.
(iii) Notwithstanding anything in the second sentence of paragraph
(a)(ii) of the bylaw to the contrary, in the event that the number of
directors to be elected to the Board of the Corporation is increased and
there is no public announcement by the Corporation naming all of the nominees
for director or specifying the size of the increased Board at least 70 days
prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this bylaw shall also be considered timely,
but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on
the 10th day following the day on which such public announcement is first
made by the Corporation.
(b) SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting.
Nominations of persons for election to the Board may be made at a special
meeting of stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (i) by or at the direction of the Board or
(ii) provided that the Board has determined that directors shall be elected
at such meeting, by any stockholder of the Corporation who is a stockholder
of record at the time of giving of notice provided for in this bylaw, who
shall be entitled to vote at the meeting and who complies with the notice
procedures set forth in this bylaw. In the event the Corporation calls a
special meeting of stockholders for the purpose of electing one or more
directors to the Board, any such stockholder may nominate a person or persons
(as the case may be), for election to such position(s) as specified in the
Corporation's notice of meeting, if the stockholder's notice required by
paragraph (a)(ii) of the bylaw shall be delivered to the Secretary at the
principal executive offices of the Corporation not earlier than the close of
business on the 90th day prior to such special meeting and not later than the
close of business on the later of the 60th day prior to such special meeting
or the 10th day following the day on which public announcement is first made
of the date of the special meeting and of the nominees proposed by the Board
to be elected at such meeting. In no event shall the public announcement of
an adjournment of a special meeting commence a new time period for the giving
of a stockholder's notice as described above.
(c) GENERAL.
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(i) Only such persons who are nominated in accordance with the
procedures set forth in this bylaw shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as
shall have been brought before the meeting in accordance with the procedures
set forth in this bylaw. Except as otherwise provided by law, the Chairman
of the meeting shall have the power and duty to determine whether a
nomination or any business proposed to be brought before the meeting was made
or proposed, as the case may be, in accordance with the procedures set forth
in this Bylaw and, if any proposed nomination or business is not in
compliance with this bylaw, to declare that such defective proposal or
nomination shall be disregarded.
(ii) For purposes of this bylaw, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news-service or in a document
publicly filed by the Corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of this bylaw, a
stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this bylaw. Nothing in this bylaw shall be deemed to
affect any rights (A) of stockholders to request inclusion of proposals in
the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange
Act or (B) of the holders of any series of Preferred Stock to elect directors
under specified circumstances.
ARTICLE THREE: DIRECTORS
3.1 MANAGEMENT. The business and property of the Corporation
shall be managed by the board of directors. Subject to the restrictions
imposed by law, the certificate of incorporation of the Corporation, or these
bylaws, the board of directors may exercise all the powers of the
Corporation.
3.2 NUMBER; QUALIFICATION; ELECTION; TERM. The board of
directors shall consist of no less than six and no more than twelve members.
The directors of the Corporation shall be divided into three classes (with
the first class ("Class I"), the second class ("Class II") and the third
class ("Class III") each initially to consist of two directors). The term of
office of the Class I directors shall expire at the 1999 annual meeting of
stockholders, the term of office of the Class II directors shall expire at
the 2000 annual meeting of stockholders and the term of office of the Class
III directors shall expire at the 2001 annual meeting of stockholders, with
each director to hold office until his or her successor shall have been duly
elected and qualified. At each annual meeting of stockholders, commencing
with the 1999 annual meeting, directors elected to succeed those directors
whose terms then expire shall be elected for a term of office to expire at
the third succeeding annual meeting of stockholders after their election,
with each director to hold office until his or her successor shall have been
duly elected and qualified.
3.3 CHANGE IN NUMBER. No decrease in the number of directors
constituting the entire board of directors shall have the effect of
shortening the term of any incumbent director.
3.4 REMOVAL. Except as otherwise provided in the certificate of
incorporation of the Corporation or these bylaws, at any meeting of
stockholders, if notice of the intention to act upon
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the removal of a director shall have been given in the notice calling such
meeting, any director or the entire board of directors may be removed for
cause by a vote of the holders of a majority of the shares then entitled to
vote on the election of directors; provided, however, that in the event that
stockholders shall have the right to cumulate votes in the election of
directors pursuant to the certificate of incorporation of the Corporation, if
less than the entire board of directors is to be removed, no one of the
directors may be removed if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of the
entire board of directors. Any director may be removed for cause, at any
special meeting of stockholders by the affirmative vote of a majority in
number of the shares then entitled to vote in person or by proxy at an
election of directors, .
3.5 VACANCIES. Newly created directorships resulting from any
increase in the authorized number of directors and any vacancies occurring in
the board of directors caused by death, resignation, retirement,
disqualification or removal from office of any directors or otherwise, may be
filled by the vote of a majority of the directors then in office, though less
than a quorum, or a successor or successors may be chosen at a special
meeting of the stockholders called for that purpose, and each successor
director so chosen shall hold office until the next election of the class for
which such directors shall have been chosen and until their successors shall
be elected and qualified.
3.6 MEETINGS OF DIRECTORS. The directors may hold their meetings and
may have an office and keep the books of the Corporation, except as otherwise
provided by statute, in such place or places within or without the State of
Delaware as the board of directors may from time to time determine or as
shall be specified in the notice of such meeting or duly executed waiver of
notice of such meeting.
3.7 FIRST MEETING. Each newly elected board of directors may hold its
first meeting for the purpose of organization and the transaction of
business, if a quorum is present, immediately after and at the same place as
the annual meeting of stockholders, and no notice of such meeting shall be
necessary.
3.8 ELECTION OF OFFICERS. At the first meeting of the board of
directors after each annual meeting of stockholders at which a quorum shall
be present, the board of directors shall elect the officers of the
Corporation.
3.9 REGULAR MEETINGS. Regular meetings of the board of directors shall
be held at such times and places as shall be designated from time to time by
resolution of the board of directors. Notice of such regular meetings shall
not be required.
3.10 SPECIAL MEETINGS. Special meetings of the board of directors
shall be held whenever called by the Chairman of the Board, the President, or
a majority of directors then in office.
3.11 NOTICE. The Secretary shall give notice of each
special meeting to each director at least 24 hours before the meeting.
Notice of any such meeting need not be given to any director who shall,
either before or after the meeting, submit a signed waiver of notice or who
shall attend such meeting without protesting, prior to or at its
commencement, the lack of notice to him.
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Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the board of directors need be specified in the notice or
waiver of notice of such meeting.
3.12 QUORUM; MAJORITY VOTE. At all meetings of the board of directors,
a majority of the directors fixed in the manner provided in these bylaws
shall constitute a quorum for the transaction of business. If at any meeting
of the board of directors there be less than a quorum present, a majority of
those present or any director solely present may adjourn the meeting from
time to time without further notice. Unless the act of a greater number is
required by law, the certificate of incorporation of the Corporation, or
these bylaws, the act of a majority of the directors present at a meeting at
which a quorum is in attendance shall be the act of the board of directors.
At any time that the certificate of incorporation of the Corporation provides
that directors elected by the holders of a class or series of stock shall
have more or less than one vote per director on any matter, every reference
in these bylaws to a majority or other proportion of directors shall refer to
a majority or other proportion of the votes of such directors.
3.13 PROCEDURE. At meetings of the board of directors, business
shall be transacted in such order as from time to time the board of directors
may determine. The Chairman of the Board, if such office has been filled,
and, if not or if the Chairman of the Board is absent or otherwise unable to
act, the President shall preside at all meetings of the board of directors.
In the absence or inability to act of either such officer, a chairman shall
be chosen by the board of directors from among the directors present. The
Secretary of the Corporation shall act as the secretary of each meeting of
the board of directors unless the board of directors appoints another person
to act as secretary of the meeting. The board of directors shall keep
regular minutes of its proceedings which shall be placed in the minute book
of the Corporation.
3.14 PRESUMPTION OF ASSENT. A director of the Corporation who is
present at the meeting of the board of directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
unless his dissent shall be entered in the minutes of the meeting or unless
he shall file his written dissent to such action with the person acting as
secretary of the meeting before the adjournment thereof or shall forward any
dissent by certified or registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent
shall not apply to a director who voted in favor of such action.
3.15 COMPENSATION. The board of directors shall have the authority to
fix the compensation, including fees and reimbursement of expenses, paid to
directors for attendance at regular or special meetings of the board of
directors or any committee thereof; provided, that nothing contained herein
shall be construed to preclude any director from serving the Corporation in
any other capacity or receiving compensation therefor.
ARTICLE FOUR: COMMITTEES
4.1 DESIGNATION. The board of directors may, by resolution adopted by
a majority of the entire board of directors, designate one or more committees.
4.2 NUMBER; QUALIFICATION; TERM. Each committee shall consist of one
or more directors appointed by resolution adopted by a majority of the entire
board of directors. The number of committee members may be increased or
decreased from time to time by resolution
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adopted by a majority of the entire board of directors. Each committee
member shall serve as such until the earliest of (i) the expiration of his
term as director, (ii) his resignation as a committee member or as a
director, or (iii) his removal as a committee member or as a director.
4.3 AUTHORITY. Each committee, to the extent expressly provided
in the resolution establishing such committee, shall have and may exercise
all of the authority of the board of directors in the management of the
business and property of the Corporation except to the extent expressly
restricted by law, the certificate of incorporation of the Corporation, or
these bylaws.
4.4 COMMITTEE CHANGES. The board of directors shall have
the power at any time to fill vacancies in, to change the membership of, and
to discharge any committee.
4.5 ALTERNATE MEMBERS OF COMMITTEES. The board of directors may
designate one or more directors as alternate members of any committee. Any
such alternate member may replace any absent or disqualified member at any
meeting of the committee. If no alternate committee members have been so
appointed to a committee or each such alternate committee member is absent or
disqualified, the member or members of such committee present at any meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the board of directors to
act at the meeting in the place of any such absent or disqualified member.
4.6 REGULAR MEETINGS. Regular meetings of any committee may be held
without notice at such time and place as may be designated from time to time
by the committee and communicated to all members thereof.
4.7 SPECIAL MEETINGS. Special meetings of any committee may be held
whenever called by any committee member. The committee member calling any
special meeting shall cause notice of such special meeting, including therein
the time and place of such special meeting, to be given to each committee
member at least two days before such special meeting. Neither the business
to be transacted at, nor the purpose of, any special meeting of any committee
need be specified in the notice or waiver of notice of any special meeting.
4.8 QUORUM; MAJORITY VOTE. At meetings of any committee, a majority of
the number of members designated by the board of directors shall constitute a
quorum for the transaction of business. If a quorum is not present at a
meeting of any committee, a majority of the members present may adjourn the
meeting from time to time, without notice other than an announcement at the
meeting, until a quorum is present. The act of a majority of the members
present at any meeting at which a quorum is in attendance shall be the act of
a committee, unless the act of a greater number is required by law, the
certificate of incorporation of the Corporation, or these bylaws.
4.9 MINUTES. Each committee shall cause minutes of its proceedings to
be prepared and shall report the same to the board of directors upon the
request of the board of directors. The minutes of the proceedings of each
committee shall be delivered to the Secretary of the Corporation for
placement in the minute books of the Corporation.
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4.10 COMPENSATION. Committee members may, by resolution of the board
of directors, be allowed a fixed sum and expenses of attendance, if any, for
attending any committee meetings or a stated salary.
4.11 RESPONSIBILITY. The designation of any committee and the
delegation of authority to it shall not operate to relieve the board of
directors or any director of any responsibility imposed upon it or such
director by law.
ARTICLE FIVE: NOTICE
5.1 METHOD. Whenever by statute, the certificate of incorporation of
the Corporation, or these bylaws, notice is required to be given to any
committee member, director, or stockholder and no provision is made as to how
such notice shall be given, personal notice shall not be required and any
such notice may be given (a) in writing, by mail, postage prepaid, addressed
to such committee member, director, or stockholder at his address as it
appears on the books or (in the case of a stockholder) the stock transfer
records of the Corporation, or (b) by any other method permitted by law
(including but not limited to overnight courier service, telegram, telex, or
telefax). Any notice required or permitted to be given by mail shall be
deemed to be delivered and given at the time when the same is deposited in
the United States mail as aforesaid. Any notice required or permitted to be
given by overnight courier service shall be deemed to be delivered and given
at the time delivered to such service with all charges prepaid and addressed
as aforesaid. Any notice required or permitted to be given by telegram,
telex, or telefax shall be deemed to be delivered and given at the time
transmitted with all charges prepaid and addressed as aforesaid.
5.2 WAIVER. Whenever any notice is required to be given to any
stockholder, director, or committee member of the Corporation by statute, the
certificate of incorporation of the Corporation, or these bylaws, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be equivalent to the
giving of such notice. Attendance of a stockholder, director, or committee
member at a meeting shall constitute a waiver of notice of such meeting,
except where such person attends for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE SIX: OFFICERS
6.1 NUMBER; TITLES; TERM OF OFFICE. The officers of the Corporation
shall be a President, a Secretary, and such other officers as the board of
directors may from time to time elect or appoint, including a Chairman of the
Board, one or more Vice Presidents (with each Vice President to have such
descriptive title, if any, as the board of directors shall determine), a
Treasurer and one or more Assistant Secretaries. Each officer shall hold
office until his successor shall have been duly elected and shall have
qualified, until his death, or until he shall resign or shall have been
removed in the manner hereinafter provided. Any two or more offices may be
held by the same person. None of the officers need be a stockholder or a
director of the Corporation or a resident of the State of Delaware.
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6.2 REMOVAL. Any officer or agent elected or appointed by the
board of directors may be removed by the board of directors whenever in its
judgment the best interest of the Corporation will be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of
the person so removed. Election or appointment of an officer or agent shall
not of itself create contract rights.
6.3 VACANCIES. Any vacancy occurring in any office of the Corporation
(by death, resignation, removal, or otherwise) may be filled by the board of
directors.
6.4 AUTHORITY. Officers shall have such authority and perform such
duties in the management of the Corporation as are provided in these bylaws
or as may be determined by resolution of the board of directors not
inconsistent with these bylaws.
6.5 COMPENSATION. The compensation, if any, of officers and
agents shall be fixed from time to time by the board of directors; provided,
however, that the board of directors may delegate the power to determine the
compensation of any officer and agent (other than the officer to whom such
power is delegated) to the Chairman of the Board or the President.
6.6 CHAIRMAN OF THE BOARD. The Chairman of the Board, if elected by
the board of directors, shall have such powers and duties as may be
prescribed by the board of directors. Such officer shall preside at all
meetings of the stockholders and of the board of directors. Such officer may
sign all certificates for shares of stock of the Corporation.
6.7 PRESIDENT. The President shall be the chief executive officer of
the Corporation and, subject to the board of directors, he shall have general
executive charge, management, and control of the properties and operations of
the Corporation in the ordinary course of its business, with all such powers
with respect to such properties and operations as may be reasonably incident
to such responsibilities. If the board of directors has not elected a
Chairman of the Board or in the absence or inability to act of the Chairman
of the Board, the President shall exercise all of the powers and discharge
all of the duties of the Chairman of the Board. As between the Corporation
and third parties, any action taken by the President in the performance of
the duties of the Chairman of the Board shall be conclusive evidence that
there is no Chairman of the Board or that the Chairman of the Board is absent
or unable to act.
6.8 VICE PRESIDENTS. Each Vice President shall have such powers and
duties as may be assigned to him by the board of directors, the Chairman of
the Board, or the President, and (in order of their seniority as determined
by the board of directors or, in the absence of such determination, as
determined by the length of time they have held the office of Vice President)
shall exercise the powers of the President during that officer's absence or
inability to act. As between the Corporation and third parties, any action
taken by a Vice President in the performance of the duties of the President
shall be conclusive evidence of the absence or inability to act of the
President at the time such action was taken.
6.9 TREASURER. The Treasurer shall have custody of the Corporation's
funds and securities, shall keep full and accurate account of receipts and
disbursements, shall deposit all monies and valuable effects in the name and
to the credit of the Corporation in such depository or depositories as may be
designated by the board of directors, and shall perform such other
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duties as may be prescribed by the board of directors, the Chairman of the
Board, or the President.
6.10 ASSISTANT TREASURERS. Each Assistant Treasurer shall have such
powers and duties as may be assigned to him by the board of directors, the
Chairman of the Board, or the President. The Assistant Treasurers (in the
order of their seniority as determined by the board of directors or, in the
absence of such a determination, as determined by the length of time they
have held the office of Assistant Treasurer) shall exercise the powers of the
Treasurer during that officer's absence or inability to act.
6.11 SECRETARY. Except as otherwise provided in these bylaws, the
Secretary shall keep the minutes of all meetings of the board of directors
and of the stockholders in books provided for that purpose, and he shall
attend to the giving and service of all notices. He may sign with the
Chairman of the Board or the President, in the name of the Corporation, all
contracts of the Corporation and affix the seal of the Corporation thereto.
He may sign with the Chairman of the Board or the President all certificates
for shares of stock of the Corporation, and he shall have charge of the
certificate books, transfer books, and stock papers as the board of directors
may direct, all of which shall at all reasonable times be open to inspection
by any director upon application at the office of the Corporation during
business hours. He shall in general perform all duties incident to the
office of the Secretary, subject to the control of the board of directors,
the Chairman of the Board, and the President.
6.12 ASSISTANT SECRETARIES. Each Assistant Secretary shall have such
powers and duties as may be assigned to him by the board of directors, the
Chairman of the Board, or the President. The Assistant Secretaries (in the
order of their seniority as determined by the board of directors or, in the
absence of such a determination, as determined by the length of time they
have held the office of Assistant Secretary) shall exercise the powers of the
Secretary during that officer's absence or inability to act.
ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS
7.1 CERTIFICATES FOR SHARES. Certificates for shares of stock of the
Corporation shall be in such form as shall be approved by the board of
directors or any exchange on which such shares are listed. The certificates
shall be signed by the Chairman of the Board or the President or a Vice
President and also by the Secretary or an Assistant Secretary or by the
Treasurer or an Assistant Treasurer. Any and all signatures on the
certificate may be a facsimile and may be sealed with the seal of the
Corporation or a facsimile thereof. If any officer, transfer agent, or
registrar who has signed, or whose facsimile signature has been placed upon,
a certificate has ceased to be such officer, transfer agent, or registrar
before such certificate is issued, such certificate may be issued by the
Corporation with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue. The certificates shall be consecutively
numbered and shall be entered in the books of the Corporation as they are
issued and shall exhibit the holder's name and the number of shares.
7.2 REPLACEMENT OF LOST OR DESTROYED CERTIFICATES. The board of
directors may direct a new certificate or certificates to be issued in place
of a certificate or certificates theretofore
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issued by the Corporation and alleged to have been lost or destroyed, upon
the making of an affidavit of that fact by the person claiming the
certificate or certificates representing shares to be lost or destroyed.
When authorizing such issue of a new certificate or certificates the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost or destroyed certificate or
certificates, or his legal representative, to advertise the same in such
manner as it shall require and/or to give the Corporation a bond with a
surety or sureties satisfactory to the Corporation in such sum as it may
direct as indemnity against any claim, or expense resulting from a claim,
that may be made against the Corporation with respect to the certificate or
certificates alleged to have been lost or destroyed.
7.3 TRANSFER OF SHARES. Shares of stock of the Corporation shall
be transferable only on the books of the Corporation by the holders thereof
in person or by their duly authorized attorneys or legal representatives.
Upon surrender to the Corporation or the transfer agent of the Corporation of
a certificate representing shares duly endorsed or accompanied by proper
evidence of succession, assignment, or authority to transfer, the Corporation
or its transfer agent shall issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction upon its
books.
7.4 REGISTERED STOCKHOLDERS. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder
in fact thereof and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part
of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by law.
7.5 REGULATIONS. The board of directors shall have the power and
authority to make all such rules and regulations as they may deem expedient
concerning the issue, transfer, and registration or the replacement of
certificates for shares of stock of the Corporation.
7.6 LEGENDS. The board of directors shall have the power and authority
to provide that certificates representing shares of stock bear such legends
as the board of directors deems appropriate to assure that the Corporation
does not become liable for violations of federal or state securities laws or
other applicable law.
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 DIVIDENDS. Subject to provisions of law and the certificate of
incorporation of the Corporation, dividends may be declared by the board of
directors at any regular or special meeting and may be paid in cash, in
property, or in shares of stock of the Corporation. Such declaration and
payment shall be at the discretion of the board of directors.
8.2 RESERVES. There may be created by the board of directors out of
funds of the Corporation legally available therefor such reserve or reserves
as the directors from time to time, in their discretion, consider proper to
provide for contingencies, to equalize dividends, or to repair or maintain
any property of the Corporation, or for such other purpose as the board of
directors shall consider beneficial to the Corporation, and the board of
directors may modify or abolish any such reserve in the manner in which it
was created.
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8.3 BOOKS AND RECORDS. The Corporation shall keep correct and complete
books and records of account, shall keep minutes of the proceedings of its
stockholders and board of directors and shall keep at its registered office
or principal place of business, or at the office of its transfer agent or
registrar, a record of its stockholders, giving the names and addresses of
all stockholders and the number and class of the shares held by each.
8.4 FISCAL YEAR. The fiscal year of the Corporation shall be fixed by
the board of directors; provided, that if such fiscal year is not fixed by
the board of directors and the selection of the fiscal year is not expressly
deferred by the board of directors, the fiscal year shall commence on October
1 and shall end on September 30 of each year.
8.5 SEAL. The seal of the Corporation shall be such as from time to
time may be approved by the board of directors.
8.6 RESIGNATIONS. Any director, committee member, or officer may resign
by so stating at any meeting of the board of directors or by giving written
notice to the board of directors, the Chairman of the Board, the President,
or the Secretary. Such resignation shall take effect at the time specified
therein or, if no time is specified therein, immediately upon its receipt.
Unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
8.7 SECURITIES OF OTHER CORPORATIONS. The Chairman of the Board, the
President, or any Vice President of the Corporation shall have the power and
authority to transfer, endorse for transfer, vote, consent, or take any other
action with respect to any securities of another issuer which may be held or
owned by the Corporation and to make, execute, and deliver any waiver, proxy,
or consent with respect to any such securities.
8.8 ACTION WITHOUT A MEETING.
(a) Unless otherwise provided in the certificate of
incorporation of the Corporation, any action required or permitted to be
taken by the stockholders of the Corporation must be effected at a duly
called annual or special meeting of such holders and may not be effected by
written consent.
(b) Unless otherwise restricted by the certificate of incorporation of
the Corporation or by these bylaws, any action required or permitted to be
taken at a meeting of the board of directors, or of any committee of the
board of directors, may be taken without a meeting if a consent or consents
in writing, setting forth the action so taken, shall be signed by all the
directors or all the committee members, as the case may be, entitled to vote
with respect to the subject matter thereof, and such consent shall have the
same force and effect as a vote of such directors or committee members, as
the case may be, and may be stated as such in any certificate or document
filed with the Secretary of State of the State of Delaware or in any
certificate delivered to any person. Such consent or consents shall be filed
with the minutes of proceedings of the board or committee, as the case may be.
8.9 INVALID PROVISIONS. If any part of these bylaws shall be held
invalid or inoperative for any reason, the remaining parts, so far as it is
possible and reasonable, shall remain valid and operative.
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8.10 MORTGAGES, ETC. With respect to any deed, deed of trust,
mortgage, or other instrument executed by the Corporation through its duly
authorized officer or officers, the attestation to such execution by the
Secretary of the Corporation shall not be necessary to constitute such deed,
deed of trust, mortgage, or other instrument a valid and binding obligation
against the Corporation unless the resolutions, if any, of the board of
directors authorizing such execution expressly state that such attestation is
necessary.
8.11 HEADINGS. The headings used in these bylaws have been inserted
for administrative convenience only and do not constitute matter to be
construed in interpretation.
8.12 REFERENCES. Whenever herein the singular number is used, the same
shall include the plural where appropriate, and words of any gender should
include each other gender where appropriate.
8.13 AMENDMENTS. Subject to the requirements of the certificate of
incorporation of the Corporation, these bylaws may be altered, amended, or
repealed or new bylaws may be adopted by the stockholders or by the board of
directors at any regular meeting of the stockholders or the board of
directors or at any special meeting of the stockholders or the board of
directors if notice of such alteration, amendment, repeal, or adoption of new
bylaws be contained in the notice of such special meeting.
The undersigned, the Secretary of the Corporation, hereby certifies that
the foregoing bylaws were adopted by unanimous consent by the directors of
the Corporation as of April 1, 1998.
/s/ DOUGLAS CHILDRESS
------------------------
Douglas Childress
Secretary
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SIXTH AMENDMENT TO CREDIT AGREEMENT AND ACKNOWLEDGMENT AND
AGREEMENT WITH RESPECT TO OTHER CREDIT DOCUMENTS
SIXTH AMENDMENT, dated as of December 4, 1998 (this "Amendment"),
among TRISTAR AEROSPACE CO. (f/k/a Maple Leaf Aerospace, Inc.) ("Parent"),
AEROSPACE ACQUISITION CORP. ("Holdings"), TRISTAR AEROSPACE, INC. (as successor
by merger with Tri-Star Aerospace Co.) ("TriStar"), TRISTAR AEROSPACE SARL, a
Wholly-Owned Subsidiary of TriStar organized and existing under the laws of
France, the financial institutions party to the Credit Agreement described
below (the "Banks") and BANKERS TRUST COMPANY, as Agent. All capitalized terms
used herein and not otherwise defined shall have the respective meanings
provided such terms in the Credit Agreement referred to below.
W I T N E S S E T H :
WHEREAS, Parent, Holdings, Tristar, the Banks and the Agent are parties to
a Credit Agreement, dated as of September 19, 1996 (as amended to the date
hereof, the "Credit Agreement");
WHEREAS, TriStar Aerospace SARL desires to borrow Revolving Loans under the
Credit Agreement and the Banks and the Agent have agreed, among other things, to
permit TriStar Aerospace SARL to borrow Revolving Loans under the Credit
Agreement subject to the terms and conditions set forth herein, in the other
Credit Documents and in the Credit Agreement (in each case as modified hereby);
and
WHEREAS, TriStar Aerospace SARL desires to become a party to the Credit
Agreement (as amended hereby) and the other parties hereto wish to amend the
Credit Agreement as herein provided;
NOW THEREFORE, it is agreed:
I. AMENDMENTS TO CREDIT AGREEMENT.
1. The first recital to the Credit Agreement is hereby amended by
replacing the reference therein to "the Borrower" with a reference to "the US
Borrower and the French Borrower".
2. Section 1.01(a) of the Credit Agreement is hereby amended by
replacing each reference therein to "the Borrower" with a reference to "the US
Borrower".
3. Section 1.01(b) of the Credit Agreement is hereby amended by
deleting said section in its entirety and inserting the following new clause (b)
in lieu thereof:
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(b) Subject to and upon the terms and conditions herein set
forth, each RL Bank severally agrees, at any time and from time to time on
and after (x) in the case of the US Borrower, the Initial Borrowing Date
and (y) in the case of the French Borrower, the Sixth Amendment Effective
Date, and in each case prior to the Revolving Loan Maturity Date, to make a
revolving loan or revolving loans (each, a "Revolving Loan" and,
collectively, the "Revolving Loans") to the US Borrower or the French
Borrower, which Revolving Loans (i) shall be made to the US Borrower and/or
the French Borrower on a several basis, (ii) shall be denominated in U.S.
Dollars, (iii) except as hereinafter provided, shall, at the option of the
respective Borrower, be incurred and maintained as and/or converted into
Base Rate Loans or Eurodollar Loans, PROVIDED that all Revolving Loans made
as part of the same Borrowing shall, unless otherwise specifically provided
herein, consist of Revolving Loans of the same Type, (iv) may be repaid and
reborrowed in accordance with the provisions hereof, (v) shall not exceed
for any Bank at any time outstanding that aggregate principal amount which,
when combined with such Bank's Percentage of all Swingline Loans then
outstanding and the Letter of Credit Outstandings (exclusive of Unpaid
Drawings relating to Letters of Credit which are repaid with the proceeds
of, and simultaneously with the incurrence of, the respective incurrence of
Revolving Loans) at such time, equals the Revolving Loan Commitment of such
Bank at such time and (vi) in the case of the French Borrower, shall not
exceed, when added to the then outstanding principal amount of Revolving
Loans and Swingline Loans incurred by the French Borrower, $5,000,000 in
aggregate principal amount outstanding at any time.
4. Section 1.01(c) of the Credit Agreement is hereby amended by
deleting said section in its entirety and inserting the following new clause (c)
in lieu thereof:
(c) Subject to and upon the terms and conditions herein set
forth, BTCo in its individual capacity agrees to make at any time and from
time to time on and after (x) in the case of the US Borrower, the Initial
Borrowing Date and (y) in the case of the French Borrower, the Sixth
Amendment Effective Date, and in each case prior to the Swingline Expiry
Date, a loan or loans to the US Borrower or the French Borrower (each, a
"Swingline Loan" and, collectively, the "Swingline Loans"), which Swingline
Loans (i) shall be made to the US Borrower and/or the French Borrower on a
several basis, (ii) shall be made and maintained as Base Rate Loans, (iii)
shall be denominated in U.S. Dollars, (iv) may be repaid and reborrowed in
accordance with the provisions hereof, (v) shall not exceed in aggregate
principal amount at any time outstanding, when combined with the aggregate
principal amount of all Revolving Loans then outstanding and the Letter of
Credit Outstandings (exclusive of Unpaid Drawings relating to Letters of
Credit which are repaid with the proceeds of, and simultaneously with the
incurrence of, the respective incurrence of Revolving Loans) at such time,
an amount equal to the Total Revolving Loan Commitment then in effect, (vi)
shall not exceed in aggregate principal amount at any time outstanding for
all Swingline Loans the Maximum Swingline Amount and (vii) in the case of
the French Borrower, shall not exceed, when added to the then outstanding
principal amount of Revolving Loans and Swingline Loans incurred by the
French Borrower, $5,000,000 in aggregate principal amount outstanding at
any time. BTCo shall not be obligated to make any Swingline Loans at a
time when a Bank Default
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exists unless BTCo has entered into arrangements satisfactory to it and
the respective Borrower to eliminate BTCo's risk with respect to the
Defaulting Bank's or Banks' participation in such Swingline Loans,
including by cash collateralizing such Defaulting Bank's or Banks'
Percentage of the outstanding Swingline Loans. BTCo will not make
a Swingline Loan after it has received written notice from any Borrower
or the Required Banks stating that a Default or an Event of Default
exists until such time as BTCo shall have received a written notice
of (i) rescission of such notice from the party or parties originally
delivering the same or (ii) a waiver of such Default or Event of Default
from the Required Banks.
5. Section 1.01(d) of the Credit Agreement is hereby amended by
deleting said section in its entirety and inserting the following new clause (c)
in lieu thereof:
(a) On any Business Day, BTCo may, in its sole discretion, give
notice to the RL Banks that its outstanding Swingline Loans shall be funded
with a Borrowing of Revolving Loans (PROVIDED that each such notice shall
be deemed to have been automatically given upon the occurrence of a Default
or an Event of Default under Section 10.05 or upon the exercise of any of
the remedies provided in the last paragraph of Section 10), in which case a
Borrowing of Revolving Loans constituting Base Rate Loans (each such
Borrowing, a "Mandatory Borrowing") shall be made by either or both of the
Borrowers, according to their respective Swingline Loans outstanding at
such time, on the immediately succeeding Business Day by all RL Banks PRO
RATA based on each RL Bank's Percentage, and the proceeds thereof shall be
applied directly to repay BTCo for such outstanding Swingline Loans of the
respective Borrowers. Each RL Bank hereby irrevocably agrees to make Base
Rate Loans upon one Business Day's notice pursuant to each Mandatory
Borrowing in the amount and in the manner specified in the preceding
sentence and on the date specified in writing by BTCo notwithstanding (i)
that the amount of the Mandatory Borrowing may not comply with the Minimum
Borrowing Amount otherwise required hereunder, (ii) whether any conditions
specified in Section 5 or 6 are then satisfied, (iii) whether a Default or
an Event of Default has occurred and is continuing, (iv) the date of such
Mandatory Borrowing and (v) the amount of the Total Revolving Loan
Commitment at such time. In the event that any Mandatory Borrowing cannot
for any reason be made on the date otherwise required above (including,
without limitation, as a result of the commencement of a proceeding under
the Bankruptcy Code in respect of any Borrower), each RL Bank (other than
BTCo) hereby agrees that it shall forthwith purchase from BTCo (without
recourse or warranty) such assignment of the outstanding Swingline Loans as
shall be necessary to cause the RL Banks to share in such Swingline Loans
ratably based upon their respective Percentages (determined before giving
effect to any termination of the Revolving Loan Commitments pursuant to the
last paragraph of Section 10), PROVIDED that (x) all interest payable on
the Swingline Loans shall be for the account of BTCo until the date the
respective assignment is purchased and, to the extent attributable to the
purchased assignment, shall be payable to the RL Bank purchasing same from
and after such date of purchase and (y) at the time any purchase of
assignments pursuant to this sentence is actually made, the purchasing RL
Bank shall be required to pay BTCo interest on the principal amount of
assignment purchased for each day from and including the day upon which the
Mandatory Borrowing
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would otherwise have occurred to but excluding the date of payment for
such assignment, at the rate otherwise applicable to Revolving Loans
maintained as Base Rate Loans hereunder for each day thereafter.
6. Section 1.01 is further amended by inserting the following new
clause (e) immediately following clause (d) thereof:
(e) On the Sixth Amendment Effective Date, all then outstanding
Revolving Loans shall be deemed to be repaid in full and reborrowed in
accordance with the terms of the amended Revolving Loan Commitments of the
RL Banks, PROVIDED that, notwithstanding anything to the contrary contained
in Section 1.11, each RL Bank agrees (in each case as to itself only) to
waive payment by the US Borrower of all breakage costs incurred as a result
of such repayment.
7. Section 1.03(a) of the Credit Agreement is hereby amended by (i)
replacing the reference to "the Borrower" therein with a reference to "a
Borrower", (ii) inserting the phrase " by the respective Borrower requesting
such proposed Borrowing" immediately following the reference therein to
"appropriately completed" and (iii) inserting the phrase "to be made to the US
Borrower," immediately following the reference to "Borrowing of Revolving Loans"
appearing in clause (v) thereof.
8. Section 1.03(b) of the Credit Agreement is hereby amended by (i)
replacing the reference in clause (i) thereof to "the Borrower" with a
reference to "a Borrower" and (ii) replacing the reference in clause (ii)
thereof to "the Borrower" with a reference to "the respective Borrower".
9. Sections 1.03(c) and 1.04 of the Credit Agreement are hereby
amended by replacing each reference therein to "the Borrower" with a reference
to "the respective Borrower".
10. Section 1.05(a) of the Credit Agreement is hereby amended by
deleting said clause (a) in its entirety and inserting the following new clause
(a) in lieu thereof:
(a) the US Borrower's and the French Borrower's respective
obligations to pay the principal of, and interest on, all the Loans made to
it by each Bank shall be evidenced (i) if Term Loans, a promissory note
executed by the US Borrower substantially in the form of Exhibit B-1 with
blanks appropriately completed in conformity herewith (each, a "Term Note"
and, collectively, the "Term Notes"), (ii) if Revolving Loans, by
promissory notes executed by the respective Borrower substantially in the
form of Exhibit B-2 with blanks appropriately completed in conformity
herewith (each, a "Revolving Note" and, collectively, the "Revolving
Notes") and (iii) if Swingline Loans, by promissory notes executed by the
respective Borrower substantially in the form of Exhibit B-3 with blanks
appropriately completed in conformity herewith (each a "Swingline Note"
and, collectively, the "Swingline Notes").
11. Section 1.05(b) of the Credit Agreement is hereby amended by
replacing all references therein to "the Borrower" with references to "the US
Borrower".
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12. Section 1.05(c) of the Credit Agreement is hereby amended by
deleting said section (c) in its entirety and inserting the following new clause
(c) in lieu thereof:
(c) (i) The Revolving Note issued to each RL Bank by the US
Borrower shall (t) be executed by the US Borrower, (u) be payable to such
Bank or its registered assigns and be dated the Initial Borrowing Date, (v)
be in a stated principal amount equal to the Revolving Loan Commitment of
such Bank and be payable in the principal amount of the outstanding
Revolving Loans made to the US Borrower evidenced thereby, (w) mature on
the Revolving Loan Maturity Date, (x) bear interest as provided in the
appropriate clause of Section 1.08 in respect of the Base Rate Loans and
Eurodollar Loans, as the case may be, evidenced thereby, (y) be subject to
voluntary prepayment as provided in Section 4.01 and mandatory repayment as
provided in Section 4.02 and (z) be entitled to the benefits of this
Agreement and the other Credit Documents and (ii) the Revolving Note issued
to each RL Bank by the French Borrower on the Sixth Amendment Effective
Date shall (t) be executed by the French Borrower, (u) be payable to such
Bank or its registered assigns and be dated the Sixth Amendment Effective
Date, (v) be in a stated principal amount equal to such Bank's Percentage
of $5,000,000 and be payable in the principal amount of the outstanding
Revolving Loans made to the French Borrower evidenced thereby, (w) mature
on the Revolving Loan Maturity Date, (x) bear interest as provided in the
appropriate clause of Section 1.08 in respect of the Base Rate Loans and
Eurodollar Loans, as the case may be, evidenced thereby, (y) be subject to
voluntary prepayment as provided in Section 4.01 and mandatory repayment as
provided in Section 4.02 and (z) be entitled to the benefits of this
Agreement and the other Credit Documents.
13. Section 1.05(d) of the Credit Agreement is hereby amended by
deleting said section (d) in its entirety and inserting the following new clause
(d) in lieu thereof:
(d) (i) The Swingline Note issued to BTCo by the US Borrower
shall (t) be executed by the US Borrower, (u) be payable to BTCo or its
registered assigns and be dated the Initial Borrowing Date, (v) be in a
stated principal amount equal to the Maximum Swingline Amount and be
payable in the principal amount of the outstanding Swingline Loans made to
the US Borrower evidenced thereby, (w) mature on the Swingline Expiry Date,
(x) bear interest as provided in Section 1.08 in respect of the Base Rate
Loans evidenced thereby, (y) be subject to voluntary prepayment as provided
in Section 4.01 and mandatory repayment as provided in Section 4.02 and (z)
be entitled to the benefits of this Agreement and the other Credit
Documents and (ii) the Swingline Note issued to BTCo by the French Borrower
shall (t) be executed by the French Borrower, (u) be payable to BTCo or its
registered assigns and be dated the Sixth Amendment Effective Date, (v) be
in a stated principal amount equal to the Maximum Swingline Amount and be
payable in the principal amount of the outstanding Swingline Loans made to
the French Borrower evidenced thereby, (w) mature on the Swingline Expiry
Date, (x) bear interest as provided in Section 1.08 in respect of the Base
Rate Loans evidenced thereby, (y) be subject to voluntary prepayment as
provided in Section 4.01 and mandatory repayment as provided in Section
4.02 and (z) be entitled to the benefits of this Agreement and the other
Credit Documents.
5
<PAGE>
14. Section 1.06 of the Credit Agreement is hereby amended by (i)
replacing each reference to "The Borrower" or "the Borrower" appearing therein
with a reference to "The respective Borrower" or "the respective Borrower",
respectively, and (ii) inserting the word "its" immediately prior to the first
reference therein to "Loans".
15. Section 1.07 of the Credit Agreement is hereby amended by
replacing the reference therein to "the Borrower" with a reference to "the
respective Borrower".
16. Section 1.08(f) of the Credit Agreement is hereby amended by
replacing the reference therein to "the Borrower" with a reference to "the
respective Borrower".
17. Section 1.09 of the Credit Agreement is hereby amended by (i)
replacing the first reference therein to "the Borrower" with a reference to "a
Borrower" and (ii) replacing all subsequent references therein to "the Borrower"
with references to "the respective Borrower".
18. Section 1.10 of the Credit Agreement is hereby amended by (i)
replacing the first reference therein to "the Borrower" with a reference to
"each Borrower" and (ii) replacing all subsequent references therein to "the
Borrower" with references to "the respective Borrower".
19. Section 1.11 of the Credit Agreement is hereby amended by (i)
replacing the word "The" at the beginning thereof with the word "Each", (ii)
replacing each remaining reference therein to "the Borrower" with references to
"the respective Borrower" and (iii) inserting the phrase "in respect of Loans
made to such Borrower or Notices of Borrowing or Notices of Conversion delivered
by such Borrower" immediately prior to the colon preceding clause (i) thereof.
20. Section 1.12 of the Credit Agreement is hereby amended by (i)
replacing the first reference therein to "the Borrower" with a reference to "the
US Borrower" and (ii) replacing the remaining reference to "the Borrower" with a
reference to "any Borrower".
21. Section 1.13 of the Credit Agreement is hereby amended by (i)
replacing the first reference therein to "the Borrower" with a reference to "a
Borrower", (ii) replacing the next two subsequent references therein to "the
Borrower" with references to "the US Borrower", (iii) replacing the reference to
"the Borrower" in clause (ii) thereof with a reference to "each Borrower" and
(iv) replacing the reference to "the Borrower" appearing in the last sentence
thereof with a reference to "the respective Borrower or Borrowers".
22. Section 2 of the Credit Agreement is hereby amended by replacing
all references therein to "the Borrower" and "the Borrower's" with a references
to "the US Borrower" and "the US Borrower's", respectively.
23. Section 3 of the Credit Agreement is hereby amended by replacing
all references therein to "The Borrower", "the Borrower" and "the Borrower's"
with references to "The US Borrower", "the US Borrower" and "the US Borrower's",
respectively.
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<PAGE>
24. Section 3 of the Credit Agreement is hereby further amended by
deleting the schedule appearing in Section 3.03(c) in its entirety and replacing
it with the following new schedule:
<TABLE>
<CAPTION>
Scheduled Commitment Amount
Reduction Date ------
--------------
<S> <C>
September 19, 2000 $15,000,000
September 19, 2001 $35,000,000
</TABLE>
25. Section 4.01(a) of the Credit Agreement is hereby amended by (i)
replacing the first reference therein to "The Borrower" with a reference to
"Each Borrower", (ii) replacing all subsequent references therein to "the
Borrower" and "the Borrower's" with references to "such Borrower" and "such
Borrower's", respectively, (iii) replacing the first reference therein to "the
Loans" with a reference to "the Loans made to it" and (iv) inserting the phrase
", in the case of the US Borrower," immediately following the reference to
"Swingline Loans and/or" appearing in clause (a) thereof.
26. Section 4.01(b) of the Credit Agreement is hereby amended by
replacing the reference therein to "the Borrower shall" with a reference to "the
US Borrower and the French Borrower shall together".
27. Section 4.02(a) of the Credit Agreement is hereby amended by (i)
replacing the first reference therein to "the Borrower" with a reference to "the
US Borrower and/or the French Borrower" and (ii) replacing all subsequent
references therein to "the Borrower" with references to "the US Borrower".
28. Sections 4.02(b) and (c) of the Credit Agreement are hereby
amended by replacing all references therein to "the Borrower" with references to
"the US Borrower"
29. Section 4.02(f) of the Credit Agreement is hereby amended by (i)
replacing all references to "the Borrower" appearing in clauses (x) and (y)(a)
through (c) of said section with references to "the US Borrower", (ii) replacing
the first reference in clause (y)(d) thereof to "the Borrower" with a reference
to "the US Borrower", (iii) replacing the second reference in clause (y)(d)
thereof to "the Borrower" with a reference to "the US Borrower and its
Subsidiaries", (iv) replacing the third reference in clause (y)(d) thereof to
"the Borrower" with a reference to "each Borrower", (v) replacing the fourth
reference in clause (y)(d) thereof to "the Borrower" with a reference to "such
Borrower" and (vi) replacing all subsequent references therein to "the Borrower"
with references to "the US Borrower".
30. Section 4.02(j) of the Credit Agreement is hereby amended by
(i) replacing the reference therein to "the Borrower may designate" with a
reference to "the US Borrower and/or the French Borrower may designate among
themselves which of their respective Loans are to be repaid (in the case of a
repayment of Revolving Loans), ", (ii) inserting the phrase "of such
Borrower" immediately prior to the reference to "of the respective Tranche"
appearing in clause
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<PAGE>
(i) thereof, and (iii) replacing the reference to "the Borrower" appearing in
clause (iii) thereof with a reference to "the respective Borrower".
31. Section 4.02 of the Credit Agreement is hereby further amended by
inserting the following new clause (l) immediately following clause (k) thereof:
(l) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, on any day that the French Borrower shall cease to be a
Wholly-Owned Subsidiary of Parent, the French Borrower shall be required
to repay in full on such date all then outstanding Revolving Loans and
Swingline Loans made to the French Borrower.
32. Section 4.04(a) of the Credit Agreement is hereby amended by (i)
replacing the first reference therein to "the Borrower" with a reference to
"each Borrower" and (ii) replacing all subsequent references therein to "the
Borrower" with references to "the respective Borrower".
33. Section 4.04(b) of the Credit Agreement is hereby amended by (i)
replacing each reference to "the Borrower" appearing in the first and second
sentences thereof with a reference to "the US Borrower", (ii) replacing the
first reference to "the Borrower" appearing in clause (x) of the third sentence
thereof with a reference to "either Borrower", (iii) replacing the second
reference to "the Borrower" appearing in clause (x) of the third sentence
thereof with a reference to "the US Borrower", (iv) replacing the reference to
"the Borrower shall not" appearing in clause (y) of the third sentence thereof
with a reference to "no Borrower shall", (v) replacing the second and third
references to "the Borrower" appearing in clause (y) of the third sentence
thereof with a reference to "the US Borrower" and (vi) replacing the reference
to "the Borrower" appearing in the fourth sentence thereof with a reference to
"each Borrower".
34. Section 5 of the Credit Agreement is hereby amended by replacing
the reference to "the Borrower" appearing in the introductory paragraph thereof
with a reference to "any Borrower".
35. Section 6.02 of the Credit Agreement is hereby amended by
replacing the reference therein to "the Borrower" with a reference to "either
Borrower".
36. Section 6 of the Credit Agreement is hereby further amended by
adding the following new Section 6.05 immediately after Section 6.04, but before
the last paragraph of Section 6:
"6.05 SPECIAL CONDITION REGARDING REVOLVING LOANS AND SWINGLINE LOANS
TO FRENCH BORROWER. At the time of the making of each Revolving Loan
(excluding Mandatory Borrowings) and each Swingline Loan to the French
Borrower, the French Borrower shall be a Wholly-Owned Subsidiary of
Parent."
37. Section 6 of the Credit Agreement is hereby further amended by
replacing the reference to "the Borrower" appearing in the final paragraph
thereof with a reference to "the US Borrower and, in the case of a Borrowing of
Revolving Loans or Swingline Loans to the French Borrower, the French Borrower".
8
<PAGE>
38. Section 7 of the Credit Agreement is hereby amended by replacing
the reference to "and the Borrower" appearing in the introductory paragraph
thereof with a reference to ", the US Borrower and, in the case of a Borrowing
of Revolving Loans or Swingline Loans to the French Borrower, the French
Borrower".
39. Section 7.05(b) of the Credit Agreement is hereby amended by
replacing the reference to "the Borrower and its Subsidiaries" appearing in the
final paragraph thereof with a reference to "the respective Borrower and its
Subsidiaries".
40. Section 7.13 (ii) of the Credit Agreement is hereby amended by
replacing the reference therein to "the Borrower's" with a reference to "the US
Borrower's".
41. Section 7.14(d) of the Credit Agreement is hereby amended by
replacing the reference therein to "the Borrower" with a reference to "the US
Borrower".
42. Section 8 of the Credit Agreement is hereby amended by replacing
the reference to "the Borrower" appearing in the introductory paragraph thereof
with a reference to "each Borrower".
43. Section 8.01(k) of the Credit Agreement is hereby amended by
replacing the reference therein to "the Borrower" with a reference to "the US
Borrower".
44. Section 8.02 of the Credit Agreement is hereby amended by
replacing all references therein to "the Borrower" with references to "the US
Borrower".
45. Section 8.03 of the Credit Agreement is hereby amended by (i)
replacing the first and third references therein to "the Borrower" with a
reference to "each Borrower" and (ii) replacing the second reference therein to
"the Borrower" with a reference to "the US Borrower".
46. Section 8.04 of the Credit Agreement is hereby amended by
replacing the reference therein to "the Borrower" with a reference to "each
Borrower".
47. Section 8.05 of the Credit Agreement is hereby amended by
replacing the reference therein to "the Borrower" with a reference to "each
Borrower".
48. Section 8.06 of the Credit Agreement is hereby amended by
replacing the reference therein to "the Borrower" with a reference to "each
Borrower".
49. Section 8.07(a) of the Credit Agreement is hereby amended by
replacing each reference therein to "the Borrower" with a reference to "each
Borrower".
50. Section 8.07(b) of the Credit Agreement is hereby amended by
replacing the reference therein to "the Borrower" with a reference to "the US
Borrower".
51. Section 8.08 of the Credit Agreement is hereby amended by
deleting the reference therein to "Borrower,".
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<PAGE>
52. Section 8.09 of the Credit Agreement is hereby amended by
replacing the reference therein to "the Borrower" with a reference to "each
Borrower".
53. Section 8.11(b) of the Credit Agreement is hereby amended by
replacing the reference therein to "the Borrower" with a reference to "the US
Borrower".
54. Section 8.12 of the Credit Agreement is hereby amended by
replacing each reference therein to "the Borrower" with a reference to "the US
Borrower".
55. Section 8.14 of the Credit Agreement is hereby amended by
replacing each reference therein to "the Borrower" with a reference to "the US
Borrower".
56. Section 8.15 of the Credit Agreement is hereby amended by
replacing the reference therein to "the Borrower" with a reference to "each
Borrower".
57. Section 8.16 of the Credit Agreement is hereby amended by
replacing the reference therein to "the Borrower" with a reference to "each
Borrower".
58. Section 8.18 of the Credit Agreement is hereby amended by
replacing the reference therein to "the Borrower" with a reference to "the US
Borrower".
59. Section 8.19 of the Credit Agreement is hereby amended by
replacing each reference therein to "The Borrower" or "the Borrower" with a
reference to "The US Borrower" or "the US Borrower", respectively.
60. Section 9 of the Credit Agreement is hereby amended by replacing
the reference to "the Borrower" appearing in the introductory paragraph thereof
with a reference to "each Borrower".
61. Section 9.01(b) of the Credit Agreement is hereby amended by
deleting said section (b) in its entirety and inserting the following new clause
(b) in lieu thereof:
(b) Notwithstanding the foregoing, neither Parent nor Holdings
will engage in any business other than its ownership of the capital stock
of Holdings or the US Borrower, respectively, and those obligations of
officers and employees of Parent permitted by Section 9.05(h) and having
those liabilities which it is responsible for (or permitted to incur) under
this Agreement and the other Documents to which it is a party; provided
that each of Parent and Holdings may engage in those activities that are
incidental to (1) the maintenance of its corporate existence in compliance
with applicable law, (2) legal, tax and accounting matters in connection
with any of the foregoing activities and (3) the entering into, and
performance of its obligations under, this Agreement and the other
Documents to which it is a party.
62. Section 9.02 of the Credit Agreement is hereby amended by (i)
replacing each reference therein to "the Borrower" with a reference to "the US
Borrower" and (ii) deleting clause (l) thereof in its entirety and inserting the
following new clause (l) in lieu thereof:
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<PAGE>
(l) so long as no Default or Event of Default exists or would result
therefrom (including, without limitation, pursuant to Section 10.10),
Parent may purchase, in the open market or otherwise, up to $20,000,000 in
the aggregate of its common stock.
63. Section 9.03 of the Credit Agreement is hereby amended by
replacing each reference therein to "the Borrower" with a reference to "the US
Borrower".
64. Section 9.04 of the Credit Agreement is hereby amended by
replacing each reference therein to "the Borrower" with a reference to "the US
Borrower".
65. Sections 9.05(b), (c), (f), (g), (j), (l), (m) and (n) of the
Credit Agreement are hereby amended by replacing each reference therein to "the
Borrower" with a reference to "the US Borrower".
66. Section 9.05(i) of the Credit Agreement is hereby amended by
deleting said section (i) in its entirety and inserting the following new
section (i) in lieu thereof:
(i) Parent and Holdings may make equity contributions, directly in
the case of Holdings, or by way of downstream contributions in the case of
Parent, to the capital of the US Borrower;
67. Section 9.06 of the Credit Agreement is hereby amended by (i)
replacing each reference to "the Borrower" appearing in clause (i) thereof with
a reference to "the US Borrower" and (ii) deleting clauses (iii), (iv) and (v)
thereof in their entirety and inserting the following new clauses (iii), (iv),
(v) and (vi) in lieu thereof:
(iii) so long as no Default or Event of Default then exists or
would result therefrom, the US Borrower may pay cash Dividends to Holdings,
which in turn shall pay such amounts to Parent, so long as the cash
proceeds thereof are promptly used by Parent for the purposes described in
clause (ii) or (v) of this Section 9.06;
(iv) cash Dividends may be paid to Holdings and/or Parent so long
as the proceeds thereof are promptly used by the ultimate recipient thereof
to pay operating expenses in the ordinary course of business (including,
without limitation, professional fees and expenses) and other similar
corporate overhead costs and expenses, PROVIDED, that the aggregate amount
of cash Dividends paid pursuant to this clause (iv) (calculated without
duplication in the case of amounts not Dividended to Holdings or the
Parent) shall at no time during any fiscal year of the US Borrower exceed
$200,000;
(v) cash Dividends may be paid to Parent and Holdings in the
amounts and at the times of any payment by the ultimate such recipient in
respect of its taxes (or taxes of the consolidated group of which it is
parent), PROVIDED, that (x) the amount of cash Dividends paid pursuant to
this clause (v) to enable Parent or Holdings to pay taxes at any time shall
not exceed the amount of such taxes owing by the ultimate such recipient at
such time for the respective period and (y) any refunds received by Parent
or Holdings shall promptly be returned by such Person to the US Borrower;
and
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<PAGE>
(vi) so long as no Default or Event of Default exists or would
result therefrom, Parent may purchase shares of common stock of Parent to
the extent permitted by Section 9.02(l).
68. Section 9.07 of the Credit Agreement is hereby amended by (i)
replacing each reference therein to "the Borrower" with a reference to "the US
Borrower", (ii) replacing the word "and" at the end of clause (iv) thereof with
a semi-colon and (iii) inserting the following new clause (vi) immediately
following clause (v) thereof: " and (vi) the purchase by Parent of its common
stock to the extent permitted by Section 9.02(l)".
69. Section 9.08 of the Credit Agreement is hereby amended by
replacing each reference therein to "the Borrower" with a reference to "the US
Borrower".
70. Section 9.14 of the Credit Agreement is hereby amended by
replacing each reference therein to "the Borrower" with a reference to "the US
Borrower"
71. Section 9.15 of the Credit Agreement is hereby amended by
replacing the first reference therein to "the Borrower" with a reference to "the
US Borrower".
72. Section 10.01 of the Credit Agreement is hereby amended by
replacing the reference therein to "The Borrower" with a reference to "Either
Borrower"
73. Section 10 of the Credit Agreement is hereby further amended by
deleting the final paragraph following Section 10.10 thereof in its entirety and
inserting the following new paragraph in lieu thereof:
then, and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing, the Agent shall, upon the written request
of the Required Banks, by written notice to the US Borrower, take any or
all of the following actions, without prejudice to the rights of the Agent
or any Bank to enforce its claims against any Guarantor or either Borrower,
except as otherwise specifically provided for in this Agreement (PROVIDED,
that if an Event of Default specified in Section 10.05 shall occur with
respect to either Borrower, the result which would occur upon the giving of
written notice by the Agent as specified in clauses (i) and (ii) below
shall occur automatically without the giving of any such notice): (i)
declare the Total Commitment terminated, whereupon the Commitment of each
Bank shall forthwith terminate immediately and any Commitment Fees shall
forthwith become due and payable without any other notice of any kind; (ii)
declare the principal of and any accrued interest in respect of all Loans
and all Obligations owing hereunder (including Unpaid Drawings) to be,
whereupon the same shall become, forthwith due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by each Borrower; (iii) enforce, as Collateral Agent (or
direct the Collateral Agent to enforce), any or all of the Liens and
security interests created pursuant to the Security Documents; (iv)
terminate any Letter of Credit which may be terminated in accordance with
its terms; (v) direct the US Borrower to pay (and the US Borrower hereby
agrees upon receipt of such notice, or upon the occurrence of any Event of
Default specified in Section 10.05, to pay) to the Collateral Agent at the
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<PAGE>
Payment Office such additional amounts of cash, to be held as security for
the US Borrower's reimbursement obligations in respect of Letters of Credit
then outstanding, equal to the aggregate Stated Amount of all Letters of
Credit then outstanding; and (vi) apply any cash collateral as provided in
Section 4.02.
74. Section 11 of the Credit Agreement is hereby amended by (i)
deleting the following definitions in their entirety:
Authorized Officer
Borrower
Borrowing
Credit Party
Guaranteed Obligations
Material Adverse Effect
Parent
Permitted Acquisition
Security Agreement Collateral
Security Documents
, (ii) inserting the following new definitions in appropriate alphabetical
order:
"Authorized Officer" shall mean, with respect to (i) delivering
Notices of Borrowing, Notices of Conversion and similar notices, any
treasurer or other financial officer of the respective Borrower delivering
such notice, (ii) delivering Letter of Credit Requests, financial
information and officer's certificates pursuant to this Agreement, any
treasurer or other financial officer of the US Borrower and (iii) any other
matter in connection with this Agreement or any other Credit Document, any
officer (or a person or persons so designated by any two officers) of
Parent or the US Borrower, in each case to the extent reasonably acceptable
to the Agent.
"Borrower" shall mean (i) at any time prior to the Sixth Amendment
Effective Date and prior to the merger of Tri-Star Aerospace Co. with and
into Tri-Star Holdings, with Tri-Star Holdings emerging as the surviving
corporation, Tri-Star Aerospace Co., (ii) at any time thereafter and prior
to the Sixth Amendment Effective Date, Tri-Star Holdings and (iii) at any
time after the Sixth Amendment Effective Date, each of the US Borrower and
the French Borrower; PROVIDED that, for purposes of Section 13.12 only,
each reference to "the Borrower" appearing therein shall be deemed a
reference to "the US Borrower".
"Borrowing" shall mean and include (i) the borrowing of Swingline
Loans by a single Borrower from BTCo on a given date and (ii) the borrowing
of one Type of Loan pursuant to a single Tranche by a single Borrower from
all of the Banks having Commitments with respect to such Tranche on a PRO
RATA basis on a given date (or resulting from conversions on a given date),
having in the case of Eurodollar Loans the same Interest Period; PROVIDED,
that Base Rate Loans incurred pursuant to Section 1.10(b) shall be
considered part of any related Borrowing of Eurodollar Loans.
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<PAGE>
"Credit Party" shall mean Parent, Holdings, the US Borrower, the
French Borrower and each Subsidiary Guarantor.
"French Borrower" shall mean TriStar Aerospace SARL, a corporation
organized and existing under the laws of France.
"French Pledge Agreement" shall have the meaning provided in the Sixth
Amendment.
"French Security Agreement" shall have the meaning provided in the
Sixth Amendment.
"Guaranteed Obligations" shall mean (i) the principal and interest on
each Note issued by each Borrower to each Bank, and Loans made, under this
Agreement and all reimbursement obligations and Unpaid Drawings with
respect to Letters of Credit, together with all the other obligations
(including obligations which, but for the automatic stay under Section
362(a) of the Bankruptcy Code, would become due) and liabilities
(including, without limitation, indemnities, fees and interest thereon) of
each Borrower to such Bank, the Agent and the Collateral Agent now existing
or hereafter incurred under, arising out of or in connection with this
Agreement or any other Credit Document and the due performance and
compliance with all the terms, conditions and agreements contained in the
Credit Documents by each Borrower and (ii) all obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities of each Borrower or any
of its Subsidiaries owing under any Interest Rate Protection Agreement or
Other Hedging Agreement entered into by such Borrower or any of its
Subsidiaries with any Bank or any affiliate thereof (even if such Bank
subsequently ceases to be a Bank under this Agreement for any reason) so
long as such Bank or affiliate participate in such Interest Rate Protection
Agreement or Other Hedging Agreement, and their subsequent assigns, if any,
whether now in existence or hereafter arising, and the due performance and
compliance with all terms, conditions and agreements contained therein.
"Material Adverse Effect" shall mean a material adverse effect on the
business, properties, assets, liabilities, condition (financial or
otherwise) or prospects of Parent, Holdings, the US Borrower, the US
Borrower and its Subsidiaries taken as a whole, Holdings and its
Subsidiaries taken as a whole or Parent and its Subsidiaries taken as a
whole; PROVIDED that for purposes of satisfying the conditions precedent to
the extensions of credit on Initial Borrowing Date and the representations
and warranties made pursuant to the Credit Documents on the Initial
Borrowing Date, it shall also constitute a Material Adverse Effect if there
has been a material adverse effect on the business, properties, assets,
liabilities, condition (financial or otherwise) or prospects of either
Tri-Star Aerospace or the Aviall Business.
"Parent" shall have the meaning provided in the first paragraph of
this Agreement, or, after such corporation's name is changed pursuant to
the events described in the
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<PAGE>
Fourth Amendment to this Agreement, dated February 9, 1998, Parent shall
mean TriStar Aerospace Co., a Delaware corporation.
"Permitted Acquisition" shall mean the acquisition by the US Borrower
of assets constituting a business, division or product line of any Person
not already a Subsidiary of the US Borrower or of 100% of the capital stock
of any such Person, which Person shall, as a result of such acquisition,
become a Domestic Subsidiary of the US Borrower, PROVIDED that (A) the
consideration paid by the US Borrower consists solely of cash (including
proceeds of Revolving Loans), the issuance of Indebtedness otherwise
permitted in Section 9.04, the issuance of Common Stock of Parent to the
extent no Default or Event of Default exists pursuant to Section 10.10 or
would result therefrom and the assumption/acquisition of any Permitted
Acquired Debt (calculated at face value) relating to such business,
division, product line or Person which is permitted to remain outstanding
in accordance with the requirements of Section 9.04, (B) in the case of the
acquisition of 100% of the capital stock of any Person, such Person shall
own no capital stock of any other Person unless either (x) such Person owns
100% of the capital stock of such other Person or (y) (1) such Person
and/or its Wholly-Owned Subsidiaries own at least 80% of the consolidated
assets of such Person and its Subsidiaries and (2) any non-Wholly Owned
Subsidiary of such Person was non-Wholly Owned prior to the date of such
Permitted Acquisition of such Person, (C) substantially all of the
business, division or product line acquired pursuant to the respective
Permitted Acquisition, or the business of the Person acquired pursuant to
the respective Permitted Acquisition and its Subsidiaries taken as a whole,
is in the United States and (D) all applicable requirements of Sections
8.14 and 9.02 applicable to Permitted Acquisitions are satisfied.
Notwithstanding anything to the contrary contained in the immediately
preceding sentence, an acquisition which does not otherwise meet the
requirements set forth above in the definition of "Permitted Acquisition"
shall constitute a Permitted Acquisition if, and to the extent, the
Required Banks agree in writing that such acquisition shall constitute a
Permitted Acquisition for purposes of this Agreement.
"Pledge Agreements" shall mean the Pledge Agreement and the French
Pledge Agreement.
"Security Agreement Collateral" shall mean all "Collateral" as defined
in the Security Agreements.
"Security Agreements" shall mean the Security Agreement and the French
Security Agreement.
"Security Documents" shall mean the Pledge Agreements, the Security
Agreements, each Mortgage and each Additional Security Document.
"Sixth Amendment" shall mean the Sixth Amendment to this Agreement
dated as of December 4, 1998.
15
<PAGE>
"Sixth Amendment Effective Date" shall have the meaning provided in
the Sixth Amendment.
"US Borrower" shall mean Tri-Star Holdings, as the surviving
corporation of the merger of Tri-Star Aerospace Co. with and into Tri-Star
Holdings.
, (iii) replacing each reference to "the Borrower" appearing in the definitions
of "Affiliate", "Applicable Excess Cash Flow Percentage", "Canadian Subsidiary",
"Consolidated Net Income", "Excess Cash Flow", "L/C Supportable Indebtedness",
"Mortgaged Property", "Notice Office", "Payment Office" and "Subsidiary
Guarantor" with references to "the US Borrower" and (iv) replacing the reference
to "the Borrower" appearing in the definition of "Bank Default" with a reference
to "either Borrower".
75. Section 12.05 of the Credit Agreement is hereby amended by
replacing the reference therein to "the Borrower" with a reference to "the US
Borrower".
76. Section 12.06 of the Credit Agreement is hereby amended by (i)
replacing the first reference therein to "the Borrower" with a reference to
"Parent" and (ii) replacing the second, third and fourth references therein to
"the Borrower" with references to "either Borrower".
77. Section 12.10 of the Credit Agreement is hereby amended by
replacing each reference therein to "the Borrower" with a reference to "the US
Borrower".
78. Section 13.01 of the Credit Agreement is hereby amended by
replacing the reference therein to "The Borrower" with a reference to "The US
Borrower".
79. Section 13.02 of the Credit Agreement is hereby amended by
replacing each reference therein to "the Borrower" with a reference to "either
Borrower".
80. Section 13.04 of the Credit Agreement is hereby amended by (i)
replacing the reference to "the Borrower may not" appearing in the first proviso
to clause (a) thereof with a reference to "neither Borrower may", (ii) replacing
the reference to "the Borrower" appearing in clause (ii) of the third proviso to
clause (a) thereof with a reference to "either Borrower", (iii) replacing the
reference to "the Borrower" appearing in clause (iii) of the third proviso to
clause (a) thereof with a reference to "each Borrower" and (iv)replacing each
reference to "the Borrower" appearing in clause (b) thereof with a reference to
"the US Borrower".
81. Section 13.07 of the Credit Agreement is hereby amended by
replacing the reference therein to "the Borrower" with a reference to "the US
Borrower".
82. Section 13.09 of the Credit Agreement is hereby amended by
replacing the reference therein to "the Borrower" with a reference to "the US
Borrower".
83. Section 13.14 of the Credit Agreement is hereby amended by
replacing the reference therein to "the Borrower" with a reference to "the US
Borrower".
16
<PAGE>
84. Section 13.15 of the Credit Agreement is hereby amended by (i)
replacing the reference to "the Borrower" appearing in clause (a) thereof with a
reference to "the US Borrower" and (ii) replacing the reference to "the Borrower
hereby acknowledges and agrees" appearing in clause (b) thereof with a
reference to "the other Credit Parties party hereto hereby acknowledge and
agree".
85. Section 13.17 of the Credit Agreement is hereby amended by (i)
replacing the reference therein to "The Borrower" with a reference to "Each
Borrower", (ii) replacing the first reference therein to "the Borrower's" with a
reference to "such Borrower's", (iii) replacing the second reference therein to
"the Borrower's" with a reference to "the respective Borrower's" and (iv)
replacing the final reference therein to "The Borrower" with a reference to "The
US Borrower".
86. Section 13 of the Credit Agreement is hereby further amended by
inserting the following new Section 13.18 at the end thereof:
13.18. JUDGMENT CURRENCY. (a) The Credit Parties' obligations
hereunder and under the other Credit Documents to make payments in U.S.
Dollars shall not be discharged or satisfied by any tender or recovery
pursuant to any judgment expressed in or converted into any currency other
than U.S. Dollars, except to the extent that such tender or recovery
results in the effective receipt by the Agent, the Collateral Agent or the
respective Bank of the full amount of U.S. Dollars expressed to be payable
to the Agent, the Collateral Agent or such Bank under this Agreement or the
other Credit Documents. If, for the purpose of obtaining or enforcing
judgment against any Credit Party in any court or in any jurisdiction, it
becomes necessary to convert from any currency other than U.S. Dollars
(such other currency being hereinafter referred to as the "Judgment
Currency") an amount due in U.S. Dollars, the conversion shall be made at
the rate of exchange (as quoted by the Agent or if the Agent does not quote
a rate of exchange on such currency, by a known dealer in such currency
designated by the Agent and reasonably acceptable to the relevant Borrower)
plus any premium and costs payable in connection with the purchase of U.S.
Dollars, in each case determined as of the Business Day immediately
preceding the day on which the judgment is given (such Business Day being
hereinafter referred to as the "Judgment Currency Conversion Date").
(b) If there is a change in the prevailing rate of exchange
between the Judgment Currency Conversion Date and the date of actual
payment of the amount due, the Borrowers covenant and agree to pay, or
cause to be paid, such additional amounts, if any (but in any event not a
lesser amount) as may be necessary to ensure that the amount paid in the
Judgment Currency, when converted at the rate of exchange prevailing on the
date of payment, will produce the amount of U.S. Dollars which could have
been purchased with the amount of Judgment Currency stipulated in the
judgment or judicial award at the rate of exchange determined on the
Judgment Currency Conversion Date.
17
<PAGE>
87. Section 14.01 of the Credit Agreement is hereby amended by
replacing the reference therein to "Parent, Holdings and Tri-Star Holdings" with
a reference to "Parent, Holdings and (with respect to the Guaranteed Obligations
of the French Borrower only) the US Borrower"
88. Section 14 of the Credit Agreement is hereby further amended by
replacing each reference therein to "the Borrower" with a reference to "the
Borrowers (or in the case of the US Borrower, the French Borrower)".
89. Annex I and Exhibits A, B-2, B-3 and I to the Credit Agreement
are hereby amended by deleting each in its entirety and inserting Annex I and
Exhibit A, B-2, B-3 and I hereto, respectively, in lieu thereof.
II. ACKNOWLEDGMENT AND AGREEMENT WITH RESPECT TO OTHER CREDIT DOCUMENTS
Each Parent Guarantor (as defined after giving effect to this Amendment)
hereby acknowledges and agrees that, in addition to any obligations guaranteed
prior to giving effect to this Amendment, it has, pursuant to Section 14 of the
Credit Agreement (as amended hereby), unconditionally guaranteed to the Secured
Creditors all of the obligations of the French Borrower under the Credit
Agreement, and it is agreed that all such obligations of the French Borrower
guaranteed by the Parent Guarantors (as defined after giving effect to this
Amendment) shall be included in all references to "Credit Document Obligations"
or similar references to obligations of such Parent Guarantor contained in any
Security Document.
III. MISCELLANEOUS PROVISIONS
1. By its execution of this Amendment, the French Borrower is deemed to be
a party to the Credit Agreement as a Borrower thereunder and accepts for itself
all of the duties and obligations required under the terms of the Credit
Agreement as modified hereby.
3. This Amendment is limited precisely as written and shall not be deemed
to be a consent to or waiver or modification of any other term or condition of
the Credit Agreement, the other Credit Documents or any of the instruments or
agreements referred to therein.
4. In order to induce the Banks to enter into this Amendment, each
Borrower hereby jointly and severally represents and warrants that (x) no
Default or Event of Default exists on the Sixth Amendment Effective Date (as
defined below) both before and after giving effect to this Amendment and (y) all
of the representations and warranties contained in the Credit Documents shall be
true and correct in all material respects on and as of the Sixth Amendment
Effective Date both before and after giving effect to this Amendment with the
same effect as though such representations and warranties had been made on and
as of the Sixth Amendment Effective Date (it being understood that any
representation or warranty made as of a specific date shall be true and correct
in all material respects as of such specific date).
5. This Amendment shall become effective on the date (the "Sixth
Amendment Effective Date"), on which (A) each Credit Party, the Required
Banks, BTCo and LaSalle National Bank shall have signed a counterpart hereof
(whether the same or different counterparts) and shall have
18
<PAGE>
delivered (including by way of facsimile) the same to the Agent at its Notice
Office and (B) each of the following conditions precedent shall have been
satisfied to the satisfaction of the Agent and the Required Banks:
(i) All necessary governmental and third party consents and/or
approvals in connection with the transactions contemplated by this
Amendment (including, without limitation, the consent of the Banks required
to consent thereto under the terms of the Credit Agreement) shall have been
obtained and remain in effect, and all applicable waiting periods shall
have expired without any action being taken by any competent authority
which restrains, prevents or imposes materially adverse conditions upon,
the consummation of this Amendment. Additionally, there shall not exist any
judgment, order, injunction or other restraint prohibiting or imposing
materially adverse conditions upon the consummation of this Amendment or
the transactions contemplated hereby;
(ii) there shall have been delivered to the Agent new Revolving
Notes reflecting the revised Revolving Loan Commitments set forth on Annex
I hereto;
(iii) the Agent shall have received satisfactory opinions of legal
counsel (both U.S. and French) relating to this Amendment and the
transactions contemplated hereby as have been reasonably requested by the
Agent or the Required Banks;
(iv) the French Borrower shall have duly authorized, executed and
delivered a pledge agreement (as modified, amended or supplemented from
time to time in accordance with the terms thereof and of the Credit
Agreement, the "French Pledge Agreement") in form and substance
satisfactory to the Agent and the Required Banks;
(v) the French Borrower shall have duly authorized, executed and
delivered a security agreement (as modified, amended or supplemented from
time to time in accordance with the terms thereof and of the Credit
Agreement, the "French Security Agreement") in form and substance
satisfactory to the Agent and the Required Banks;
(vi) since December 31, 1997, nothing shall have occurred (and
neither the Agent nor the Required Banks shall have become aware of any
facts or conditions not previously known) which the Agent or the Required
Banks shall determine could have a material adverse effect on the rights or
remedies of the Banks or the Agent, or on the ability of Parent or any of
its Subsidiaries to perform their respective obligations to the Agent or
the Banks or which could have a Materially Adverse Effect;
(vii) no litigation by any entity (private or governmental) shall
be pending or threatened with respect to this Amendment or the transactions
contemplated hereby or any documentation executed in connection herewith,
or with respect to any material debt of Parent or its Subsidiaries which is
to remain outstanding after the consummation of this Amendment, or which
the Agent or the Required Banks shall determine could have a Material
Adverse Effect;
19
<PAGE>
(viii) all agreements relating to, and the corporate and capital
structure of, Parent and its Subsidiaries, and all organizational documents
of such entities shall either not have changed since the Effective Date,
or, if changed, such changes shall be satisfactory to the Commitment
Parties;
(ix) all Loans made and Commitments outstanding pursuant to the
Credit Agreement shall be in full compliance with all applicable margin
regulations and, immediately after giving effect to this Amendment, there
shall exist no conflict with (i) any indebtedness of Parent or any of its
subsidiaries that is to remain outstanding or (ii) any material agreements
to which Parent or any of its subsidiaries is a party;
(x) the Agent shall have received a solvency certificate from
the chief financial officer of the US Borrower supporting the conclusion
that, after giving effect to this Amendment and the increase of the Total
Revolving Loan Commitment (computed as if the Total Unutilized Revolving
Loan Commitment were $0), Parent and its Subsidiaries, taken as a whole,
are not insolvent and will not be rendered insolvent by the indebtedness
incurred in connection therewith, and will not be left with unreasonably
small capital with which to engage in their business and will not have
incurred debts beyond their ability to pay such debts as they mature;
(xi) the US Borrower shall have paid all costs, fees, expenses
(including, without limitation, legal fees and expenses) and other
compensation payable to the Agent or the Banks to the extent due,
including, without limitation, a fee to each Bank which executes and
delivers a counterpart of this Amendment on or prior to December 4, 1998,
an amendment fee equal to 1/4 of 1% of the sum of (x) the aggregate
outstanding principal amount of such Bank's Term Loans and (y) the amount
of such Bank's Revolving Loan Commitment, in the case of each of clauses
(x) and (y) above calculated immediately prior to giving effect to this
Amendment; and
(xii) there shall not exist or be continuing any Default or Event
of Default under the Credit Agreement.
Unless the Agent has received actual notice from any Bank that the
conditions set forth above have not been satisfied, upon the satisfaction of the
conditions specified in clause (A) of the immediately preceding sentence and
upon the Agent's good faith determination that the other conditions described
above have been satisfied, the Sixth Amendment Effective Date shall be deemed to
have occurred, regardless of any subsequent determination that one or more of
the conditions thereto had not been satisfied (although the occurrence of the
Sixth Amendment Effective Date shall not release the Borrower from any liability
for failure to satisfy one or more of the conditions specified above). The
Agent will give the Borrower and each Bank prompt notice of the occurrence of
the Sixth Amendment Effective Date.
6. This Amendment may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which counterparts
when executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument. A complete set of counterparts
shall be lodged with the Company and the Agent.
20
<PAGE>
7. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF
NEW YORK.
8. From and after the Sixth Amendment Effective Date, all references in
the Credit Agreement and each of the Credit Documents to the Credit Agreement
shall be deemed to be references to the Credit Agreement as amended hereby.
* * *
21
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
TRISTAR AEROSPACE CO.
By:
-----------------------------------
Title: Executive Vice President &
Chief Financial Officer
AEROSPACE ACQUISITION CORP.
By:
-----------------------------------
Title: Executive Vice President &
Chief Financial Officer
TRISTAR AEROSPACE, INC.
By:
-----------------------------------
Title: Executive Vice President &
Chief Financial Officer
TRISTAR AEROSPACE SARL
By
-----------------------------------
Title: President & Chief Executive Officer
BANKERS TRUST COMPANY,
Individually and as Administrative Agent
By:
-----------------------------------
Title: Vice President
LASALLE NATIONAL BANK
By:
-----------------------------------
Title:
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
By:
-----------------------------------
Title: Authorized Signatory
SENIOR DEBT PORTFOLIO
By: Boston Management and Research
as Investment Advisor
By:
-----------------------------------
Title: Vice President
KEYBANK N.A.
By:
-----------------------------------
Title: Vice President
PILGRIM AMERICA PRIME RATE TRUST
By: Pilgrim America Investments, Inc.
as its Investment Manager
By:
-----------------------------------
Title: Vice Presidemt
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By:
-----------------------------------
Title: Senior Vice President & Director
-23-
<PAGE>
ANNEX I
OUTSTANDING TERM LOANS AND COMMITMENTS
<TABLE>
<CAPTION>
Bank Outstanding Revolving Loan
---- Term Loans Commitment
------------- ---------------
<S> <C> <C>
Bankers Trust Company $2,450,000.00 $20,000,000.00
LaSalle National Bank $0 $20,000,000.00
KeyBank N.A. $7,350,000.00 $10,000,000.00
Senior Debt Portfolio $14,749,494.95 $0
Morgan Stanley Dean Witter $9,800,000.00 $0
Prime Income Trust
Van Kampen American Capital $7,840,000.00 $0
Prime Rate Trust
Pilgrim America Prime Rate $6,810,505.05 $0
Trust
-------------- --------------
Total $49,000,000.00 $50,000,000.00
</TABLE>
-24-
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
AGREEMENT, dated as of January 15, 1998, by and between Tristar
Aerospace Co., a Delaware corporation (the "Company"), and Doug Childress
(the "Executive").
WHEREAS, the Company desires to retain the Executive as its
Executive Vice President of Finance and Chief Financial Officer, and the
Executive desires to provide his services to the Company in such capacity, on
the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the premises and the respective
covenants and agreements of the parties set forth below, the parties agree as
follows:
1. EMPLOYMENT. Subject to all of the terms and conditions set
forth in this Agreement, the Company hereby employs the Executive, effective
as of January 15, 1998 as its Executive Vice President of Finance and Chief
Financial Officer, and the Executive hereby accepts such employment. The term
of employment contemplated hereby shall commence on January 15, 1998 (the
"Commencement Date") and shall end on the second anniversary of the
Commencement Date, unless sooner terminated as hereinafter provided (the
"Term").
2. DUTIES. During the Term, the Executive shall perform all
duties and functions reasonably appurtenant to his position as Executive
Vice President of Finance and Chief Financial Officer, which shall include
responsibilities relating to finance, budgeting, financial planning,
accounting, tax, controls and treasury.
3. (a) SALARY. During the Term, the Executive shall receive an
annual salary of $150,000, payable in accordance with the customary payroll
practices of the Company and shall be eligible for such raises and bonuses as
the Compensation Committee of the Board of Directors of the Company may
provide.
(b) BENEFITS. The Executive shall receive such medical and
other benefits as are regularly offered to other senior executives of the
Company.
4. EXPENSES. During the Term, the executive shall be entitled to
receive reimbursement for all reasonable travel and business expenses incurred
by him (in accordance with the policies and procedures of the Company) in
performing services hereunder, provided that the Executive promptly and
properly accounts therefore in accordance with the Company's expense policy.
5. TERMINATION.
(a)(i) TERMINATION WITHOUT CAUSE. If, prior to the expiration of
the Term, the Company terminates the employment of the Executive other than
for Cause (as defined herein), the Executive shall receive an amount equal to
two times his base compensation for the twelve-month period immediately
preceding such termination of employment, payable by the Company in equal
installments, without interruption, concurrently with the payment of the
Company's
<PAGE>
normally scheduled payroll for active employees, until the expiration of a
period of two years from the date of Termination.
(a)(ii) The Executive shall be entitled to such medical and other
benefits on substantially the same terms as are regularly offered to senior
executives of the Company until the expiration of a period of one year from
the Date of Termination.
Notwithstanding the foregoing, if the Executive commences new
full-time employment during the two-year period beginning on the Date of
Termination, the benefits described in Section 7(a)(i) and Section 7(a)(ii)
shall cease immediately upon the commencement of such employment.
(b) OTHER TERMINATION. In the event that the employment of the
Executive is terminated (i) due to the death or disability (as defined
herein) of the Executive, (ii) by the Company for "Cause", or (iii) for any
other reason not included in Section 5(a), the Executive shall have no right
to receive any compensation hereunder after the Date of Termination (as
defined herein).
(c) DEFINITIONS. For purposes of this agreement, (i) "Disability"
shall mean the inability (as determined by the Board of Directors of the
Company after consultation with the Executive's regular attending physician)
of the Executive, as a result of incapacity due to physical or mental illness
or disability, to perform his duties with the Company for six consecutive
months or shorter periods aggregating six months during any twelve month
period; and (ii) "Cause" shall mean the occurrence of one or more of the
following events: (A) any intentional or willful failure by the Executive to
substantially perform his or her employment duties which shall not have been
corrected within thirty days following written notice of the duties which
such Executive has failed to substantially perform, (B) any engaging by such
Executive in misconduct which is significantly injurious to the Company or
any of its subsidiaries or affiliates, (C) any breach by the Executive of any
material covenant contained in the Management Stockholders' and
Optionholders' Agreement or the subscription agreement entered into by the
executive with the Company, or (D) such Executive's conviction or entry of a
plea of NOLO CONTENDERE in respect of any felony, or of a misdemeanor which
results in or is reasonably expected to result in economic or reputational
injury to the Company or any of its subsidiaries or affiliates.
(d) NOTICE OF TERMINATION. Any termination of the Executive's
employment (other than a termination due to the death of the Executive) shall
be communicated by a written notice of termination (the "Notice of
Termination") in accordance with the notice provisions herein.
(e) DATE OF TERMINATION. For purposes of this Agreement, the "Date
of Termination" shall mean (i) if the Executive's employment is terminated by
his death, the date of his death, (ii) if the Executive's employment is
terminated due to Disability, ten days after delivery to the executive of the
Notice of Termination, and (iii) in any other case, the date specified in the
Notice of Termination.
<PAGE>
6. EXECUTIVE COVENANTS.
(a) NON-COMPETITION. During the Term and for such period of time
following the Term as the Executive shall receive payments pursuant to
Section 5(a)(i) hereof, the Executive expressly covenants and agrees that he
shall not, without the express written consent of the Company, for his own
account or jointly with any other person, directly or indirectly, own,
manage, operate, join, control, loan money to, invest in, or otherwise
participate in, or be connected with, or become or act as an officer,
employee, consultant, representative or agent of any business, individual,
partnership, firm or corporation (other than the Company and its subsidiaries
and affiliates) which is in competition with any business in which the
Company or any of its subsidiaries and affiliates are then engaged or
planning to be engaged; PROVIDED, HOWEVER, that the Executive may purchase or
own, solely as an inactive investor, the securities of any entity if (a) such
securities are publicly traded on a nationally-recognized stock exchange or
on NASDAQ and (b) the aggregate holdings of such securities by the executive
and his immediate family do not exceed three percent (3%) of the voting power
or three percent (3%) of the capital stock of such entity.
(b) NO SOLICITATION. The Executive hereby agrees that during the
Term and for a period of one year after the Date of Termination, he shall
not, directly or indirectly, for his own account or jointly with another, or
for or on behalf of any entity, as principal, agent or otherwise, (i) solicit
or induce or in any manner attempt to solicit or induce any person employed
by or acting as a consultant to or agent of the Company or by any of its
subsidiaries or affiliates to leave such position or (ii) interfere with,
disrupt or attempt to disrupt any relationship, contractual or otherwise,
between the Company or any of its subsidiaries or affiliates and any of the
customers, client or suppliers of the Company or any of its subsidiaries or
affiliates.
(c) CONFIDENTIAL INFORMATION. The Executive expressly covenants
and agrees that he will not at any time, whether during or after the Term,
directly or indirectly, disclose, use or permit the use of any trade secrets,
confidential information or proprietary information of, or relating to, the
Company or any of its subsidiaries or affiliates, other than as contemplated
hereunder during the Term.
(d) COVENANTS NON-EXCLUSIVE. The Executive acknowledges and agrees
that the covenants contained in this Section 6 shall not be deemed exclusive
of any common law rights of the Company or any of its subsidiaries or
affiliates in connection with the relationships contemplated hereby and that
the Company shall have any and all rights as may be provided by law in
connection with the relationships contemplated hereby.
7. NOTICE. Any and all notices or any other communication
provided for herein shall be made in writing by hand-delivery, first-class
mail (registered or certified, with return receipt requested), telecopier, or
overnight air courier guaranteeing next day delivery, effective upon receipt,
to the address of the party appearing under his or its name below (or to such
other address under his or its name below) or such other address as may be
designated in writing by such party):
<PAGE>
IF TO THE EXECUTIVE:
Doug Childress
6119 Ridge Top Lane
Garland, Texas 75043
IF TO THE COMPANY:
Tri-Star Aerospace Co.
11535 East Pine Street
Tulsa, Oklahoma 74116
Attention: Mr. Quentin Bourjeaurd
With a copy to:
Odyssey Investment Partners, L.P.
31 West 52nd Street
New York, New York 10019
Attention: Mr. Stephen Berger
10. MISCELLANEOUS.
(a) AMENDMENT. Any provision of this Agreement may be amended or
waived if, but only if, such amendment or waiver is agreed to in writing
signed by the executive and a duly authorized officer of the Company (other
than the Executive).
(b) WAIVER. No waiver by any party hereto at any time of any
breach of another party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be
deemed a waiver of any other provision hereof. This Agreement shall be
binding on and inure to the benefit of the Company and its successors and
permitted assigns.
(c) GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the law of the State of Delaware without giving effect to
the conflict of laws provisions thereof.
(d) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.
(e) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
<PAGE>
(f) ENTIRE AGREEMENT. This Agreement supersedes any other
agreement, whether written or oral, that may have been made or entered into
between the parties hereto and constitutes the entire agreement by the
parties related to the matters specified herein.
(g) EQUITABLE RELIEF. It is hereby acknowledged that irreparable
harm would occur in the event that any of the provisions of this Agreement
were not performed fully by the undersigned in accordance with the terms
specified herein, and that monetary damages are an inadequate remedy for
breach of this Agreement because of the difficulty of ascertaining and
quantifying the amount of damage that will be suffered by the parties relying
hereon in the event that the undertakings and provisions contained in this
Agreement were breached or violated. Accordingly, each party hereto shall be
entitled to an injunction or injunctions to restrain, enjoin and prevent
breaches of the undertakings and provisions hereof and to enforce
specifically the undertakings and provisions hereof in any court of the
United States or any state having jurisdiction over the matter, it being
understood that any such remedies shall be in addition to, and not in lieu
of, any other rights and remedies available at law or in equity.
<PAGE>
IN WITNESS WHEREOF the parties have signed and delivered this
Agreement as of the date first above written.
TRISTATE AEROSPACE CO.
By: /s/ Q. Bourjeaurd
-------------------------------
Name: Q. Bourjeaurd
Title: President
/s/ Doug Childress
---------------------------
Doug Childress
1/20/98
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of December 8, 1997, by and between Tristar
Aerospace Co., a Delaware corporation (the "Company"), and Denny J. Barge
(the "Executive").
WHEREAS, the Company desires to retain the Executive as its Vice
President of Strategic Planning, and the Executive desires to provide his
services to the Company in such capacity, on the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the premises and the respective
covenants and agreements of the parties set forth below, the parties agree as
follows:
1. EMPLOYMENT. Subject to all of the terms and conditions set
forth in this Agreement, the Company hereby employs the Executive, effective
as of December 8, 1997 as its Vice President of Strategic Planning, and the
Executive hereby accepts such employment. The term of employment contemplated
hereby shall commence on December 8, 1997 (the "Commencement Date") and shall
end on the second anniversary of the Commencement Date, unless sooner
terminated as hereinafter provided (the "Term").
2. DUTIES. During the Term, the Executive shall perform all
duties and functions reasonably appurtenant to his position as Vice President
of Strategic Planning, which shall include responsibilities relating to
implementation of supply chain management initiatives.
3. (a) SALARY. During the Term, the Executive shall receive an
annual salary of $200,000, payable in accordance with the customary payroll
practices of the Company and shall be eligible for such raises and bonuses as
the Compensation Committee of the Board of Directors of the Company may
provide.
(b) BENEFITS. The Executive shall receive such medical and
other benefits as are regularly offered to other senior executives of the
Company.
4. EXPENSES. During the Term, the executive shall be entitled to
receive reimbursement for all reasonable travel and business expenses
incurred by him (in accordance with the policies and procedures of the
Company) in performing services hereunder, provided that the Executive
promptly and properly accounts therefor in accordance with the Company's
expense policy.
<PAGE>
5. TERMINATION.
(a) (i) TERMINATION WITHOUT CAUSE. If, prior to the
expiration of the Term, the Company terminates the employment of the
Executive other than for Cause (as defined herein) and other than by reason of
Disability (as defined herein), or the Executive terminates his employment for
Good Reason (as defined herein), the Executive shall receive an amount equal
to one times his base compensation for the twelve-month period immediately
preceding such termination of employment, payable in one lump sum, thirty
days following the Date of Termination.
(ii) The Executive shall be entitled to such medical and
other benefits on substantially the same terms as are regularly offered to
senior executives of the Company until the expiration of a period of one year
from the Date of Termination.
(b) OTHER TERMINATION. In the event that the employment of
the Executive is terminated (i) due to death or disability (as defined herein)
of the Executive, (ii) by the Company for "Cause," or (iii) for any other
reason not included in Section 5(a), the Executive shall have no right to
receive any compensation hereunder after the Date of Termination (as defined
herein).
(c) DEFINITIONS. For purposes of this agreement, (i)
"Disability" shall mean the inability (as determined by the Board of
Directors of the Company after consultation with the Executive's regular
attending physician) of the Executive, as a result of incapacity due to
physical or mental illness or disability, to perform his duties with the
Company for six consecutive months or shorter periods aggregating six months
during any twelve month period; and (ii) "Cause" shall mean the occurrence of
one or more of the following events: (A) any intentional or willful failure
by the Executive to substantially perform his employment duties which shall
not have been corrected within thirty days following written notice of the
duties which such Executive has failed to substantially perform, (B) any
engaging by such Executive in misconduct which is significantly injurious to
the Company or any of its subsidiaries or affiliates, (C) any breach by the
Executive of any material covenant contained in the Management Stockholders'
and Optionholders' Agreement or any subscription agreement entered into by
the Executive with the Company, or (D) such Executive's conviction or entry
of a plea of NOLO CONTENDERE in respect of any felony, or of a misdemeanor
which results in or is reasonably expected to result in economic or
reputational injury to the Company or any of its subsidiaries or affiliates;
(iii) "Good Reason" shall mean (A) a material breach of this Agreement by the
Company, which breach shall not have been cured within 30 days after the
Executive shall have given written notice thereof to the Board of Directors,
or (B) the material diminution of the Executive's stature or his authority or
responsibility for matters relating to supply chain management. Notwithstanding
the foregoing, any event described in this Section 5(c)(iii)(B) shall not
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constitute "Good Reason" in the event that the Company, within 14 days
following written notice by the Executive to the Board of Directors of the
Company setting forth a description thereof, cures such event or occurrence.
For purposes of clause (B) of this Section 5(c)(iii), the determination
whether the Executive's stature, authority or responsibility shall have been
diminished shall be determined after giving effect to any acquisition,
consolidation, merger or reorganization transaction, if any.
(d) NOTICE OF TERMINATION. Any termination of the
Executive's employment (other than a termination due to the death of the
Executive) shall be communicated by a written notice of termination (the
"Notice of Termination") in accordance with the notice provisions herein.
(e) DATE OF TERMINATION. For purposes of this Agreement, the
"Date of Termination" shall mean (i) if the Executive's employment is
terminated by his death, the date of his death, (ii) if the Executive's
employment is terminated due to Disability, ten days after delivery to the
Executive of the Notice of Termination, and (iii) in any other case, the date
specified in the Notice of Termination.
6. EXECUTIVE COVENANTS.
(a) NON-COMPETITION. During the Term and for such period of
time following the Term as the Executive shall receive payments pursuant to
Section 5(a)(i) hereof, the Executive expressly covenants and agrees that he
shall not, without the express written consent of the Company, for his own
account or jointly with any other person, directly or indirectly, own,
manage, operate, join, control, loan money to, invest in, or otherwise
participate in, or be connected with, or become or act as an officer,
employee, consultant, representative or agent of any business, individual,
partnership, firm or corporation (other than the Company and its subsidiaries
and affiliates) which is in competition with any business in which the
Company or any of its subsidiaries and affiliates are then engaged or
planning to be engaged; PROVIDED, HOWEVER, that the Executive may purchase or
own, solely as an inactive investor, the securities of an entity if (a) such
securities are publicly traded on a nationally-recognized stock exchange or
on NASDAQ and (b) the aggregate holdings of such securities by the executive
and his immediate family do not exceed three percent (3%) of the voting power
or three percent (3%) of the outstanding capital stock of such entity.
(b) NO SOLICITATION. The Executive hereby agrees that during
the Term and for a period of one year after the Date of Termination, he shall
not, directly or indirectly, for his own account or jointly with another, or
for or on behalf of any entity, as principal, agent or otherwise, (i) solicit
or induce or in any manner attempt to solicit or induce any person employed
by or acting as a consultant to or agent of the Company or by any of its
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subsidiaries or affiliates to leave such position or (ii) interfere with,
disrupt or attempt to disrupt any relationship, contractual or otherwise,
between the Company or any of its subsidiaries or affiliates and any of the
customers, clients or suppliers of the Company or any of its subsidiaries or
affiliates.
(c) CONFIDENTIAL INFORMATION. The Executive expressly
covenants and agrees that he will not at any time, whether during or after
the Term, directly or indirectly, disclose, use or permit the use of any
trade secrets, confidential information or proprietary information of, or
relating to, the Company or any of its subsidiaries or affiliates, other than
as contemplated hereunder during the Term.
(d) COVENANTS NON-EXCLUSIVE. The Executive acknowledges and
agrees that the covenants contained in this Section 7 shall not be deemed
exclusive of any common law rights of the Company or any of its subsidiaries
or affiliates in connection with the relationships contemplated hereby and
that the Company shall have any and all rights as may be provided by law in
connection with the relationships contemplated hereby.
7. NOTICE. Any and all notices or any other communication
provided for herein shall be made in writing by hand-delivery, first-class
mail (registered or certified, with return receipt requested), telecopier, or
overnight air courier guaranteeing next day delivery, effective upon receipt,
to the address of the party appearing under his or its name below (or to such
other address under his or its name below) or such other address as may be
designated in writing by such party):
IF TO THE EXECUTIVE:
Denny J. Barge
5320 Carnaby Street, #268
Irving, Texas 75038
IF TO THE COMPANY:
Tri-Star Aerospace Co.
11535 East Pine Street
Tulsa, Oklahoma 74116
Attention: Mr. Quentin Bourjeaurd
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With a copy to:
Odyssey Investment Partners, L.P.
31 West 52nd Street
New York, New York 10019
Attention: Mr. Stephen Berger
8. MISCELLANEOUS.
(a) AMENDMENT. Any provision of this Agreement may be amended
or waived if, but only if, such amendment or waiver is agreed to in writing
signed by the Executive and a duly authorized officer of the Company (other
than the Executive).
(b) WAIVER. No waiver by any party hereto at any time of any
breach of another party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be
deemed a waiver of any other provision hereof. This Agreement shall be
binding on and inure to the benefit of the Company and its successors and
permitted assigns.
(c) GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the law of the State of Delaware without giving
effect to the conflict of laws provisions thereof.
(d) COUNTERPARTS. This Agreement may be executed in
counterparts each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
(e) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
(f) ENTIRE AGREEMENT. This Agreement supersedes any other
agreement, whether written or oral, that may have been made or entered into
between the parties hereto and constitutes the entire agreement by the
parties related to the matters specified herein.
(g) EQUITABLE RELIEF. It is hereby acknowledged that
irreparable harm would occur in the event that any of the provisions of this
Agreement were not performed fully by the undersigned in accordance with the
terms specified herein, and that monetary
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damages are an inadequate remedy for breach of this Agreement because of the
difficulty of ascertaining and quantifying the amount of damage that will be
suffered by the parties relying hereon in the event that the undertakings and
provisions contained in this Agreement were breached or violated.
Accordingly, each party hereto shall be entitled to an injunction or
injunctions to restrain, enjoin and prevent breaches of the undertakings and
provisions hereof and to enforce specifically the undertakings and provisions
hereof in any court of the United States or any state having jurisdiction
over the matter, it being understood that any such remedies shall be in
addition to, and not in lieu of, any other rights and remedies available at
law or in equity.
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IN WITNESS WHEREOF, the parties have signed and delivered this
Agreement as of the date first above written.
TRISTAR AEROSPACE CO.
By: /s/ QUENTIN BOURJEAURD
---------------------------------
Name: QUENTIN BOURJEAURD
Title: PRESIDENT & CHIEF EXECUTIVE OFFICER
/s/ Denny J. Barge
---------------------------------
Denny J. Barge
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EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of August 1, 1998,
by and between TriStar Aerospace, Inc., doing business at 2527 Willowbrook,
Dallas, Texas 75220 (the "Company") and Trevor J. Wright, residing presently at
704 Dover Place, Southlake, Texas 76092 ("Employee").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of distributing aerospace
hardware and providing inventory management services; and
WHEREAS, Employee is experienced and knowledgeable in the management, sales
and marketing of aerospace hardware business and has agreed to work for the
Company as its Executive Vice President of Sales and Marketing;
WHEREAS, the Company is interested in employing Employee and Employee is
interested in working for the Company; and
WHEREAS, this Agreement will supersede and replace all prior consulting
and/or employment agreements between the Company and Employee;
NOW THEREFORE, in consideration of the mutual covenants and conditions
herein contained, the parties hereto agree as follows:
1. EMPLOYMENT. Employee is hereby employed in the position of Executive
Vice President of Sales and Marketing of the Company to render services in
connection with the management, sales and marketing of the Company. Employee
hereby accepts such employment and agrees that he will at all times use his best
efforts to discharge his duties and utilize his skills in the best interests of
the Company.
2. DUTIES.
(a) Employee will have responsibility for all functions and duties
related to the sales and marketing of the Company, including but not
limited to, business development and customer relations.
(b) Employee will perform all other duties as assigned by the
President and Chief Executive Officer and by the Company's Board of
Directors.
3. LOCATION OF EMPLOYMENT. Employee's office and principal place of
business in carrying out his duties hereunder shall be at the Company's
corporate headquarters in Dallas. Employee will give reasonable consideration
to any proposed change in the location of his employment if such change would
serve the best interest of the Company. If the Company does relocate Employee,
it will provide him with adequate financial compensation to offset his moving
expenses and any losses he incurs due to the relocation.
<PAGE>
4. TERM. Employee's employment under this Agreement shall be for a term
of two years commencing on August 1, 1998 (the "Commencement Date") and ending
on August 3, 2000. This Agreement may be renewed if 30 days before the
termination date of this Agreement the parties agree in writing to extend the
Agreement to a specific date. The period beginning on the Commencement Date and
ending July 31, 2000, or upon the expiration of any renewal period shall be
referred to as the "Employment Term."
5. COMPENSATION. In consideration for the services to be performed by
Employee herein, the Company shall pay Employee as follows:
(a) BASE SALARY. The Company shall pay to Employee an annual base
salary of $140,000. This salary shall be payable in accordance with
the customary payroll practices of the Company. The Employee shall be
eligible for such raises as the Compensation Committee of the Board of
Directors of the Company (the "Compensation Committee"), in its sole
and absolute discretion, may provide.
(b) BONUS. In addition to a base salary, the Employee is entitled to
participate in the Executive and Key Employee Incentive Plan or some
other Incentive or Bonus Plan then approved and authorized by the
Compensation Committee. A copy of the most recently approved Bonus
Plan has been provided to and reviewed by the Employee.
(c) TAXES. All compensation paid to Employee hereunder shall be
subject to applicable employment and withholding taxes. Employee
shall be responsible for any taxes resulting from a determination that
any portion of any benefits supplied to Employee hereunder may be
reimbursing personal as well as business expenses.
6. EMPLOYEE BENEFITS.
(a) BENEFIT PLANS OR OTHER ARRANGEMENTS. Subject to meeting
eligibility provisions, Employee shall be entitled to participate in
all employee benefit plans of the Company, and to receive such other
employee benefits as are available to the Company's officers as such
benefits may exist from time to time, including but not limited to,
group health, disability and life insurance benefits and participation
in the Company's 401K Savings Plan, and the Company's profit sharing,
stock purchase and stock option plans. Employee will be subject to
any changes made to the aforesaid employee benefit plans.
(b) VACATIONS AND SICK LEAVE. Employee shall be entitled to receive
the same number of sick leave and vacation days as is maintained in
the Company's vacation and sick leave plan.
7 EXPENSES.
(a) RELOCATION EXPENSES. Upon presentation by the Employee to the
Company of expense reports and satisfactory supporting documentation
evidencing payment of such expenses, in such form as shall be
requested by the Company, the Company shall reimburse the Employee for
such expenses as the
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Board of Directors of the Company, in its sole and absolute
discretion, determines to be necessary and reasonable in
connection with the relocation of Employee, his family and their
personal effects to a new location designated by the Company.
(b) BUSINESS EXPENSES. During the term of the Employee's employment
hereunder, the Employee shall be entitled to receive reimbursement for
all reasonable travel and business expenses incurred by him (in
accordance with the policies and procedures of the Company) at the
express direction of the President of the Company, provided that the
Employee promptly and properly accounts therefore in accordance with
the Company's expense policy.
8. TERMINATION. Employee's employment may be terminated during the
Employment Term by either party at any time by giving written notice to the
other party stating the grounds for such termination in accordance with the
provisions of this Section 8. In the event of such termination, Employee's
rights and entitlements shall be determined in accordance with the following
provisions:
(a) DISABILITY. The Company shall have the right to terminate this
Agreement if Employee incurs a permanent disability during the
Employment Term. For the purpose of this Agreement, "Permanent
Disability" shall mean inability of Employee to perform the services
required hereunder due to physical or mental disability which
continues for either (i) a total of 180 working days during any
12-month period or (ii) 150 consecutive working days. In the event
that either party disputes whether Employee has a permanent
disability, such dispute shall be submitted to a physician mutually
agreed upon by Employee or his legal guardian and the Company. If
the parties are unable to agree on a mutually satisfactory physician,
each shall select a reputable physician, who, together, shall in turn
select a third physician whose determination of Employee's ability to
perform his job duties shall be conclusive and binding to the parties.
Evidence of such disability shall be conclusive notwithstanding that a
disability policy or clause in an insurance policy covering Employee
shall contain a different definition of "Permanent Disability."
If Employee suffers a Permanent Disability and the Company terminates
his employment after the appropriate time period as cited above, the
Company will pay to Employee the balance of his base salary under this
Agreement pursuant to subsection (f) below until the end of the
Employment Term less any disability payments which Employee is
eligible to receive from any insurance company pursuant to a policy
purchased by the Company. Employee also shall receive the cash value
of any earned but unused sick leave and vacation time.
(b) DEATH. If Employee dies during the Employment Term, the Company
will pay to his estate the balance of his base salary under this
Agreement pursuant to subsection (f) below. Employee's estate also
shall receive the cash value of any earned but unused sick leave and
vacation time.
(c) "FOR CAUSE". If the Company terminates this Agreement "For
Cause" as defined in this subsection, Employee shall not be entitled
to any damages from the Company or its employees for such termination.
If the Company terminates this
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Agreement for cause, Employee shall receive his base salary under
Section 5(a) only through the date of termination.
For purposes of this Agreement, "For Cause" shall mean the willful,
continued and material failure by Employee to follow the reasonable
and legitimate directions of the Board of Directors or of the
President and Chief Executive Officer in connection with Employee's
duties hereunder, but only after (i) the Chairman and Chief Executive
Officer delivers a written notice to Employee specifically setting
forth the manner in which he believes Employee has failed to follow
such directions and providing at least 30 days to correct the
deficiencies, and (ii) such willful and material failure to follow
directions is not corrected within the designated time period;
conviction of a felony; embezzlement from the Company; fraud; engaging
in conduct contrary to the best interests of the Company; habitual
absenteeism not related to disability or illness, but only after
written notice from the Board of Directors followed by a repetition of
such habitual absenteeism.
(d) "WITHOUT CAUSE" AND CONSTRUCTIVE TERMINATION. If the Company
terminates this Agreement without Cause or if Employee terminates this
Agreement because of Constructive Termination as defined below,
Employee shall receive an amount equal to two times his base salary
for the twelve month period immediately preceding such termination
of employment in accordance with subsection (f) below, and the cash
value of any earned but unused sick leave and vacation time.
If Employee's employment with the Company terminates pursuant to this
subsection, he shall not be required to mitigate damages by seeking
other employment or otherwise; however, the amount paid by the Company
shall be reduced by any compensation earned by Employee from another
employer or through consulting.
For purposes of this Agreement "Constructive Termination" means the
continued and material failure of the Company to comply with its
covenants and obligations under this Agreement, but only after (i)
Employee delivers written notice to the Company specifically setting
forth the manner in which he believes the Company has so failed to
comply with its covenants and obligations and providing at least 30
days to correct the deficiencies, and (ii) such material failures are
not corrected within the designated time period.
(e) RESIGNATION OR NONRENEWAL OF AGREEMENT. If Employee resigns from
his employment during the Employment Term, he shall receive his base
salary through his date of termination and the cash value of any
earned but unused sick leave and vacation time. If this Agreement
expires by its own terms or either Company or Employee choose not to
renew the Agreement, then Employee shall receive his base salary
through the date the Agreement expires and the cash value of any
earned but unused sick leave and vacation time.
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(f) TIME FOR PAYMENT. The payment of any balance of Employee's base
salary due under this section will be made on the Company's regularly
scheduled pay days.
9. ADDITIONAL OBLIGATIONS OF EMPLOYEE DURING AND AFTER EMPLOYMENT.
(a) ACKNOWLEDGMENTS. Employee acknowledges that, as an officer
and employee of the Company (including its subsidiaries and its
affiliated companies) he will obtain information that derives
independent value from not being generally known to the public.
Employee acknowledges that part of the consideration for the
covenant not to compete in Section 10 is supported by this factor.
(b) NONCOMPETITION AND NONSOLICITATION. During the Employment
Term and for such period of time following the Employment Term as
the Employee shall receive payments pursuant to Section 8(d) hereof
or in the event Employee is terminated for Cause, then for a period
of 12 months from the Date of Termination, Employee will not,
directly or indirectly, work for or provide any services to any
employer or other business entity who competes with the Company.
During such period of noncompetition, Employee shall not solicit
business from any party who, on the date of termination of
Employee's employment is, or within one year prior thereto was, a
customer of the Company or to whom the Company has made, or from
whom the Company has received, a written sales proposal within 12
months prior to such date of termination. Employee understands,
acknowledges, and agrees that such customers are developed and
maintained by the Company through use of confidential, proprietary,
and trade secret information to which Employee may have access
during his employment term. The requirement of this subsection
does not extend to geographical locations in which the Company is
no longer doing business at the time Employee's employment
terminates. Employee also agrees that until 12 months after the
termination of his employment for any reason, he will not directly
or indirectly attempt to persuade or induce any Company employee to
leave his or her employment with the Company or hire any such
employee to work with Employee at a subsequent employer.
(c) RECORDS. All records, files, documents, and the like, or
abstracts, summaries, or copies thereof, relating to the business of
the Company, which the Company or Employee shall prepare or use or
come into contact with during his employment, shall remain the sole
property of the Company and shall not be removed from the premises or
disclosed to any person without written consent of the Company, and
Employee shall promptly return all such records in his possession or
under his control to the Company upon termination of his employment.
(d) TRADE SECRETS AND CONFIDENTIALITY. During the course of
Employee's employment, he will have access to and become familiar with
various trade secrets and confidential information belonging to the
Company, consisting of but not limited to, compilations of
information, financial and operations records, technical
specifications, sales procedures, customer requirements, pricing
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<PAGE>
information, customer and supplier lists, methods of doing business,
and business plans. Employee acknowledges that such confidential
information and trade secrets exist and are owned and shall continue
to be owned solely by the Company and that he shall not discuss or
disclose any trade secrets or confidential information belonging to
the Company to any person or entity except as is required for him to
perform his duties under this Agreement.
(e) RELIEF. In addition to its other remedies, the Company shall be
entitled to equitable relief, including provisional and final
injunctive relief, to enforce its rights under this section.
10. NOTICES. All notices required to be given hereunder shall be
personally delivered to the signatories of this Agreement or shall be given by
certified mail, return receipt requested, addressed to the party to which the
notice is to be given at the address for that party first set forth above.
11. ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement, except involving matters under Section 9 of this Agreement which
will be resolved in the Texas State Courts, shall be settled by binding
arbitration. Any such arbitration proceedings shall be conducted as follows:
(a) Any party wishing to pursue a claim or controversy under this
section must give the other party written notice of the claim or
controversy within 180 days after the disputed event occurred.
(b) Arbitration shall be conducted by three arbitrators, one to be
selected by each of the parties and the third to be designated by the
two arbitrators so selected. In the event of their failure to agree
on the third arbitrator, selection shall be made by the American
Arbitration Association of Dallas, Texas where the arbitration shall
take place.
(c) The arbitrators shall follow the Employment Arbitration Rules of
the American Arbitration Association, except as otherwise provided
herein. The arbitrators shall substantially comply with Texas rules
of evidence; shall grant essential but limited discovery; shall
provide for the exchange of witness lists and exhibit copies; shall
conduct a pretrial hearing; and shall consider dispositive motions.
Each party shall have the right to request the arbitrators to make
findings of specific factual issues.
(d) In the event the Company terminates Employee's employment under
Section 8(c) of this Agreement and Employee challenges the termination
under this section, if the Arbitrator rules that the Company did not
have cause to terminate Employee's employment, the maximum amount of
damages that the Arbitrator may award to Employee is the balance of
his base salary under this Agreement and the cash value of any earned
but unused sick leave and vacation time, $25,000 for relocation
expenses, and Employee's legal fees and expenses in bringing the
arbitration.
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(e) The arbitrators shall complete their proceedings and render their
decision within 40 days after submission of the dispute to them,
unless both parties agree to an extension. Each party shall cooperate
with the arbitrators to comply with procedural time requirements, and
the failure of either to do so shall entitle the arbitrators to extend
the arbitration proceedings accordingly and to impose sanctions on the
party responsible for the delay, payable to the other party.
(f) The majority decision of the arbitrators shall contain
findings of facts on which the decision is based, including any
specific factual findings requested by either party, and shall
further contain the reasons for the decision with reference to the
legal principles on which the arbitrators relied. Such decision of
the arbitrators shall be final and binding upon the parties, and
accordingly the Company and Employee shall promptly comply with the
terms of such award, and a judgment by a court of competent
jurisdiction may be entered in accordance therewith.
(g) The fees and expenses of the arbitrators in connection with the
resolution of disputes pursuant hereto shall be borne by the party who
does not prevail in the arbitration.
(h) The Company and Employee hereby consent to the jurisdiction of
the courts of the State of Texas for purposes of entering judgment
with respect to an arbitration award.
12. INDEMNIFICATION. Employee will be subject to and provided the
protection afforded in the indemnification provisions of the current provisions
of the Company's Certificate of Incorporation and By-Laws.
13. MISCELLANEOUS PROVISIONS.
(a) ENTIRE AGREEMENT. This Agreement replaces and supplants all
prior agreements, oral or written, between the parties and constitutes
the entire understanding of the parties; and no change, alteration or
modification hereof may be made except by a writing signed by the
parties hereto.
(b) SUCCESSION. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns. The Company shall have the
right to assign this Agreement to a parent, affiliate or subsidiary
corporation or to any corporation with which it may merge or
consolidate subject to the provisions of Section 8(e) herein.
(c) APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
(d) AMENDMENT. This Agreement may only be amended, or a new
agreement substituted, by a written instrument duly authorized and
executed by the Company and Employee.
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(e) WAIVER. The waiver by either party of a breach or violation of
any provision of this Agreement shall not operate as or be construed
as a waiver of any subsequent breach hereof.
(f) SEVERABILITY. The Company and Employee agree that each of the
foregoing covenants shall be deemed a separate, severable and
independent covenant, and in the event any covenant shall be declared
invalid by any court of competent jurisdiction, such invalidity shall
not in any manner affect or impair the validity or enforceability of
any other unrelated part or provision of such covenant or of any other
covenant contained herein.
(g) MULTIPLE ORIGINALS. This Agreement may be executed in multiple
originals, each of which shall be deemed an original.
IN WITNESS WHEREOF the parties have executed this Agreement as of this 1st
day of August, 1998.
COMPANY:
TriStar Aerospace, Inc.
By: /s/QUENTIN BOURJEAURD
--------------------------------------
Quentin Bourjeaurd
President and Chief Executive Officer
EMPLOYEE:
/s/ TREVOR J. WRIGHT
-----------------------------
Trevor J. Wright
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MAY 15, 1997
[LETTERHEAD LOGO]
Mr. John R. King Jr.
1557 Faringdon Drive
Plano, Texas 75075
Dear John:
I am pleased to extend to you an offer of employment to join the Tri-Star
Aerospace Inc. (the "Company") team as Vice President of Information Systems,
with initial responsibility for directing and managing the existing Tri-Star
data systems and related personnel, and providing tbe Company with a vision
and plan to lead our future systems development efforts. Your future duties
may change depending on the needs of the Company, and may include duties
which will fall outside the realm of information systems.
Your base compensation will be $10,000 per month, with eligibility for bonus
compensation at the discretion of the Company. In addition, you will be
eligible to participate in this month's private offering of common stock in
Maple Leaf Aerospace, Inc. ("Maple Leaf") with a purchase of up to $50,000 in
Maple Leaf common stock. You will receive option grants under Maple Leaf's
1996 Stock Option Plan (the "Option Plan") for the purchase of 540 additional
common shares, one-half of which options shall be exercisable at a price of
$231.59 per share, with the other half subject to escalating strike prices.
All of the options shall be subject to (i) the attainment of company
performance targets as set forth in the Option Plan and your grant letters,
(ii) deferred exercise schedules and (iii) various restrictions set forth in
your grant letters, the MSOA, the Option Plan and other documents. Your
participation in the Private Offering and the Option Plan shall be contingent
upon execution of related documents acceptable to The Company, including but
not limited to the Amended and Restated Management Stockholders and
Optionholders Agreement (the "MSOA").
In the event your employment with Tri-Star is terminated by the Company for
any reason other than for Cause (as defined in the MSOA), death, or
disability (as defined in the MSOA), you will receive severance pay equal to
one year of base compensation, payable in usual installments on pay days as
if termination had not occurred. Because such severence pay is intended to
provide security in case of lost earnings, it shall be reduced by an amount
equal to any extent that you have earned income during the one year period
following termination. In consideration for employment, you agree to the
provisions of Attachment A.
You will be eligible for all of the standard benefits provided to employees,
as outlined in the Tri-Star Aerospace. Inc. employee handbook for the United
States employees. In addition, during your first year of employment you will
accrue personal time at the rate of sixteen days (the rate applicable to
employees who have already completed one year of employment), and any
provisions precluding taking personal time during your first ninety days of
employment will be waived.
John, we believe this is an excellent opportunity for you to join our
management team, and we are all looking forward to working with you. To
indicate your acceptance of the terms and conditions set forth herein, please
sign in the space provided below.
Sincerely,
/s/ Bruce McInnis
- -----------------------------
Bruce McInnis
Agreed,
/s/ John R. King, Jr.
-----------------------------
John R. King, Jr.
<PAGE>
ATTACHMENT A
[LETTERHEAD LOGO]
1. NON-COMPETITION. During the term of his employment and for a period of
one (1) year after termination thereof, John R. King, Jr. (the "Executive")
expressly covenants and agrees that he shall not, without the express
written consent of the Company, for his own account or jointly with any other
person, directly or indirectly, own, manage, operate, join, control, loan
money to, invest in, or otherwise participate in, or be connected with, or
become or act as an officer, employee, consultant, representative or agent of
any business, individual, partnership, firm or corporation (other than the
Company and its subsidiaries and affiliates) which is in competition with any
business in which the Company or any of its subsidiaries and affiliates are
then engaged or planning to be engaged; PROVIDED, HOWEVER, that the Executive
may purchase or own, solely as an inactive investor, the securities of any
entity if (a) such securities are publicly traded on a nationally-recognized
stock exchange or on NASDAQ and (b) the aggregate holdings of such securities
by the Executive and his immediate family do not exceed three percent (3%) of
the voting power or three percent (3%) of the capital stock of such entity.
2. NON-SOLICITATION. The Executive hereby agrees that during his employment
for a period of one year after the termination thereof, he shall not,
directly or indirectly, for his own account or jointly with another, or for
or on behalf of any entity, as principal, agent or otherwise, (i) solicit or
induce or in any manner attempt to solicit or induce any person employed by
or acting as a consultant to or agent of the Company or any of its
subsidiaries or affiliates to leave such position or (ii) interfere with,
disrupt or attempt to disrupt any relationship, contractual or otherwise,
between the Company or any of its subsidiaries or affiliates and any of the
customers, clients or suppliers of the Company or any of its subsidiaries or
affiliates.
3. CONFIDENTIAL INFORMATION. The Executive expressly covenants and agrees
that he will not at any time, whether during or after the Term, directly or
indirectly, disclose, use or permit the use of any trade secrets,
confidential information or proprietary information of, or relating to, the
Company or any of its subsidiaries or affiliates, other than as contemplated
hereunder during the Term. Confidential or proprietary information shall not
include information that is, at the time of receipt by Executive, in the
public domain or is otherwise generally known in the industry or subsequently
enters the public domain or becomes generally known in the industry through
no fault of the Executive.
Agreed,
/s/ John R. King, Jr.
-----------------------------
John R. King, Jr.
<PAGE>
SUBSIDIARIES OF THE REGISTRANT
Aerospace Acquisition, Corp (Delaware)
Tri-Star Aerospace Ltd. (U.K.)
Tri-Star Aerospace, Inc. (Florida)
Tri-Star Aerospace Ltd. (Ontario, Canada)
TriStar Aerospace SARL (France)
TriStar Aerospace International, Inc. (Barbados)
The Registrant and its subsidiaries from time to time utilize the name
"Tri-Star" as a variation to their actual name.
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed
Registration Statements file No. 333-68165.
Tulsa, Oklahoma
December 21, 1998
/s/ ARTHUR ANDERSEN LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TRISTAR
AEROSPACE AND SUBSIDIARIES FORM 10-K AS OF SEPTEMBER 30, 1998 AND FOR THE TWELVE
MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<CASH> 8,202
<SECURITIES> 0
<RECEIVABLES> 35,551
<ALLOWANCES> 1,072
<INVENTORY> 94,980
<CURRENT-ASSETS> 141,915
<PP&E> 5,345
<DEPRECIATION> 1,413
<TOTAL-ASSETS> 155,758
<CURRENT-LIABILITIES> 27,219
<BONDS> 75,000
0
0
<COMMON> 170
<OTHER-SE> 53,369
<TOTAL-LIABILITY-AND-EQUITY> 155,758
<SALES> 185,945
<TOTAL-REVENUES> 185,945
<CGS> 126,372
<TOTAL-COSTS> 29,430
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,475
<INCOME-PRETAX> 24,831
<INCOME-TAX> 9,048
<INCOME-CONTINUING> 15,783
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,783
<EPS-PRIMARY> 0.94
<EPS-DILUTED> 0.88
</TABLE>