<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 13, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
MAPLE LEAF AEROSPACE, INC.
(TO BE RENAMED TRISTAR AEROSPACE CO.*)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
Delaware 5088 75-2665751
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
2527 Willowbrook Road
Dallas, Texas 75220-4420
(214) 956-3400
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------------
Mr. Quentin Bourjeaurd
Chief Executive Officer
Maple Leaf Aerospace, Inc.
2527 Willowbrook Road
Dallas, Texas 75220-4420
(214) 956-3400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
COPIES TO:
Simeon Gold, Esquire Stephen A. Riddick, Esquire
Weil, Gotshal & Manges LLP Piper & Marbury L.L.P.
767 Fifth Avenue 36 South Charles Street
New York, New York 10153 Baltimore, Maryland 21201-3018
(212) 310-8000 (410) 539-2530
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
- ----------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ----------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ----------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
- --------------------------
* The Registrant will change its name to "TriStar Aerospace Co." as soon as
practicable after the date of this Registration Statement.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE
<S> <C> <C>
Common Stock, $0.01 par value.................................... $244,294,192 $72,067
</TABLE>
(1) Includes 1,991,529 shares which the Underwriters have the option to purchase
from certain stockholders of the Registrant to cover over-allotments, if
any.
(2) Estimated solely for purpose of calculating the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION
, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
13,276,858 SHARES
[LOGO]
TRISTAR AEROSPACE CO.
COMMON STOCK
-----------
All of the 13,276,858 shares of Common Stock (the "Common Stock") of TriStar
Aerospace Co. (the "Company") offered hereby (the "Offering") are being sold by
certain stockholders of the Company (the "Selling Stockholders"). See "Principal
and Selling Stockholders." The Company will not receive any of the proceeds from
the sale of shares of Common Stock in the Offering. It is currently estimated
that the initial public offering price per share of Common Stock in the Offering
will be between $14.00 and $16.00. See "Underwriting" for a discussion of the
factors to be considered in determining the initial public offering price.
Application has been made to have the Common Stock listed on the New York Stock
Exchange under the symbol "TS".
--------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 HEREOF FOR A DISCUSSION OF CERTAIN
MATTERS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS TO
TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS STOCKHOLDERS(1)
<S> <C> <C> <C>
Per share.......................................... $ $ $
Total(2)........................................... $ $ $
</TABLE>
(1) The Selling Stockholders will bear all of the expenses of registration and
distribution of the shares of Common Stock offered hereby.
(2) Certain stockholders of the Company have granted the Underwriters a 30-day
option to purchase up to 1,991,529 additional shares of Common Stock solely
to cover over-allotments, if any. To the extent that the option is
exercised, the Underwriters will offer the additional shares to the public
at the Price to Public shown above. If the option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Selling Stockholders will be $ , $ and $ , respectively. See
"Underwriting."
--------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the offices
of BT Alex. Brown Incorporated, Baltimore, Maryland, on or about , 1998.
BT ALEX. BROWN SBC WARBURG DILLON READ INC.
THE DATE OF THIS PROSPECTUS IS , 1998.
2
<PAGE>
[FLIP OUT PAGE/ARTWORK]
The Company intends to distribute to its stockholders annual reports
containing financial statements audited by its independent public accountants
and will make available copies of quarterly reports for the first three quarters
of each fiscal year containing unaudited financial statements.
--------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING
AND MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS AND
NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT
OTHERWISE REQUIRES, REFERENCES IN THIS PROSPECTUS TO "THE COMPANY" OR "TRISTAR"
REFER COLLECTIVELY TO TRISTAR AEROSPACE CO. AND ITS SUBSIDIARIES. UNLESS
OTHERWISE INDICATED, THE INFORMATION CONTAINED IN THIS PROSPECTUS (I) ASSUMES NO
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND (II) GIVES EFFECT TO A
158-FOR-1 STOCK SPLIT OF THE COMMON STOCK. THIS PROSPECTUS CONTAINS, IN ADDITION
TO HISTORICAL INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN THE SECTIONS ENTITLED "RISK
FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS," "BUSINESS" AND ELSEWHERE IN THIS PROSPECTUS.
THE COMPANY
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.
While approximately 59% of the Company's revenues for fiscal 1997 were derived
from traditional distribution sales and services ("conventional sales"), a
substantial and growing percentage of the Company's revenues are derived from
long-term inventory management agreements under which TriStar performs a wide
variety of value-added services (commonly referred to as "JIT services"). 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 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,
Raytheon, Bell Helicopter, Gulfstream, United Airlines, British Airways and
Federal Express. Through its JIT services and conventional sales, the Company
processed over 950,000 transactions involving over 78,000 stockkeeping units
("SKUs") in fiscal 1997, resulting in over $140 million of sales to
approximately 2,000 customers.
Historically, the procurement and management of aerospace hardware by
aircraft OEMs, airlines and MRO facilities have been highly inefficient due to
certain industry characteristics including (i) the high number of SKUs (in
excess of 250,000) used in the manufacture and repair of aircraft, (ii) the cost
structures of aerospace hardware manufacturers, which favor long production runs
that require large quantity purchases by end users, (iii) the limited capacity
of aerospace hardware manufacturers during cyclical upturns, which creates long
lead times for products and (iv) the very low per-unit costs of aerospace
hardware parts, which make it uneconomical for end users to manage aerospace
hardware inventories in-house. Multiple SKU requirements, large purchase
quantities and long lead times create inefficiencies in the supply chain for
aerospace hardware, resulting in shortages of critical parts, which lead to
costly production stoppages for end users and the over-production of
non-critical parts requiring increased working capital investment by end users.
In addition, many end users incur significant annual expenses for personnel,
facilities and systems necessary to manage the complexities associated with the
procurement and management of their aerospace hardware requirements. In many
instances, these process costs exceed the low per-unit costs of the parts
themselves.
TriStar's JIT services are designed to provide solutions for its customers
by overcoming the inefficiencies inherent in the supply chain for aerospace
hardware. Under the terms of its JIT agreements, the
3
<PAGE>
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, quality assurance and other
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. By outsourcing the procurement and
management of aerospace hardware to TriStar, the Company's customers can realize
significant cost savings and production efficiencies principally as a result of
(i) the elimination of process costs relating to the planning, purchasing and
expediting of aerospace hardware, (ii) a reduction in carrying costs, including
labor, financing and overhead charges, (iii) a reduction in parts shortages,
which can lead to costly production line stoppages and (iv) a reduction in
product costs.
TriStar's leading market position as a provider of value-added inventory
management services provides it with large amounts of information on its
customers' usage patterns with respect to individual aerospace hardware parts.
This information is recorded electronically through the Company's order and
fulfillment processes. The Company compiles usage data from each of its
customers and analyzes the data in the context of historical usage trends to
forecast aggregate and customer-specific demand for individual aerospace
hardware parts. The Company uses these demand forecasts when ordering aerospace
hardware to ensure efficient and reliable delivery to its customers while
optimizing its own inventory. In addition, TriStar intends to utilize these
forecasts to provide its primary suppliers with reliable demand data to allow
them to better schedule their manufacturing processes.
Recognizing the benefits that outsourcing could provide to end users of
aerospace hardware, in 1990 the Company's predecessor developed new sales
efforts, operating processes and systems to provide these services. By 1991 it
had secured its first JIT agreement with Rockwell International, and by the end
of 1993 had secured JIT agreements with Grumman, Beech Aircraft and Gulfstream.
Today the Company has expanded its JIT programs to include 16 agreements with 11
companies servicing over 25 facilities in the United States, Canada and England.
In addition, JIT revenues have grown at a compound annual rate of 44.1% over the
past three years to $57.5 million, representing approximately 41% of the
Company's total revenues for fiscal 1997. Strong growth in the Company's JIT
programs enabled it to increase revenues at a time when the aerospace industry
was experiencing a significant downturn in the early and mid-1990's. The Company
believes that OEMs, airlines and MRO facilities will continue to outsource their
aerospace hardware procurement and management needs in order to focus on their
core businesses and reduce costs. The Company believes that its status as a
leading provider of JIT services favorably positions it to benefit from this
trend and to increase its share of the aerospace hardware market.
COMPANY STRENGTHS
The Company believes it has a number of core strengths which have resulted
in consistent growth of sales and earnings despite the historically cyclical
nature of the aerospace industry. The principal factors contributing to
TriStar's emergence as a market leader are:
- LEADING PROVIDER OF JIT SERVICES. The Company's long-term JIT agreements
provide it with the following competitive advantages: (i) JIT programs
provide TriStar with growth opportunities which are not directly tied to
the aerospace industry cycle, (ii) JIT programs enable TriStar to
aggregate purchases of hardware across multiple customers, thereby
reducing acquisition costs and improving margins, (iii) JIT programs
provide TriStar with reliable real-time data regarding the usage patterns
of aerospace hardware across a wide customer base, allowing the Company to
better forecast and manage its aerospace hardware needs and those of its
customers, (iv) JIT programs typically result in the Company receiving
additional conventional sales opportunities due to its status as a
preferred supplier to the customer and (v) JIT programs integrate the
Company with its customers' operations, which management believes creates
significant switching costs for its customers.
4
<PAGE>
- DATABASE OF HISTORICAL USAGE INFORMATION. TriStar has developed an
in-depth database of its customers' historical usage patterns relating to
all of the aerospace hardware in the Company's inventory. By continually
analyzing this information, the Company is able to gain insight into the
likely future usage patterns of each particular part it distributes,
allowing the Company to better forecast and manage its own aerospace
hardware needs as well as those of its customers. The Company believes
this usage information and its experience in managing customers'
inventories add stability to its JIT customer base by providing a
foundation of knowledge unique to its customers and unmatched by its
competitors.
- QUALITY ASSURANCE AND RELIABILITY. The Company's quality assurance
programs include physical inspection of substantially all incoming
shipments as well as electronic storage of manufacturers' certifications
to allow for instant traceability. In addition, the Company's processes
and systems have been designed to ensure the timely and consistent
delivery of products and services, which have allowed the Company to
establish a reputation for reliability with its customers.
- SIGNIFICANT ECONOMIES OF SCALE RELATING TO SIZE. As one of the largest
aerospace hardware distributors, TriStar makes significant annual
purchases of inventory on behalf of its many customers. As a result, the
Company believes that it is one of the largest customers of many of its
suppliers, allowing it to take advantage of price reductions associated
with large volume purchases.
- STRONG RELATIONSHIPS WITH LEADING FASTENER MANUFACTURERS. TriStar has
long-established relationships with substantially all of the major
suppliers of aerospace hardware, including Fairchild, Huck, SPS, Kaynar
and Hi-Shear. TriStar has been designated an Authorized Distributor by
more than 65 manufacturers of aerospace hardware, including most of the
major fastener manufacturers.
GROWTH STRATEGY
Management has identified the following strategies which it believes provide
specific opportunities for growth:
- JIT SERVICES EXPANSION. The Company's strong growth has been generated
internally and has been due in large part to the success of its JIT
programs. The Company intends to continue to expand its JIT business by
(i) increasing the number of SKUs, services and products offered and the
number of facilities covered under existing JIT agreements and (ii)
targeting additional JIT customers, including airlines, air cargo
companies, MRO facilities and smaller OEMs.
- INCREASED AFTERMARKET PENETRATION. The Company intends to increase its
penetration of non-OEM segments of its marketplace, including the airline
and MRO facility segments, by (i) further expanding its product offerings
in response to the inventory needs of participants in these market
segments, (ii) continuing to tailor its JIT services to meet the specific
demands of these participants, and (iii) increasing its sales and
marketing efforts to these participants.
- INTERNATIONAL EXPANSION. The Company plans to expand its presence and
increase its market penetration in Europe and Asia through expansion of
its product offerings to include additional European standard (i.e.,
Airbus) parts. The Company believes its increased presence in Europe, as a
result of a recent supply agreement with Aerospatiale, a member of the
Airbus consortium, will help to position the Company as a supplier of
aerospace hardware to the Airbus aftermarket and assist in attracting
other European aerospace customers. The Company also plans to pursue
strategic alliances in the Pacific Rim and Asia.
- SUPPLY CHAIN MANAGEMENT. The Company acts as a conduit between its
customers and suppliers to minimize imbalances in the supply and demand of
aerospace hardware. By utilizing its historical database of customer usage
patterns to provide manufacturers with demand forecasts, the Company
believes it can alleviate a portion of the supply chain disruptions,
usually associated with the
5
<PAGE>
cyclicality of the aerospace industry, which have adversely affected the
Company's customers and suppliers in the past.
- STRATEGIC ACQUISITIONS. The aerospace hardware distribution industry is
comprised of a small number of large companies, such as TriStar, and
numerous small, local and regional businesses. The Company believes that
opportunities exist to consolidate the aerospace hardware industry through
strategic acquisitions and to broaden its product line and enter new
and/or under-penetrated markets through the acquisition of certain of its
competitors.
HISTORY OF THE COMPANY; SALE OF COMMON STOCK BY MAJORITY STOCKHOLDER
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 the 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 $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 , 1998, the Company changed its name to "TriStar Aerospace
Co."
The Company's executive offices are located at 2527 Willowbrook Road,
Dallas, Texas 75220-4420, and its telephone number is (214) 956-3400.
Odyssey is currently the record owner of 69.9% of the outstanding Common
Stock of the Company. In connection with its previously announced dissolution
and liquidation, Odyssey intends to sell the Common Stock of the Company owned
by it in the Offering. Based on a price of $15.00 per share (the midpoint of the
estimated price range set forth on the cover of this Prospectus), Odyssey will
receive an estimated $147.4 million of the $186.7 million of aggregate proceeds
to be received by the Selling Stockholders, net of underwriting discounts and
commissions, as a result of the Offering ($163.1 million of the $214.7 million
of aggregate proceeds if the Underwriters' over-allotment option is exercised in
full).
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Selling Stockholders........ 13,276,858 shares
Common Stock outstanding after the Offering............. 16,787,974 shares(1)
Use of proceeds......................................... The Company will not receive any
of the proceeds from the sale of
shares of Common Stock in the
Offering, all of which proceeds
will be received by the Selling
Stockholders.
Proposed New York Stock Exchange symbol................. TS
</TABLE>
- ------------------------
(1) Excludes (i) 2,981,867 shares of Common Stock issuable upon exercise of
outstanding options under the Company's 1996 Stock Option Plan, all of which
will be exercisable following consummation of the Offering, and (ii) an
additional 2,000,000 shares reserved for issuance under the Company's 1998
Stock Option Plan. See "Management--Stock Option Plans."
6
<PAGE>
SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THE COMPANY AND THE PREDECESSOR
<TABLE>
<CAPTION>
PREDECESSOR(1)
-------------------------------------------- COMPANY
------------------------------------
PERIOD YEAR
YEAR ENDED DECEMBER 31, ENDED ENDED
--------------------------------- SEPT. 19, SEPT. 30,
1994 1995 1996 1997(2)
--------- --------- --------- ---------- THREE MONTHS ENDED
DECEMBER 31,
------------------------
1993 1996 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................... $ 43,135 $ 50,725 $ 65,579 $ 55,186 $ 140,719 $ 30,966 $ 42,635
Gross profit............... 14,583 14,905 18,816 15,696 44,326 9,958 13,219
Selling, general and
administrative........... 9,773 10,785 12,488 8,897 21,048 4,447 6,040
Operating income........... 4,810 4,120 6,328 6,799 23,278 5,511 7,179
Interest expense........... 1,682 2,017 2,251 1,512 5,263 1,547 1,204
Provision for income
taxes(3)................. -- -- -- -- 6,559 1,520 2,291
Net income................. 3,175 2,200 4,104 5,306 11,603 2,444 3,735
Earnings per share:
Basic.................... $ 0.73 $ 0.16 $ 0.23
Diluted.................. 0.70 0.16 0.21
Weighted average shares
outstanding:
Basic.................... 15,897 15,118 16,583
Diluted.................. 16,509 15,118 17,615
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR(1)
--------------------------------- COMPANY
-----------------------------------------------
DECEMBER 31, SEPTEMBER 30,
--------------------------------- ---------------------
1994 1995 1996(4) 1997(2)
--------- --------- --------- ---------- DECEMBER 31,
------------------------
1996 1997
1993 ----------- -----------
----------- (UNAUDITED) (UNAUDITED)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets............. $ 50,758 $ 50,376 $ 58,962 $ 86,611 $ 99,680 $ 89,178 $ 110,010
Total assets............... 54,408 51,504 59,970 97,216 110,235 99,405 120,527
Current liabilities........ 11,044 10,078 33,548 22,308 28,076 23,162 31,633
Long-term debt, less
current maturities....... 20,266 16,929 -- 55,500 49,000 53,500 52,000
Stockholders' equity....... 21,704 23,103 25,027 19,408 33,159 22,743 36,894
</TABLE>
- ------------------------
(1) Tri-Star Aerospace, Inc. and subsidiary and affiliate.
(2) 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.
(3) 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.
(4) 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.
7
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AVIALL AEROSPACE
<TABLE>
<CAPTION>
PERIOD
YEAR ENDED DECEMBER 31, ENDED
--------------------------------- SEPT. 19,
1994 1995 1996(1)
1993 --------- --------- ---------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.......................................................... $ 11,884 $ 17,229 $ 25,580 $ 23,085
Gross profit...................................................... 3,156 2,945 5,802 5,035
Selling, general and administrative(2)............................ 5,803 5,654 5,884 4,730
Operating income (loss)........................................... (2,647) (2,709) (82) 305
BALANCE SHEET DATA:
Current assets.................................................... $ 8,244 $ 6,680 $ 17,022 $ 20,528
Total assets...................................................... 9,756 8,011 18,345 21,790
Current liabilities............................................... 534 2,778 5,145 3,195
Long-term debt.................................................... -- -- -- --
Intercompany debt................................................. 9,222 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.
8
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING AN INVESTMENT IN
THE COMMON STOCK.
DEPENDENCE ON COMMERCIAL AIRCRAFT INDUSTRY. The worldwide commercial
aircraft industry is the primary market for the products distributed by the
Company and the Company's services. 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 24.8%
(including 11.3% from former McDonnell Douglas facilities and 7.1% from former
Rockwell International facilities) and 11.7% of the Company's fiscal 1997 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.
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.
9
<PAGE>
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. See "Business--Growth Strategy."
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, and Charles Balchunas, Chief Operating Officer
of the Company, 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 and Balchunas. See
"Management--Employment Agreements." The Company does not maintain key man life
insurance on the lives of any of its executive officers or key employees.
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 been evaluating its computer software programs and operating
systems 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 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
10
<PAGE>
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--Product
Liability and 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.
NO PRIOR PUBLIC MARKET; POTENTIAL VOLATILITY OF STOCK PRICE. Prior to the
Offering, there has been no public market for the Common Stock, and there can be
no assurance that an active trading market will develop after the Offering or,
if a trading market does develop, that it will be sustained or that shares of
Common Stock could be resold at or above the initial public offering price. The
initial public offering price of the Common Stock offered hereby will be
determined through negotiations among the Company, the Selling Stockholders and
the representatives of the Underwriters and may not be an indication of the
actual value of the stock or of the price at which the Common Stock will
actually trade after the Offering. After completion of the Offering, the market
price of the Common Stock could be subject to significant variation due to
fluctuations in the Company's operating results, changes in earnings estimates
by securities analysts, the degree of success the Company achieves in
implementing its business strategy, changes in business or regulatory conditions
affecting the Company, its customers or its competitors, and other factors. In
addition, the financial markets may experience volatility that affects the
market prices of companies in ways unrelated to the operating performance of
such companies, and such volatility may adversely affect the market price of the
Common Stock.
BENEFITS OF OFFERING TO EXISTING STOCKHOLDERS. Odyssey is selling an
aggregate of 10,484,707 shares of Common Stock in the Offering (11,598,780
shares if the Underwriters' over-allotment option is exercised in full) in
connection with the previously announced dissolution and liquidation of Odyssey.
Odyssey will receive an estimated $147.4 million in proceeds from the sale of
such shares based upon an initial public offering price of $15.00 per share (the
midpoint of the estimated price range set forth on the cover of this Prospectus)
and after deducting the estimated underwriting discounts and commissions,
reflecting a net gain of $12.59 per share over the original cost of such shares
to Odyssey and an aggregate net gain of approximately $132.0 million. In the
event the Underwriters' over-allotment option is exercised in full, Odyssey will
sell all of the shares of Common Stock currently owned of record by it. Stephen
Berger, Muzzafar Mirza and William Hopkins, members of the Company's Board of
Directors, are partners or principals of Odyssey and will be resigning from the
Company's Board of Directors as soon as practicable after consummation of the
Offering. In addition, several other Selling Stockholders presently serve or
formerly served as directors and/or executive officers of the Company, including
Richard P. Small, who will also resign from his position as Vice Chairman of the
Company's Board of Directors as soon as practicable after consummation of the
Offering. See "Principal and Selling Stockholders."
The existing stockholders of the Company will receive certain benefits from
the sale of the Common Stock offered hereby. The Offering will establish a
public market for the Common Stock and will provide increased liquidity to the
existing stockholders for the shares of Common Stock they will own after the
Offering, subject to certain limitations. See "Shares Eligible For Future Sale."
Furthermore, the consummation of the Offering will cause certain of the stock
options held by management of the Company to vest and become immediately
exercisable. See "Management--Executive Compensation" and "--Stock Option
Plans--1996 Stock Option Plan."
11
<PAGE>
IMMEDIATE AND SUBSTANTIAL DILUTION. The initial public offering price of
the Common Stock will be substantially higher than the net tangible book value
per share of Common Stock. Accordingly, purchasers of Common Stock in the
Offering will experience immediate and substantial dilution. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE. Future sales of shares of Common Stock by
existing stockholders (including shares issued upon exercise of stock options),
or the perception that such sales could occur, could adversely affect prevailing
market prices for the Common Stock. Upon completion of the Offering, the Company
will have outstanding 16,787,974 shares of Common Stock. Of such shares, the
13,276,858 shares sold in the Offering will be freely tradeable without
restriction or limitation under the Securities Act of 1933, as amended (the
"Securities Act"), unless purchased by "affiliates" of the Company, as that term
is defined in Rule 144 under the Securities Act. Subject to Rule 144 under the
Securities Act (as currently in effect), after expiration of the lock-up periods
described below (or earlier with the consent of the representative of the
Underwriters), the remaining 3,511,116 shares will become eligible at various
times for sale in the public marketplace. In addition, upon completion of the
Offering, 2,981,867 shares of Common Stock will be issuable upon exercise of
outstanding options under the Company's stock option plans and an additional
2,000,000 shares of Common Stock will be reserved for issuance under such plans.
To the extent that the Underwriters' over-allotment option is not exercised
fully, the Company has agreed to file a registration statement on Form S-8
following the expiration of the lock-up periods described below covering any
shares subject to options granted to G. Bruce McInnis, one of the Selling
Stockholders, under the Company's 1996 Stock Option Plan. Shares registered
under such registration statement which are issued upon the exercise of options
will be freely transferable in the open market.
The Company, its directors and executive officers and current stockholders
have agreed that, for a period of 180 days after the consummation of the
Offering, they will not, without the prior written consent of BT Alex. Brown
Incorporated, offer, sell or otherwise dispose of, any shares of Common Stock.
See "Underwriting" and "Shares Eligible for Future Sale."
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, tender
offer or proxy contest involving the Company or may otherwise have an adverse
effect on the market price of the Common Stock. 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. See "Description of Capital Stock."
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 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. See "Description of Capital
Stock--Preferred Stock."
12
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock in
the Offering, all of which proceeds will be received by the Selling
Stockholders.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock and currently intends to retain all earnings for the foreseeable future
for use in the operation and expansion of its business. Accordingly, the Company
currently has no plans to pay dividends on its Common Stock. Under the terms of
the Company's credit agreement, the Company is prohibited from paying dividends
on its Common Stock. The payment of any future dividends will be determined by
the Board of Directors of the Company in light of conditions then existing,
including the Company's earnings, financial condition and capital requirements,
restrictions in financing agreements, business conditions and other factors.
13
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1997. This table should be read in conjunction with the
Consolidated Financial Statements and related Notes thereto of the Company
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31,
1997(1)
------------------
(IN THOUSANDS)
<S> <C>
Total debt.................................................................................... $ 52,500
Stockholders' equity:
Preferred stock............................................................................. --
Common stock................................................................................ 166
Additional paid-in capital.................................................................. 21,101
Retained earnings........................................................................... 15,627
-------
Total stockholders' equity................................................................ $ 36,894
-------
Total capitalization.......................................................................... $ 89,394
-------
-------
</TABLE>
- ------------------------
(1) The Selling Stockholders will bear all of the expenses of registration and
distribution of the shares of Common Stock sold in the Offering. The Company
will receive up to approximately $2.7 million in proceeds from the exercise
of options relating to shares of Common Stock included in the Offering
(including proceeds from the exercise of options relating to shares included
in the Underwriters' over-allotment option), which the Company will use for
working capital and general corporate purposes.
DILUTION
The net tangible book value of the Company as of December 31, 1997 was $28.2
million or $1.43 per share of Common Stock. Net tangible book value is the
Company's total tangible assets (total assets less intangible assets) less total
liabilities at December 31, 1997. Net tangible book value per share is
determined by dividing the net tangible book value by the number of outstanding
shares of Common Stock, including the assumed exercise of all vested options,
after consummation of the Offering. The net tangible book value dilution per
share shown below represents the difference between the assumed amount per share
paid by purchasers of Common Stock in the Offering (the midpoint of the price
range set forth on the cover of this Prospectus) and the net tangible book value
per share of Common Stock. The following table illustrates the per share
dilution:
<TABLE>
<CAPTION>
<S> <C>
Assumed initial public offering price per share.................................. $ 15.00
Net tangible book value per share................................................ 1.43
---------
Net tangible book value dilution per share....................................... $ 13.57
---------
---------
</TABLE>
14
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THE COMPANY AND THE PREDECESSOR
The following table sets forth selected historical financial data for the
Company and the Predecessor. The selected financial data for the Predecessor for
the year ended December 31, 1993, were derived from the unaudited combined
financial statements of the Predecessor. The selected financial data for the
Predecessor for the years ended December 31, 1994 and 1995, and for the period
ended September 19, 1996, were derived from the audited combined financial
statements of the Predecessor. The selected financial data for the Company as of
September 30, 1996, and for the year ended September 30, 1997, were derived from
the audited consolidated financial statements of the Company. The selected
financial data for the Company for the three-month periods ended December 31,
1996 and 1997 were derived from the unaudited consolidated financial statements
of the Company included elsewhere herein, and, in the opinion of management of
the Company, contain all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of results of operations and
financial condition.
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 Prospectus.
<TABLE>
<CAPTION>
COMPANY
PREDECESSOR(1) -------------------------------
-------------------------------------------- THREE MONTHS ENDED
PERIOD YEAR
YEAR ENDED DECEMBER 31, ENDED ENDED DECEMBER 31,
------------------------------- SEPT. 19, SEPT. 30, --------------------
1993 1994 1995 1996 1997(2) 1996 1997
--------- --------- --------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues......................................... $ 43,135 $ 50,725 $ 65,579 $ 55,186 $ 140,719 $ 30,966 $ 42,635
Gross profit..................................... 14,583 14,905 18,816 15,696 44,326 9,958 13,219
Selling, general and administrative.............. 9,773 10,785 12,488 8,897 21,048 4,447 6,040
Operating income................................. 4,810 4,120 6,328 6,799 23,278 5,511 7,179
Interest expense................................. 1,682 2,017 2,251 1,512 5,263 1,547 1,204
Provision for income taxes(3).................... -- -- -- -- 6,559 1,520 2,291
Net income....................................... 3,175 2,200 4,104 5,306 11,603 2,444 3,735
Earnings per share:
Basic.......................................... $ 0.73 $ 0.16 $ 0.23
Diluted........................................ 0.70 0.16 0.21
Weighted average shares outstanding:
Basic.......................................... 15,897 15,118 16,583
Diluted........................................ 16,509 15,118 17,615
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR(1) COMPANY
------------------------------- ---------------------------------
DECEMBER
DECEMBER 31, SEPTEMBER 30, 31,
------------------------------- ---------------------- ---------
1993 1994 1995 1996(4) 1997(2) 1996
--------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets........................................ $ 50,758 $ 50,376 $ 58,962 $ 86,611 $ 99,680 $ 89,178
Total assets.......................................... 54,408 51,504 59,970 97,216 110,235 99,405
Current liabilities................................... 11,044 10,078 33,548 22,308 28,076 23,162
Long-term debt, less current maturities............... 20,266 16,929 -- 55,500 49,000 53,500
Stockholders' equity.................................. 21,704 23,103 25,027 19,408 33,159 22,743
<CAPTION>
1997
---------
<S> <C>
BALANCE SHEET DATA:
Current assets........................................ $ 110,010
Total assets.......................................... 120,527
Current liabilities................................... 31,633
Long-term debt, less current maturities............... 52,000
Stockholders' equity.................................. 36,894
</TABLE>
- ------------------------------
(1) Tri-Star Aerospace, Inc. and subsidiary and affiliate.
(2) 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.
(3) 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.
(4) 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.
15
<PAGE>
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 for the year ended December 31, 1993, were derived from the
unaudited financial statements of Aviall Aerospace. The selected financial data
for Aviall Aerospace for the years ended December 31, 1994 and 1995 and the
period ended September 19, 1996 were derived from the audited financial
statements of Aviall Aerospace. 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 the Prospectus.
<TABLE>
<CAPTION>
PERIOD
YEAR ENDED DECEMBER 31, ENDED
------------------------------- SEPT. 19,
1993 1994 1995 1996(1)
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................................................. $ 11,884 $ 17,229 $ 25,580 $ 23,085
Gross profit............................................................. 3,156 2,945 5,802 5,035
Selling, general and administrative(2)................................... 5,803 5,654 5,884 4,730
Operating income (loss).................................................. (2,647) (2,709) (82) 305
BALANCE SHEET DATA:
Current assets........................................................... $ 8,244 $ 6,680 $ 17,022 $ 20,528
Total assets............................................................. 9,756 8,011 18,345 21,790
Current liabilities...................................................... 534 2,778 5,145 3,195
Long-term debt........................................................... -- -- -- --
Intercompany debt........................................................ 9,222 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.
16
<PAGE>
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
PROSPECTUS.
GENERAL
The Company was formed on August 21, 1996 and began operations on September
19, 1996, when it acquired the Predecessor and 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 generates a portion of its revenues from sales to customers
outside of the United States. The Company's revenues from foreign customers
represented $19.2 million in its fiscal year ended September 30, 1997, or
approximately 13.6% of total revenues. All of the Company's revenues are
invoiced in United States dollars.
The Company recognizes revenues from JIT services and conventional sales.
Revenues are recognized at the time of shipment. The principal elements
comprising TriStar's cost of goods sold are costs of aerospace hardware, freight
charges and a provision for excess and obsolete inventory. TriStar does not
manufacture or alter the products that it distributes and, therefore, does not
incur significant labor or overhead costs associated with product sales. Gross
profit represents revenues less cost of goods sold. TriStar's selling, general
and administrative expenses are comprised mainly of labor and benefit costs and
operating and occupancy expenses associated with the corporate office and the
Company's warehousing and distribution facilities.
MATTERS AFFECTING COMPARABILITY
For the year ended September 30, 1997, the financial statements of the
Company include the results of the Predecessor and Aviall Aerospace combined for
a full year of operations. The periods from January 1, 1996 to September 19,
1996 for the Predecessor and Aviall Aerospace represent the stand-alone
operations of each entity for less than a full year of operations. The years
ended December 31, 1995 for the Predecessor and Aviall Aerospace represent the
stand-alone operations of each entity for 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.
17
<PAGE>
RESULTS OF OPERATIONS OF THE COMPANY AND THE PREDECESSOR
The following table sets forth for the periods indicated the percentage of
revenues represented by certain items in the statements of operations of the
Company and the Predecessor:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------- -------------------------------
YEAR PERIOD YEAR THREE MONTHS ENDED
ENDED ENDED ENDED DECEMBER 31,
DEC. 31, SEPT. 19, SEPT. 30, --------------------
1995 1996 1997 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues.................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.......................................... 71.3% 71.6% 68.5% 67.8% 69.0%
--------- --------- --------- --------- ---------
Gross profit................................................ 28.7% 28.4% 31.5% 32.2% 31.0%
Selling, general and administrative......................... 19.0% 16.1% 15.0% 14.4% 14.2%
--------- --------- --------- --------- ---------
Operating income............................................ 9.7% 12.3% 16.5% 17.8% 16.8%
Interest expense............................................ 3.4% 2.7% 3.7% 5.0% 2.8%
Other income................................................ 0.0% 0.0% (0.1%) 0.0% (0.1%)
--------- --------- --------- --------- ---------
Income before taxes......................................... 6.3% 9.6% 12.9% 12.8% 14.1%
Provision for income taxes.................................. 0.0% 0.0% 4.7% 4.9% 5.4%
--------- --------- --------- --------- ---------
Net income.................................................. 6.3% 9.6% 8.2% 7.9% 8.7%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
THE COMPANY
THREE MONTH PERIOD ENDED DECEMBER 31, 1997 COMPARED TO THREE MONTH PERIOD
ENDED DECEMBER 31, 1996.
REVENUES--Revenues increased $11.6 million, or 37.4%, to $42.6 million for
the three month period ended December 31, 1997, compared to $31.0 million for
the same period in 1996. The Company's revenues have increased primarily due to
growth in customer demand resulting from increased commercial aircraft build
rates.
GROSS PROFIT--Gross profit increased $3.2 million, or 32.0%, to $13.2
million for the three month period ended December 31, 1997, compared to $10.0
million for the same period in 1996. The increase in gross profit was primarily
due to an increase in revenues, as discussed above, partially offset by a
decrease in gross margin to 31.0% for the three months ended December 31, 1997
from 32.2% for the same period in 1996. The decrease in the gross margin was
primarily due to a retroactive price increase of approximately $400,000
collected from a major JIT customer in December 1996.
SELLING, GENERAL AND ADMINISTRATIVE--Selling, general and administrative
expenses increased $1.6 million, or 36.4%, to $6.0 million for the three month
period ended December 31, 1997, compared to $4.4 million for the same period in
1996. The increase was primarily due to increased personnel costs necessary to
support the growth in revenues. Selling, general and administrative expenses as
a percentage of revenues were 14.2% for the three month period ended December
31, 1997, compared to 14.4% for the same period in 1996.
INTEREST EXPENSE--Interest expense decreased approximately $343,000, or
22.9%, to $1.2 million for the three months ended December 31, 1997, compared to
$1.5 million for the same period in 1996. The decrease in interest expense was
primarily due to lower debt levels resulting from positive cash flows from
operations and the conversion of a note payable to Common Stock on January 15,
1997.
NET INCOME--Net income increased $1.3 million, or 54.2%, to $3.7 million for
the three months ended December 31, 1997, compared to $2.4 million for the same
period in 1996. The increase in net income was
18
<PAGE>
primarily due to an increase in revenues and a decrease in interest expense,
partially offset by a decrease 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 five 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.
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.
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THE PREDECESSOR
PERIOD BEGINNING JANUARY 1, 1996 AND ENDED SEPTEMBER 19, 1996 COMPARED TO THE
YEAR ENDED DECEMBER 31, 1995.
REVENUES--Revenues decreased $10.4 million, or 15.9%, to $55.2 million for
the period ended September 19, 1996, compared to $65.6 million for the year
ended December 31, 1995. The decrease was primarily due to the 1995 revenue
amount representing a full year of operations. However, average daily sales
during the period ended September 19, 1996 increased by 17.2% over average daily
sales during the year ended December 31, 1995, primarily resulting from a growth
in demand resulting from increased commercial aircraft build rates, as well as
the expansion of SKUs sold under JIT agreements with two of the Company's major
customers resulting from their increased acceptance of the Company's JIT
services.
GROSS PROFIT--Gross profit decreased $3.1 million, or 16.5%, to $15.7
million for the period ended September 19, 1996, compared to $18.8 million for
the year ended December 31, 1995. The decrease in gross profit was primarily due
to the 1995 amount representing a full year of operations, partially offset by
the increase in average daily sales, as discussed above. Additionally, the gross
margin decreased 0.3% to 28.4% for the period ended September 19, 1996, compared
to 28.7% for the year ended December 31, 1995.
SELLING, GENERAL AND ADMINISTRATIVE--Selling, general and administrative
expenses decreased $3.6 million, or 28.8%, to $8.9 million for the period ended
September 19, 1996, compared to $12.5 million for the year ended December 31,
1995. The decrease was primarily due to the 1995 amount representing a full year
of operations. Selling, general and administrative expenses as a percentage of
revenues was 16.1% for the period ended September 19, 1996, compared to 19.0%
for the year ended December 31, 1995. The decrease was primarily due to the
increase in average daily sales, as discussed above, without a proportional
increase in selling, general and administrative expenses, due to operating
efficiencies realized by the Company.
INTEREST EXPENSE--Interest expense decreased approximately $739,000, or
32.1%, to $1.5 million for period ended September 19, 1996, compared to $2.3
million for the year ended December 31, 1995. The decrease was primarily due to
the 1995 amount representing a full year of interest expense.
NET INCOME--Net income increased $1.2 million, or 29.3%, to $5.3 million for
the period ended September 19, 1996, compared to $4.1 million for the year ended
December 31, 1995. The increase in net income was primarily due to the increase
in average daily sales without a proportional increase in selling, general and
administrative expense, as discussed above, partially offset by 1995
representing a full year of operations.
RESULTS OF OPERATIONS OF AVIALL AEROSPACE
The following table sets forth for the periods indicated the percentage of
revenues represented by certain items in the statements of operations of Aviall
Aerospace:
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
DECEMBER 31, SEPTEMBER 19,
1995 1996
------------ -------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................................. 100.0% 100.0%
Cost of goods sold........................................................ 77.3% 78.2%
------------ -------------
Gross profit.............................................................. 22.7% 21.8%
Selling, general and administrative....................................... 23.0% 20.5%
------------ -------------
Operating income (loss)................................................... (0.3%) 1.3%
------------ -------------
------------ -------------
</TABLE>
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PERIOD BEGINNING JANUARY 1, 1996 AND ENDED SEPTEMBER 19, 1996 COMPARED TO THE
YEAR ENDED DECEMBER 31, 1995
REVENUES--Revenues decreased $2.5 million, or 9.8%, to $23.1 million for the
period ended September 19, 1996, compared to $25.6 million for the year ended
December 31, 1995. The decrease was due to the 1995 revenue amount representing
a full year of operations. However, average daily sales during the period ended
September 19, 1996 increased by 20.3% over average daily sales during the year
ended December 31, 1995. This increase was primarily attributable to higher
sales under two of Aviall Aerospace's JIT agreements.
GROSS PROFIT--Gross profit decreased approximately $767,000, or 13.2%, to
$5.0 million for the period ended September 19, 1996, compared to $5.8 million
for the year ended December 31, 1995. The decrease in gross profit was primarily
due to the 1995 amount representing a full year of operations, partially offset
by the increase in average daily sales, as discussed above. Additionally, the
gross margin decreased 0.9% to 21.8% for the period ended September 19, 1996,
compared to 22.7% for the year ended December 31, 1995. The decrease in the
gross margin was primarily due to price increases for certain aerospace hardware
parts which were not passed on to customers.
SELLING, GENERAL AND ADMINISTRATIVE--Selling, general and administrative
expenses decreased $1.2 million, or 20.3%, to $4.7 million for the period ended
September 19, 1996, compared to $5.9 million for the year ended December 31,
1995. The decrease in expenses was primarily due to the 1995 amount representing
a full year of operations. Selling, general and administrative expenses as a
percentage of revenues was 20.5% for the period ended September 19, 1996,
compared to 23.0% for the year ended December 31, 1995. The decrease was
primarily due to the increase in average daily sales, as discussed above,
without a proportional increase in selling, general and administrative expenses.
Because Aviall Aerospace was an operating division of Aviall Services, Inc.
("Aviall Services") during the periods presented and was not accounted for as a
separate entity, the amounts for selling, general and administrative expenses
above include allocations of Aviall Service's corporate overhead to Aviall
Aerospace in the amounts of $1.2 million and $1.7 million for the periods ended
September 19, 1996 and the year ended December 31, 1995, respectively.
OPERATING INCOME (LOSS)--Operating income (loss) increased $387,000 to
$305,000 for the period ended September 19, 1996, compared to ($82,000) for the
year ended December 31, 1995. The increase in operating income was primarily due
to the increase in average daily sales without a proportional increase in
selling, general and administrative expenses, as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements consist primarily of working capital
needs, capital expenditures and scheduled payments of interest on its
indebtedness under the Credit Agreement referred to below. The Company's working
capital requirements have increased as a result of higher accounts receivable
and inventory levels needed to support its growth in revenues. The Company's
working capital was $78.4 million as of December 31, 1997.
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 also has a $30.0 million revolving credit facility (the
"Revolver") under the Credit Agreement. As of December 31, 1997, the Company had
borrowings of $3.0 million outstanding under the
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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.
The Term Notes and Revolver provide for borrowings of up to $80.0 million of
which the Company had total borrowings of $52.5 million at December 31, 1997.
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, 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 non-cash charges of $2.5
million, less changes in working capital items of $4.5 million.
The Company's capital expenditures were $1.0 million in fiscal 1997. In
1996, the Company also used $70.0 million in cash in connection with the
acquisitions of the Predecessor and Aviall Aerospace. The Company's net cash
used by financing activities in fiscal 1997 was $5.3 million, consisting
primarily of payments made on the Revolver.
The Company expects to spend approximately $3.0 million for capital
expenditures in fiscal 1998. These capital expenditures will relate principally
to computer system (both software and hardware) upgrades, conversion and
implementation costs. Additional costs related to the conversion and
implementation will be incurred throughout 1999 and are currently estimated to
be approximately $2.0 million.
The Company believes 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 Company has been evaluating its computer software programs and operating
systems 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. The so-called "Year 2000" issue is the result of computer programs
being written using two digits (rather than four) to define the applicable year,
resulting in incorrect calculations for the year 2000 and beyond. Based on
present information, the Company believes that it will be able to achieve such
Year 2000 compliance through a combination of modifications to some existing
programs and systems, and the replacement of other programs and systems.
Anticipated expenses to design and implement the modifications or replacement
systems are not expected to exceed $200,000 and will be incurred in fiscal 1998
and 1999.
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 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share," which the Company adopted in its first quarter fiscal 1998 financial
statements. This new standard establishes methods for computing and presenting
earnings per share ("EPS") and also simplifies the previous standards found in
APB Opinion No. 15, "Earnings Per Share." It requires dual presentation of basic
and diluted EPS on the Statements of Consolidated Operations. The adoption of
this standard did not have a significant impact on the Company's earnings per
share calculations.
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<PAGE>
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which is effective in fiscal year 1999. This new statement establishes
standards for reporting and displaying comprehensive income and its components
(revenues, expenses, gains, and losses) in a full set of general-purpose
financial statements. The statement requires that an enterprise (i) classify
items of other comprehensive income by their nature in a financial statement and
(ii) display the accumulated balance of other comprehensive income separately
from retained earnings and additional paid-in capital in the equity section of a
statement of financial position. The Company does not expect the impact of this
new statement to have a material impact on its consolidated financial
statements.
In June 1997, the FASB also issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," which is effective in fiscal year
1999. This new statement revises standards for public companies to report
information about segments of their business and also requires disclosure of
selected segment information in quarterly financial reports. The statement also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company has not yet determined the
impact this new statement may have on disclosures in its consolidated financial
statements.
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<PAGE>
INDUSTRY OVERVIEW
The aerospace hardware industry is highly fragmented and is comprised of a
large number of manufacturers and an even greater number of distributors. The
Company estimates the worldwide market for aerospace hardware to be
approximately $1.5 billion, which is divided into approximately $750 million of
direct sales by manufacturers and $750 million of sales by distributors. The
Company believes that the percentage of sales made by distributors directly to
end users has and will continue to increase. Although there are more than 100
manufacturers of aerospace hardware, the top 20 manufacturers represent a
substantial portion of aerospace hardware manufacturing sales. Many of these
manufacturers have experienced significant sales growth over the past two years
due largely to the growth in commercial aircraft build rates. The distribution
segment of the aerospace hardware industry is even more fragmented than the
manufacturing segment; however, the four largest distributors (including the
Company) account for a significant portion of total sales.
Distributors continue to play an increasingly important role in the
aerospace hardware industry due to supply and demand disruptions which
characterize the industry and are caused by (i) the high number of SKUs (in
excess of 250,000) required to manufacture and repair aircraft, (ii) the
economics of fastener manufacturing, which tend to favor long production runs
which allow for more efficient amortization of fixed set-up costs and (iii)
manufacturing inefficiencies (i.e., batch and queue processes). The high number
of SKUs makes forecasting an extremely complex task for end users who must
decide on the optimal quantity and timing of orders. It also requires end users
to invest heavily in personnel and systems to manage the constant flow of
products. Therefore, to meet their inventory needs, end users are required to
invest in costly infrastructures to procure and manage tens of thousands of SKUs
and millions of parts. The second and third factors cited above (long production
runs and manufacturing inefficiencies) create a divergence between the quantity
of aerospace hardware demanded by customers (based on forecasted usage) and the
quantity which must be produced by manufacturers to derive a profit. As a
result, end users experience both shortages of critical product and excess
supply of non-critical product.
The maintenance of the material management infrastructures cited above can
generate total processing costs which exceed the low per-unit cost of the part
itself. In addition, to minimize costly production stoppages caused by parts
shortages, end users have been forced to invest valuable working capital into
excess inventories. Aerospace hardware distributors act as a conduit to minimize
these potential supply chain disruptions by aggregating demand from a large
number of end users and sourcing hardware from multiple suppliers, thereby
smoothing the disparity in the supply and demand requirements of the
marketplace. As a result, the Company believes that breadth of supplier and
customer bases and, most importantly, access to reliable usage data which can be
used to forecast customer and supplier requirements are key competitive
advantages in the aerospace distribution marketplace.
24
<PAGE>
BUSINESS
GENERAL
The Company is both a leading distributor of aerospace hardware and a
leading provider of customized inventory management services to OEMs of aircraft
and aircraft components, to commercial airlines and to MRO facilities. While
approximately 59% of the Company's revenues for fiscal 1997 were derived from
conventional sales, a substantial and growing percentage of the Company's
revenues are derived from long-term JIT agreements under which TriStar performs
a wide variety of value-added services. 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 believes that,
through the Predecessor, 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, Raytheon, Bell
Helicopter, Gulfstream, United Airlines, British Airways and Federal Express.
Through its JIT services and conventional sales, the Company processed over
950,000 transactions involving over 78,000 SKUs in fiscal 1997, resulting in
over $140 million of sales to approximately 2,000 customers.
TriStar's JIT services are designed to provide solutions for its customers
by overcoming the inefficiencies inherent in the supply chain for aerospace
hardware. 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, quality assurance and other 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. By outsourcing the procurement and management of aerospace hardware
to TriStar, the Company's customers can realize significant cost savings and
production efficiencies principally as a result of (i) the elimination of
process costs relating to the planning, purchasing and expediting of aerospace
hardware, (ii) a reduction in carrying costs, including labor, financing and
overhead charges, (iii) a reduction in parts shortages, which can lead to costly
production line stoppages and (iv) a reduction in product costs.
TriStar's leading market position as a provider of value-added inventory
management services provides it with large amounts of information on its
customers' usage patterns with respect to individual aerospace hardware parts.
This information is recorded electronically through the Company's order and
fulfillment processes. The Company compiles usage data from each of its
customers and analyzes the data in the context of historical usage trends to
forecast aggregate and customer-specific demand for individual aerospace
hardware parts. The Company uses these demand forecasts when ordering aerospace
hardware to ensure efficient and reliable delivery to its customers while
optimizing its own inventory. In addition, TriStar intends to utilize these
forecasts to provide its primary suppliers with reliable demand data to allow
them to better schedule their manufacturing processes.
Recognizing the benefits that outsourcing could provide to end users of
aerospace hardware, in 1990 the Predecessor developed new sales efforts,
operating processes and systems to provide these services. By 1991 it had
secured its first JIT agreement with Rockwell International, and by the end of
1993 had secured JIT agreements with Grumman, Beech Aircraft and Gulfstream.
Today the Company has expanded its JIT programs to include 16 agreements with 11
companies servicing over 25 facilities in the United States, Canada and England.
In addition, JIT revenues have grown at a compound annual rate of 44.1% over the
past three years to $57.5 million, representing approximately 41% of the
Company's total revenues for fiscal 1997. Strong growth in the Company's JIT
programs enabled it to increase revenues at a time when
25
<PAGE>
the aerospace industry was experiencing a significant downturn in the early and
mid-1990's. The Company believes that OEMs, airlines and MRO facilities will
continue to outsource their aerospace hardware procurement and management needs
in order to focus on their core businesses and reduce costs. The Company
believes that its status as a leading provider of JIT services favorably
positions it to benefit from this trend and to increase its share of the
aerospace hardware market.
COMPANY STRENGTHS
The Company believes it has a number of core strengths which have resulted
in consistent growth of sales and earnings despite the historically cyclical
nature of the aerospace industry. The principal factors contributing to
TriStar's emergence as a market leader are:
- LEADING PROVIDER OF JIT SERVICES. The Company's long-term JIT agreements
provide it with a number of competitive advantages. JIT programs provide
TriStar with growth opportunities which are not directly tied to aerospace
industry cycles. By expanding the products and services under existing JIT
agreements and establishing new JIT agreements, TriStar should be able to
increase its share of the aerospace hardware market even during cyclical
downturns in the aerospace industry. JIT programs enable TriStar to
aggregate purchases of hardware across multiple customers, thereby
reducing acquisition costs and improving margins. JIT programs provide
TriStar with reliable real-time data regarding the usage patterns of
aerospace hardware across a wide customer base since they typically
encompass all of the customer's purchases of a particular part. By
aggregating and analyzing this data, TriStar is better able to forecast
and manage its own aerospace hardware needs and those of its customers.
JIT programs typically result in the Company receiving additional
conventional sales opportunities due to its status as a preferred supplier
to the customer. In addition, JIT programs integrate the Company's
programs and systems with the operations of its customers. As a result,
management believes its customers would incur significant switching costs
and inconvenience in replacing the Company's programs and systems in the
event they were to engage another supplier.
- DATABASE OF HISTORICAL USAGE INFORMATION. TriStar has made significant
investments in information systems which have enabled the Company to
develop an in-depth database of its customers' historical usage patterns
relating to all of the aerospace hardware in the Company's inventory. This
database includes historical usage patterns for each of the Company's JIT
and conventional sales customers, as well as lists of acceptable
substitutes for each aerospace hardware part in its inventory according to
each customer's specifications. By continually analyzing this information,
the Company is able to gain insight into the likely future usage patterns
of each particular part it distributes. Accordingly, the database provides
TriStar with an important tool in managing its own inventory positions as
well as those of its customers. The Company believes that its accumulation
of historical information and its experience in managing inventories add
stability to its JIT customer base by providing a foundation of knowledge
unique to its customers and unmatched by its competitors.
- QUALITY ASSURANCE AND RELIABILITY. Management believes that one of the
key factors which has contributed to the Company's success and position
within its industry is its quality assurance program and its reputation
for reliability. The Company's quality assurance program includes physical
inspection of substantially all incoming shipments as well as electronic
storage of manufacturers' certifications. The Company scans all required
documentation received from manufacturers into its optical imaging system
which allows such documentation to be electronically retrieved for instant
traceability. In addition, the Company's processes and systems have been
designed to ensure the timely and consistent delivery of products and
services. These processes and systems have allowed the Company to
establish a reputation for reliability with its customers which has
contributed to its growth, particularly with respect to its JIT programs.
- SIGNIFICANT ECONOMIES OF SCALE RELATING TO SIZE. The Company maintains an
on-hand inventory of over 100,000 SKUs for its customers' diverse
aerospace hardware requirements. This inventory is
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<PAGE>
supported by sophisticated order processing, inventory management and
reporting systems. As one of the largest aerospace hardware distributors,
TriStar makes significant annual purchases of inventory on behalf of its
many customers. As a result, the Company believes that it is one of the
largest customers of many of its suppliers, allowing it to take advantage
of price reductions associated with large volume purchases. The Company
believes that it is favorably positioned, as customers are reducing the
number of aerospace hardware suppliers to those that are technologically
sophisticated and well-capitalized and which can provide full service and
a broad range of products.
- STRONG RELATIONSHIPS WITH LEADING FASTENER MANUFACTURERS. TriStar has
long-established relationships with substantially all of the major
suppliers of aerospace hardware, including Fairchild, Huck, SPS, Kaynar
and Hi-Shear. TriStar has been designated an Authorized Distributor by
more than 65 manufacturers of aerospace hardware, including most of the
major fastener manufacturers.
GROWTH STRATEGY
Management has identified the following strategies which it believes provide
specific opportunities for profitable growth:
- JIT SERVICES EXPANSION. The Company's strong growth has been generated
internally and has been due in large part to the success of its JIT
programs. The Company intends to continue to expand its JIT business by
increasing the number of SKUs, services and products offered and the
number of facilities covered under existing JIT agreements. In addition,
the Company has targeted additional JIT customers which include airlines,
air cargo companies, MRO facilities and smaller OEMs. For example, the
Company recently signed a five-year agreement to provide JIT services to
Federal Express.
- INCREASED AFTERMARKET PENETRATION. The Company intends to increase its
penetration of non-OEM segments of its marketplace, including the airline
and MRO facility segments, by (i) further expanding its product offerings
in response to the inventory needs of participants in these market
segments, (ii) continuing to tailor its JIT services to meet the specific
demands of these participants and (iii) increasing its sales and marketing
efforts to these participants. The Company has recently established an
airline marketing group to focus on increasing market penetration of that
sector.
- INTERNATIONAL EXPANSION. The Company plans to expand its presence and
increase its market penetration in Europe and Asia through expansion of
its product offerings to include additional European standard (i.e.,
Airbus) parts. The Company recently entered into a supply agreement with
Aerospatiale, a member of the Airbus consortium, and plans to establish
sales, JIT services and warehousing operations in France in the near
future. The Company anticipates that this recent supply agreement will
help to position the Company as a supplier of aerospace hardware to the
Airbus aftermarket and assist in attracting other European aerospace
customers. The Company also plans to pursue strategic alliances in the
Pacific Rim and Asia.
- SUPPLY CHAIN MANAGEMENT. The Company acts as a conduit between its
customers and suppliers to minimize imbalances in the supply and demand of
aerospace hardware. The Company's database of its customers' historical
usage patterns, including the types and quantities of aerospace hardware
used and the timing of purchases, is a valuable asset which the Company
utilizes to forecast aggregate and customer specific demand. The Company
has long-standing relationships with its key suppliers and believes that
an opportunity exists to achieve greater efficiency in the aerospace
hardware supply chain through the establishment of long-term agreements
with suppliers. By utilizing its historical database to provide
manufacturers with demand forecasts, the Company believes it can alleviate
a portion of the supply chain disruptions usually associated with the
cyclicality of the aerospace industry, which have adversely affected the
Company's customers and suppliers in the past.
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- STRATEGIC ACQUISITIONS. The aerospace hardware distribution industry is
comprised of a small number of large companies, such as TriStar, and
numerous small, local and regional businesses. The Company believes that
opportunities exist to consolidate the aerospace hardware industry through
strategic acquisitions. In addition, the Company believes that the
acquisition of certain of its competitors would enable it to broaden its
product line and enter new and/or under-penetrated markets.
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 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 $57.5 million in fiscal 1997 or approximately 41% 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 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 $83.2 million in fiscal
1997, or approximately 59% of total sales.
28
<PAGE>
OPERATIONS
TriStar's JIT services and conventional sales require the Company to
routinely execute over 2,500 transactions daily involving the receipt and
shipment of products. In addition, the Company provides demand forecasting,
purchasing, quality assurance and, when applicable, documentation services on
all parts received for its customers. The Company's processes and functions are
described below:
FORECASTING AND PURCHASING
The Company's management information systems allow it to forecast estimated
future demand for all of the aerospace hardware items in its inventory by
analyzing a variety of inputs, including, among other things, historical usage,
the number of acceptable substitutes and the variability of historical demand
for each part number. The key to the Company's ability to accurately forecast
future usage is the database of historical information it maintains on every
item it distributes.
Usage forecasts are reviewed automatically by the Company's systems on a
daily basis and compared with the in-stock availability of each part, as well as
applicable manufacturer lead times and customer minimum stock requirements to
determine the timing of optimal reorder quantities. When required, the system
generates an order slip which is delivered to the Company's material managers
who have long-standing relationships with key manufacturers. Each material
manager is responsible for specific product groups. Following the receipt of
system-generated purchase order documents, the appropriate material manager
conducts an independent review to verify the need for additional products.
Specifically, each part is assigned a three-letter code which indicates the
number of customers for that part over the last 12 months (an indicator of
liquidity) and its degree of profitability. These liquidity and profitability
codes allow the material managers to focus on the fastest turning, highest
margin products. The material management group currently consists of 24
employees.
INSPECTION AND QUALITY ASSURANCE
The Company's quality assurance group inspects substantially all shipments
upon receipt by the Company. Initial inspection involves count and dimension
validation, and review of manufacturers' certifications and required test
results, to ensure that the correct part number and quantities have been
received and that all required test results and verifications have been
provided. In addition, a statistical sample of the shipment is physically
inspected to assure no damage to the parts is evident and that the physical
attributes (i.e., dimensions, finish, etc.) comply with specifications. Any
parts not adhering to required standards are rejected, segregated and returned
to the supplier.
The Company has been C.A.S.E. registered and awarded Qualified Suppliers
List status by the U.S. Department of Defense. In addition, the Company is
working to achieve ISO 9000 certification. TriStar is certified as a qualified
supplier by Boeing, Aerospatiale, Lockheed, Northrop Grumman, Raytheon, Bell
Helicopter and others.
TriStar currently employs 34 inspectors in its quality assurance group. Each
inspector is required to complete an education program that was designed by the
Company and the Tulsa Technology Center specifically for TriStar employees. The
program teaches blueprint reading, metrology and quality assurance principles.
DOCUMENTATION
Once an incoming lot has passed the Company's quality inspection, the
manufacturer's name, certifications, test reports and other information required
to assure source-to-customer traceability are scanned into an optical imaging
system and stored in the Company's computer system. This system also provides a
record of TriStar's compliance with contractual quality assurance obligations to
its customers. In addition, a unique bar-coded label is affixed to each
container in the lot linking it to a specific receipt, part
29
<PAGE>
and lot number in inventory to ensure accessibility of all data related to that
lot. These computerized, fully integrated inventory functions permit
source-to-customer tracking by lot control number and manufacturer on all
products sold. To ensure proper safekeeping of traceability data, the original
received documentation, as well as backup copies on CD ROM digital imaging
disks, are maintained off-site.
ORDER ENTRY AND FULFILLMENT
On-hand inventory is maintained in a system of warehouses which include two
central distribution facilities ("CDFs"), which also function as FSLs, and eight
additional FSLs. This inventory is backed up by parts on order with suppliers in
quantities and on delivery schedules established to meet planned stocking and
consumption levels. A logistics plan is recalculated every night and
requirements for new buys, transfers and expedited deliveries are presented to
the Company's operations department daily.
Personnel at the CDFs (i) receive and inspect all incoming shipments and
review and store required documentation, (ii) process (i.e., pick, pack and
ship) all conventional sales orders (approximately 1,300 daily) and (iii)
process all FSL replenishment requirements. The FSL replenishment process
ensures that only customer-qualified (as to manufacturer, revision level, type
of documents needed, alternate part numbers, etc.) stock gets placed in the
FSLs, thereby avoiding any need for inspection at the FSLs. FSLs usually are
located in close proximity to the supported customer and contain only those
items used by that customer. The FSLs process (i.e., pick, pack and ship) all
JIT sales orders (approximately 1,500 daily).
JIT SERVICES
Through its JIT services, the Company is able to replicate every aspect of
the supply chain for aerospace hardware and to manage the movement of products
from the manufacturer's shipping dock to the bins on the customer's factory
floor.
- Orders are received electronically via bar code scanning,
computer-to-computer interface with the customer ordering system, other
electronic commerce networks and direct customer manual input into the
TriStar system.
- As orders are received, they are batch processed, picked, packed and
shipped by the FSL, usually within one working day. The FSL order
processing system documents stocks available at the FSL, creates data
files needed to invoice the customer, records all data needed to maintain
traceability of the items delivered, provides waybill and shipping data
and updates all consumption data for planning and historical tracking
purposes.
- Quantities to be delivered in response to each order for an item are
calculated frequently based upon customer consumption and reorder
frequency to develop cost-effective delivery solutions. This, in turn,
affects the overall FSL stock and replenishment plan.
- As an FSL reaches a predetermined minimum stocking level, the CDF
automatically receives an order to replenish the FSL. That order
identifies not only the specific quantity needed but also the specific
stock at the CDF that is approved by the customer as to manufacturer,
revision level and documentation, including alternate part numbers that
may be used to fulfill such customer requirements.
CONVENTIONAL SALES
Through its conventional sales, the Company provides its customers with
high-quality aerospace hardware at reasonable prices on an as-ordered basis.
- Orders are received from customers either as a result of specific
contracts that establish prices for groups of products, or as a result of
having provided price and delivery data based upon a request for quotation
from the customer.
30
<PAGE>
- On receipt of an order, a sales representative checks for stock
availability. If stock is available, the order is entered to a CDF
creating a picking request within seconds from the time it is entered. The
picking request contains all data needed to fulfill the order, including
customer quality requirements, pricing, packaging and shipping
instructions. Routine orders are usually shipped within two working days.
Priority orders received before noon are usually shipped the same day.
Rush orders are usually ready for shipment within two hours. A label is
generated and attached to each outgoing package which contains all data
needed to maintain traceability.
- If stock is not immediately available, the sales representative informs
the customer and provides the estimated delivery date. At the customer's
request, a sale order is entered creating a "buy" requirement that is
received and executed by the Company's purchasing department, typically
within one working day.
- Orders may be scheduled that are held for picking until the date required
by the customer. On, but not before the date specified, the system
generates the required picking request.
- Receipts of stock at the CDF trigger an automatic search for open customer
and FSL replenishment requirements, grouping incoming items into "Routine"
and "Expedite" categories. As stock is accepted by the inspection process,
picking requests are automatically generated to rapidly move inventory
from the dock through order fulfillment or FSL replenishment.
SALES AND MARKETING
JIT SERVICES
The Company's JIT marketing and contract group consists of national account
executives and regional business development representatives, assisted by
planners who are product sourcing, pricing, and implementation specialists. This
group, as well as individual local sales representatives, identify opportunities
to provide contractual sales or JIT services. Additionally, customers will
solicit proposals for JIT services through which they specify the services to be
contracted and the products to be delivered. Upon identification of a JIT
opportunity, the Company prepares a tailored presentation of its JIT systems,
potential cost benefit analysis and service level analysis which is typically
given to senior management members of the customers' materials, purchasing,
quality, finance and management information systems departments. The Company
then performs an evaluation of the customer's facility, which includes
documentation of appropriate levels of systems and processes. This evaluation
also includes production floor bin mapping to identify the required locations
and estimated usage patterns of individual aerospace hardware parts. The Company
then develops a proposal which sets forth products and services to be provided
and pricing, taking into account consumption levels, frequency of delivery and
minimum stock requirements. In addition to the proposal, the Company provides an
impact analysis of the potential savings as a result of adoption of the
proposal.
CONVENTIONAL SALES
The Company's conventional sales utilize a traditional organization made up
of 105 sales personnel divided into four geographical regions encompassing 11
offices, each with its own sales manager. Within regions, individual sales
personnel are assigned smaller territories and are responsible for the customers
in their areas. In addition to calling on customers, these sales personnel
respond daily to customer requests by quoting prices, placing product orders and
suggesting acceptable substitutes. In addition, some of these sales personnel
have been designated as key account representatives for the Company's largest
customers and are responsible for identifying new sales opportunities and for
addressing customer issues.
31
<PAGE>
CUSTOMERS
The Company has over 2,000 customers, which include OEMs of aircraft and
aircraft components, commercial airlines and MRO facilities. During fiscal 1997,
the Company's top ten customers accounted for approximately 50.5% of total
sales, with Boeing (including former McDonnell Douglas and Rockwell
International facilities) and Northrop Grumman accounting for approximately
24.8% and 11.7% of total sales, respectively.
MANAGEMENT INFORMATION SYSTEMS
The Company's management information systems provide for automation of all
order management, demand forecasting, inventory management, purchasing, pricing,
billing and accounts payable functions. The Company's electronic data scanning
and optical imaging systems provide accurate and rapid retrieval of inventory
traceability documents required by the Company's customers in order for them to
comply with applicable regulations. The Company's systems routinely process over
2,500 transactions per day, allowing the Company to provide relatively short
order-to-delivery cycle times. Management believes speed and accuracy are
critical in the highly competitive aerospace hardware distribution industry. In
addition, approximately 68% of the orders received from the Company's customers
are transmitted electronically.
The Company believes electronic commerce conducted over the Internet will
grow in importance in the future and is developing its own interactive web site
(tristar-aero.com) and an Intranet. The Company intends to make electronic
product catalogs available both over the Internet and in CD-ROM versions.
Management plans to continue to invest in technology to improve the quality,
reliability and cost-effectiveness of its operations.
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 $57.3
million of TriStar's purchases in fiscal 1997, representing approximately 64.7%
of total purchases of $88.7 million.
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<PAGE>
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 December 24, 1997, the Company employed 384 full-time employees. The
Company is not a party to any collective bargaining agreements and management
considers its employee relations to be good.
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.
<TABLE>
<CAPTION>
FACILITY DESCRIPTION LOCATION SQUARE FOOTAGE
- ------------------------------------------------------------------- ----------------------------- --------------
<S> <C> <C>
Corporate Headquarters and Central Warehouse....................... Dallas, TX 77,554
Sales Office and Central Warehouse................................. Tulsa, OK 53,588
Sales Office and Warehouse......................................... Deerfield Beach, FL 20,520
Sales Office and Warehouse......................................... Long Beach, CA 19,878
Warehouse.......................................................... Bridgeton, MO 16,500
Warehouse.......................................................... Augusta, KS 10,000
Sales Office and Warehouse......................................... Mississauga, Ontario 7,871
Sales Office and Warehouse......................................... Lachine, Quebec 4,268
Sales Office and Warehouse......................................... London, England 3,906
Sales Office and Warehouse......................................... Macon, GA 3,750
Sales Office....................................................... Auburn, WA 2,640
Sales Office....................................................... Fort Worth, TX 2,250
Sales Office....................................................... Sherman Oaks, CA 1,776
Sales Office....................................................... Cornwall, NY 350
</TABLE>
PRODUCT LIABILITY AND LEGAL PROCEEDINGS
The Company currently provides no express warranties as to the performance
of the products it distributes. However, the nature of the Company's business
exposes it to possible 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.
See "Risk Factors-- Product Liability; Claims Exposure."
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 or 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.
33
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table and biographies set forth information concerning those
individuals who are currently serving as members of the Board of Directors or as
executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE* PRINCIPAL POSITIONS WITH THE COMPANY
- -------------------------------------------------- ----- -------------------------------------------------------
<S> <C> <C>
Stephen Berger.................................... 58 Chairman of the Board of Directors
Quentin Bourjeaurd................................ 40 Director, President and Chief Executive Officer
Charles Balchunas................................. 53 Director, Executive Vice President and Chief Operating
Officer
Douglas E. Childress.............................. 40 Executive Vice President, Chief Financial Officer,
Treasurer and Secretary
Louis F. Partenza................................. 40 Senior Vice President, Sales and Marketing
John R. King, Jr.................................. 49 Vice President, Information Technology
Richard P. Small.................................. 68 Vice Chairman of the Board of Directors
Muzzafar Mirza.................................... 40 Director
William Hopkins................................... 34 Director
</TABLE>
- ------------------------
* As of December 31, 1997
STEPHEN BERGER has served as Chairman of the Board of Directors of the
Company since the Company's formation in 1996. Mr. Berger is a member of Odyssey
Investment Partners, LLC, a private investment firm, and is also a general
partner of Odyssey. From 1990 to 1993 Mr. Berger was employed by GE Capital
Corp. where he served as Chairman and CEO of FGIC and subsequently was an
Executive Vice President of GE Capital Corp.
QUENTIN BOURJEAURD has served on the Board of Directors of the Company since
September 19, 1996. Mr. Bourjeaurd has served as President of the Company since
September 19, 1996 and as the Chief Executive Officer of the Company since
December 2, 1996. From June 1993 to September 19, 1996, Mr. Bourjeaurd was the
Vice President and General Manager of Aviall Aerospace, then a business unit of
Aviall Services, Inc. Mr. Bourjeaurd formed Bourjeaurd Specialty Products, Inc.
in June 1983 and was the President and sole stockholder of such company until
its acquisition by Aviall Services, Inc. in June 1993.
CHARLES BALCHUNAS has served on the Board of Directors of the Company and as
Executive Vice President and Chief Operating Officer of the Company since
September 19, 1996. Mr. Balchunas joined the Predecessor in August 1990 as a
customer service manager, subsequently becoming the Executive Vice President and
Chief Operating Officer of the Predecessor. Prior to joining the Predecessor,
Mr. Balchunas served as a Lieutenant Colonel with the United States Marine
Corps. During his 22 years of service with the Marine Corps, Mr. Balchunas
gained extensive experience in aviation, aviation maintenance and logistics
systems management as an aircraft maintenance manager, an airfield operations
manager and the Commanding Officer, Headquarters of the Marine Corps Air Station
in Iwakuni, Japan.
DOUGLAS E. CHILDRESS joined the Company as the Vice President-Finance and
Treasurer on August 29, 1997 and became an Executive Vice President, the Chief
Financial Officer and the Secretary of the Company on January 15, 1998. Prior to
joining the Company, Mr. Childress served as the Director of Accounting,
Consulting and Evaluation Services of Interstate Battery System of America from
October 1994 to August 1997 and as an Audit and Consulting Manager with the KL
Real Estate Group of Ernst & Young from July 1993 to October 1994. Mr. Childress
co-founded the consulting firm Worldwide Holdings Corporation in 1990 prior to
which time he had been employed as an audit manager with Ernst & Young. Mr.
Childress is a certified public accountant and an accredited member of the
American Society of Appraisers.
34
<PAGE>
LOUIS F. PARTENZA has served as the Senior Vice President, Sales and
Marketing of the Company since March 31, 1997. Prior to joining the Company, Mr.
Partenza was the Senior Vice President of Sales, Marketing and Purchasing with
Solair, Inc., a subsidiary of Banner Aerospace, Inc., which he joined in May
1995. From June 1991 to May 1995, Mr. Partenza was employed in the Accessory
Services division of UNC, Inc., starting as a General Manager and subsequently
becoming Vice President of Sales and Marketing. From 1986 to June 1991, Mr.
Partenza was a General Manager and Vice President of Finance with Barocas
Aircraft Parts prior to which time Mr. Partenza had worked as an auditor since
1981 with Coopers & Lybrand and Deloitte & Touche.
JOHN R. KING, JR. has served as the Company's Vice President, Information
Technology since April 7, 1997. Prior to joining the Company, Mr. King had
served as the Vice President of Operations of FFSC Inc. (formerly Fitz & Floyd)
since 1987. In such capacity Mr. King oversaw approximately 350 employees with
the FFSC Inc.'s MIS, Inventory Control, Warehouse and Distribution, Customer
Service and Retail department reporting to him. From 1984 to 1987 Mr. King was
the Vice President of Systems Applications with Benton Schneider & Associates, a
software and consulting firm. Mr. King is certified in production and inventory
management by the American Production and Inventory Control Society.
RICHARD P. SMALL has served as the Vice Chairman of the Board of Directors
of the Company since September 19, 1996. Prior to that date, Mr. Small had been
the controlling shareholder, Chairman of the Board, and Chief Executive Officer
of the Predecessor since 1984.
MUZZAFAR MIRZA has served on the Board of Directors of the Company since the
Company's formation in 1996. Mr. Mirza is a member of Odyssey Investment
Partners, LLC and has been a principal in the private equity investing group of
Odyssey since 1993. From 1988 to 1993, Mr. Mirza was employed by the merchant
banking group of GE Capital Corp.
WILLIAM HOPKINS has served on the Board of Directors of the Company since
October 3, 1996. Mr. Hopkins is a member of Odyssey Investment Partners, LLC and
has been a principal in the private equity investing group of Odyssey since
1994. Prior to joining Odyssey, Mr. Hopkins was a member of the merchant banking
group of GE Capital Corp. Mr. Hopkins began his financial career as a corporate
lending officer with the Wells Fargo Bank.
COMPOSITION OF THE COMPANY'S BOARD OF DIRECTORS AFTER THE OFFERING
Upon or shortly before the Offering, the Board of Directors of the Company
will be divided into three classes, each of whose members will serve for a
staggered three-year term. Messrs. Hopkins and Small will initially serve in the
class whose term expires in 1999, Messrs. Mirza and Balchunas will initially
serve in the class whose term expires in 2000 and Messrs. Berger and Bourjeaurd
will initially serve in the class whose term expires in 2001. As soon as
practicable after the Offering, each of Messrs. Berger, Mirza, Hopkins and Small
will resign from the Company's Board of Directors. The Company anticipates that,
upon or shortly after the Offering, Mr. Bourjeaurd will become the Chairman of
the Board of Directors and Mr. Childress will be elected to the Board of
Directors. In addition, the Company anticipates that the Board of Directors will
elect three outside directors to the Board to fill the then existing vacancies.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a Compensation Committee that until the
consummation of the Offering will continue to be comprised of Messrs. Berger,
Mirza and Hopkins. There are no Compensation Committee interlocks which are
required to be disclosed by the rules promulgated under the Securities Act. The
Board of Directors intends to establish an Audit Committee effective upon
closing of this Offering. The Audit Committee will recommend the independent
accountants to be appointed by the Board of Directors to audit the financial
statements of the Company, which includes an inspection of the books and
accounts of the Company, and will review with such accountants the scope of
their audit and
35
<PAGE>
their report thereon, including any questions and recommendations that may arise
relating to such audit and report or the Company's internal accounting and
auditing procedures.
DIRECTOR COMPENSATION
Members of the Board of Directors receive no compensation for services
rendered in their capacity as such other than reimbursement for out-of-pocket
expenses incurred in connection with their attendance at meetings or otherwise
in their capacity as a director.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of
the Chief Executive Officer of the Company and each of the other executive
officers of the Company receiving over $100,000 in compensation during fiscal
1997 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------
---------------------------------------------------- SECURITIES
OTHER ANNUAL ALL OTHER UNDERLYING
SALARY BONUS COMPENSATION COMPENSATION OPTIONS
NAME AND PRINCIPAL POSITION ($) ($) ($) ($)(1) (#)
- ---------------------------------------------- --------- --------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Quentin Bourjeaurd............................ 202,706 350 -- 1,993 1,853,340
President and Chief Executive Officer
Charles Balchunas............................. 161,927 100,350 16,215(2) 3,352 723,320
Executive Vice President and Chief Operating
Officer
G. Bruce McInnis(3)........................... 133,846 100,350 66,935(2) 525 723,320
Assistant to the Chairman
Louis F. Partenza............................. 70,000 50,250 46,650(2) 189 158,000
Senior Vice President, Sales and Marketing
</TABLE>
- ------------------------
(1) Represents (i) amounts paid for term life insurance premiums on behalf of
Messrs. Bourjeaurd, Balchunas, McInnis and Partenza in the amounts of
$1,263, $789, $525 and $189, respectively, and (ii) contributions to the
Company's 401(k) plan on behalf of Mr. Bourjeaurd and Mr. Balchunas in the
amounts of $730 and $2,563, respectively.
(2) Represents reimbursement of expenses incurred by Messrs. Balchunas, McInnis
and Partenza in relocating to Dallas, Texas in connection with their
commencement of employment with the Company in fiscal 1997.
(3) During fiscal 1997, Mr. McInnis served as the Chief Financial Officer and
Executive Vice President-- Administration of the Company. As of January 15,
1998, Mr. McInnis resigned from such positions to become Assistant to the
Chairman of the Board of Directors of the Company.
36
<PAGE>
The following table sets forth information concerning stock option grants
made to each of the Named Executive Officers during fiscal 1997:
OPTION GRANTS IN FISCAL 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
------------------------------- AT ASSUMED ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE APPRECIATION
SECURITIES TOTAL OPTIONS FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ------------------------------- -------------- --------------- ----------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Quentin Bourjeaurd............. 1,853,340(2) 48.33 1.47 9/18/06 1,705,073 4,336,816
Charles Balchunas.............. 361,660(3) 9.43 1.47 9/18/06 332,727 846,289
72,332(4) 1.89 2.91 9/18/06 (37,613) 65,099
72,332(5) 1.89 5.09 9/18/06 (195,296) (92,585)
72,332(6) 1.89 7.34 9/18/06 (358,043) (255,332)
72,332(7) 1.89 9.93 9/18/06 (545,383) (442,672)
72,332(8) 1.89 12.75 9/18/06 (749,360) (646,648)
G. Bruce McInnis............... 361,660(3) 9.43 1.47 9/18/06 321,877 806,502
72,332(4) 1.89 2.91 9/18/06 (39,783) 57,142
72,332(5) 1.89 5.09 9/18/06 (197,466) (100,541)
72,332(6) 1.89 7.34 9/18/06 (360,213) (263,288)
72,332(7) 1.89 9.93 9/18/06 (547,553) (450,628)
72,332(8) 1.89 12.75 9/18/06 (751,529) (654,605)
Louis F. Partenza.............. 79,000(9) 2.06 1.47 9/18/06 67,940 169,850
15,800(4) 0.41 2.91 9/18/06 (9,164) 11,218
15,800(5) 0.41 5.09 9/18/06 (43,608) (23,226)
15,800(6) 0.41 7.34 9/18/06 (79,158) (58,776)
15,800(7) 0.41 9.93 9/18/06 (120,080) (99,698)
15,800(8) 0.41 12.75 9/18/06 (164,636) (144,254)
</TABLE>
Under the terms of the grant letters relating to the options, options which
are not exercisable at the date of grant become "available" in the Company's
fiscal years 1997 through 2001 depending on satisfaction by the Company of
certain performance targets. Once "available," 25% of such options may be
exercised immediately with 25% of the remaining options becoming exercisable at
the end of each of the next three fiscal years. The availability and
exercisability of the options are subject to acceleration in certain
circumstances. As a result of the Offering, all of the options which are
"available" prior to the Offering will become immediately exercisable. In
addition, 80% of the options eligible to become "available" in fiscal years
ending subsequent to the Offering will become immediately exercisable as a
result of the Offering. The options which are not accelerated as described in
the foregoing sentence will terminate upon consummation of the Offering.
- ------------------------
(1) These amounts are based on calculations at hypothetical 5% and 10%
compounded annual appreciation rates prescribed by the Securities and
Exchange Commission (the "Commission") and, therefore, are not intended to
forecast possible future appreciation, if any, of the Common Stock. Solely
for purposes of calculating the potential realizable value of the indicated
options, the Company has assumed the value of the underlying Common Stock on
the date of each grant to be $1.47, the per share price paid by Odyssey for
the Common Stock on September 19, 1996. Messrs. Bourjeaurd's and Balchunas's
options were granted on September 19, 1996. Messrs. McInnis's and Partenza's
options were granted on January 14, 1997 and March 31, 1997, respectively.
(2) Of the options granted, 21.31% were eligible to become "available" in fiscal
1997 and 19.67% are eligible to become available in each of the Company's
fiscal years 1998, 1999, 2000 and 2001 depending on satisfaction by the
Company of certain performance targets. The Compensation
37
<PAGE>
Committee has determined that 93% of the options eligible to become
available in fiscal year 1997 actually became available.
(3) Of the options granted, 20% became "available" under the terms of the
specific grant letters on the date of grant, and up to 20% are eligible to
become "available" in each of the Company's fiscal years 1998, 1999, 2000
and 2001 depending on the satisfaction by the Company of certain performance
targets.
(4) The options reflected were eligible to become "available" depending on the
satisfaction by the Company of certain performance targets for fiscal year
1997. The Compensation Committee has determined that 93% of the options
reflected became available based on the Company's performance in fiscal
1997.
(5) The options reflected are eligible to become "available" depending on the
satisfaction by the Company of certain performance targets for fiscal 1998.
(6) The options reflected are eligible to become "available" depending on the
satisfaction by the Company of certain performance targets for fiscal 1999.
(7) The options reflected are eligible to become "available" depending on the
satisfaction by the Company of certain performance targets for fiscal 2000.
(8) The options reflected are eligible to become "available" depending on the
satisfaction by the Company of certain performance targets for fiscal 2001.
(9) Of the options granted, 20% were eligible to become "available" in fiscal
1997 and 20% are eligible to become available in each of the Company's
fiscal years 1998, 1999, 2000 and 2001 depending on satisfaction by the
Company of certain performance targets. The Compensation Committee has
determined that 93% of the options eligible to become available in 1997
actually became available.
The Named Executive Officers did not exercise any options for shares of
Common Stock during fiscal 1997. The following table sets forth certain
information concerning the value of unexercised options held by the Named
Executive Officers at the end of fiscal 1997:
FISCAL 1997 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END
----------------------------- ----------------------------
NAME EXERCISABLE/UNEXERCISABLE(#)(1) EXERCISABLE/UNEXERCISABLE($)(1)
- ----------------------------------------------------- ----------------------------- ----------------------------
<S> <C> <C>
Quentin Bourjeaurd................................... 91,838/1,761,502 1,242,568/23,833,122
Charles Balchunas.................................... 34,900/688,420 447,981/7,120,117
G. Bruce McInnis..................................... 34,900/688,420 447,981/7,120,117
Louis F. Partenza.................................... 7,348/150,652 94,128/1,559,026
</TABLE>
- ------------------------
(1) Solely for purposes of calculating the value of the indicated options as of
September 30, 1997, as required by the rules of the Commission, the Company
has assigned to the Common Stock a value of $15.00 per share (the midpoint
of the price range set forth on the cover of this Prospectus).
38
<PAGE>
EMPLOYMENT AGREEMENTS
QUENTIN BOURJEAURD EXECUTIVE EMPLOYMENT AGREEMENT. Mr. Bourjeaurd entered
into an executive employment agreement with the Company on September 19, 1996.
Pursuant to his employment agreement, Mr. Bourjeaurd will serve as President of
the Company through September 19, 2001, unless earlier terminated as provided
therein. Under his employment agreement, Mr. Bourjeaurd receives an annual
salary of $200,000 and is entitled to medical and other benefits generally
available to senior executives of the Company. On July 1, 1997 the Compensation
Committee increased Mr. Bourjeaurd's annual compensation to $225,000.
Mr. Bourjeaurd's employment agreement also provides that if Mr. Bourjeaurd's
employment is terminated by the Company other than for Cause (as defined
therein), Mr. Bourjeaurd will continue to receive his salary and benefits (as
severance) until the earlier to occur of (i) the expiration of the term of his
employment agreement or (ii) the second anniversary of the date of termination;
provided that such continued salary and benefits will cease upon commencement by
Mr. Bourjeaurd of other full-time employment. In the event Mr. Bourjeaurd's
employment is terminated for Cause or by reason of death or Disability (as
defined therein), no further compensation will be payable by the Company.
Additionally, Mr. Bourjeaurd's employment agreement contains a non-competition
provision pursuant to which Mr. Bourjeaurd has agreed not to engage in any
business activity, without the consent of the Company, which would be in
competition with any business engaged in by the Company during his employment
and thereafter for as long as he continues to receive any of the severance
payments described above.
CHARLES BALCHUNAS EXECUTIVE EMPLOYMENT AGREEMENT. Mr. Balchunas entered
into an executive employment agreement with the Company on February 1, 1997.
Pursuant to his employment agreement, Mr. Balchunas will serve as Chief
Operating Officer of the Company through December 31, 1999, unless earlier
terminated as provided therein. Under his employment agreement, Mr. Balchunas
receives an annual salary of $200,000, is eligible for such discretionary
bonuses as the Compensation Committee may determine and is entitled to medical
and other benefits generally available to senior executives of the Company.
Mr. Balchunas's employment agreement also provides that if Mr. Balchunas's
employment is terminated other than for Cause (as defined therein), Mr.
Balchunas will continue to receive his salary and benefits (as severance) for a
period of two years following the Date of Termination (as defined therein) of
his employment; provided that such continued salary and benefits will cease upon
commencement by Mr. Balchunas of other full-time employment. In the event Mr.
Balchunas's employment is terminated for Cause or by reason of death or
Disability (as defined therein), no further compensation will be payable by the
Company. Additionally, Mr. Balchunas's employment agreement contains a
non-competition provision pursuant to which Mr. Balchunas has agreed not to
engage in any business activity, without the consent of the Company, which would
be in competition with any business engaged in by the Company during his
employment and for two years thereafter.
G. BRUCE MCINNIS EMPLOYMENT AGREEMENT. Mr. McInnis and the Company are
parties to an amended and restated employment agreement dated as of January 15,
1998. Pursuant to such employment agreement, Mr. McInnis will serve as Assistant
to the Chairman of the Board of Directors of the Company through January 15,
2000, unless earlier terminated as provided therein. Under his employment
agreement, Mr. McInnis receives an annual salary of $200,000 and is entitled to
receive medical and other benefits generally available to senior executives of
the Company.
Mr. McInnis's employment agreement provides that if the Company terminates
Mr. McInnis's employment other than for Cause (as defined therein), Mr. McInnis
will continue to receive his salary and benefits (as severance) until the
earlier of (i) January 15, 2000 or (ii) the occurrence of certain triggering
events relating to the sale and transferability of Mr. McInnis's shares of
Common Stock. In the event Mr. McInnis's employment is terminated for Cause or
by reason of death or Disability (as defined therein), no further compensation
will be payable by the Company. Additionally, Mr. McInnis's employment
39
<PAGE>
agreement contains a non-competition provision pursuant to which Mr. McInnis has
agreed not to engage in any business activity, without the consent of the
Company, which would be in competition with any business engaged in by the
Company during his employment and thereafter for as long as he continues to
receive any of the severance payments described above.
Mr. McInnis's employment agreement also provides that the Company will use
its best efforts to have the shares of Common Stock held by Mr. McInnis or
subject to exercisable options held by him included in the Offering (subject to
certain exclusion and cut-back provisions) and, if all such shares are not
included in the Offering, to use its best efforts to file, within 30 days
following the lock-up period set forth in the Underwriting Agreement, a Form S-8
relating to all exercisable options to purchase shares of Common Stock then held
by Mr. McInnis. The Company has also agreed not to terminate Mr. McInnis's
employment other than for Cause during a specified period following the Offering
relating to the sale and transferability of his Common Stock.
LOUIS F. PARTENZA EMPLOYMENT AGREEMENT. Mr. Partenza entered into an
employment agreement with the Company on March 17, 1997. Pursuant to his
employment agreement, Mr. Partenza will serve as Senior Vice President, Sales
and Marketing of the Company through December 31, 1999, unless earlier
terminated as provided therein. Under his employment agreement, Mr. Partenza
receives an annual salary of $140,000, is eligible to receive a bonus of up to
50% of his salary and is entitled to medical and other benefits generally
available to senior executives of the Company.
Mr. Partenza's employment agreement also provides that if Mr. Partenza's
employment is terminated other than for Cause (as defined therein), Mr. Partenza
will continue to receive his salary and benefits (as severance) for a period of
two years following the Date of Termination (as defined therein) of his
employment; provided that such continued salary and benefits will cease upon
commencement by Mr. Partenza of other full-time employment. In the event Mr.
Partenza's employment is terminated for Cause or by reason of death or
Disability (as defined therein), no further compensation will be payable by the
Company. Additionally, Mr. Partenza's employment agreement contains a
non-competition provision pursuant to which Mr. Partenza has agreed not to
engage in any business activity, without the consent of the Company, which would
be in competition with any business engaged in by the Company during his
employment and for two years thereafter, provided that Mr. Partenza continues to
receive any of the severance payments described above.
BONUS PLAN
Prior to the Offering, the Company intends to adopt an executive incentive
compensation plan, the form of which will be filed as an exhibit to the
registration statement of which this Prospectus is a part.
STOCK OPTION PLANS
1996 STOCK OPTION PLAN
The Company's 1996 Stock Option Plan (the "1996 Plan") authorizes the
issuance of up to 3,950,000 shares of common stock of the Company pursuant to
stock options granted to key employees, non-employee directors and consultants
of the Company. The 1996 Plan does not provide for stock appreciation rights.
The 1996 Plan will expire on September 18, 2006, unless earlier terminated
by the Company's Board of Directors. The authorized number of shares, the
exercise price of outstanding options and the number of shares under options are
subject to appropriate adjustment in the event of any change in the number of
outstanding shares of the Company's common stock through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, reverse split,
split-up, split-off, spin-off, combination of shares, exchange of shares or
other like change in the capital structure of the Company.
40
<PAGE>
The 1996 Plan is administered by the Compensation Committee which selects
the optionees and determines the terms and provisions of each option grant
within the parameters set forth in the 1996 Plan.
In general, in the event of a "change of control" of the Company (as defined
in the 1996 Plan), each option will terminate within a specified number of days
after notice to the holder of such option, and each such holder will receive an
amount equal to the excess of the aggregate fair market value of the shares of
Common Stock subject to the option over the exercise price, payable in the same
consideration as received by the stockholders of the Company upon the closing of
such transaction. In addition, the grant letters pursuant to which the
outstanding options were granted provide that all options not subject to
acceleration by virtue of the consummation of the Offering will terminate
following consummation of the Offering.
Options may not be transferred except by will or the laws of descent and
distribution and may be exercised only by the holder during the lifetime of such
holder.
The options granted under the 1996 Plan are evidenced by stock option
agreements and are intended to be options that do not meet the requirements for
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended. The exercise price of options must be at least
the fair market value of the Company's common stock on the date the option is
granted, and each option must expire no later than September 18, 2006. To
exercise an option, the optionee must deliver to the Company full payment for
the shares purchased, provided that the Compensation Committee may in its
discretion (i) accept as payment shares of the Company's common stock having a
fair market value equal to the purchase price of the shares being purchased or
(ii) accept such other payment as the Compensation Committee shall permit in its
sole discretion at the time of exercise. The Compensation Committee is empowered
to amend the 1996 Plan, subject to stockholder approval in certain
circumstances.
As of December 31, 1997, options to purchase 3,834,810 of Common Stock were
outstanding under the 1996 Plan.
1998 STOCK OPTION PLAN
Prior to the Offering, the Company intends to adopt a stock option plan
authorizing the issuance of options covering 2,000,000 shares of Common Stock,
the form of which will be filed as an exhibit to the registration statement of
which this Prospectus is a part.
41
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
GENERAL
The table below and the notes thereto set forth as of January 31, 1998 and
after giving effect to the Offering (assuming no exercise of the Underwriters'
over-allotment option, except as otherwise disclosed in the footnotes to the
table) certain information concerning the beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) of the Company's Common
Stock by (i) each person known by the Company to own beneficially more than 5%
of the outstanding Common Stock, (ii) each director of the Company and each
Named Executive Officer and (iii) all directors and executive officers and
directors of the Company as a group. Additionally, the table names each Selling
Stockholder and specifies the number of shares of Common Stock to be sold by
each. Except as indicated in the footnotes to the table, the persons named in
the table have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them, subject to community property
laws where applicable.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY
OWNED
BEFORE OFFERING SHARES BEING AFTER THE OFFERING
------------------------- SOLD IN ------------------------
NAME AND ADDRESS NUMBER PERCENT THE OFFERING NUMBER PERCENT
- ----------------------------------------------- ------------ ----------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Odyssey Partners, L.P(1)....................... 19,087,597 96.55 10,484,707 1,114,073 6.64
31 West 52nd Street
New York, NY 10019
Stephen Berger(1).............................. 19,087,597 96.55 10,484,707 1,114,073 6.64
Muzzafar Mirza................................. -- -- -- -- --
William Hopkins................................ -- -- -- -- --
Richard P. Small(2)............................ 2,046,732 12.34 1,850,142 196,590 1.17
7434 South Gary
Tulsa, OK 74136
Quentin Bourjeaurd(3).......................... 3,006,266 16.59 120,527 2,885,739 15.75
Charles Balchunas(4)........................... 739,041 4.30 -- 739,041 4.25
Louis F. Partenza(5)........................... 198,764 1.19 -- 198,764 1.17
All directors and executive officers as a group 19,087,597 96.55 12,455,376 5,324,472 27.72
(9 persons)(6)...............................
G. Bruce McInnis(7)............................ 807,297 4.70 204,768 602,529 3.59
BT Investment Partners, Inc.(8)................ 682,244 4.11 616,714 65,530 *
</TABLE>
- ------------------------
* Less than one percent.
(1) Includes (i) 11,598,780 shares owned of record by Odyssey and (ii) 7,488,817
shares (including 206,647 shares subject to options which are currently
exercisable and 2,979,988 shares subject to options which will become
exercisable upon consummation of the Offering) over which Odyssey has a
proxy and power of attorney pursuant to the Stockholders Agreement described
below. See "Certain Transactions--Management Stockholders' and
Optionholders' Agreement." If the Underwriters' over-allotment option is
exercised in full, Odyssey will beneficially own no shares after the
Offering. Messrs. Stephen Berger, Jack Nash, Leon Levy, Brian Wruble and
Joshua Nash are general partners of Odyssey and, accordingly, may be deemed
to own beneficially the shares beneficially owned by Odyssey. Each such
general partner disclaims beneficial ownership of the shares beneficially
owned by Odyssey.
(2) The shares reflected are owned of record by R.P. Small Corp., of which Mr.
Small is the sole stockholder. If the Underwriters' over-allotment option is
exercised in full, Mr. Small will beneficially own no shares after the
Offering.
42
<PAGE>
(3) Includes (i) 1,472,244 shares owned of record by Mr. Bourjeaurd, (ii) 91,838
shares subject to options which are currently exercisable and (iii)
1,442,184 shares subject to options which will become exercisable as a
result of the Offering. If the Underwriters' over-allotment option is
exercised in full, Mr. Bourjeaurd will beneficially own 2,872,932, or
15.35%, of the shares of Common Stock outstanding after the Offering. Mr.
Bourjeaurd's business address is 2527 Willowbrook Road, Dallas, Texas 75220.
(4) Includes (i) 136,512 shares owned of record by Mr. Balchunas, (ii) 34,900
shares subject to options which are currently exercisable and (iii) 567,629
shares subject to options which will become exercisable as a result of the
Offering.
(5) Includes (i) 68,256 shares owned of record by Mr. Partenza, (ii) 7,348
shares subject to options which are currently exercisable and (iii) 123,160
shares subject to options which will become exercisable as a result of the
Offering.
(6) Includes (i) 11,598,780 shares owned of record by Odyssey and (ii) 7,488,817
shares (including shares subject to options which will be exercisable after
the Offering) over which Odyssey has a proxy and power of attorney pursuant
to the Stockholders Agreement. Mr. Berger, the Chairman of the Board of
Directors of the Company, is a general partner of Odyssey and may be deemed
to own beneficially the shares beneficially owned by Odyssey (see note 1
above). The shares being sold in the Offering include shares to be sold by
Odyssey and Messrs. Small and Bourjeaurd. The shares beneficially owned
after the Offering include (i) 1,114,073 shares owned of record by Odyssey
which may be deemed to be beneficially owned by Mr. Berger, (ii) 196,590
shares beneficially owned by Mr. Small as the sole stockholder of R.P. Small
Corp. (see note 2 above) and (iii) 4,013,809 shares beneficially owned by
the remaining directors and officers of the Company. If the Underwriters'
over-allotment option is exercised in full, Odyssey and Mr. Small will
beneficially own no shares after the Offering and the remaining directors
and officers will own 4,001,002, or 20.40%, of shares of Common Stock
outstanding after the Offering.
(7) Includes (i) 204,768 shares owned of record by Mr. McInnis, (ii) 34,900
shares subject to options which are currently exercisable, and (iii) 567,629
shares subject to options which will become exercisable as a result of the
Offering. If the Underwriters' over-allotment option is exercised in full,
Mr. McInnis will beneficially own no shares after the Offering.
(8) If the Underwriters' over-allotment option is exercised in full, BT
Investment Partners, Inc. will beneficially own no shares after the
Offering.
43
<PAGE>
CERTAIN TRANSACTIONS
MANAGEMENT STOCKHOLDERS' AND OPTIONHOLDERS' AGREEMENT
The Company, Odyssey, BT Investment Partners, Inc. ("BT Investments") and
each management stockholder and optionholder are parties to an Amended and
Restated Management Stockholders' and Optionholders' Agreement dated as of May
15, 1997 (the "Stockholders Agreement"). The Stockholders Agreement provides,
among other things, for certain limitations on transfers of the Common Stock,
for the grant of proxies and powers of attorney in favor of Odyssey, and for
certain "piggyback" registration rights in favor of the management stockholders
with respects to registered offerings of the Common Stock by the Company. Upon
consummation of the Offering, however, the Stockholders Agreement will
terminate, except with respect to the "piggyback" registration rights granted to
the management stockholders.
REGISTRATION RIGHTS AGREEMENT
The Company and Odyssey are parties to a Registration Rights Agreement dated
as of November 7, 1996 (the "Registration Rights Agreement"). The Registration
Rights Agreement provides Odyssey with certain "demand" registration rights, as
well as certain "piggyback" registration rights with respect to registered
offerings of the Common Stock by the Company. In addition, the Company, Odyssey
and R.P. Small Corp. are parties to a letter agreement (the "Small Agreement"),
dated November 7, 1996, which grants R.P. Small Corp. the same "piggyback"
registration rights as those granted to Odyssey under the Registration Rights
Agreement, as well as certain rights to participate in "demand" registrations
instituted by Odyssey. In the event that Odyssey and R.P. Small Corp. sell all
of the Common Stock owned by them in the Offering, the Registration Rights
Agreement and the Small Agreement will be terminated.
INTEREST OF CERTAIN PERSONS IN THE OFFERING
Odyssey formed the Company on August 21, 1996 to facilitate the acquisition
of the Predecessor and Aviall Aerospace and currently owns of record 69.9% of
the outstanding Common Stock of the Company. In connection with its previously
announced dissolution and liquidation, Odyssey intends to sell the Common Stock
of the Company owned by it in the Offering. Based on a value of $15.00 per share
(the midpoint of the estimated price range set forth on the cover of this
Prospectus), Odyssey will receive an estimated $147.4 million of the $186.7
million of the aggregate proceeds to be received by the Selling Stockholders,
net of underwriting discounts and commissions, as a result of the Offering
($163.1 million of the $214.7 million of the aggregate proceeds if the
Underwriters' over-allotment option is exercised in full). Messrs. Stephen
Berger, Muzzafar Mirza and William Hopkins, members of the Company's Board of
Directors, are partners or principals of Odyssey.
In addition, several other Selling Stockholders presently serve or formerly
served as directors and/or executive officers of the Company, including Messrs.
Richard P. Small and Quentin Bourjeaurd. Mr. Small, formerly the controlling
stockholder, Chairman of the Board and Chief Executive Officer of the
Predecessor and currently the Vice Chairman of the Company's Board of Directors,
intends to sell in the Offering all of the Common Stock owned by R.P. Small
Corp., of which Mr. Small is the sole stockholder. R.P. Small Corp. will receive
an estimated $26.0 million of the aggregate net proceeds to be received by the
Selling Stockholders as a result of the Offering ($28.8 million if the
Underwriters' over-allotment option is exercised in full). Mr. Bourjeaurd, the
President and Chief Executive Officer of the Company, is seeking to sell 120,527
shares of Common Stock in the Offering (133,334 shares if the Underwriters'
over-allotment option is exercised in full) and will receive an estimated $1.7
million of the aggregate net proceeds to be received by the Selling Stockholders
as a result of the Offering ($1.9 million if the Underwriters' over-allotment
option is exercised in full). See "Principal and Selling Stockholders."
44
<PAGE>
EMPLOYEE STOCK PURCHASE PLAN
On April 29, 1997, the Company adopted an Employee Stock Purchase Plan (the
"Stock Purchase Plan"). Any employee, officer or director of the Company is
eligible to participate in the Stock Purchase Plan. The Stock Purchase Plan is
administered by the Board of Directors of the Company, which, in its sole
discretion, may determine the number of shares issuable to an eligible
purchaser, the purchase price thereof, vesting requirements and any other
additional terms as the Board of Directors deems appropriate.
On May 30, 1997, the Company issued and sold an aggregate of 660,598 shares
of its common stock, at a price of $1.47 per share, to 21 employees of the
Company pursuant to the Stock Purchase Plan. Such shares were issued in reliance
upon the exemption from registration provided by Rule 701 under the Securities
Act. Among the employees purchasing such shares were Messrs. Charles Balchunas,
G. Bruce McInnis, Louis F. Partenza and John R. King.
LOANS TO MANAGEMENT
On September 19, 1996, the Company loaned Mr. Bourjeaurd $200,000 at an
interest rate of 5.93% per annum, the proceeds of which were used to purchase
Common Stock of the Company. The entire principal and interest under such loan
was repaid by Mr. Bourjeaurd on December 11, 1997. On April 15, 1997, the
Company loaned an additional $100,000 to Mr. Bourjeaurd at an interest rate of
5.83% per annum, the proceeds of which were used to purchase additional Common
Stock. The entire principal and interest under such loan was repaid by Mr.
Bourjeaurd on December 11, 1997.
On May 30, 1997, the Company loaned Mr. Balchunas $75,000 at an interest
rate of 6.74% per annum, the proceeds of which were used, together with personal
funds, to purchase 136,512 shares of Common Stock of the Company at a purchase
price of $1.47 per share. Until all principal and interest is paid in full, Mr.
Balchunas is required to apply all proceeds from any sale or transfer of any
shares of Common Stock owned by him to the principal and interest then owing
under the loan. Interest is otherwise payable semi-annually. All of the 136,512
shares purchased by Mr. Balchunas are pledged to the Company as security for
such loan.
On May 30, 1997, the Company loaned Mr. Partenza $75,000 at an interest rate
of 6.74% per annum, the proceeds of which were used, together with personal
funds, to purchase 68,256 shares of Common Stock of the Company at a purchase
price of $1.47 per share. Until all principal and interest is paid in full, Mr.
Partenza is required to apply all proceeds from any sale or transfer of any
shares of Common Stock owned by him to the principal and interest then owing
under the loan. Interest is otherwise payable semi-annually. All of the 68,256
shares purchased by Mr. Partenza are pledged to the Company as security for such
loan.
TRANSACTIONS RELATING TO THE ACQUISITIONS OF THE PREDECESSOR AND AVIALL
AEROSPACE
Prior to the Company's acquisition of the Predecessor, the Predecessor
maintained a VEBA trust which held a life insurance policy on behalf of Mr.
Small, and through which the premiums for such policy were paid. As a result of
the acquisition of the Predecessor by merger, the Company succeeded the
Predecessor as the administrator of the VEBA trust. In connection with the
acquisition of the Predecessor, the Company entered into a letter agreement with
Mr. Small whereby: (i) the Company agreed to transfer the life insurance
policies to Mr. Small in exchange for a payment by Mr. Small to the VEBA trust
of $660,000, the approximate cash surrender value of the life insurance
policies, and (ii) the Company agreed to reimburse Mr. Small for such payment as
cash was paid out of the VEBA trust for premiums for health insurance maintained
by the Company. Pursuant to such agreement, the Company made a payment of
$330,000 to Mr. Small on October 16, 1997. The Company anticipates that the
remaining funds in the VEBA trust will be paid out for health insurance premiums
in fiscal 1998 and that the remaining amount due to Mr. Small under such
agreement will be paid to him shortly after the end of the Company's 1998 fiscal
year.
45
<PAGE>
In connection with the acquisition of the Predecessor, the Company entered
into an agreement with Mr. Small providing for payments to Mr. Small in the
amount of $225,000 per year, of which $165,000 represented a deferred portion of
the merger consideration payable to Mr. Small in connection with the merger and
$60,000 represented payment for management and consulting services to be
rendered to the Company by Mr. Small for two years following the acquisition of
the Predecessor with respect to inventory held by the Predecessor prior to the
acquisition.
As compensation for his services in coordinating, structuring and
consummating the simultaneous acquisitions of the Predecessor and Aviall
Aerospace, the Company agreed to pay Mr. Bourjeaurd a fee in the amount of
$2,560,000. Such fee was paid by the Company in installments as follows: $51,370
in May 1997, $500,000 in October 1997, $795,560 in December 1997 and $1,213,070
in February 1998.
46
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 40,000,000 shares of
Common Stock, par value $0.01 per share, and 10,000,000 shares of Preferred
Stock, par value $0.01 per share (the "Preferred Stock"). As of the date of this
Prospectus, there are 16,583,206 shares of Common Stock outstanding and no
shares of Preferred Stock outstanding or reserved for issuance.
The following description of the Company's capital stock is a summary of the
material terms of such stock. The following does not purport to be complete and
is subject in all respects to applicable Delaware law and to the provisions of
the Company's Amended and Restated Certificate of Incorporation (the
"Certificate") and Bylaws.
COMMON STOCK
Subject to the prior rights of any series of Preferred Stock which may from
time to time be authorized and outstanding, holders of Common Stock are entitled
to receive dividends out of funds legally available therefor when, as and if
declared by the Board of Directors and to receive pro rata net assets of the
Company legally available for distribution upon liquidation or dissolution.
Holders of Common Stock are entitled to one vote for each share of Common
Stock held on each matter to be voted on by the holders of Common Stock,
including the election of directors. The Common Stock has no preemptive rights
or cumulative voting rights and no redemption, sinking fund or conversion
provisions.
PREFERRED STOCK
The Preferred Stock may be issued by resolution of the Company's Board of
Directors from time to time without any action of the stockholders. The
Preferred Stock may be issued in one or more series and the Board of Directors
may fix the designation and relative powers, including voting powers,
preferences, rights, qualifications, limitations and restrictions of each series
so authorized. The issuance of any such series may have an adverse effect on the
rights of holders of Common Stock or impede the completion of a merger, tender
offer or other takeover attempt. The Company has no plans to issue shares of any
series of Preferred Stock.
CERTAIN CERTIFICATE AND BYLAW PROVISIONS
Certain provisions of the Certificate and the Bylaws could discourage
potential takeover attempts and could delay or prevent a change in control of
the Company. These provisions are intended to enhance the likelihood of
continuity and stability in the composition of the Board of Directors of the
Company and in the policies formulated by the Board of Directors and to
discourage certain types of transactions that may involve an actual or
threatened change of control of the Company. The provisions are designed to
reduce the vulnerability of the Company to an unsolicited proposal for a
takeover of the Company. The provisions are also intended to discourage certain
tactics that may be used in proxy fights. However, such provisions could have
the effect of discouraging others from making tender offers for the Company's
shares and, as a consequence, they may also inhibit fluctuations in the market
price of the Common Stock that often result from actual or rumored takeover
attempts. Such provisions may also have the effect of preventing changes in the
management of the Company.
CLASSIFIED BOARD OF DIRECTORS. There shall not be less than six nor more
than twelve directors. The Company presently has six directors. The Certificate
provides for the classification of the Board of Directors into three classes,
each class to consist as nearly as possible of one-third of the directors. The
term of office of the first class of directors will expire at the 1999 Annual
Meeting of Stockholders; the term of the second class of directors will expire
at the 2000 Annual Meeting of Stockholders; and the term
47
<PAGE>
of the third class of directors will expire at the 2001 Annual Meeting of
Stockholders. At each annual meeting, the class of directors to be elected at
such meeting will be elected for a three-year term and the directors in the
other two classes will continue in office. See "Management--Composition of the
Company's Board of Directors after the Offering."
The Certificate also permits the Board of Directors to create new
directorships and to elect new directors to serve for the full term of the class
of directors in which the new directorship was created. The Board of Directors
(or its remaining members, even though less than a quorum) is also empowered to
fill vacancies on the Board of Directors occurring for any reason for the
remainder of the term of the class of director in which the vacancy occurred.
SPECIAL STOCKHOLDERS' MEETINGS AND STOCKHOLDER ACTION. The Bylaws provide
that special meetings of the stockholders may be called only by the Chairman of
the Board or the President of the Company or upon a resolution adopted by a
majority of the entire Board of Directors. Stockholders are not generally
permitted to call, or to require that the Board of Directors call, a special
meeting of stockholders. Moreover, the business permitted to be conducted at any
special meeting of stockholders is limited to the business brought before the
meeting pursuant to the notice of the meeting given by the Company. In addition,
the Certificate provides that any action taken by the stockholders of the
Company must be effected at an annual or special meeting of stockholders and not
by written consent.
The provision of the Certificate prohibiting stockholder action by written
consent may have the effect of delaying consideration of a stockholder proposal
until the next annual meeting. This provision would also prevent the holders of
a majority of the outstanding Common Stock from unilaterally using the written
consent procedure to take stockholder action. Moreover, the provisions of the
Bylaws prevent a stockholder from forcing stockholder consideration of a
proposal over the opposition of the Board of Directors of the Company by calling
a special meeting of stockholders prior to the time the Board believes such
consideration to be appropriate.
PROCEDURES FOR STOCKHOLDER NOMINATIONS AND PROPOSALS. The Bylaws establish
an advance notice procedure for stockholders to nominate candidates for election
as directors or to bring other business before meetings of stockholders of the
Company (the "Stockholder Notice Procedure"). Only those stockholder nominees
who are nominated in accordance with the Stockholder Notice Procedure will be
eligible for election as directors of the Company. Under the Stockholder Notice
Procedure, notice of stockholder nominations to be made at an annual meeting (or
of any other business to be brought before such meeting) must be received by the
Company not less than 60 days nor more than 90 days prior to the first
anniversary of the previous year's annual meeting. Moreover, the Stockholder
Notice Procedure provides that if the Board of Directors of the Company has
determined that directors will be elected at a special meeting, a stockholder
must give written notice to the Secretary of the Company of any nominations to
be brought before a special meeting, not earlier than the 90th day prior to the
special meeting and not later than the later of the 60th day prior to the
special meeting or the 10th day following the first public announcement by the
Company of the date of the special meeting.
The Bylaws provide that only such business may be conducted at a special
meeting as is specified in the Company's notice of meeting. The Bylaws also
provide that at an annual meeting only such business may be conducted as has
been brought before the meeting (i) pursuant to the Company's notice of meeting,
(ii) by, or at the direction of, the Board of Directors or (iii) by a
stockholder who has given timely written notice pursuant to the Stockholder
Notice Procedure to the Secretary of the Company of such stockholder's intention
to bring such business before such meeting.
By requiring advance notice of nominations by stockholders, the Stockholder
Notice Procedure will afford the Board of Directors an opportunity to consider
the qualifications of the proposed nominees and, to the extent deemed necessary
or desirable by the Board of Directors, to inform stockholders about such
qualifications. By requiring advance notice of other proposed business, the
Stockholder Notice Procedure will provide a more orderly procedure for
conducting annual meetings of stockholders and, to the extent
48
<PAGE>
deemed necessary or desirable by the Board of Directors, will provide the Board
of Directors with an opportunity to inform stockholders, prior to such meetings,
of any business proposed to be conducted at such meetings, together with the
Board of Directors' position regarding action to be taken with respect to such
business, so that stockholders can better decide whether to attend such a
meeting or to grant a proxy regarding the disposition of any such business.
Although the Bylaws do not give the Board of Directors any power to approve
or disapprove stockholder nominations for the election of directors or proposals
for action, they may have the effect of precluding a contest for the election of
directors or the consideration of stockholder proposals if the proper procedures
are not followed, and of discouraging or deterring a third party from conducting
a solicitation of proxies to elect its own slate of directors or to approve its
own proposal, without regard to whether consideration of such nominees or
proposals might be harmful or beneficial to the Company and its stockholders.
AMENDMENT OF THE CERTIFICATE. The Certificate provides that an amendment
thereof must first be approved by a majority of the Board of Directors and (with
certain exceptions) thereafter approved by the holders of a majority of the
total votes eligible to be cast by holders of voting stock with respect to such
amendment or repeal; provided that the affirmative vote of 75% of the total
votes eligible to be cast by holders of voting stock, voting together as a
single class, is required to (i) amend or repeal the provisions of the
Certificate with respect to (A) the election of directors, (B) the right of
stockholders to act by written consent and (C) amendment of the Bylaws, (ii)
adopt any provision inconsistent with such provisions and (iii) amend or repeal
the provisions of the Certificate with respect to amendments to the Certificate.
AMENDMENT OF BYLAWS. The Certificate provides that the Bylaws may be
amended or repealed by action of the Board of Directors or by the stockholders.
Such action by the Board of Directors requires the affirmative vote of a
majority of the directors then in office without action by the stockholders.
Such action by the stockholders requires the affirmative vote of the holders of
at least 75% of the total votes eligible to be cast by holders of voting stock
with respect to such amendment or repeal at an annual meeting of stockholders or
a special meeting called for such purposes, unless the Board of Directors
recommends that the stockholders approve such amendment or repeal at such
meeting, in which case such amendment or repeal shall only require the
affirmative vote of a majority of the total votes eligible to be cast by holders
of voting stock with respect to such amendment or repeal.
LIMITATIONS ON DIRECTORS' LIABILITY. The Certificate provides that a
director will not be personally liable to the Company or its stockholders for
monetary damages for any 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 a knowing violation of law, (iii) under
Section 174 of the Delaware law, which concerns unlawful payments of dividends,
stock purchases or redemptions or (iv) for any transaction from which the
director derived an improper personal benefit. If the Delaware law is
subsequently amended to permit further limitation of the personal liability of
directors, the liability of a director of the Company will be eliminated or
limited to the fullest extent permitted by the Delaware law as so amended.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company is subject to the provisions of Section 203 of the DGCL. That
section provides, with certain exceptions, that a Delaware corporation may not
engage in any of a broad range of business combinations with a person or
affiliate or associate of such person who is an "interested stockholder" for a
period of three years from the date that such person became an interested
stockholder unless: (i) the transaction resulting in a person's becoming an
interested stockholder, or the business combination, is approved by the board of
directors of the corporation before the person becomes an interested
stockholder, (ii) upon consummation of the transaction that resulted in the
interested stockholder's becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
49
<PAGE>
corporation outstanding at the time the transaction commenced (excluding shares
owned by persons who are both officers and directors of the corporation, and
shares held by certain employee stock ownership plans); or (iii) on or after the
date the person becomes an interested stockholder, the business combination is
approved by the corporation's board of directors and by the holders of at least
66 2/3% of the corporation's outstanding voting stock at an annual or special
meeting, excluding shares owned by the interested stockholders. An "interested
stockholder" is defined as any person (other than the corporation or any direct
or indirect majority owned subsidiary of the corporation) that is (i) the owner
of 15% or more of the outstanding voting stock of the corporation or (ii) an
affiliate or associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation at any time within the
three-year period immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder. Section 203 of the
DGCL could have the effect of discouraging prospective take-over attempts
because of the inability of a potential acquiror to combine the Company with
another entity.
50
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
No prediction can be made as to the effect, if any, that future sales of
Common Stock, or the availability of Common Stock for future sale, will have on
the market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock (including shares issued upon exercise of
options), or the perception that such sales could occur, may adversely affect
prevailing market prices for the Common Stock. See "Risk Factors--Shares
Eligible for Future Sale."
Upon completion of the Offering, the Company will have outstanding
16,787,974 shares of Common Stock. Of the shares of Common Stock that will be
outstanding after the Offering, the 13,276,858 shares sold in the Offering will
be freely tradeable without restriction or limitation under the Securities Act,
unless purchased by "affiliates" of the Company, as that term is defined in Rule
144 under the Securities Act. All of the remaining 3,511,116 shares of Common
Stock held by existing stockholders will be "restricted" securities within the
meaning of the Securities Act as a result of the issuance thereof in private
transactions not involving a public offering. The "restricted" securities may
not be resold unless they are registered under the Securities Act or are sold
pursuant to an available exemption from registration, including Rule 144 under
the Securities Act.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least one
year (including the holding period of any prior owner except an "affiliate" (as
that term is defined in Rule 144)) is entitled to sell, within any three-month
period, a number of those shares that does not exceed the greater of (i) 1% of
the then outstanding shares of the Common Stock (167,880 shares immediately
after the Offering) or (ii) the average weekly trading volume in the Common
Stock during the four calendar weeks preceding the date on which notice of the
sale is filed with the Commission. Sales under Rule 144 are also subject to
certain manner of sale provisions, notice requirements and requirements as to
the availability of current public information concerning the Company. Rule 144
provides that a person (or persons whose shares are aggregated) who is not
deemed to have been an affiliate of the Company at any time during the 90 days
preceding a sale, and who has beneficially owned shares for at least two years
(including the holding period of any prior owner except an "affiliate") is
entitled to sell those shares under Rule 144(k) without regard to the
limitations described above.
After completion of the Offering and expiration of the 180-day lockup
agreement described under "Underwriting," 3,511,116 shares (1,917,348 shares if
the Underwriters' over-allotment options are exercised in full) of Common Stock
held by stockholders prior to the consummation of the Offering will be eligible
for sale on the open market under Rule 144 (as currently in effect), subject to
the volume and manner of sales limitations referred to above.
In May 1997, the Company sold shares of its Common Stock to certain of its
officers and employees under the provisions of Rule 701 under the Securities
Act. While such shares are "restricted" securities under Rule 144, the resale
provisions under Rule 701 permit non-affiliates to sell their Rule 701 shares
without complying with the notice provisions, public information, volume
limitations or holding period restrictions of Rule 144 and permit affiliates to
sell their Rule 701 shares without complying with the Rule 144 holding period
restrictions, in each case commencing 90 days after the date of this prospectus.
After the Offering, 646,852 of the 3,511,116 shares otherwise eligible for sale
under Rule 144 will be eligible for sale under Rule 701, subject to the
expiration of the 180-day lock-up agreement described under "Underwriting."
Upon completion of the Offering, 2,981,867 shares of Common Stock will be
issuable upon exercise of outstanding options under the Company's stock option
plans and an additional 2,000,000 shares of Common Stock will be reserved for
issuance under such plans. To the extent that the Underwriters' over-allotment
option is not exercised in full, the Company has agreed to file a registration
statement on Form S-8 following the expiration of the lock-up agreement
described under "Underwriting" covering any shares subject to options granted to
G. Bruce McInnis, one of the Selling Stockholders, under the Company's
51
<PAGE>
1996 stock option plan. Shares registered under such registration statement
which are issued upon the exercise of options will be freely transferable in the
open market.
Stockholders of the Company party to the Stockholders Agreement will have
certain "piggyback" registration rights with respect to registered offerings of
the Common Stock following consummation of the Offering. See "Certain
Transactions--Management Stockholders' and Optionholders' Agreement."
52
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Underwriters named below (the "Underwriters"), through their
representatives, BT Alex. Brown Incorporated and SBC Warburg Dillon Read Inc.
(together, the "Representatives"), have severally agreed to purchase from the
Selling Stockholders, the following respective numbers of shares of Common Stock
at the public offering price less the underwriting discounts and commissions
shown on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- -------------------------------------------------------------------------------- ------------
<S> <C>
BT Alex. Brown Incorporated.....................................................
SBC Warburg Dillon Read Inc.....................................................
------------
Total....................................................................... 13,276,858
------------
------------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase the total number of shares of Common Stock offered hereby if any of
such shares are purchased.
The Selling Stockholders have been advised by the Representatives that the
Underwriters propose to offer the shares of Common Stock to the public at the
initial public offering price set forth on the cover page of this Prospectus and
to certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $ per share to certain other dealers. After commencement of
the initial public offering, this offering price and other selling terms may be
changed by the Representatives.
Certain stockholders of the Company have granted to the Underwriters an
option, exercisable not later than 30 days after the date of this Prospectus, to
purchase up to 1,991,529 additional shares of Common Stock at the initial public
offering price set forth on the cover page of the Prospectus. To the extent that
the Underwriters exercise such option, each of the Underwriters will have a firm
commitment to purchase approximately the same percentage thereof that the number
of shares of Common Stock to be purchased by it shown in the above table bears
to 13,276,858 and the stockholders granting such option will be obligated,
pursuant to such option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of the 13,276,858 shares of Common Stock offered
hereby. If purchased, the Underwriters will offer such additional shares on the
same terms as those on which the 13,276,858 shares are being offered.
To facilitate this offering of the Common Stock, the Underwriters may engage
in transactions that stabilize, maintain or otherwise affect the market price of
the Common Stock. Specifically, the Underwriters may over-allot shares of the
Common Stock in connection with this Offering, thereby creating a short position
in the Underwriters' syndicate account. Additionally, to cover such
over-allotments or to stabilize the market price of the Common Stock, the
Underwriters may bid for, and purchase, shares of Common Stock in the open
market. Any of these activities may maintain the market price of the Common
Stock at a level above that which might otherwise prevail in the open market.
The Underwriters are not required to engage in these activities, and, if
commenced, any such activities may be discontinued at any time. The
Representatives, on behalf of the Underwriters, also may reclaim selling
concessions allowed to an Underwriter or dealer if the syndicate repurchases
shares of Common Stock distributed by that Underwriter or dealer.
53
<PAGE>
The Underwriting Agreement contains covenants of indemnity and contribution
among the Underwriters, the Company and the Selling Stockholders regarding
certain liabilities, including liabilities under the Securities Act.
The Company, its directors and executive officers and current stockholders
have agreed not to offer, sell or otherwise dispose of any shares of Common
Stock, except upon the exercise of currently outstanding stock options, for a
period of 180 days from the date of this Prospectus without the prior written
consent of BT Alex. Brown Incorporated.
The Representatives have advised the Company and the Selling Stockholders
that the Underwriters do not intend to confirm sales to any account over which
they exercise discretionary authority.
Prior to the Offering, there has been no public market for the Common Stock.
Consequently, the initial public offering price for the Common Stock was
determined by negotiation among the Company, the Selling Stockholders and the
Representatives. Among the factors considered in such negotiations were market
conditions, the results of operations of the Company in recent periods, the
market capitalizations and stages of development of other companies which the
Company and the Representatives believe to be comparable to the Company,
estimates of the business potential of the Company, the state of the Company's
development and other factors deemed relevant.
Bankers Trust Company, an affiliate of BT Alex. Brown Incorporated, one of
the Representatives, was the Agent in establishing the Term Loans and the
Revolver under the Credit Agreement in September 1996. In addition, BT
Investments will sell its interest in the Company to the extent the Underwriters
exercise the over-allotment option.
54
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the Offering will be passed upon
for the Company and the Selling Stockholders by Weil, Gotshal & Manges LLP, New
York, New York. Robert Todd Lang, the sole shareholder of a professional
corporation which is a partner of Weil, Gotshal & Manges LLP, is a limited
partner of Odyssey and, accordingly, has a fractional undivided interest in the
Common Stock of the Company owned by Odyssey. Certain legal matters in
connection with the Offering will be passed upon for the Underwriters by Piper &
Marbury L.L.P., Baltimore, Maryland.
EXPERTS
The audited financial statements included in this Prospectus and elsewhere
in the Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission in
Washington, D.C. a Registration Statement on Form S-1 (together with all
amendments thereto, the "Registration Statement"), under the Securities Act with
respect to the shares of Common Stock offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement and the
exhibits and schedules filed therewith, certain portions of which have been
omitted as permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock offered hereby,
reference is hereby made to the Registration Statement and to the exhibits and
schedules filed therewith. Statements contained in this Prospectus regarding the
contents of any contract or other document referred to are not necessarily
complete and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being deemed to be qualified in its entirety by such reference. The
Registration Statement, including all exhibits and schedules thereto, may be
inspected without charge at the principal office of the Commission located at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Midwest Regional
Office of the Commission located at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and at the Northeast Regional office of
the Commission located at Seven World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Room 1204, Washington, D.C.
20549, at prescribed rates. The Commission also maintains an Internet web site
that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission. The address of
that site is http://www.sec.gov.
Prior to filing the Registration Statement of which this Prospectus is a
part, the Company was not subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Upon effectiveness of the Registration Statement, the Company will become
subject to the informational and periodic reporting requirements of the Exchange
Act, and in accordance therewith, will file periodic reports, proxy statements,
and other information with the Commission. Such periodic reports, proxy
statements, and other information will be available for inspection and copying
at the public reference facilities and other regional offices referred to above.
The Company intends to register the securities offered by the Registration
Statement under the Exchange Act simultaneously with the effectiveness of the
Registration Statement and to furnish its stockholders with annual reports
containing audited financial statements and such other reports as may be
required from time to time by law and applicable stock exchange rules.
55
<PAGE>
TRISTAR AEROSPACE CO.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
TRISTAR AEROSPACE CO.:
Report of Independent Public Accountants................................................................... F-2
Consolidated Balance Sheets--December 31, 1997 (unaudited) and September 30, 1997 and 1996................. F-3
Consolidated Statements of Operations--Three Months Ended December 31, 1997 and 1996 (unaudited), Year
Ended September 30, 1997 and Period from Inception (August 21, 1996) to September 30, 1996............... F-4
Consolidated Statements of Stockholders' Equity--Three Months Ended December 31, 1997 (unaudited), Year
Ended September 30, 1997 and Period from Inception (August 21, 1996) to September 30, 1996............... F-5
Consolidated Statements of Cash Flows--Three Months Ended December 31, 1997 and 1996 (unaudited), Year
Ended September 30, 1997 and Period from Inception (August 21, 1996) to September 30, 1996............... F-6
Notes to Consolidated Financial Statements................................................................. F-7
TRI-STAR AEROSPACE, INC. AND SUBSIDIARY (PREDECESSOR):
Report of Independent Public Accountants................................................................... F-14
Combined Statements of Operations--Period Ended September 19, 1996 and Year Ended December 31, 1995........ F-15
Combined Statements of Cash Flows--Period Ended September 19, 1996 and Year Ended December 31, 1995........ F-16
Notes to Combined Financial Statements..................................................................... F-17
AVIALL AEROSPACE BUSINESS UNIT OF AVIALL SERVICES, INC.:
Report of Independent Public Accountants................................................................... F-20
Statements of Operating Income (Loss)--Period Ended September 19, 1996 and Year Ended December 31, 1995.... F-21
Statements of Cash Flows--Period Ended September 19, 1996 and Year Ended December 31, 1995................. F-22
Notes to Financial Statements.............................................................................. F-23
</TABLE>
F-1
<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, 1997
and 1996, and the related consolidated statements of operations, stockholders'
equity and cash flows for the year ended September 30, 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, 1997 and 1996, and the results of their
operations and their cash flows for the year ended September 30, 1997, and the
period from inception (August 21, 1996) to September 30, 1996 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
November 26, 1997 (except with
respect to the matters discussed in
Note 10, as to which the date is
February 12, 1998)
F-2
<PAGE>
TRISTAR AEROSPACE CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, ------------------
1997 1997 1996
------------ -------- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash....................................... $ 3,201 $ 4,764 $ 1,522
Accounts receivable, net................... 28,824 24,305 16,470
Inventories, net........................... 76,214 69,085 68,521
Prepaid expenses........................... 394 149 98
Deferred tax asset......................... 1,377 1,377 --
------------ -------- --------
Total current assets................. 110,010 99,680 86,611
PROPERTY AND EQUIPMENT, net.................. 1,760 1,623 1,124
INTANGIBLES AND OTHER ASSETS, net............ 8,757 8,932 9,481
------------ -------- --------
$120,527 $110,235 $ 97,216
------------ -------- --------
------------ -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt....... $ 500 $ 500 $ 1,500
Accounts payable........................... 22,123 18,308 12,819
Income taxes payable....................... 3,305 1,573 178
Accrued liabilities........................ 5,705 7,695 7,811
------------ -------- --------
Total current liabilities............ 31,633 28,076 22,308
------------ -------- --------
LONG-TERM DEBT, less current maturities...... 52,000 49,000 55,500
------------ -------- --------
COMMITMENTS (Note 6)
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........................ 166 166 151
Additional paid-in capital................. 21,101 21,101 18,968
Retained earnings.......................... 15,627 11,892 289
------------ -------- --------
Total stockholders' equity........... 36,894 33,159 19,408
------------ -------- --------
$120,527 $110,235 $ 97,216
------------ -------- --------
------------ -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
TRISTAR AEROSPACE CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED INCEPTION
ENDED DECEMBER 31, SEPTEMBER TO SEPTEMBER
------------------------ 30, 30,
1997 1996 1997 1996
----------- ----------- ----------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES.................................... $ 42,635 $ 30,966 $ 140,719 $ 3,555
COST OF GOODS SOLD.......................... 29,416 21,008 96,393 2,442
----------- ----------- ----------- ------
Gross profit.............................. 13,219 9,958 44,326 1,113
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.................................. 6,040 4,447 21,048 463
----------- ----------- ----------- ------
Operating income.......................... 7,179 5,511 23,278 650
INTEREST AND OTHER:
Interest expense.......................... 1,204 1,547 5,263 184
Other income.............................. (51) -- (147) --
----------- ----------- ----------- ------
Income before taxes....................... 6,026 3,964 18,162 466
PROVISION FOR INCOME TAXES.................. 2,291 1,520 6,559 177
----------- ----------- ----------- ------
NET INCOME.................................. $ 3,735 $ 2,444 $ 11,603 $ 289
----------- ----------- ----------- ------
----------- ----------- ----------- ------
EARNINGS PER SHARE (Note 2):
Basic..................................... $ .23 $ .16 $ .73 $ .02
----------- ----------- ----------- ------
----------- ----------- ----------- ------
Diluted................................... .21 .16 .70 .02
----------- ----------- ----------- ------
----------- ----------- ----------- ------
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic..................................... 16,583 15,118 15,897 15,118
----------- ----------- ----------- ------
----------- ----------- ----------- ------
Diluted................................... 17,615 15,118 16,509 15,118
----------- ----------- ----------- ------
----------- ----------- ----------- ------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<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.......................... 15,118 151 20,100 -- 20,251
EQUITY TRANSACTION EXPENSES.............................. -- -- (1,132) -- (1,132)
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
NET INCOME (unaudited)................................... -- -- -- 3,735 3,735
--------- ----- ----------- --------- ------------
BALANCE, December 31, 1997 (unaudited)................... 16,583 $ 166 $ 21,101 $ 15,627 $ 36,894
--------- ----- ----------- --------- ------------
--------- ----- ----------- --------- ------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
TRISTAR AEROSPACE CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED DECEMBER 31, YEAR ENDED INCEPTION
------------------------ SEPTEMBER TO SEPTEMBER
1997 1996 30, 1997 30, 1996
----------- ----------- ------------ ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................... $ 3,735 $ 2,444 $ 11,603 $ 289
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities, net of acquisitions--
Depreciation and amortization............... 354 278 1,031 27
Provision for doubtful accounts............. 15 -- 549 --
Provision for excess and obsolete
inventories............................... 701 502 2,338 --
Deferred income taxes....................... -- -- (1,377) --
Changes in operating assets and liabilities--
Increase in accounts receivable............. (4,534) (2,012) (8,384) (1,375)
Increase in inventories..................... (7,830) (520) (2,902) (330)
(Increase) decrease in prepaid expenses and
other..................................... (217) (85) (60) 169
Increase (decrease) in accounts payable..... 3,815 554 5,489 (304)
Increase in income taxes payable............ 1,732 1,453 1,395 177
Decrease in accrued liabilities............. (1,990) (153) (116) (872)
----------- ----------- ------------ ---------------
Net cash provided by (used in) operating
activities.............................. (4,219) 2,461 9,566 (2,219)
----------- ----------- ------------ ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.......................... (344) (74) (972) (3)
Acquisitions, net of cash acquired............ -- -- -- (70,066)
----------- ----------- ------------ ---------------
Net cash used in investing activities..... (344) (74) (972) (70,069)
----------- ----------- ------------ ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of stock............................. -- -- 1,168 20,251
Equity transaction expenses................... -- -- -- (1,132)
Loan acquisition costs........................ -- -- -- (2,309)
Proceeds from initial borrowings.............. -- -- -- 55,000
Borrowings on revolving facility.............. 3,000 3,000 11,700 2,000
Payments on revolving facility................ -- (5,000) (17,700) --
Payments on term note borrowings.............. -- -- (500) --
Purchase of stock............................. -- -- (20) --
----------- ----------- ------------ ---------------
Net cash provided by (used in) financing
activities.............................. 3,000 (2,000) (5,352) 73,810
----------- ----------- ------------ ---------------
NET INCREASE (DECREASE) IN CASH................. (1,563) 387 3,242 1,522
CASH, beginning of period....................... 4,764 1,522 1,522 --
----------- ----------- ------------ ---------------
CASH, end of period............................. $ 3,201 $ 1,909 $ 4,764 $ 1,522
----------- ----------- ------------ ---------------
----------- ----------- ------------ ---------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest........................ $ 1,239 $ 936 $ 4,385 $ 174
Cash paid for income taxes.................... 559 -- 6,539 --
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
TRISTAR AEROSPACE CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AS TO INFORMATION FOR DECEMBER 31, 1997)
1. ORGANIZATION AND BUSINESS:
TriStar Aerospace Co. (formerly Maple Leaf Aerospace, Inc.--see Note 10) and
subsidiaries (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 and rivets), fluid and
hydraulic systems parts (fittings, couplings and 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 was formed on August 21, 1996, and began operations on September
19, 1996, when it acquired Tri-Star Aerospace, Inc. (Predecessor) and the Aviall
Aerospace Business Unit of Aviall, Inc. through a series of transactions for
approximately $74 million. The purchase price included approximately $50 million
in cash, $21 million in liabilities assumed and $3 million in acquisition
related expenses. Of the $50 million in cash paid, $3 million was placed in
escrow as contingent consideration and is payable to the former shareholders of
Predecessor on September 19, 1999, to the extent that such amount is not paid by
the Company to satisfy certain indemnifications given the Company by the former
shareholders of Predecessor.
The acquisitions have been accounted for by 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The consolidated financial statements include accounts of TriStar Aerospace,
Inc. and its 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.
ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, --------------------
1997 1997 1996
------------ --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Accounts receivable...................................... $ 29,387 $ 24,854 $ 16,470
Less--allowance for doubtful accounts.................... 563 549 --
------------ --------- ---------
$ 28,824 $ 24,305 $ 16,470
------------ --------- ---------
------------ --------- ---------
</TABLE>
F-7
<PAGE>
TRISTAR AEROSPACE CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED AS TO INFORMATION FOR DECEMBER 31, 1997)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost (specific identification method)
or market and consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, --------------------
1997 1997 1996
------------ --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Merchandise inventory.................................... $ 44,038 $ 39,569 $ 44,444
Integrated supply contract inventory..................... 35,215 31,848 24,077
------------ --------- ---------
79,253 71,417 68,521
Less--excess and obsolete inventory reserve.............. 3,039 2,332 --
------------ --------- ---------
$ 76,214 $ 69,085 $ 68,521
------------ --------- ---------
------------ --------- ---------
</TABLE>
PROPERTY AND EQUIPMENT
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 fifteen years. Accumulated depreciation was approximately
$693,000 at December 31, 1997, and $483,000 and $11,000 at September 30, 1997
and 1996, respectively.
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,
DECEMBER 31, --------------------
1997 1997 1996
------------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Goodwill (30 years)......................................... $ 7,111 $ 7,111 $ 7,111
Loan acquisition costs (7 years)............................ 2,309 2,309 2,309
Other....................................................... 59 87 78
------ --------- ---------
9,479 9,507 9,498
Less--accumulated amortization.............................. 722 575 17
------ --------- ---------
$ 8,757 $ 8,932 $ 9,481
------ --------- ---------
------ --------- ---------
</TABLE>
REVENUE RECOGNITION
Revenues are recognized at the time of shipment.
F-8
<PAGE>
TRISTAR AEROSPACE CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED AS TO INFORMATION FOR DECEMBER 31, 1997)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
SEGMENT INFORMATION
During the year ended September 30, 1997, the Company had domestic revenues
of $121.5 million and foreign revenues of $19.2 million.
INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," which
requires the asset and liability method of accounting for income taxes. The
differences between the financial statement and tax bases of assets and
liabilities are determined annually. Deferred income tax assets and liabilities
are computed for those differences using currently enacted tax laws and rates
that apply to the periods in which they are expected to affect taxable income.
EARNINGS PER SHARE
The Company adopted SFAS No. 128, "Earnings Per Share," effective December
31, 1997, and all earnings per share amounts disclosed herein have been
calculated under the provisions of SFAS No. 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. Diluted earnings per
common share were determined on the assumed exercise of dilutive options, as
determined by applying the treasury stock method.
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 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.
F-9
<PAGE>
TRISTAR AEROSPACE CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED AS TO INFORMATION FOR DECEMBER 31, 1997)
4. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, --------------------
1997 1997 1996
------------ --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
$30 million revolving credit facility, matures September
19, 2001, interest payable quarterly at the Bankers
Trust Base Rate plus a spread (10% at September 30,
1997), mandatory principal reductions of $15 million in
September 2000 and 2001................................ $ 3,000 $ -- $ 6,000
Bank term note, matures September 30, 2003, interest
payable quarterly at the Eurodollar rate plus a spread
(9% at September 30, 1997), principal payments of $0.5
million due annually September 1998 through 2002 with
the balance due at maturity............................ 49,500 49,500 50,000
Convertible note payable................................. -- -- 1,000
------------ --------- ---------
52,500 49,500 57,000
Current maturities of long-term debt..................... 500 500 1,500
------------ --------- ---------
$ 52,000 $ 49,000 $ 55,500
------------ --------- ---------
------------ --------- ---------
</TABLE>
Future maturities of long-term debt at September 30, 1997 were as follows
(in thousands):
<TABLE>
<CAPTION>
<S> <C>
1998............................................................................... $ 500
1999............................................................................... 500
2000............................................................................... 500
2001............................................................................... 500
2002............................................................................... 500
Thereafter......................................................................... 47,000
---------
49,500
Current maturities of long-term debt............................................... 500
---------
$ 49,000
---------
---------
</TABLE>
The revolving facility and term note provide for borrowings up to $80
million. All of the Company's debt is collateralized by substantially all assets
of the Company and is subject to certain financial covenants. At September 30,
1997, 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 noncash transaction for purposes of the consolidated statement
of cash flows.
F-10
<PAGE>
TRISTAR AEROSPACE CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED AS TO INFORMATION FOR DECEMBER 31, 1997)
4. LONG-TERM DEBT: (CONTINUED)
Subsequent to year end, the revolving facility and term note agreement was
amended to adjust certain financial covenants and reduce the interest rate
spreads applicable to each of the facilities which 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.
5. INCOME TAXES:
The provision for income taxes includes the following components for the
periods ended September 30:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Federal:
Current.............................................................................. $ 6,714 $ 149
Deferred............................................................................. (1,236) --
State:
Current.............................................................................. 1,222 28
Deferred............................................................................. (141) --
--------- ---------
Provision for income taxes............................................................. $ 6,559 $ 177
--------- ---------
--------- ---------
</TABLE>
The provision for income taxes was at an effective rate of 36 percent and 38
percent in 1997 and 1996, respectively. 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:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Expected provision at federal statutory rate of 35% and 34% for 1997 and 1996,
respectively......................................................................... $ 6,357 $ 159
Increase (decrease) resulting from:
State income taxes, net of federal income tax benefit................................ 726 18
Issuance of stock as consideration................................................... (452) --
Other................................................................................ (72) --
--------- ---------
Provision for income taxes............................................................. $ 6,559 $ 177
--------- ---------
--------- ---------
</TABLE>
The Company's net deferred tax asset was as follows at September 30, 1997
(in thousands):
<TABLE>
<S> <C> <C>
Inventory valuation reserves............................... $ 912
Accrued compensation....................................... 138
Accounts receivable valuation reserves..................... 182
Accrued professional fees.................................. 76
Other...................................................... 69
---------
Net deferred tax asset................................... $ 1,377
---------
---------
</TABLE>
F-11
<PAGE>
TRISTAR AEROSPACE CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED AS TO INFORMATION FOR DECEMBER 31, 1997)
6. COMMITMENTS:
OPERATING LEASES
The Company leases office and warehouse facilities and certain computer
equipment under operating leases expiring from December 1997 to April 2002.
Future minimum annual lease commitments at September 30, 1997 are approximately
as follows (in thousands):
<TABLE>
<S> <C>
1998................................................................ $ 706
1999................................................................ 465
2000................................................................ 309
2001................................................................ 71
2002................................................................ 57
Thereafter.......................................................... 31
---------
$ 1,639
---------
---------
</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 two-year life. Generally, vendor purchases are made under distributorship
agreements which are cancelable upon 30-days notice.
EMPLOYEE BENEFIT PLANS
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.
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 determines necessary to properly fund the benefits payable under
the plan.
7. SALES TO SIGNIFICANT CUSTOMERS:
During the year ended September 30, 1997, and the period from inception
(August 21, 1996) to September 30, 1996, the Company had two customers that
individually accounted for more than ten percent of consolidated revenues.
8. RELATED PARTY TRANSACTIONS:
In conjunction with the acquisitions, an officer of the Company was issued
790,000 shares of common stock as consideration for services rendered in
connection with the acquisition. The stock issuance is included with the initial
contribution of capital in the consolidated statements of stockholders' equity.
The stock issuance was treated as a reduction of equity and as a noncash
transaction in the consolidated statement of cash flows. An officer and a
director of the Company also have bonus plans as part of the acquisitions which
pay out over two to four years. The estimated amounts payable under the plans
were recorded as a liability under the purchase method of accounting.
F-12
<PAGE>
TRISTAR AEROSPACE CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED AS TO INFORMATION FOR DECEMBER 31, 1997)
9. EMPLOYEE STOCK PLANS:
STOCK PURCHASE PLAN
The Company adopted an employee stock purchase plan which reserves 790,000
shares of common stock for issuance to any employee, officer or director at the
discretion of the Board. The number of shares issued to each individual and the
price to be paid for the shares is determined solely by the Board. During 1997,
approximately 632,000 shares were issued under the plan at prices which
approximated the fair market value of the Company's stock on the date of
commitment to issuance.
STOCK OPTION PLAN
The Company adopted a stock option plan which allows for the issuance of
3,950,000 options to key employees of the Company. The options have exercise
prices ranging from $1.47 to $12.75 per share and 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 vest ratably over the following three years. All options
which do not become available through the attainment of the performance measures
become available and exercisable nine years and nine months after the grant
date. All options expire ten years after the grant date. During 1997 and 1996,
3,676,818 options were granted at a price equal to or above the fair market
value at the date of grant and 198,746 options became exercisable at exercise
prices of $1.47 and $3.37. At September 30, 1997, 3,676,818 options were
outstanding at exercise prices ranging from $1.47 to $12.75 per share. During
the three-month period ended December 31, 1997, 158,000 options were issued at
an exercise price of $3.80 per share, the fair market value at the date of
grant, and 31,600 were immediately exercisable.
The Company adopted the disclosure-only provisions of SFAS 123, "Accounting
for Stock-Based Compensation." Accordingly, no compensation cost has been
recognized for the stock option plan. Had compensation cost for the Company's
stock option 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:
<TABLE>
<S> <C> <C>
NET INCOME (in thousands): 1997 1996
--------- ---------
As reported....................................................... $ 11,603 $ 289
Pro forma......................................................... 11,520 289
EARNINGS PER SHARE:
As reported....................................................... $ 0.73 $ 0.02
Pro forma......................................................... 0.72 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 weighted average assumptions:
dividend yield of 0 percent, risk-free interest rate of 6.30 percent to 6.80
percent, and expected lives of ten years.
10. SUBSEQUENT EVENT:
On February 12, 1998, the Company adopted a resolution to change its name
from Maple Leaf Aerospace, Inc. to TriStar Aerospace Co. Such name change has
been reflected herein.
On February 12, 1998, the Company declared a 158 for one stock split. The
earnings per share and share amounts in the consolidated financial statements
and the notes thereto have been restated to reflect the stock split.
F-13
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of TriStar Aerospace Co.:
We have audited the accompanying combined statements of operations and cash
flows of Tri-Star Aerospace, Inc. (a Florida corporation) and subsidiary and
affiliate for the periods ended September 19, 1996 and December 31, 1995. 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 results of operations and cash flows of Tri-Star
Aerospace, Inc. and subsidiary and affiliate for the periods ended September 19,
1996 and December 31, 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
January 24, 1997
F-14
<PAGE>
TRI-STAR AEROSPACE, INC. AND SUBSIDIARY
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
SEPTEMBER 19, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
REVENUES............................................................................ $ 55,186 $ 65,579
COST OF GOODS SOLD.................................................................. 39,490 46,763
------------- ------------
Gross profit...................................................................... 15,696 18,816
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........................................ 8,897 12,488
------------- ------------
Operating income.................................................................. 6,799 6,328
INTEREST EXPENSE.................................................................... 1,512 2,251
OTHER INCOME........................................................................ (19) (27)
------------- ------------
Net income........................................................................ $ 5,306 $ 4,104
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-15
<PAGE>
TRI-STAR AEROSPACE, INC. AND SUBSIDIARY
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
SEPTEMBER 19, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................................ $ 5,306 $ 4,104
Adjustments to reconcile net income to net cash provided by (used in) operating
activities--
Depreciation and amortization................................................... 356 480
Provision for excess and obsolete inventories................................... 1,961 1,850
Payment of dividends to minority interest owners................................ (272) --
Changes in operating assets and liabilities--
Increase in accounts receivable................................................. (499) (2,613)
Increase in inventories......................................................... (541) (8,548)
(Increase) decrease in prepaid expenses and other............................... (163) 27
Increase in trade accounts payable.............................................. 1,991 727
Increase (decrease) in integrated supply program contract payable............... 625 (202)
Increase in accrued liabilities................................................. 292 658
------------- ------------
Net cash provided by (used in) operating activities......................... 9,056 (3,517)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Repayment of notes receivable..................................................... 121 700
Capital expenditures.............................................................. (190) (381)
------------- ------------
Net cash provided by (used in) investing activities......................... (69) 319
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings.......................................................... 18,754 43,235
Payments on debt.................................................................. (23,294) (38,876)
Proceeds from borrowings from stockholder......................................... -- 500
Payments on debt to stockholder................................................... -- (500)
Distributions to stockholders..................................................... (3,832) (2,180)
Proceeds from other note.......................................................... -- 1,000
------------- ------------
Net cash provided by (used in) financing activities......................... (8,372) 3,179
------------- ------------
NET INCREASE (DECREASE) IN CASH..................................................... 615 (19)
CASH, beginning of period........................................................... 131 150
------------- ------------
CASH, end of period................................................................. $ 746 $ 131
------------- ------------
------------- ------------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest............................................................ $ 1,646 $ 2,200
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-16
<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). Subsequent to
September 19, 1996, Tri-Star International, Inc. was dissolved and all earnings
distributed to the shareholders of record (see Note 5). 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 Service,
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, and therefore, the Company does not record deferred tax assets or
liabilities or income tax expense.
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
F-17
<PAGE>
TRI-STAR AEROSPACE, INC. AND SUBSIDIARY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
3. CONCENTRATION OF BUSINESS RISK: (CONTINUED)
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 ended September 19, 1996, and the year ended December 31,
1995, 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>
<CAPTION>
YEAR AMOUNT
- ------------------------------------------------------------------------------------- ---------
<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 and $0 in 1996 and 1995, respectively, related to the Company's
contributions.
F-18
<PAGE>
TRI-STAR AEROSPACE, INC. AND SUBSIDIARY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
4. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
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,
Inc. 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 $30.7 million, including $3 million of contingent
consideration. Such contingent consideration was placed in escrow and is payable
to the 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. Subsequent to the acquisition, TriStar repaid
outstanding borrowings of $14.2 million under a revolving line of credit, $4.5
million under a term loan, $1 million under a note payable and $.5 million under
a note payable to the majority stockholder of the Company. Additionally, TriStar
paid the shareholders of the Company $1.1 million to purchase their 26.2 percent
interest in Tri-Star International, Inc.
F-19
<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 (loss) and
cash flows of the Aviall Aerospace Business Unit of Aviall, Inc. (a Delaware
corporation) for the periods ended September 19, 1996 and December 31, 1995.
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 results of operations and cash flows of the Aviall
Aerospace Business Unit of Aviall, Inc. for the periods ended September 19, 1996
and December 31, 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
May 9, 1997
F-20
<PAGE>
AVIALL AEROSPACE BUSINESS UNIT OF AVIALL, INC.
STATEMENTS OF OPERATING INCOME (LOSS)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
SEPTEMBER 19, DECEMBER 31,
------------- ------------
1996 1995
------------- ------------
<S> <C> <C>
REVENUES............................................................................ $ 23,085 $ 25,580
COST OF GOODS SOLD.................................................................. 18,050 19,778
------------- ------------
Gross profit...................................................................... 5,035 5,802
------------- ------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Third-party expenses.............................................................. 3,541 4,213
Intercompany allocations.......................................................... 1,189 1,671
------------- ------------
4,730 5,884
------------- ------------
Operating income (loss)............................................................. $ 305 $ (82)
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-21
<PAGE>
AVIALL AEROSPACE BUSINESS UNIT OF AVIALL, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
SEPTEMBER 19, DECEMBER 31,
------------- ------------
1996 1995
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Operating income (loss)........................................................... $ 305 $ (82)
Adjustments to reconcile operating income (loss) to net cash used in operating
activities--
Depreciation.................................................................... 304 388
Loss (gain) on sale of fixed assets............................................. 2 (2)
Provision for excess and obsolete inventories................................... 1,072 1,901
Changes in assets and liabilities--
Decrease (increase) in accounts receivable.................................... 607 (2,098)
Increase in inventories....................................................... (5,164) (10,443)
(Increase) decrease in prepaid expenses and other............................. (21) 305
(Decrease) increase in accounts payable....................................... (1,947) 2,333
(Decrease) increase in accrued liabilities.................................... (3) 34
------------- ------------
Net cash used in operating activities....................................... (4,845) (7,664)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.............................................................. (245) (378)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net intercompany borrowings....................................................... 5,090 8,049
------------- ------------
NET INCREASE IN CASH................................................................ -- 7
CASH, beginning of period........................................................... 22 15
------------- ------------
CASH, end of period................................................................. $ 22 $ 22
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-22
<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 statements of operating income (loss) are 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 statements are not intended to be a complete presentation of
Aviall Aerospace's results of operations. The losses of Aviall Aerospace were
included in Aviall's consolidated corporate tax return. No provision or benefit
for income taxes has been recorded in the statements of operating income (loss).
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 ended September 19, 1996, and the year ended December 31,
1995, 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 which are cancelable upon 30 days notice.
F-23
<PAGE>
AVIALL AEROSPACE BUSINESS UNIT OF AVIALL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. TRANSACTIONS WITH AFFILIATES:
Aviall Aerospace had sales of $1,254,000 and $2,139,000 in 1996 and 1995,
respectively, to Aviall affiliates. Corporate level expenses of $1,189,000 and
$1,671,000 were allocated to Aviall Aerospace in 1996 and 1995, respectively.
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
$18.5 million.
F-24
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Summary Historical Financial and Operating Data........................... 7
Risk Factors.............................................................. 9
Use of Proceeds........................................................... 13
Dividend Policy........................................................... 13
Capitalization............................................................ 14
Dilution.................................................................. 14
Selected Historical Financial and Operating Data.......................... 15
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 17
Industry Overview......................................................... 24
Business.................................................................. 25
Management................................................................ 34
Principal and Selling Stockholders........................................ 42
Certain Transactions...................................................... 44
Description of Capital Stock.............................................. 47
Shares Eligible For Future Sale........................................... 51
Underwriting.............................................................. 53
Legal Matters............................................................. 55
Experts................................................................... 55
Available Information..................................................... 55
Index to Financial Statements............................................. F-1
</TABLE>
--------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE SHARES OF COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
Shares
[LOGO]
TRISTAR AEROSPACE CO.
Common Stock
--------------
P R O S P E C T U S
--------------
BT ALEX. BROWN
SBC WARBURG DILLON READ INC.
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE OR DISTRIBUTION.(1)
<TABLE>
<S> <C>
Filing Fee--Securities and Exchange Commission.................. $ 72,067
Listing Fee--New York Stock Exchange............................ *
Filing Fee--National Association of Securities Dealers, Inc..... 24,929
Accounting Fees and Expenses.................................... *
Printing and Engraving Expenses................................. *
Legal Fees and Expenses......................................... *
Transfer Agent and Registrar Fees............................... *
Miscellaneous Expenses.......................................... *
---------
Total....................................................... *
---------
---------
</TABLE>
- ------------------------
* To be added by amendment.
(1) The Selling Stockholders will bear all of the expenses of registration and
distribution of the shares of Common Stock registered hereunder.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation (the "Certificate") of the Company provides
that a director will not be personally liable to the Company 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 a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law (the "Delaware Law"), which
concerns unlawful payments of dividends, stock purchases or redemptions, or (iv)
for any transaction from which the director derived an improper personal
benefit. If the Delaware Law is subsequently amended to permit further
limitation of the personal liability of directors, the liability of a director
of the Company will be eliminated or limited to the fullest extent permitted by
the Delaware Law as amended.
The Registrant, as a Delaware corporation, is empowered by Section 145 of
the Delaware Law, subject to the procedures and limitation stated therein, to
indemnify any person against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with any threatened, pending or completed action, suit or proceeding
in which such person is made a party by reason of his being or having been a
director, officer, employee or agent of the Registrant. The statute provides
that indemnification pursuant to its provisions is not exclusive of other rights
of indemnification to which a person may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise.
The Company currently maintains a Directors and Officers Liability Insurance
policy to cover indemnifiable losses of up to $10,000,000 that may payable by
the Company.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On September 19, 1996, the Company issued and sold an aggregate of
14,327,756 shares of its common stock to Odyssey Partners, L.P., BT Investment
Partners, Inc., R.P. Small Corp. and Mr. Quentin Bourjeaurd in consideration for
$21,001,044.38 in cash. Simultaneously, the Company issued 790,000 shares of its
common stock to Mr. Bourjeaurd in consideration for services rendered to the
Company by Mr. Bourjeaurd in coordinating, structuring and consummating the
Company's acquisition of Tri-Star Aerospace, Inc. and the Aviall Aerospace
business unit of Aviall Services, Inc. On January 15,
II-1
<PAGE>
1997, the Company issued and sold 682,244 shares of its common stock to Odyssey
Partners, L.P. upon the conversion of a $1,000,005.62 convertible note made on
September 19, 1996 by the Company to Odyssey Partners, L.P. On April 29, 1997
the Company issued and sold an aggregate of 136,354 shares of its common stock
to four individuals, each of which was an "accredited investor" as defined in
Rule 501(a) under the Securities Act, in consideration for $199,862.17 in cash.
With respect to the above-described transactions, the Company relied upon
the exemption from registration provided by Section 4(2) of the Securities Act
relating to transactions by an issuer not involving any public offering.
On May 30, 1997, the Company issued and sold an aggregate of 660,598 shares
of its common stock to 21 employees of the Company pursuant to the Company's
Stock Purchase Plan in consideration for $911,075.06 in cash. Such shares were
issued in reliance upon the exemption from registration provided by Rule 701
under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ---------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement(2)..................................................................
2.1 Agreement and Plan of Merger, dated as of August 28, 1996, by and among Maple Leaf Aerospace, Inc.,
Aero Acquisition Corp., Aerospace Merger Sub I, Inc., Tri-Star Aerospace, Inc., and certain
Stockholders.(1).................................................................................
2.2 Asset Purchase Agreement, dated September 5, 1996, by and among Aviall (Canada) Ltd., Aviall
Services Inc. and Maple Leaf Aerospace, Inc.(1)..................................................
3.1 Amended and Restated Certificate of Incorporation of the Company(2)................................
3.2 Bylaws of the Company(2)...........................................................................
4.1 Form of Common Stock Certificate(2)................................................................
5.1 Opinion of Weil, Gotshal & Mangers LLP(2)..........................................................
10.1 Credit Agreement, dated as of September 19, 1996, among the Company and Bankers Trust Company, as
agent.(1)........................................................................................
10.2 First Amendment to Credit Agreement, dated as of April, 1997, among the Company and Bankers Trust
Company, as agent.(1)............................................................................
10.3 Second Amendment to Credit Agreement, dated as of August 4, 1997, among the Company and Bankers
Trust Company, as agent.(1)......................................................................
10.4 Third Amendment to Credit Agreement, dated as of November 7, 1997, among the Company and Bankers
Trust Company, as agent.(1)......................................................................
10.5 Security Agreement, dated as of September 19, 1996, among the Company and Bankers Trust Company, as
agent.(1)........................................................................................
10.6 Pledge Agreement, dated as of September 19, 1996, among the Company and Bankers Trust Company, as
agent.(1)........................................................................................
10.7 Lease Agreement, dated July 12, 1990, among the Company and Robert L. Zeligson Trust.(1)...........
10.8 Lease Agreement, dated December 4, 1990, among the Company and Robert L. Zeligson Trust.(1)........
10.9 Lease Agreement, dated May 31, 1991, among the Company and Robert L. Zeligson Trust.(1)............
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ---------------------------------------------------------------------------------------------------
<C> <S>
10.10 Build and Lease Agreement, dated April 30, 1993, among the Company and Robert L. Zeligson
Trust.(1)........................................................................................
10.11 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.(1)................................................................................
10.12 Lease Agreement, dated January 28, 1997, among the Company and Robert L. Zeligson Trust.(1)........
10.13 Lease Agreement, dated September 16, 1997, among the Company and William Weinberg.(1)..............
10.14 Registration Rights Agreement, dated November 7, 1996, among the Company, Odyssey Partners, L.P.
and certain Stockholders, together with Letter Agreement, dated November 7, 1996, among the
Company, R.P. Small Corp. and Odyssey Partners, L.P.(1)..........................................
10.15 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.(1).................................................................................
10.16 Maple Leaf Aerospace, Inc. 1996 Stock Option Plan.(1)..............................................
10.17 Maple Leaf Aerospace, Inc. Employee Stock Purchase Plan.(1)........................................
10.18 Employment Agreement, dated September 19, 1996, between the Company and Quentin Bourjeaurd.(1).....
10.19 Employment Agreement, dated February 1, 1997, between the Company and Charles Balchunas.(1)........
10.20 Amended and Restated Executive Employment Agreement, dated as of January 15, 1998, between the
Company and G. Bruce McInnis.(1).................................................................
10.21 Employment Agreement, dated March 17, 1997, between the Company and Louis Partenza.(1).............
10.22 Promissory Note, dated September 19, 1996, from Quentin Bourjeaurd in favor of the Company.(2)
10.23 Promissory Note, dated May 30, 1997, from Charles Balchunas in favor of the Company.(2)
10.24 Promissory Note, dated May 30, 1997, from Louis Partenza in favor of the Company.(2)
10.25 TriStar Aerospace Co. 1998 Stock Option Plan.(2)...................................................
10.26 TriStar Aerospace Co. Executive Incentive Compensation Plan.(2)....................................
11.1 Statement re: Computation of per share earnings(1).................................................
21.1 Subsidiaries of the Registrant(2)..................................................................
23.1 Consent of Weil, Gotshal & Manges LLP (included in opinion filed as Exhibit 5).....................
23.2 Consent of Arthur Andersen LLP(1)..................................................................
24.1 Powers of Attorney of directors and officers of the Registrant
(Included on Page II-5 of this Registration Statement.)..........................................
27.1 Financial Data Schedule(1).........................................................................
-------------------------
</TABLE>
(1) Filed herewith.
(2) To be filed by amendment.
II-3
<PAGE>
(b) Financial Statement Schedules
ITEM 17. UNDERTAKINGS.
The undersigned Registrant undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas, State of Texas,
on the 13th day of February, 1998.
<TABLE>
<S> <C> <C>
MAPLE LEAF AEROSPACE, INC.
(To be renamed TriStar Aerospace Co.)
By: /s/ QUENTIN BOURJEAURD
-----------------------------------------
Quentin Bourjeaurd
President and Chief Executive Officer
</TABLE>
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on the 13th day
of February, 1998, in the capacities indicated. Each officer or director whose
signature appears below hereby appoints each of William Hopkins, Quentin
Bourjeaurd and Douglas E. Childress as his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, to sign on his
behalf, as an individual and in the capacity stated below, any amendment or
post-effective amendment to this Registration Statement, and any registration
statement relating to an offering made in connection with the Offering
contemplated by this Registration Statement that is to become effective pursuant
to Rule 462(b) under the Securities Act of 1933, and to file the same, with all
Exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
which such attorney-in-fact and agent may deem appropriate or necessary, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or any
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------ ------------------------------------------------------
<C> <S>
/s/ QUENTIN BOURJEAURD
-------------------------------------- President and Chief Executive Officer (Principal
Quentin Bourjeaurd Executive Officer) and Director
/s/ DOUGLAS E. CHILDRESS
-------------------------------------- Chief Financial Officer (Principal Financial Officer
Douglas E. Childress and Accounting Officer)
/s/ CHARLES BALCHUNAS
-------------------------------------- Director
Charles Balchunas
/s/ STEPHEN BERGER
-------------------------------------- Chairman of the Board of Directors
Stephen Berger
/s/ WILLIAM HOPKINS
-------------------------------------- Director
William Hopkins
/s/ MUZZAFAR MIRZA
-------------------------------------- Director
Muzzafar Mirza
/s/ RICHARD P. SMALL
-------------------------------------- Vice Chairman of the Board of Directors
Richard P. Small
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO.
- -------------
<C> <S> <C>
1.1 Form of Underwriting Agreement(2)...........................................................
2.1 Agreement and Plan of Merger, dated as of August 28, 1996, by and among Maple Leaf
Aerospace, Inc., Aero Acquisition Corp., Aerospace Merger Sub I, Inc., Tri-Star Aerospace,
Inc., and certain Stockholders.(1)........................................................
2.2 Asset Purchase Agreement, dated September 5, 1996, by and among Aviall (Canada) Ltd., Aviall
Services Inc. and Maple Leaf Aerospace, Inc.(1)...........................................
3.1 Amended and Restated Certificate of Incorporation of the Company(2).........................
3.2 Bylaws of the Company(2)....................................................................
4.1 Form of Common Stock Certificate(2).........................................................
5.1 Opinion of Weil, Gotshal & Mangers LLP(2)...................................................
10.1 Credit Agreement, dated as of September 19, 1996, among the Company and Bankers Trust
Company, as agent.(1).....................................................................
10.2 First Amendment to Credit Agreement, dated as of April, 1997, among the Company and Bankers
Trust Company, as agent.(1)...............................................................
10.3 Second Amendment to Credit Agreement, dated as of August 4, 1997, among the Company and
Bankers Trust Company, as agent.(1).......................................................
10.4 Third Amendment to Credit Agreement, dated as of November 7, 1997, among the Company and
Bankers Trust Company, as agent.(1).......................................................
10.5 Security Agreement, dated as of September 19, 1996, among the Company and Bankers Trust
Company, as agent.(1).....................................................................
10.6 Pledge Agreement, dated as of September 19, 1996, among the Company and Bankers Trust
Company, as agent.(1).....................................................................
10.7 Lease Agreement, dated July 12, 1990, among the Company and Robert L. Zeligson Trust.(1)....
10.8 Lease Agreement, dated December 4, 1990, among the Company and Robert L. Zeligson
Trust.(1).................................................................................
10.9 Lease Agreement, dated May 31, 1991, among the Company and Robert L. Zeligson Trust.(1).....
10.10 Build and Lease Agreement, dated April 30, 1993, among the Company and Robert L. Zeligson
Trust.(1).................................................................................
10.11 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.(1)......................................................
10.12 Lease Agreement, dated January 28, 1997, among the Company and Robert L. Zeligson
Trust.(1).................................................................................
10.13 Lease Agreement, dated September 16, 1997, among the Company and William Weinberg.(1).......
10.14 Registration Rights Agreement, dated November 7, 1996, among the Company, Odyssey Partners,
L.P. and certain Stockholders, together with Letter Agreement, dated November 7, 1996,
among the Company, R.P. Small Corp. and Odyssey Partners, L.P.(1).........................
10.15 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.(1)..................................................................
10.16 Maple Leaf Aerospace, Inc. 1996 Stock Option Plan.(1).......................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
- -------------
<C> <S> <C>
10.17 Maple Leaf Aerospace, Inc. Employee Stock Purchase Plan.(1).................................
10.18 Employment Agreement, dated September 19, 1996, between the Company and Quentin
Bourjeaurd.(1)............................................................................
10.19 Employment Agreement, dated February 1, 1997, between the Company and Charles
Balchunas.(1).............................................................................
10.20 Amended and Restated Executive Employment Agreement, dated as of January 15, 1998, between
the Company and G. Bruce McInnis.(1)......................................................
10.21 Employment Agreement, dated March 17, 1997, between the Company and Louis Partenza.(1)......
10.22 Promissory Note, dated September 19, 1996, from Quentin Bourjeaurd in favor of the
Company.(2)...............................................................................
10.23 Promissory Note, dated May 30, 1997, from Charles Balchunas in favor of the Company.(2).....
10.24 Promissory Note, dated May 30, 1997, from Louis Partenza in favor of the Company.(2)........
10.25 TriStar Aerospace Co. 1998 Stock Option Plan.(2)............................................
10.26 TriStar Aerospace Co. Executive Incentive Compensation Plan.(2).............................
11.1 Statement re: Computation of per share earnings(1)..........................................
21.1 Subsidiaries of the Registrant(2)...........................................................
23.1 Consent of Weil, Gotshal & Manges LLP (included in opinion filed as Exhibit 5)..............
23.2 Consent of Arthur Andersen LLP(1)...........................................................
24.1 Powers of Attorney of directors and officers of the Registrant
(Included on Page II-5 of this Registration Statement.)...................................
27.1 Financial Data Schedule(1)..................................................................
-------------------------
</TABLE>
(1) Filed herewith.
(2) To be filed by amendment.
<PAGE>
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MAPLE LEAF AEROSPACE, INC.,
AEROSPACE ACQUISITION CORP.,
AEROSPACE MERGER SUB I, INC.,
TRI-STAR AEROSPACE, INC.,
AND THOSE CERTAIN STOCKHOLDERS OF
TRI-STAR AEROSPACE, INC.
EXECUTING A SIGNATURE PAGE HERETO
<PAGE>
TABLE OF CONTENTS
<TABLE>
SECTION PAGE
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<S> <C> <C>
ARTICLE 1. THE MERGER . .. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Effects of the Merger. . . . . . . . . . . . . . . . . . . . . . 2
1.5 Articles of Incorporation; By-laws . . . . . . . . . . . . . . . 3
1.6 Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2. EFFECT OF THE MERGER ON THE SECURITIES
OF THE CONSTITUENT CORPORATIONS. . . . . . . . . . . . . . . . . 3
2.1 Effect on Capital Stock. . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 3. MERGER CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Amount of Merger Consideration . . . . . . . . . . . . . . . . . 4
3.2 Payment of Merger Consideration. . . . . . . . . . . . . . . . . 4
3.3 Confirmation of Merger Consideration;
Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE COMPANY SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . 8
4.1 Organization; Corporate Power; Good Standing . . . . . . . . . 8
4.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 Capitalization; Subsidiaries . . . . . . . . . . . . . . . . . . 9
4.4 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.5 The Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.6 Leased Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.7 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . 12
4.8 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.9 Financial Information. . . . . . . . . . . . . . . . . . . . . . 13
4.10 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . 14
4.11 Licenses, Permits and Authorizations . . . . . . . . . . . . . . 14
4.12 No Undisclosed Liabilities, Etc. . . . . . . . . . . . . . . . . 15
4.13 Consents and Approvals of Governmental
Authorities. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.14 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.15 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.16 Contracts and Agreements . . . . . . . . . . . . . . . . . . . . 19
4.17 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . 19
i
<PAGE>
SECTION PAGE
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<S> <C> <C>
4.18 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . 20
4.19 No Material Adverse Change . . . . . . . . . . . . . . . . . . . 22
4.20 Title to and Condition of Assets; Encumbrances . . . . . . . . . 22
4.21 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.22 Labor, Employment Contracts and Employee Benefit
Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.23 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . 26
4.24 Conduct in Ordinary Course . . . . . . . . . . . . . . . . . . . 27
4.25 No Illegal Payments. . . . . . . . . . . . . . . . . . . . . . . 28
4.26 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.27 Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . 29
4.28 Interest in Customers, Etc . . . . . . . . . . . . . . . . . . . 30
4.29 Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.30 Officers and Directors; Bank Accounts. . . . . . . . . . . . . . 30
4.31 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF MAPLE LEAF . . . . . . . . . . 31
5.1 Organization; Corporate Power and Good Standing. . . . . . . . . 31
5.2 Corporate Authorization. . . . . . . . . . . . . . . . . . . . . 31
5.3 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.5 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 6. OTHER COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . 32
6.1 Access and Investigation; Confidentiality . . . . . . . . . . . 32
6.2 Agreement to Cooperate to Obtain Consents and
Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.3 Operation of the Business. . . . . . . . . . . . . . . . . . . . 34
6.4 Negative Covenant. . . . . . . . . . . . . . . . . . . . . . . . 34
6.5 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.6 No Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.7 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 36
6.8 Additional Agreements. . . . . . . . . . . . . . . . . . . . . . 36
6.9 Alienation of Shares . . . . . . . . . . . . . . . . . . . . . . 36
6.10 No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . 37
6.11 Access to Information. . . . . . . . . . . . . . . . . . . . . . 37
6.12 Section 338 Elections and Related Matters . . . . . . . . . . . 38
6.13 Tri-Star Canada. . . . . . . . . . . . . . . . . . . . . . . . . 40
6.14 Use of Name. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.15 Elections. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.16 Tax Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.17 Waiver of Claims Under the FBCA. . . . . . . . . . . . . . . . . 41
6.18 Liquidation of International . . . . . . . . . . . . . . . . . . 41
ii
<PAGE>
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<S> <C> <C>
ARTICLE 7. CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 41
7.1 Conditions to Parent's, Sub's and Merger Sub's Obligation
to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.1.1 Representations and Warranties of the Company and
the Company Shareholders; Compliance with Agreement. . . 41
7.1.2 Stock Certificates . . . . . . . . . . . . . . . . . . . 42
7.1.3 Escrow Agreement . . . . . . . . . . . . . . . . . . . . 42
7.1.4 Waiver Agreements. . . . . . . . . . . . . . . . . . . . 42
7.1.5 Non-Competition Agreement. . . . . . . . . . . . . . . . 42
7.1.6 Contracts. . . . . . . . . . . . . . . . . . . . . . . . 42
7.1.7 Absence of Material Change . . . . . . . . . . . . . . . 42
7.1.8 Regulatory Approvals . . . . . . . . . . . . . . . . . 43
7.1.9 Leases . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.1.10 Consents . . . . . . . . . . . . . . . . . . . . . . . . 43
7.1.11 Resignations . . . . . . . . . . . . . . . . . . . . . . 43
7.1.12 Financing. . . . . . . . . . . . . . . . . . . . . . . . 43
7.1.13 Concurrent Closing of Aviall Transaction . . . . . . . . 44
7.1.14 Certificate of Good Standing . . . . . . . . . . . . . . 44
7.1.15 Articles of Incorporation; By-Laws . . . . . . . . . . . 44
7.1.16 Employment Contract. . . . . . . . . . . . . . . . . . . 44
7.1.17 Resolutions; Incumbency. . . . . . . . . . . . . . . . . 44
7.1.18 Opinion of Counsel . . . . . . . . . . . . . . . . . . . 44
7.1.19 FIRPTA Affidavit . . . . . . . . . . . . . . . . . . . . 44
7.1.20 Books and Records. . . . . . . . . . . . . . . . . . . . 45
7.1.21 No Injunction. . . . . . . . . . . . . . . . . . . . . . 45
7.1.22 Section 338(h) (10) Election . . . . . . . . . . . . . . 45
7.1.23 Base Amount Certificate. . . . . . . . . . . . . . . . . 45
7.1.24 Liquidation of International . . . . . . . . . . . . . . 45
7.1.25 Further Instruments. . . . . . . . . . . . . . . . . . . 45
7.2 Conditions to the Company's and the Company Shareholders'
Obligation to Close. . . . . . . . . . . . . . . . . . . . . . . 46
7.2.1 Representations and Warranties of Parent, Sub and
Merger Sub; Compliance with Agreement. . . . . . . . . . 46
7.2.2 Merger Consideration . . . . . . . . . . . . . . . . . . 46
7.2.3 Resolutions; Incumbency. . . . . . . . . . . . . . . . . 46
7.2.4 Certificate of Good Standing . . . . . . . . . . . . . . 46
7.2.5 Certificate of Incorporation; By-Laws . . . . . . . . . 46
7.2.6 Opinion of Counsel . . . . . . . . . . . . . . . . . . . 47
iii
<PAGE>
SECTION PAGE
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<S> <C> <C>
7.2.7 Employment Contract; Stockholders' Agreement . . . . . . 47
7.2.8 Regulatory Approvals . . . . . . . . . . . . . . . . . . 47
7.3 Post-Closing Actions. . . . . . . . . . . . . . . . . . . . . . 47
7.3.1 Payment of Company Receivable. . . . . . . . . . . . . . 47
7.3.2 Purchase of TIMS and Tri-Star U.K. . . . . . . . . . . . 48
ARTICLE 8. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 48
8.1 Indemnity by the Company Shareholders. . . . . . . . . . . . . . 48
8.2 Indemnity by Parent, Sub and Merger Sub. . . . . . . . . . . . . 49
8.3 Procedure and Payment. . . . . . . . . . . . . . . . . . . . . . 49
8.4 Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.5 Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.6 Tax Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.7 Purchase Price Adjustment. . . . . . . . . . . . . . . . . . . . 51
ARTICLE 9. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.1 Termination Date . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 10. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.1 Survival of Representations and Warranties . . . . . . . . . . . 52
10.2 Disclosure and Confidentiality . . . . . . . . . . . . . . . . . 52
10.3 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.4 Governing Law; Construction; Submission to Jurisdiction. . . . . 52
10.5 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.7 Completeness of Agreement. . . . . . . . . . . . . . . . . . . . 53
10.8 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.11 No Benefit to Others . . . . . . . . . . . . . . . . . . . . . . 55
10.12 Schedules and Headings . . . . . . . . . . . . . . . . . . . . . 56
10.13 Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 28, 1996, by and among
MAPLE LEAF AEROSPACE, INC., a Delaware corporation ("Parent"), AEROSPACE
ACQUISITION CORP., a Delaware corporation and wholly-owned subsidiary of
Parent ("Sub"), AEROSPACE MERGER SUB I, INC., a Florida corporation and
wholly-owned subsidiary of Sub ("MERGER SUB"; Parent, Sub and Merger Sub
being herein collectively referred to as "MAPLE LEAF"), TRI-STAR AEROSPACE,
INC., a Florida corporation (the "COMPANY"), and those certain stockholders
of the Company executing a signature page hereto (the "Company Shareholders").
W I T N E S S E T H :
WHEREAS, the Company is engaged in the business of distributing aerospace
hardware and fittings in the aviation industry (the "BUSINESS") and has its
principal place of business located at 11535 East Pine Street, Tulsa, Oklahoma,
74116;
WHEREAS, the Company Shareholders own an aggregate of 117,347 shares
(the "SHARES") of common stock, $.10 par value per share ("COMMON STOCK"), of
the Company, which Shares constitute, subject to the disclosures set forth in
Schedule 4.3(a), all of the issued and outstanding shares of capital stock of
the Company;
WHEREAS, the Company Shareholders and the respective Boards of Directors of
Maple Leaf have adopted resolutions approving this Agreement, pursuant to which
Merger Sub shall be merged with the Company and the Company shall become a
wholly-owned subsidiary of Sub (the "MERGER");
WHEREAS, the Company Shareholders have determined that the Merger would be
fair and in their best interests; and
WHEREAS, the Company Shareholders, the Company, Parent, Sub and Merger
Sub desire to make certain representations, warranties, covenants and
agreements in connection with the Merger and also to prescribe various
conditions to the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
<PAGE>
ARTICLE 1.
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement and Plan of Merger (this "AGREEMENT"), and in accordance with the
Florida Business Corporation Act, as amended (the "FBCA"), Merger Sub shall be
merged with and into the Company at the Effective Time (as hereinafter defined).
Upon the Effective Time, the separate existence of Merger Sub shall cease,
and the Company shall continue as the surviving corporation (the "Surviving
Corporation").
1.2 CLOSING. Unless this Agreement shall have been terminated pursuant
to Article 9 and subject to the satisfaction or waiver of the conditions set
forth in Article 7, the closing of the Merger (the "CLOSING") shall take
place beginning at 9:00 a.m., New York City time, on a date mutually
acceptable to the parties not more than three business days after all
conditions to the Closing set forth in this Agreement have been satisfied or
waived, at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New
York, New York 10153 or such other time or place as the parties shall agree
(such time and date being herein referred to as the "CLOSING DATE").
1.3 EFFECTIVE TIME. The parties hereto shall file with the Secretary
of State of the State of Florida (the "SECRETARY OF STATE") on the date of
the Closing (or on such other date as Parent and the Company may agree)
articles of merger or other appropriate documents, executed in accordance
with the relevant provisions of the FBCA, and make all other filings or
recordings required under the FBCA in connection with the Merger. The Merger
shall become effective upon the filing of the articles of merger with the
Secretary of State, or at such later time as is specified in the articles of
merger (the "EFFECTIVE TIME").
1.4 EFFECTS OF THE MERGER. The Merger shall have the effects set forth
in the FBCA. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
2
<PAGE>
1.5 ARTICLES OF INCORPORATION: BY-LAWS. (a) At the Effective Time,
Merger Sub's Articles of Incorporation shall be the Articles of Incorporation
of the Surviving Corporation.
(b) The By-Laws of Merger Sub as in effect at the Effective Time
shall, from and after the Effective Time, be the By-Laws of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
1.6 DIRECTORS. The directors of Merger Sub at the Effective Time
shall, from and after the Effective Time, be the directors of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
1.7 OFFICERS. At the Effective Time, the officers of Merger Sub shall
become the officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected
and qualified, as the case may be.
ARTICLE 2.
EFFECT OF THE MERGER ON THE SECURITIES
OF THE CONSTITUENT CORPORATIONS
2.1 EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of Common
Stock or any shares of capital stock of Merger Sub:
(a) COMMON STOCK OF MERGER SUB. Each share of common stock of Merger
Sub issued and outstanding immediately prior to the Effective Time shall be
converted into and become one validly issued, fully paid and nonassessable share
of common stock of the Surviving Corporation.
(b) CONVERSION OF OUTSTANDING COMMON STOCK. Each share of Common
Stock issued and outstanding immediately prior to the Effective Time shall be
converted into the right to receive its allocable portion of the Merger
Consideration (as defined in Section 3.1 below), and all certificates
representing shares of Common Stock issued and outstanding immediately prior
to the Effective Time shall no longer be outstanding and shall automatically
be cancelled
3
<PAGE>
and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Common Stock shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration
upon surrender of such certificate in accordance with this Agreement.
ARTICLE 3.
MERGER CONSIDERATION
3.1 AMOUNT OF MERGER CONSIDERATION. The aggregate consideration to be
received by the Company Shareholders for their Shares pursuant to the Merger
(the "MERGER CONSIDERATION") shall be an amount equal to:
(a) the FIXED MERGER CONSIDERATION which shall consist of $27,700,000
LESS an amount equal to the amount of S corporation earnings distributed by
the Company to the Company Shareholders prior to, at or in connection with
the Closing pursuant to Section 6.3(a) hereof, on a dollar-for-dollar
basis, provided that there shall be no such adjustment in respect of
distributions solely for purposes of meeting tax obligations of the Company
Shareholders pursuant to Section 6.3(a) (i) to the extent such
distributions are not made at or in connection with the Closing; and
(b) the CONTINGENT MERGER CONSIDERATION, which shall consist of
$3,000,000 and which sum shall be reduced from time to time and applied in
accordance with an Escrow Agreement, to be dated as of the Closing Date, by
and among Parent, Sub, Merger Sub, the Surviving Corporation, the Company
Shareholders and the escrow agent named therein, (the "ESCROW AGREEMENT").
The Escrow Agreement shall be in form and substance reasonably acceptable
to the parties thereto and shall provide for the reduction and application
from time to time until the third anniversary of the Closing Date of the
escrow of the Contingent Merger Consideration established thereby of all
amounts required to satisfy the first $3,000,000 of Losses (as defined in
Section 8.1 below) suffered or incurred by the Surviving Corporation for
which the Company Shareholders have agreed to indemnify pursuant to clause
(iv) of Section 8.1.
3.2 PAYMENT OF MERGER CONSIDERATION. On the Closing Date, Sub and/or
Merger Sub shall:
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(a) pay an amount equal to the Fixed Merger Consideration by wire
transfer of immediately available funds to a single account designated by
Richard P. Small, as representative of the Company Shareholders (the
"REPRESENTATIVE"), in writing not less than two (2) days prior to the Closing
Date, such payment to be allocated among the Company Shareholders in
accordance with their pro rata ownership of the Shares as set forth on
Schedule 3.2(a) hereto; and
(b) deposit $3,000,000 in escrow with the escrow agent named in the
Escrow Agreement, to be held and applied in accordance therewith.
3.3 CONFIRMATION OF MERGER CONSIDERATION; ADJUSTMENT.
(a) Within 60 days following the Closing Date, the Surviving
Corporation will prepare and deliver to the Representative a balance sheet of
the Company as at the close of business on the Closing Date (which balance
sheet shall not give effect to the concurrent acquisition by Maple Leaf of
assets of the Aerospace Business Unit of Aviall Services, Inc. and Aviall
(Canada) Ltd. (the "AVIALL ASSETS")) (the "CLOSING DATE BALANCE SHEET") and
the Adjustment Certificate described in Section 3.3(b) below; PROVIDED,
HOWEVER, that any delay by the Surviving Corporation in delivering the same
shall not impair any of its or Maple Leaf's rights under this Agreement. The
Closing Date Balance Sheet shall be audited, reported on and certified by the
Chicago, Illinois office of Arthur Andersen LLP ("Andersen"), shall be based
upon the books and records of Company and the Subsidiaries (as defined in
Section 4.3(c) below), shall be prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a basis consistent with
that of the preceding fiscal periods, and shall present fairly the financial
position of Company and the Subsidiaries as at the Closing Date. The Company
Shareholders hereby agree to instruct and use their best efforts to cause
Grant Thornton LLP or the Tulsa, Oklahoma office of Arthur Andersen LLP to
cooperate with and assist Andersen in preparing the Closing Date Balance
Sheet including, without limitation, with respect to disclosing their work
papers, schedules, memoranda, notes and other documents with respect to their
work for the Company. The Representative's independent public accountants
shall have the opportunity to observe the taking of inventories in connection
with the preparation of the Closing Date Balance Sheet, and to consult with
and to examine the work papers,
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schedules and other documents prepared or reviewed by Andersen in connection
with the preparation of their report and the Adjustment Certificate.
(b) In conjunction with, and based on its determinations in,
reporting on the Closing Date Balance Sheet, Andersen shall render and
deliver to Maple Leaf, the Surviving Corporation and the Representative a
certificate (the "ADJUSTMENT CERTIFICATE") setting forth the stockholders'
equity of the Company immediately prior to the Closing and (i) without giving
effect to the S corporation stockholder distributions contemplated by Section
6.3(a) (ii) (y) hereof and (ii) computing the reserve for the inventory asset
in connection therewith on the basis of the Company's past custom and
practice in accordance with GAAP (the "CLOSING DATE STOCKHOLDERS' EQUITY"),
which Adjustment Certificate shall show such calculation and state that such
calculation has been made in accordance with the provisions of this Section 3.3.
(c) The Representative shall have a period of 30 days after
delivery of the Closing Date Balance Sheet and the Adjustment Certificate to
present in writing to Maple Leaf and the Surviving Corporation any objections
the Company Shareholders may have to any of the matters set forth therein,
which objections shall be set forth in reasonable detail. If no objections
are raised within such 30-day period, the Closing Date Balance Sheet and the
Adjustment Certificate shall be deemed accepted and approved by the parties
and the Merger Consideration Adjustment (as defined in Section 3.3(f) below),
if any, determined thereby shall be paid in accordance with Section 3.3(f)
below within 10 days of the expiration of such 30-day period.
(d) If the Representative shall raise any objections to the
determinations made in the Closing Date Balance Sheet or the Adjustment
Certificate within the aforesaid 30-day period, the parties' respective
accountants shall attempt to resolve the matter or matters in dispute and, if
resolved, such firms shall send a joint notice to the parties stating the
manner in which the dispute was resolved and confirming or revising the
Merger Consideration Adjustment, whereupon such confirmed or revised Merger
Consideration Adjustment shall be final and binding on the parties and shall
be paid in accordance with Section 3.3(f) below within 10 days of delivery of
such joint notice. If, however, such dispute cannot be resolved by the
parties nor by their accountants within 45 days after the delivery of
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the Closing Date Balance Sheet and the Adjustment Certificate, then the
specific matters in dispute shall be submitted to either Ernst & Young LLP or
Coopers & Lybrand LLP (the "DESIGNATED ACCOUNTING FIRM") or, if such firms
decline to act in such capacity, such other firm of independent public
accountants mutually acceptable to Maple Leaf, the Surviving Corporation and
the Representative, which firm shall make a final and binding determination
as to such matter or matters. The Designated Accounting Firm or such, other
accounting firm shall send its written determination of the matters in
dispute to the parties and their respective accountants, whereupon the
confirmed or revised Merger Consideration Adjustment determined by the
Designated Accounting Firm or such other independent accounting firm shall be
binding on the parties hereto and shall be paid in accordance with Section
3.3(f) below within 10 days of delivery of such written determination.
(e) The parties agree to cooperate with each other and each
other's authorized representatives and with the Designated Accounting Firm or
any other accounting firm selected by the parties in order that any and all
matters in dispute shall be resolved as soon as practicable and that a final
determination of the Merger Consideration Adjustment shall be made. Each
party shall be responsible for all fees and expenses of their own
accountants, provided that the fees and expenses of the Designated Accounting
Firm or any other accounting firm selected by the parties pursuant to Section
3.3(d) shall be paid one-half by the Surviving Corporation and one half
allocated pro rata among the Company Shareholders.
(f) The "MERGER CONSIDERATION ADJUSTMENT" shall be the amount by
which the Closing Date Stockholders' Equity determined as provided in the
preceding paragraphs is less than $25,408,053 (the "BASE AMOUNT"). The
Merger Consideration Adjustment, together with interest thereon at the rate
of 8% per annum from the Closing Date, shall be paid to the Surviving
Corporation by the Company Shareholders, on a pro rata basis in relation to
their proportionate ownership of Shares immediately prior to the Closing, by
certified or bank check payable to the order of the Surviving Corporation.
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ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE COMPANY SHAREHOLDERS
The Company and the Company Shareholders hereby severally represent and
warrant to Maple Leaf as follows (it being understood that all
representations and warranties made with respect to Tri-Star Inventory
Management Service, Inc., an Illinois corporation ("TIMS"), and Tri-Star
Aerospace Ltd., a corporation organized under the laws of the United Kingdom
("TRI-STAR U.K."), Tri-Star Aerospace, Inc., an Ontario corporation
("TRI-STAR CANADA"), and Tri-Star International, Inc., a Florida corporation
("INTERNATIONAL"), are being made severally to Maple Leaf only by the
shareholders of those respective corporations as disclosed on Schedule 4.3(c)):
4.1 ORGANIZATION: CORPORATE POWER: GOOD STANDING. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Florida. The Company has full corporate power and
authority to carry on the Business as now conducted and to own, lease and
operate its properties in the manner presently conducted. The Company has
full corporate power and authority to execute and deliver this Agreement and
the other agreements contemplated hereby, to perform its respective obligations
hereunder and thereunder and to consummate the transactions contemplated
hereby and thereby. The Company is qualified or licensed to do business as a
foreign corporation in the jurisdictions set forth in SCHEDULE 4.1 hereto,
which constitute all jurisdictions where its ownership or leasing of property
or the conduct of its business requires such qualification.
4.2 AUTHORIZATION. (a) The execution and delivery of this Agreement
and the other agreements contemplated hereby and the performance by the
Company of its obligations hereunder and thereunder have been duly authorized
by all necessary corporate action and no other corporate, act on the part of
the Company, its Board of Directors, or its stockholders is necessary to
authorize the execution, delivery or performance by the Company of this
Agreement or any other agreement contemplated hereby or thereby. This
Agreement has been, and the other agreements contemplated hereby and the
instruments and documents to be delivered by the Company hereunder will be,
duly executed and delivered by the Company and each constitutes the legal,
valid and
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binding obligations of the Company and are enforceable against the Company in
accordance with their respective terms (subject to applicable bankruptcy,
reorganization, insolvency, and other similar laws relating to or affecting
the enforcement of creditors' rights generally and to the availability of
equitable remedies).
(b) Such Company Shareholder has all requisite power, authority
and legal capacity to execute and deliver this Agreement and each of the
other agreements, certificates and instruments contemplated hereby to be
executed by such Company Shareholder in connection with the consummation of
the transactions contemplated by this Agreement (collectively, the "COMPANY
SHAREHOLDER DOCUMENTS"), and to consummate the transactions contemplated
hereby and thereby. This Agreement has been, and each of the Company
Shareholder Documents will be at or prior to the Closing, duly executed and
delivered by such Company Shareholder and (assuming the due authorization,
execution and delivery by the other parties hereto and thereto) this
Agreement constitutes, and each of the Company Shareholder Documents when so
executed and delivered will constitute, legal, valid and binding obligations
of such Company Shareholder, enforceable against such Company Shareholder in
accordance with their respective terms (subject to applicable bankruptcy,
reorganization, insolvency, and other similar laws relating to or affecting
the enforcement of creditors' rights generally and to the availability of
equitable remedies).
4.3 CAPITALIZATION; SUBSIDIARIES.
(a) The authorized capital stock of the Company consists of
200,000 shares of Common Stock, each such share entitling the holder thereof
to one vote on every matter upon which stockholders of the Company are
entitled to vote. As of the date hereof, and subject to the disclosures set
forth in SCHEDULE 4.3(a), there are 117,347 shares of Common Stock issued and
outstanding, and no shares of capital stock are held by the Company as
treasury stock. Except for the Common Stock, the Company does not have any
authorized class or series of capital stock or other equity securities. All
of the issued and outstanding shares of Common Stock were duly authorized for
issuance and are validly issued, fully paid and non-assessable. Except as
disclosed on Schedule 4.3(b), there is no existing option, warrant, call,
right, commitment or other agreement of any character to which the Company is
a party requiring, and there are no securities of
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the Company outstanding which upon conversion or exchange would require, the
issuance, sale, repurchase, redemption or transfer of any shares of capital
stock or other equity securities of the Company or other securities
convertible into, exchangeable for or evidencing the right to subscribe for
or purchase shares of capital stock or other equity securities of the Company.
(b) Except as disclosed on Schedule 4.3(b), (i) there is no
existing option, warrant, call, right, commitment or other agreement of any
character to which such Company Shareholder is a party requiring the
issuance, sale, repurchase or transfer of any shares of capital stock or
other equity securities of the Company or other securities convertible into,
exchangeable for or evidencing the right to subscribe for or purchase shares
of capital stock or other equity securities of the Company, and (ii) neither
such Company Shareholder nor the Company is a party to any voting trust or
other voting agreement with respect to any of the shares of Common Stock or
to any agreement relating to the issuance, sale, redemption, transfer or
other disposition of the capital stock of the Company.
(c) Schedule 4.3(c) hereto sets forth the name and address of each
entity in which the Company owns a majority of the outstanding voting
securities or other equity interests or in which one or more of the Company
Shareholders own, alone or in the aggregate with other Company Shareholders
and/or the Company, all of the outstanding voting securities or other equity
interests (each, a "SUBSIDIARY" and, collectively, the "SUBSIDIARIES"; which
term shall include, without limitation, TIMS, Tri-Star U.K., Tri-Star Canada
and International), and, for each such Subsidiary, the jurisdiction in which
it is incorporated or organized, the jurisdictions, if any, in which it is
qualified to do business, the number of shares of its authorized capital
stock, the number and class of shares thereof duly issued and outstanding,
the names of all stockholders or other equity owners and the number of shares
of stock owned by each stockholder or the amount of equity owned by each
equity owner. The outstanding shares of capital stock or equity interests of
each Subsidiary are validly issued, fully paid and non-assessable, and all
such shares or other equity interests represented as being owned by Company
or by one or more of the Company Shareholders are owned by it, him, her or
them (as appropriate) free and clear of any and all Liens (as defined in
Section 4.5 below). Except as disclosed on Schedule 4.3(b), there is no
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existing option, warrant, call, commitment or agreement requiring, and there
are no securities of any Subsidiary outstanding which upon conversion or
exchange would require, the issuance, sale, repurchase or transfer of any
shares of capital stock or other equity interests of any Subsidiary or other
securities convertible or exchangeable into shares of capital stock or other
equity interests of any Subsidiary or other equity security of any
Subsidiary. Each Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and is duly qualified to do business and is in good standing
under the laws of each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such qualification.
4.4 NO VIOLATION. (a) Neither the execution and delivery of this
Agreement, nor the performance by the Company of its obligations hereunder
nor the consummation of the transactions contemplated hereby will (i)
violate, conflict with, result in any breach of, constitute a default under,
or result in the termination or acceleration of the Company's Articles of
Incorporation or By-Laws or the organizational documents of any Subsidiary,
or, except as disclosed on SCHEDULE 4.16, any agreement, mortgage, indenture,
license, obligation or instrument to which the Company or any of the
Subsidiaries is a party or by which the Company, any of the Subsidiaries or
any of their respective properties or assets is bound or affected; (ii) other
than the Defined Consents (as defined in Section 4.16 below), require the
consent of any other party to, or result in the creation or imposition of any
Lien upon the Company or any of the Subsidiaries or any of their respective
properties or assets under, any agreement or commitment to which the Company
or any of the Subsidiaries is a party or by which any of them or any of their
respective properties or assets are bound; or (iii) violate any law,
judgment, decree, order, regulation or rule of any court or governmental
authority to which the Company or any of the Subsidiaries is subject.
(b) Neither the execution and delivery of this Agreement, nor
the performance by such Company Shareholder of his or her obligations
hereunder nor the consummation of the transactions contemplated hereby will
(i) violate, conflict with, result in any breach of, constitute a default
under, or result in the termination or acceleration of any agreement,
mortgage, indenture, license, obligation or instrument to which such Company
Shareholder is a party or
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by which such Company Shareholder or any of his or her Shares in the Company
(as disclosed on Schedule 3.2(a)) or shares in any Subsidiary (as disclosed
on Schedule 4.3(c)) is bound or affected; (ii) require the consent of any
other party to, or result in the creation or imposition of any Lien upon,
such Company Shareholder or any of his or her Shares in the Company or shares
in any Subsidiary under any agreement or commitment to which such Company
Shareholder is a party or by which such Company Shareholder is, or his or her
Shares in the Company or shares in any Subsidiary are, bound; or (iii)
violate any law, judgment, decree, order, regulation or rule of any court or
governmental authority to which such Company Shareholder is, or his or her
Shares in the Company or shares in any Subsidiary are, subject.
4.5 THE SHARES. Such Company Shareholder is the record and beneficial
owner of all of the Shares in the Company indicated as being owned by such
Company Shareholder on Schedule 3.2(a) and of all the shares of Subsidiaries
indicated as being owned by such Company Shareholder on Schedule 4.3(c), in
each case, free and clear of any and all liens, mortgages, pledges, security
interests, charges, adverse claims, encumbrances or adverse rights of any
kind (collectively, "LIENS"). Such Company Shareholder has the capacity,
power and authority to transfer, convey, assign and deliver all such shares
as provided in this Agreement and pursuant to the form of agreement attached
hereto as Schedule 7.3.2.
4.6 LEASED ASSETS. Neither the Company nor any of the Subsidiaries
owns any interest in any real property. The building, plants, structures,
fixtures and equipment leased by the Company or any of the Subsidiaries and
used in the Business are sufficient for the continued conduct of the Business
after the Closing in substantially the same manner as conducted prior to the
Closing.
4.7 ACCOUNTS RECEIVABLE. All accounts receivable, notes or other
evidences of indebtedness of any person or entity (including, without
limitation, of any officer, stockholder, employee or Affiliate of the
Company) held by the Company and the Subsidiaries (the "ACCOUNTS RECEIVABLE")
represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of the Business. Unless paid prior
to the Closing Date, the Accounts Receivable are or will be as of the Closing
Date current and collectible net of the respective reserves shown on the
Financial Statements (as defined in Section 4.9) as
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of the Closing Date, which reserves are adequate and calculated consistent
with past practice. There is no contest, claim, or right of set-off, other
than returns in the ordinary course of Business, with any obligor of an
Accounts Receivable relating to the amount or validity of such Accounts
Receivable. The Company has delivered to Parent under cover of a certificate
referencing this Section 4.7 a complete and accurate list of all Accounts
Receivable as of the end of the month preceding the date of this Agreement,
which certificate and list are hereby incorporated herein and made a part of
this Agreement.
4.8 INVENTORY. All inventory of the Company and the Subsidiaries,
whether or not reflected in the Financial Statements, consists of a quality
and quantity usable and salable in the ordinary course of the Business,
except for obsolete items and items dispositioned to scrap, all of which have
been fully reserved for in the Financial Statements or on the accounting
records of the Company as of the Closing Date, as the case may be, including
reserves (believed to be adequate) of an amount not to exceed $2,000,000 for
inventory as to which documentation and/or other evidence of traceability may
be lost, incomplete or otherwise not suitable. All inventories not written
off have been priced at the lower of cost or market on a specific
identification basis. The quantities of each item of inventory are not, in
the best estimate of the Company and the Company Shareholders, excessive, but
are reasonable in the present circumstances of the Business, after being
reserved for in the Financial Statements or on the accounting records of the
Company as of the Closing Date, as the case may be. The Company and the
Subsidiaries have at all times sold and distributed their products in
compliance with applicable law. The Company and the Subsidiaries possess,
and at Closing will possess, all documentation (as has been represented to
the Company by the source of supply) of certifications for product
conformance to applicable specifications and/or records relating to
traceability to source of supply for each item of inventory that has not been
fully reserved for on the Financial Statements as is required for the Company
and the Subsidiaries to sell or otherwise transfer all items of inventory
(for use in their intended manner of usage) in accordance with applicable law
and industry practice.
4.9 FINANCIAL INFORMATION. The Company has heretofore delivered to
Parent copies of the following financial statements (collectively, the
"FINANCIAL STATEMENTS"):
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(a) the consolidated balance sheets of the Company as of December 31,
1995 and 1994, and the related consolidated statement of earnings,
consolidated statements of stockholders' equity and consolidated statements
of cash flow for the respective 12-month periods then ended, together with
the independent public accountants' report thereon; and
(b) the unaudited balance sheet of the Company as of July 31, 1996
(the "LATEST BALANCE SHEET") and the related income and expenses statements
and expenses for the seven month period then ended.
Each of the foregoing Financial Statements presents fairly the
financial condition and results of operations of the Company in accordance
with GAAP consistently applied throughout the periods covered thereby subject
to, for the interim Financial Statements, normal year-end adjustments (which,
individually or in the aggregate, are not material) and lack of footnotes and
other presentation items. All reserves and accrued liabilities on the
Financial Statements are to be considered fungible one with each and any
other.
4.10 BOOKS AND RECORDS. The articles of incorporation, bylaws, minutes
of meetings of the board of directors (and any committee thereof) and
stockholders, stock ledgers, tax, accounting, employee and other records,
sales documentation, files, documents and papers of the Company and each of
the Subsidiaries, copies of which have been made available to Parent, have
been maintained in accordance with sound business practices and the
requirements of Section 13(b)(2) of the Securities Exchange Act of 1934, as
amended (regardless of whether or not the Company is subject to that Section),
including the maintenance of an adequate system of internal controls.
4.11 LICENSES, PERMITS AND AUTHORIZATIONS. The Company and each of the
Subsidiaries has all material approvals, licenses and permits of all
governmental authorities and agencies necessary for the conduct of the
Business and the ownership and use of their respective properties and assets,
all of which are identified on SCHEDULE 4.11 ("PERMITS"). Neither the
Company nor any Subsidiary has received any notices to the effect that it is
not in compliance with any such Permit.
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4.12 NO UNDISCLOSED LIABILITIES, ETC. Neither the Company nor any
Subsidiary has any debts, liabilities or obligations of any nature (whether
absolute, accrued, contingent or otherwise, and whether due or to become due)
that would be required to be set forth on a balance sheet prepared in
accordance with GAAP consistently applied, except (a) liabilities and
obligations under the Contracts (as defined in Section 4.16), (b) liabilities
and obligations to the extent reflected and accrued for or reserved against
on the Latest Balance Sheet, (c) liabilities and obligations described on
SCHEDULE 4.12, and (d) liabilities and obligations which have arisen after
the date of the Latest Balance Sheet in the ordinary course of the Business;
PROVIDED HOWEVER, that the aggregate amount of liabilities in respect of (i)
loans owing by the Company to the Company Shareholders, (ii) outstanding
amounts under the Company's revolving credit facility, (iii) amounts owing to
Massachusetts Mutual Life Insurance Co., and (iv) checks written against the
Company's bank accounts that have not cleared, shall not exceed $22,000,000.
4.13 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES. No consent,
approval or authorization of, notice to, or declaration, filing or
registration with, any governmental or regulatory authority is required to be
made or obtained in connection with the execution, delivery and performance
by the Company and the Company Shareholders of this Agreement and the
consummation of the transactions contemplated hereby.
4.14 LITIGATION. Except as disclosed in SCHEDULE 4.14, there is no
suit, action, proceeding or investigation pending or, to the best knowledge
of the Company and the Company Shareholders, threatened against the Company,
any of the Subsidiaries, or any of their respective assets, properties,
securities or rights, before any court, arbitrator or administrative or
governmental body.
4.15 TAX RETURNS. (a) Except as disclosed in SCHEDULE 4.15, the Company
and each Subsidiary has timely filed all Tax Returns (as defined below)
required to be filed by it, such Tax Returns are complete and correct, and
all Taxes (as defined below) due, or claimed in writing by any taxing
authority to be due, have been timely paid or provided for in the Financial
Statements of the Company and in the financial statements of each Subsidiary
in accordance with GAAP. Neither the Company nor any Subsidiary has incurred
any Tax liability for their taxable years beginning
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January 1, 1996 other than in respect of the conduct of the business of the
Company and each Subsidiary in the ordinary course. With respect to any
period up to the Closing Date for which Tax Returns have not yet been filed,
or for which Taxes are not yet due or owing, the Company and each Subsidiary
have made (or with respect to any period after the end of the most recent
fiscal quarter will make) due and sufficient current accruals for any such
Taxes owed by the Company and each Subsidiary in their books and records in
accordance with GAAP. The Company has delivered to Parent true, correct and
complete copies of its federal and state income Tax Returns for the preceding
two taxable years, and the Company and each Subsidiary will deliver to Parent
prior to the Closing true, correct and complete copies of their federal and
state income Tax Returns for the preceding three taxable years.
(b) There are no Liens with respect to Taxes upon any of the
assets of the Company or any Subsidiary, other than Liens for Taxes which are
not yet due and payable.
(c) The Company and TIMS qualify as S corporations as defined in
Section 1361 of the Code (as defined below) and, if applicable, comparable
provisions of state or local law, and have been S corporations since January
1, 1987 and January 1, 1993, respectively. The Company filed its election to
be an S corporation on December 15, 1986, and TIMS filed its election to be
an S corporation on March 15, 1993.
(d) Except as disclosed on Schedule 4.15(d), the Tax Returns of
the Company have been examined by the Internal Revenue Service (the "IRS")
for the taxable periods ending December 31, 1989, and have been examined by
the state or local taxing authorities set forth on Schedule 4.15 for the
taxable periods shown on such schedule. The Tax Returns of the Subsidiaries
have not been examined by the IRS or, with respect to Tri-Star U.K., any
relevant foreign taxing authority, or any state or local taxing authority.
There are no outstanding agreements, waivers, or arrangements extending the
statutory period of limitation applicable to any claim for, or the period for
the collection or assessment of, Taxes due from or with respect to the
Company or any Subsidiary for any taxable period. No closing agreement
pursuant to Section 7121 of the Code or compromise pursuant to Section 7122
of the Code (or any predecessor provision) or any similar provision of any
state, local, or foreign law has been entered into by the
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Company or any Subsidiary. No audit or other proceeding by any court,
governmental or regulatory authority is pending or, to the knowledge of the
Company and the Company Shareholders and the shareholders of each Subsidiary,
threatened with respect to any Taxes due from the Company or any Subsidiary,
or any Tax Return filed by the Company or any Subsidiary. No assessment of
Tax is proposed against the Company or any Subsidiary or any of its or their
assets.
(e) All elections made or filed by the Company or any Subsidiary
with respect to Taxes are set forth on Schedule 4.15. No consent to the
application of Section 341(f)(2) of the Code (or any predecessor provision)
has been made or filed by the Company or any Subsidiary or with respect to
any of its or their assets. None of the assets of the Company or any
Subsidiary is an asset or property that is or will be required to be treated
as being (i) owned by any person other than the Company or such Subsidiary
pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code
of 1954, as amended and in effect immediately before the enactment of the Tax
Reform Act of 1986, or (ii) "tax-exempt use property" within the meaning of
Section 168(h)(1) of the Code. Neither the Company nor any Subsidiary has
agreed to or is required to make any adjustment pursuant to Section 481(a) of
the Code (or any predecessor provision) by reason of any change in any
accounting method of the Company or any Subsidiary, and there is no
application pending with any taxing authority requesting permission for any
changes in any accounting method of the Company or any Subsidiary. To the
knowledge of the Company and the Company Shareholders and the shareholders of
each Subsidiary, the IRS has not proposed any such adjustment or change in
accounting method.
(f) Neither the Company nor any Subsidiary is or has been in
violation (or with notice or lapse of time or both, would not be in
violation) of any applicable law relating to the payment or withholding of
Taxes. The Company and the Subsidiaries have duly and timely withheld from
employee salaries, wages, and other compensation and paid over to the
appropriate taxing authorities all amounts required to be so withheld and
paid over for all periods under all applicable laws.
(g) The Company and the Subsidiaries are not parties to, are not
bound by, and are not obligated under, any Tax sharing agreement or similar
contract or arrangement.
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(h) There is no contract, agreement, plan or arrangement covering
any person that, individually or collectively, could give rise to the payment
of any amount that would not be deductible by the Company or any Subsidiary
by reason of Section 280G of the Code.
(i) The Company has not made any distribution of S corporation
earnings to or on behalf of, or prepared or delivered any filing to the IRS
(including, without limitation, any filing on Form K-1) with respect to,
Stephen M. Rourke. The last distribution of S corporation earnings made by
the Company to or on behalf of Kurt Weber was made in September, 1993 for the
period ended August 17, 1993, and the Company has not prepared or delivered
any filing to the IRS (including, without limitation, any filing on Form K-1)
with respect to Kurt Weber since September, 1993, except for one such Form K-1
in respect of fiscal year 1993 which was prepared in error and was not filed.
For purposes of this Section 4.15, any reference to the Company or any
Subsidiary shall include any corporation which merged with or into or was
liquidated into the Company or any such Subsidiary.
For purposes of this Agreement, "CODE" shall mean the Internal Revenue
Code of 1986, as amended (including without limitation any successor internal
revenue law), and the rules and regulations promulgated thereunder; "TAXES"
shall mean all taxes, charges, fees, levies, or other similar assessments,
including without limitation (a) income, gross receipts, ad valorem, premium,
excise, real property, personal property, windfall profit, sales, use,
transfer, licensing, withholding, employment, payroll, estimated and
franchise taxes imposed by the United States, any state, local, or foreign
government, or any subdivision, agency, or other similar person of the United
States, or any such government, (b) any interest, fines, penalties,
assessments, or additions to tax resulting from, attributable to, or incurred
in connection with any such tax or any contest or dispute thereof and (c) any
Taxes for which the Company or any Subsidiary is liable as a transferee or as
an indemnitor, guarantor, surety or in a similar capacity under any contract,
arrangement, understanding or commitment, whether oral or written; and "TAX
RETURNS" shall mean any report, return, statement, or other information
required to be supplied to a taxing authority in connection with Taxes.
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4.16 CONTRACTS AND AGREEMENTS. Except as disclosed on SCHEDULE 4.16,
every agreement, license, lease, and contract, written or oral, to which the
Company or any of the Subsidiaries is a party or by which any of their
respective properties or assets is bound or subject and (a) that involves (i)
an annual obligation of more than $10,000 or (ii) an aggregate obligation of
more than $100,000, (b) that provides for the disclosure by the Company or
any Subsidiary of any confidential or proprietary information, or (c) that is
with an Affiliate, director or employee of the Company (the "CONTRACTS") is
in full force and effect. SCHEDULE 4.16 currently identifies certain
Contracts and, as supplemented prior to the Closing Date, will identify every
Contract and, except as disclosed on SCHEDULE 4.16 (collectively, the
"DEFINED CONSENTS"), no consent, approval or waiver of any third party or
governmental authority is required under any Contract to maintain such
Contract in full force and effect and preserve the Company's and the
Subsidiaries' rights and benefits thereunder from and after the Closing Date.
Neither the Company nor any Subsidiary nor, to the knowledge of the Company
and the Company Shareholders, any other party to any Contract is in default,
and no event has occurred which with the giving of notice or passage of time
or both would constitute a default by the Company or any Subsidiary or, to
the knowledge of the Company and the Company Shareholders, by any other party
under any Contract or obligation owed by the Company or any Subsidiary which
default would adversely affect, either individually or together with other
defaults, the operating results, condition (financial or otherwise), assets,
liabilities, properties or business prospects of the Company. The Company has
furnished to Parent accurate and complete copies of each of the Contracts
referred to in the first sentence of this Section 4.16 identified on Schedule
4.16 as of the date hereof and an accurate and complete summary of the oral
Contracts so listed and, prior to the Closing Date, will have furnished to
Parent accurate and complete copies of all Contracts referred to in the first
sentence of this Section 4.16 and an accurate and complete summary of all
oral Contracts therein referred to.
4.17 COMPLIANCE WITH LAWS. Except as disclosed on SCHEDULE 4.17, the
Company, each Subsidiary, and the manner in which they respectively operate
their business and use their properties and assets are in substantial
compliance with any applicable law, ordinance or regulation of any federal,
state or government or agency. Neither the Company nor any Subsidiary has
received any notice of any violation
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or alleged violation from any governmental agency relating there to.
4.18 ENVIRONMENTAL MATTERS. (a) Except as disclosed on SCHEDULE 4.18:
(i) the Company and the Subsidiaries and any real property owned,
operated or leased by the Company or the Subsidiaries (collectively, the
"REAL PROPERTY") and the operations thereon, at all times so owned,
operated or leased, have been, and are, and will be as of the Closing,
in full compliance with, and have not been and are not in violation of,
or liable under, any Environmental Law (as defined below);
(ii) neither the Company nor any of the Subsidiaries is subject to
any Environmental Costs and Liabilities (as defined below) and neither have
any basis to expect that the Company or the Subsidiaries will be subject
to any Environmental Costs and Liabilities;
(iii) neither the Company nor the Subsidiaries nor any other person
for whose conduct the Company or the Subsidiaries is or may be held to be
responsible has received any actual or threatened order, notice, claim or
other communication from any governmental body or person, including, but
not limited to, the current or prior owner or operator of the Real
Property, of any actual or potential violation of, or failure to comply
with, any Environmental Law, or of any actual or threatened obligation to
undertake or bear the cost of any environmental, health, and safety
liabilities with respect to the operations of the Company and the
Subsidiaries or the Real Property;
(iv) There are no pending or, to the knowledge of the Company and the
Company Shareholders, threatened actions, proceedings, claims or
investigations against the Company or the Subsidiaries or any of the Real
Property alleging the violation of or seeking to impose liability pursuant
to any Environmental Laws and there are no pending or, to the knowledge of
the Company and the Company Shareholders, threatened Liens or other
restrictions of any nature against the Company or the Subsidiaries or any
of the Real Property resulting from or imposed pursuant to any
Environmental Law; and
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(v) There has been no Release (as defined below) or, to the
knowledge of the Company and the Company Shareholders, threat of Release of
any Hazardous Substances (as defined below) at or from any of the Real
Property at any time at which the Company or any of the Subsidiaries owned,
operated or leased any of the Real Property or at any other locations
where any hazardous substances were generated, manufactured, refined,
transferred, produced, disposed, treated, imported, used, or processed from
by or for the Company or the Subsidiaries, or to the knowledge of the
Company and the Company Shareholders, at any property adjacent to the Real
Property, whether by the Company or any other person or entity.
(b) The Company has delivered to Parent true and complete copies
and results of any reports, studies, analyses, tests, or monitoring data
possessed or initiated by the Company or any Subsidiary pertaining to
environmental conditions in, on, or under any of the Real Property or any
Real Property formerly owned, operated or leased by the Company or concerning
compliance with Environmental Laws by the Company, the Subsidiaries or any
other person or entity for whose conduct the Company or the Subsidiaries is
or may be held responsible.
(c) For purposes of this Agreement, the following terms shall have
the following definitions: (i) "ENVIRONMENTAL COSTS AND LIABILITIES" means
any and all losses, liabilities, obligations, damages, fines, penalties,
judgments, actions, claims, costs and expenses (including, without
limitation, fees, disbursements and expenses of legal counsel, experts,
engineers and consultants and the costs of investigation and feasibility
studies and remedial action) arising from or under any Environmental Law or
order or agreement with any governmental authority or other person or entity;
(ii) "ENVIRONMENTAL LAW" means any federal, state, local, or foreign law
(including common law), statute, code, ordinance, rule, regulation or other
legal requirement relating to the environment, natural resources, public or
employee health and safety, and the regulation of, or imposition of standards
of conduct concerning Releases or threatened Releases of noises, odors, or
Hazardous Substances into the environment or otherwise relating to the
manufacture, processing, generation, distribution, use, treatment, storage,
disposal, cleanup, transport or handling of Hazardous Substances and includes,
but is not limited to, the Comprehensive Environmental Response, Compensation
and
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Liability Act, 42 U.S.C. Section 9601 ET SEQ., the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 ET SEQ., the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 ET SEQ., the Clean Water Act, 33
U.S.C. Section 1251 ET SEQ., the Clean Air Act, 33 U.S.C. Section 2601 ET
SEQ., the Toxic Substances Control Act, 15 U.S.C. Section 2601 ET SEQ., the
Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Section 136 ET
SEQ., the Oil Pollution Act of 1990, 33 U.S.C Section 2701 ET SEQ. and the
Occupational Safety and Health Act, 29 U.S.C. Section 651 ET. SEQ., as such
laws have been amended or supplemented, and the regulations promulgated
pursuant thereto, and all analogous state or local statutes; (iii) "HAZARDOUS
SUBSTANCES" means any substance, material or waste which is regulated by any
governmental authority or the United States or other national government,
including, without limitation, any material, substance or waste which is
defined as a "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "contaminant,"
"pollutant," "toxic waste" or "toxic substance" under any provision of
Environmental Law, which includes, but is not limited to, petroleum,
petroleum products, asbestos, urea formaldehyde and polychlorinated
biphenyls; (iv) "RELEASE" means any release, spill, emission, leaking,
pumping, pouring, dumping, emptying, injection, deposit, disposal, discharge,
dispersal, leaching, or migration on or into the indoor or outdoor
environment or into or out of any property.
4.19 NO MATERIAL ADVERSE CHANGE. Since May 31, 1996, there has been no
material adverse change in the assets, liabilities, condition (financial or
otherwise), operating results, employee or customer relations, business
activities or business prospects of the Company or any Subsidiary. Neither
the Company nor any Subsidiary has received any notice and neither the
Company nor any of the Company Shareholders has any knowledge or any
reasonable basis to believe that any customers intend to discontinue or
substantially diminish or change their relationship with the Company or any
Subsidiary on account of the transaction contemplated hereby or otherwise.
4.20 TITLE TO AND CONDITION OF ASSETS; ENCUMBRANCES. The Company's and
the Subsidiaries' properties and assets are in good condition and repair,
ordinary wear and tear excepted, and none of such properties or assets
requires any repair or replacement except for maintenance in the ordinary
course of the Company's and the Subsidiaries' operations. The Company and the
Subsidiaries have good and marketable
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title to their respective properties and assets and none of such properties
or assets is subject to any Lien of any kind, except (i) those disclosed in
the Latest Balance Sheet and as set forth in SCHEDULE 4.20, and (ii) possible
minor matters that, in the aggregate, are not substantial in amount and do
not, individually or in the aggregate, detract from or interfere with the
present or intended use of any of such properties or assets or impair the
Company's or any Subsidiary's business operations in any material respect.
4.21 EMPLOYEES. Set forth on SCHEDULE 4.21 attached hereto is a true
and complete list setting forth (a) the names, current salaries of, and other
compensation payable to, the employees of the Company and the Subsidiaries,
regardless of the amount of annual compensation, (b) the names and total
annual compensation for all independent contractors who render services on a
regular basis to the Company or the Subsidiaries, or who are currently under
contract to render services to the Company or the Subsidiaries, whose current
annual compensation is $10,000 or more, and (c) the names of each employee of
the Company or the Subsidiaries, who is party to an employment,
confidentiality, non-compete or other agreement with the Company or the
Subsidiaries (true and complete copies of which have been delivered to
Parent). The Company and the Subsidiaries have not promised to any employee
orally or in writing any bonus or increase in compensation or change in any
Employee Benefit Plan (as defined in Section 4.22(a)), or creation of any new
Employee Benefit Plan, whether or not legally binding.
4.22 LABOR, EMPLOYMENT CONTRACTS AND EMPLOYEE BENEFIT PROGRAMS. (a) The
Company and the Subsidiaries have and at the Closing Date will have, no
obligations, contingent or otherwise, written or oral, under any employment
contract or Employee Benefit Plan, other than (i) those disclosed in the
Latest Balance Sheet and those listed in SCHEDULE 4.22, true and correct
copies, or descriptions of which have been delivered to Parent pursuant to
Section 4.22(g), (ii) normal salary or wage accruals, (iii) normal salesman
and management incentive compensation pursuant to the arrangements described
on Schedule 4.22 in accordance with the Company's past custom and practice,
and (iv) paid vacations, sick leave and holiday accruals in accordance with
the Company's past practice and policy which is described on Schedule 4.22.
The Company and the Subsidiaries have performed all obligations required to
be performed under all such agreements or Employee Benefit
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Plans and are not in arrears or breach under any of the terms thereof.
"EMPLOYEE BENEFIT PLAN" means "employee benefit plan" as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended, and
regulations promulgated thereunder ("ERISA"), and any other plan, program,
arrangement, contract or agreement which the Company and the Subsidiaries has
maintained, sponsored, adopted or obligated itself under with respect to one
or more employees' or former employees' benefits, including, but not limited
to, short-term or long-term sickness or disability, bonus or incentive
compensation, stock option or equity participation plans, severance pay,
vacation pay, deferred compensation or stock purchase plans.
(b) Neither the Company nor any of the Subsidiaries is a party to
or obligated under or with respect to any collective bargaining agreements,
arrangements or contracts with any labor union or other representative of
employees or any employee benefits provided by any such agreement. No
employees of the Company or the Subsidiaries are represented by any labor
organization. No labor organization or group of employees has made a pending
demand for recognition or certification. No work stoppage, slowdown, strike,
union organizational activity, allegation, charge or complaint of employment
discrimination or other similar occurrence EXCEPT AS SET FORTH ON SCHEDULE
4.22 has occurred during the Company's or the Subsidiaries' past three
completed fiscal years, or is pending or threatened against the Company or
any of the Subsidiaries; nor does the Company or the Company's Shareholders
know any basis for any such allegation, charge, or complaint. The Company
and each of the Subsidiaries is in compliance and have complied with all
applicable laws relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity, the Worker Adjustment
and Retraining Notification Act of 1988 and any similar state or local "plant
closing" law, collective bargaining and the payment of Social Security taxes
and any state taxes. There are no administrative charges or court complaints
pending or, to the knowledge of the Company and the Company Shareholders,
threatened against the Company or any of the Subsidiaries before the U.S.
Equal Employment Opportunity Commission or any state, federal, Canadian or
foreign court or agency concerning alleged employment discrimination or any
other matter relating to the employment of labor. There is no unfair labor
practice charge or complaint pending or, to the knowledge of the Company and
the Company Shareholders, threatened against the Company or any of the
Subsidiaries
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before the National Labor Relations Board or any similar state, local,
Canadian or foreign labor relations body. To the knowledge of the Company
and the Company Shareholders, the Company's and the Subsidiaries' relations
with their respective employees are good.
(c) Neither the Company nor any Subsidiary has or will have as of
the Closing Date any liability or obligation, contingent or otherwise, under
a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA. Neither
the Company nor any Subsidiary has at any time, or will have as of the
Closing Date, maintained, sponsored, adopted, contributed to, or obligated
itself in any manner, contingent or otherwise, with respect to, a defined
benefit pension plan subject to Title IV of ERISA.
(d) The Employee Benefit Plans intended to qualify under Section
401 of the Code do so qualify, and nothing has occurred and, to the knowledge
of the Company and the Company Shareholders after reasonable inquiry, nothing
will occur which would result in the loss of such qualification for any
period through the Closing Date. In addition, the Tri-Star Aerospace Inc.
Employees' Welfare Benefit Plan (the "VEBA") qualifies as a voluntary
employees' beneficiary association under Section 501(c)(9) of the Code, and
nothing has occurred and, to the knowledge of the Company and the Company
Shareholders after reasonable inquiry, nothing will occur which would result
in the VEBA having unrelated business taxable income under the Code for any
period through the Closing Date. The trustee of the VEBA may be changed by
the appropriate corporate action by the Company.
(e) All contributions and insurance premiums to or in respect of
the Employee Benefit Plans for any period ending on or before the Closing
Date have been paid in full and no Employee Benefit Plan has any accumulated
funding deficiencies or "amount of unfunded benefit liabilities" as defined
in Section 4001(a)(18) of ERISA.
(f) There has been no "reportable event" as defined in Section
4043 of ERISA with respect to any Employee Benefit Plan.
(g) True, correct and complete copies of the following documents,
with respect to each of the Employee Benefit Plans, have been delivered to
Parent by the Company: (i) plans and related trust documents, and amendments
thereto; (ii) the most recent Forms 5500; (iii) the last IRS
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determination letter; (iv) summary plan descriptions; and (v) written
descriptions of all non-written agreements relating to the Employee Benefit
Plans.
(h) There are no pending actions, claims or lawsuits asserted or
instituted against the Employee Benefit Plans, their assets, the plan sponsor
or administrator, or against any fiduciary (other than routine benefit
claims), nor does any of the Company or the Company Shareholders have
knowledge of facts which could form the basis for any such action, claim or
lawsuit.
(i) The Employee Benefit Plans are and have been maintained in
accordance with their terms, all applicable provisions of ERISA, the Code and
all other applicable federal and state laws and regulations.
(j) Except as disclosed in SCHEDULE 4.22(j), no Employee Benefit
Plan provides retiree life or health benefits, or provides for continuing
benefits or coverage for any participant or beneficiary EXCEPT under the
Consolidated Omnibus Budged Reconciliation Act of 1974, as amended ("COBRA")
and at the individual's expense. The Company and each ERISA Affiliate have
complied with the notice and continuation requirements of Section 4908B of
the Code, COBRA, and Part 6 of Subtitle B of Title I of ERISA.
(k) Neither the execution of this Agreement nor the consummation
of the transaction contemplated hereby will (i) result in any payment
becoming due to any current, former or retired employee of the Company or any
Subsidiary under any Employee Benefit Plan, (ii) increase any benefits under
any Employee Benefit Plan, or (iii) accelerate the payment or vesting of any
such benefits.
4.23 INSURANCE POLICIES. Attached hereto as SCHEDULE 4.23 is a correct
and complete list and description, including policy numbers, names and
addresses of insurers and expiration dates, of all insurance policies owned
by the Company and the Subsidiaries, and the Company has delivered to Parent
true and complete copies of all such policies. Such policies are in full
force and effect, and the Company and the Subsidiaries are not in default
under any of them. Except as set forth on SCHEDULE 4.23, neither the Company
nor any Subsidiary has received any notice of (a) cancellation or intent to
cancel, or (b) increase or intent to increase premiums, with respect to such
insurance policies and neither the Company nor any of the Company Shareholders
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is aware of any basis for any such action. Except as disclosed on SCHEDULE
4.23, such policies are sufficient for compliance by the Company and the
Subsidiaries with workers' compensation and all obligations under Contracts
and provide adequate coverage for the Company, all of the Subsidiaries, and
their respective properties, assets and business operations as presently
conducted.
4.24 CONDUCT IN ORDINARY COURSE. Except as set forth on SCHEDULE 4.24,
since the date of the Latest Balance Sheet, the Company and the Subsidiaries
have conducted their respective businesses only in the ordinary course of
business consistent with past custom and practice, have incurred no
liabilities other than in the ordinary course of business consistent with
past custom and practice, and there has been no:
(a) payment or increase by the Company or any of the Subsidiaries
(except in the ordinary course of business consistent with past custom and
practice) of any dividend or other distribution, bonuses, salaries, or other
compensation to any stockholder, director, officer or employee, or entry into
any employment, severance, or similar contract with any director, officer or
employee;
(b) adoption of, or increase in the payments to or benefits under,
any profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement or other employee benefit plan for or with any employees,
or direct or indirect representation or promise, oral or written, to any
person concerning any Employee Benefit Plan which is inconsistent with the
terms of such Employee Benefit Plan;
(c) damage to or destruction or loss of any asset or property of
the Company or any Subsidiary, whether or not covered by insurance, adversely
affecting the properties, assets, business, financial condition, or prospects
of the Company or any Subsidiary;
(d) entry into, termination of, or receipt of notice of
termination of any (i) employment agreement or collective bargaining
arrangement, (ii) license, distributorship, dealer, sales representative,
joint venture, credit, loan, guaranty or similar agreement, or (iii) Contract
or transaction involving a total remaining commitment by or to the Company or
any Subsidiary of at least $100,000;
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(e) issuance of any securities or sale (other than sales of inventory in
the ordinary course of business), lease, or other disposition of any asset or
property used in the conduct of the Business, or mortgage or pledge of, or
imposition of any Lien on, any asset or property of the Company or any
Subsidiary;
(f) cancellation or waiver of any claims or rights with a value to the
Company or any Subsidiary in excess of $100,000;
(g) material change in any tax or financial accounting method used by
the Company or any Subsidiary;
(h) disclosure of confidential information of the Company or any
Subsidiary except to a person or entity that is subject to a written
agreement prohibiting such person's or entity's disclosure thereof;
(i) actual or threatened loss of customers or key personnel of the
Business having or that would have a material adverse effect on the operating
results, financial condition, business, properties or prospects of the
Business; or
(j) agreement, whether oral or written, by the Company to do any of the
foregoing.
4.25 NO ILLEGAL PAYMENTS. With respect to their respective businesses,
neither the Company, nor any Subsidiary or other Affiliate thereof, nor, to
the knowledge of the Company and the Company Shareholders, any of the
Company's or any Subsidiary's respective officers, directors, employees,
sales agents or other representatives (i) has made or committed to make any
unlawful payments, contributions, gifts, entertainment or endorsements
relating to political activity; (ii) has made or committed to make any direct
or indirect unlawful payment, contribution or gift to any domestic or foreign
governmental official or employee; (iii) violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977, as amended, or any
other U.S. or applicable foreign law relating to improper payments to
governmental representatives; or (iv) made any bribe, rebate, kickback,
payoff, influence payment, unlawful contribution or other illegal payment to
any person or entity.
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4.26 LEASES. All leases of the real and personal property leased by
the Company and any Subsidiary, including all such leases with related
parties or Affiliates, are listed on Schedule 4.26. All leases with
Affiliates and related parties are identified in Schedule 4.26 and carry
terms and conditions no less favorable in all material respects to the
Company or such Subsidiary than those which the Company or such Subsidiary
could have obtained in arm's length transactions with unrelated third
parties. The Company and any such Subsidiary enjoys peaceful and undisturbed
possession under all such leases, and all of such leases are valid and in
full force and effect and neither party is in default under any of such
leases and, to the knowledge of the Company and the Company Shareholders, no
event has occurred which with the giving of notice or the passage of time or
both could constitute a default under any of such leases. All premises
covered by such leases have sufficient access to roads and utilities for the
continued conduct of the Business in the manner presently conducted.
4.27 PROPRIETARY RIGHTS. Schedule 4.27 lists (a) all trademarks,
tradenames, copyrights, patents, and all pending applications and
registrations for the foregoing used by the Company and the Subsidiaries in
the operation of their respective businesses (the items listed on Schedule
4.27, together with all logos, know-how, trade secrets, lists of past,
present and potential customers, computer software and programs, sales data,
sales and advertising materials, scheduling and service methods, sales and
service manuals, and all licenses for the foregoing, and all other
proprietary, confidential or other similar information (in whatever form or
medium) used by the Company and the Subsidiaries in the operation of their
respective businesses, including the use of and rights to the name "Tri-Star
Aerospace", being collectively referred to herein as the "Proprietary
Rights"), and (b) all license, royalty or other agreements relating to the
Proprietary Rights, true and complete copies of which have been delivered to
Parent. The Company and/or the Subsidiaries own(s) good title to all of the
Proprietary Rights, subject to the licenses and matters set forth in Schedule
4.27, all of which are sufficient to enable the Business, as now conducted,
to be conducted without infringement of or conflict with similar rights of
others. The use of the Proprietary Rights by the Company and the Subsidiaries
does not infringe on the known rights of any person or entity and no person
or entity has asserted any such claim. To the knowledge of the Company
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and the Company Shareholders, no person or entity infringes upon the
Proprietary Rights.
4.28 INTEREST IN CUSTOMERS, ETC. Neither the Company, nor any
Subsidiary, nor any of their respective Affiliates has any direct or indirect
interest in any competitor, supplier or customer or in any person or entity
from whom or to whom the Company or any Subsidiary leases any real or
personal property or in any other person or entity with whom the Company or
any Subsidiary has any business relationship.
4.29 WARRANTIES. Schedule 4.29 summarizes all claims outstanding,
pending or, to the knowledge of the Company and the Company Shareholders,
threatened under or for breach of any warranty relating to any products sold
or distributed by the Company or any Subsidiary. The copies of the product
warranties attached to Schedule 4.29 represent true and complete copies of
all express warranties of products sold or distributed by the Company and the
Subsidiaries. The reserves for product warranty claims on the Latest Balance
Sheet are consistent with the Company's prior practices and are adequate to
cover warranty claims against any products sold or distributed by the Company
and the Subsidiaries prior to the date thereof.
4.30 OFFICERS AND DIRECTORS: BANK ACCOUNTS. Schedule 4.30 contains a
complete and correct list of (a) the names, offices and term of office of
each director and officer of the Company and each Subsidiary and (b) and
locations of all banks in which the Company or any Subsidiary has accounts or
safe deposit boxes and the names of all persons authorized to draw thereon or
to have access thereto. Except as set forth on Schedule 4.30, no person
holds a power of attorney to act on behalf of the Company or any Subsidiary.
4.31 DISCLOSURE. Neither this Article 4 nor any writing delivered by
the Company or the Company Shareholders to Parent, Sub, Merger Sub or the
Surviving Corporation in connection with the transactions contemplated hereby
contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein and therein, in light of
the circumstances in which they were made, not misleading. There is no
material fact which has not been disclosed to Maple Leaf which materially
adversely affects the Company, the Subsidiaries or their assets, liabilities,
financial condition, operations, operating results, business or business
prospects, or the
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ability of the Company and the Company Shareholders to consummate the
transactions contemplated hereby.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF MAPLE LEAF
Parent, Sub and Merger Sub hereby jointly and severally represent and
warrant to the Company and the Company Shareholders as follows:
5.1 ORGANIZATION: CORPORATE POWER AND GOOD STANDING. Each of Parent and
Sub is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Florida. Each of Parent, Sub and Merger Sub has full corporate power and
authority to execute and deliver this Agreement and the other agreements
contemplated hereby, to perform its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby.
5.2 CORPORATE AUTHORIZATION. The execution and delivery of this
Agreement and the other agreements contemplated hereby and the performance by
Parent, Sub and Merger Sub of their respective obligations hereunder And
thereunder have been duly authorized by all necessary corporate action and no
other corporate act on the part of Parent, Sub or Merger Sub is necessary to
authorize the execution, delivery or performance by Parent, Sub and Merger
Sub of this Agreement or any other agreement contemplated hereby or thereby.
This Agreement has been duly executed by Parent, Sub and Merger Sub, and
constitutes, and the other agreements contemplated hereby, and the
instruments and documents to be delivered by Parent, Sub and Merger Sub
hereunder, also constitute, the legal, valid and binding obligations of
Parent, Sub and Merger Sub enforceable against Parent, Sub and Merger Sub in
accordance with their respective terms (subject to bankruptcy,
reorganization, insolvency, and other similar laws relating to or affecting
the enforcement of creditors' rights generally and to the availability of
equitable remedies).
5.3 NO VIOLATION. Neither the execution and delivery of this
Agreement, nor the performance by Parent, Sub and Merger Sub of their
respective obligations hereunder nor the consummation of the transactions
contemplated hereby (a)
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will violate, conflict with, result in any breach of, constitute a default
under, or result in the termination or acceleration of, Parent's, Sub's or
Merger Sub's certificate or articles of incorporation or By-Laws, or any
agreement, license, obligation or instrument to which Parent, Sub or Merger
Sub is a party or by which it is bound or affected; (b) would require the
consent of any other party under any agreement or commitment to which Parent,
Sub or Merger Sub is a party, or by which Parent, Sub or Merger Sub is bound;
or (c) will violate any law, judgment, decree, order, regulation or rule of
any court or governmental authority to which Parent, Sub or Merger Sub is
subject.
5.4 LITIGATION. There is no action, suit, investigation, proceeding,
claim or other pending or, to Parent's, Sub's and Merger Sub's knowledge,
threatened against or relating to Parent, Sub or Merger Sub, or any
properties or rights of Parent, Sub or Merger Sub, before any court which
affects or seeks to affect consummation of the transactions contemplated
hereby.
5.5 DISCLOSURE. Neither this Article 5 nor any writing delivered by
Parent, Sub or Merger Sub to the Company or the Company Shareholders in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits a material fact necessary to make the
statements contained herein and therein, in light of the circumstances in
which they were made, not misleading. There is no material fact which has not
been disclosed to the Company and the Company Shareholders which materially
adversely affects the ability of Parent, Sub and Merger Sub to consummate the
transactions contemplated hereby.
ARTICLE 6.
OTHER COVENANTS
6.1 ACCESS AND INVESTIGATION; CONFIDENTIALITY. (a) Between the date of
this Agreement and the Closing Date, the Company and Richard P. Small shall
afford Maple Leaf and its representatives and prospective investors and
lenders and their representatives (collectively, the "Advisors") full and
free access, upon reasonable prior notice, to, and shall furnish upon
reasonable prior request, all information concerning the Company's and the
Subsidiaries' business and properties, including but not limited to
contracts, books, records, Tax, employee benefit, financial and accounting
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information and physical inventory. The Company and Richard P. Small shall
also afford Maple Leaf and the Advisors the ability to inspect the Company's
and the Subsidiaries' assets and physical locations (which inspection shall
include, but not be limited to, the right, but not the obligation, to retain
one or more environmental professionals to conduct an environmental
assessment and investigation of the Real Property, which Environmental
Investigation shall include the right to conduct such tests of soil,
groundwater, surface water or air that Maple Leaf may reasonably require to
determine whether there exists an adverse environmental condition at any of
the Real Property), and to contact and interview employees and
representatives of the Company and customers of the Company to obtain
information relating to the Company's assets and business. At all times, the
Company and the Company Shareholders will use their reasonable efforts to
ensure that any such information provided to Maple Leaf or the Advisors is
accurate and complete.
(b) In connection with the foregoing due diligence investigation, Maple
Leaf agrees not to disclose to any third party (other than on a "need to
know" basis to the Advisors) any financial data, market information, supplier
or customer list or other information which is proprietary or confidential to
the Company and which is learned or acquired by Maple Leaf or the Advisors in
connection with such due diligence investigation. In the event that the
transaction contemplated hereby shall, for any reason, be terminated, Maple
Leaf and the Advisors shall return to the Company all such information and
data, and shall not retain any copies or extracts thereof.
6.2 AGREEMENT TO COOPERATE TO OBTAIN CONSENTS AND APPROVALS. The
parties hereto each hereby agree to cooperate with one another and to use all
reasonable efforts to obtain all governmental and third party consents and
approvals to the Merger and as otherwise necessary to complete the
transactions contemplated by this Agreement (including all filings, if any,
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act")), it being understood that in exercising such reasonable efforts, no
party shall be obligated to make any payment to a third party (other than in
connection with standard filing fees and the like) or to divest any assets,
properties or operations (including, with respect to Maple Leaf, any of the
Aviall Assets). Between the date of this Agreement and the Closing Date, the
Company shall (i) cooperate with
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Parent and Sub with respect to all filings that Maple Leaf elect to make or
are required to make in connection with the Merger, and (ii) cooperate with
Maple Leaf in obtaining all consents identified in Schedule 4.16 (including
taking all actions requested by Maple Leaf to cause early termination of any
applicable waiting period under the HSR Act).
6.3 OPERATION OF THE BUSINESS. Between the date of this Agreement and
the Closing Date, the Company shall, and the Company and the Company
Shareholders shall cause the Company and each Subsidiary, as appropriate, to:
(a) conduct the Business only in the ordinary course of business
(consistent with past custom and practice) without the prior consent of
Parent, except that the Company may (i) make uniform distributions of S
corporation earnings to the Company Shareholders for purposes of meeting
income tax obligations as to the Company, TIMS and International consistent
with past custom and practice; (ii) immediately prior to and in conjunction
with the Closing (x) repay to the Company Shareholders all loans owing by the
Company to the Company Shareholders in an aggregate principal amount not to
exceed $1,500,000, and (y) make a distribution to the Company Shareholders in
the amount of $16,473,974, PLUS an amount equal to S corporation earnings
from April 1, 1996 to the Closing Date, MINUS the amount of any S corporation
earnings distributed to the Company Shareholders to meet income tax
obligations as provided in clause (i) above; and (iii) enter into such
transactions as are contemplated as conditions to Closing and which
transactions are to take place on the Closing Date in connection therewith;
(b) use its best efforts to preserve intact the current business
organization of the Company and each Subsidiary, keep available the services
of the current officers, employees, and agents of the Company and each
Subsidiary, and maintain the relations and good will with suppliers,
customers, landlords, creditors, employees, agents, and others having
business relationships with the Company and each Subsidiary; and
(c) confer with Parent and Sub concerning operational and financial
matters of a material nature.
6.4 NEGATIVE COVENANT. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, the
Company shall not, and
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the Company and the Company Shareholders shall cause the Company and each
Subsidiary not to, without the prior consent of Parent, take any affirmative
action, or fail to take any reasonable action within their or its control, as
a result of which any of the changes or events listed in Section 4.24 is
likely to occur; PROVIDED, HOWEVER, that the Company may borrow funds to
finance the payment of shareholder loans referred to in Section 6.3 above.
6.5 NOTIFICATION. (a) Between the date of this Agreement and the
Closing Date, the Company and the Company Shareholders agree that each will
promptly notify Parent in writing if such party becomes aware of any fact or
condition that causes or constitutes a breach of any of the representations
and warranties of the Company or the Company Shareholders as of the date of
this Agreement, or if such party becomes aware of the occurrence after the
date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a breach of any
such representation or warranty had such representation or warranty been made
as of the time of occurrence or discovery of such fact or condition. During
the same period, the Company and/or the Company Shareholders will promptly
notify Parent of the occurrence of any breach of any covenant of the Company
or the Company Shareholders in this Article 6 or of the occurrence of any
event that may make the satisfaction of the conditions in Article 7
impossible or unlikely.
(b) Between the date of this Agreement and the Closing Date, Parent
agrees that it will promptly notify the Company and the Representative in
writing if Parent becomes aware of any fact or condition that causes or
constitutes a breach of any of the representations and warranties of Maple
Leaf as of the date of this Agreement, or if Parent becomes aware of the
occurrence after the date of this Agreement of any fact or condition that
would (except as expressly contemplated by this Agreement) cause or
constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. During the same period, Parent will
promptly notify the Company and the Representative of the occurrence of any
breach of any covenant of Maple Leaf in this Article 6 or of the occurrence
of any event that may make the satisfaction of the conditions in Article 7
impossible or unlikely.
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6.6 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to its terms, the Company and each Company Shareholder
hereby agrees with Maple Leaf that neither the Company nor such Company
Shareholder, nor any of their respective Affiliates, officers, directors,
shareholders or employees, nor any investment banker, attorney, accountant or
other representative retained by any of them, shall, directly or indirectly,
solicit offers from, negotiate with, or in any manner encourage, discuss with
the offer or, or accept any proposal of any other person or entity relating
to the acquisition of the capital stock, assets or business of the Company or
any Subsidiary, in whole or in part, whether directly or indirectly, through
purchase, merger, consolidation or otherwise (other than sales of inventory
in the ordinary course). The Company will immediately notify Parent in the
event that the Company receives any such proposal or learns of any person's
or entity's interest in making any such proposal.
6.7 FURTHER ASSURANCES. The parties hereto hereby agree that, from
time to time, whether before or after the Closing Date, each of them will,
and will cause their respective Affiliates to, execute and deliver such
further instruments of conveyance and transfer and take such other action as
may be necessary to carry out the purposes and intents hereof. No party to
this Agreement shall take, or permit any of its Affiliates or representatives
to take, any actions which are inconsistent with the purposes and intentions
of this Agreement.
6.8 ADDITIONAL AGREEMENTS. The Company Shareholders shall, from time to
time after the Closing, upon the request of Parent, Sub, Merger Sub, or the
Surviving Corporation, perform, execute and deliver, or cause to be
performed, executed, and delivered, all such further acts and instruments as
may be required for the better assigning, transferring, granting, conveying,
assuring and confirming to the Surviving Corporation the rights, assets and
properties of the Company and each Subsidiary.
6.9 ALIENATION OF SHARES. Richard P. Small agrees not to sell,
transfer, pledge, encumber or otherwise dispose of any Shares in the Company
or any shares in any Subsidiary owned by him between the date of the
Agreement and the Closing. Each of the other Company Shareholders agrees not
to sell, transfer, pledge, encumber or otherwise dispose of any of the Shares
in the Company or any shares in any Subsidiary, respectively, owned by them
between the date of
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the Agreement and the Closing, except to a person or entity who shall agree
to be bound by the terms of this Agreement (including, without limitation, as
to the Company Shareholders' representations and warranties, covenants and
indemnification obligations) and execute and deliver to Parent, Sub and
Merger Sub a counterpart hereof.
6.10 NO SOLICITATION. (a) In the event the Closing is not effected,
Parent and Sub agree that neither they nor their agents will, for a period of
two years from the last date that the parties hereto, or any of them,
terminate the proposed transaction, directly or indirectly solicit for
employment any person who is employed by the Company on the date of this
Agreement; PROVIDED that Parent, Sub and their agents shall not be prohibited
from soliciting the employment of any such person (i) following any complete
termination of such person's employment with the Company, or (ii) who may
respond to a general advertisement for employment published by Parent or Sub
which is not specifically targeted at the employees of the Company.
(b) In the event the Closing is not effected, the Company agrees that
it will not, for a period of two years from the last date that the parties
hereto, or any of them, terminate the proposed transaction, directly or
indirectly solicit for employment any person who is or becomes employed by
Parent or Sub following the date of this Agreement; PROVIDED that the Company
shall not be prohibited from soliciting the employment of any such person (i)
following any complete termination of such person's employment with Parent or
Sub, or (ii) who may respond to a general advertisement for employment
published by the Company which is not specifically targeted at the employees
of Parent or Sub.
6.11 ACCESS TO INFORMATION. The Company Shareholders, the shareholders
of each Subsidiary and Parent will provide to each other, and Parent will
cause the Surviving Corporation to provide to the Company Shareholders and
the shareholders of each Subsidiary, full access, at any reasonable time and
from time to time, at the business location at which the books and records
are maintained, after the Closing Date, to such Tax data of the Company and
the Subsidiaries as the Company Shareholders, the shareholders of each
Subsidiary or Parent, as the case may be, may from time to time reasonably
request and will furnish, and request the independent accountants and legal
counsel of the Company Shareholders, the shareholders of
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each Subsidiary, Parent or the Company to furnish to the Company
Shareholders, the shareholders of each Subsidiary or Parent, as the case may
be, such additional Tax and other information and documents in the possession
of such persons as the Company Shareholders, the shareholders of each
Subsidiary or Parent may from time to time reasonably request. In
particular, the Company Shareholders and the shareholders of each Subsidiary
will provide to Parent, to the extent. requested by Parent, true and complete
copies of all separate Tax Returns (and related workpapers) of the Company
and the Subsidiaries. Any examination of such books and records by the
Company Shareholders, the shareholders of each Subsidiary or Parent shall be
free of charge, but shall be at the expense of the requesting party.
6.12 SECTION 338 ELECTIONS AND RELATED MATTERS.
(a) Parent may elect, at Parent's sole option, to file an election
under Section 338(h) (10) of the Code and under any comparable provisions of
state or local law with respect to the purchase of the stock of the Company
and TIMS (the "Election"). Each of the shareholders of the Company and TIMS
shall, at the request of Parent, execute the appropriate IRS forms that are
required to make the Election (E.Q., Form 8023-A). If the Election is made,
each of such shareholders and Parent shall report, in connection with the
determination of income, franchise or other Taxes measured by net income, the
transactions being undertaken pursuant to this Agreement in a manner
consistent with the Election. In addition, if the Election is made, the
determination of the fair market value of the assets and the allocation of
the purchase price of the stock of the Company and TIMS (within the meaning
of Section 338(h) (10) of the Code and the Treasury Regulations promulgated
thereunder) shall be determined and allocated in accordance with Schedule
6.12 attached hereto. Parent and the shareholders of the Company and TIMS
shall file all Tax returns, as may be required, in a manner consistent with
such allocation and values.
(b) Parent shall notify the shareholders of the Company and TIMS in
writing of its intention to file the Election no later than ten days prior to
January 15, 1997 (the "Election Notice") and, upon delivery of the Election
Notice, Parent shall be obligated to make the Election on or before March 15,
1997.
(c) Within 60 days after the execution of this Agreement, the
shareholders of the Company and TIMS shall
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provide Parent with a computation of the aggregate adjusted tax basis of the
assets of the Company and TIMS as of the opening of business on the first day
of the then current taxable year of the Company and TIMS (the "Asset Basis").
The Asset Basis shall be based on the Tax Returns and books and records (to
the extent not inconsistent with such Tax Returns) of the Company and TIMS.
(d) On the Closing Date, the shareholders of the Company and TIMS shall
deposit five copies of an Internal Revenue Service Form 8023-A, completed as
reasonably agreed by the parties in conformity with Schedule 6.12 hereto and
duly executed by such shareholders (the "Election Forms") with Parent.
(e) Parent shall be responsible for the preparation and filing of all
forms and documents required in connection with the Election. In connection
with the Election Notice, Parent shall provide the shareholders of the
Company and TIMS with copies of (i) any necessary corrections, amendments or
supplements to such Form 8023-A as reasonably agreed to by the parties or as
necessary to conform the allocation of the purchase price to Schedule 6.12
hereto, (ii) all attachments required to be filed therewith pursuant to
applicable Treasury Regulations, and (iii) any comparable forms and
attachments with respect to any applicable state or local elections being
made pursuant to the Election. At the request of Parent, the shareholders of
the Company and TIMS shall execute and deliver to Parent within 10 days of
receipt of the Election Notice such documents or forms as are required by any
tax laws to complete properly the Election. The shareholders of the Company
and TIMS and Parent shall cooperate fully with each other and make available
to each other such Tax data and other information as may be reasonably
required by such shareholders or Parent in order to timely file the Election
and any other required statements or schedules. The shareholders of the
Company and TIMS shall promptly execute and deliver to the Parent any
amendments subsequent to the filing of the Election to Form 8023-A (and any
comparable state and local forms) and attachments which are required to be
filed under applicable law and are reasonably requested by Parent.
(f) The shareholders of the Company and TIMS shall comply with all of
the requirements of Section 338(h) (10) of the Code and the Treasury
Regulations thereunder. Such shareholders shall take no action which is
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inconsistent with the requirements for filing the Election under the Code and
the applicable Treasury Regulations.
(g) To the extent permitted by state and local laws, the principles and
procedures of this Section shall also apply with respect to a Section 338(h)
(10) election or equivalent or comparable provision under state or local law,
including, without limitation, an election under Section 338(g) of the Code
or equivalent or comparable provision under state or local law. The
shareholders of the Company and TIMS covenant and agree that, to the extent
that an election similar to a Section 338(h) (10) election under the Code is
optional under any state or local law, if so directed by Parent, such
shareholders shall join in any such election as designated by Parent in the
Election Notice.
6.13 TRI-STAR CANADA. Prior to the Closing, the Company shall wind down
and terminate the business operations of Tri-Star Canada.
6.14 USE OF NAME. The Company Shareholders hereby agree that, upon the
consummation of the transactions contemplated hereby, Parent and the
Surviving Corporation shall have the sole right to the use of the name
"Tri-Star Aerospace" and the Company Shareholders shall not, and shall not
cause or permit any of their Affiliates to, use such name or any variation or
simulation thereof in any business activity.
6.15 ELECTIONS. The Company Shareholders and the shareholders of TIMS
and Tri-Star U.K. will cause the Company and each Subsidiary to refrain from
making, filing, or entering into any election, consent, or agreement
described in Section 4.15(e) hereof with respect to the Company, any
Subsidiary or any of their assets.
6.16 TAX CLAIMS. The Company and each Subsidiary shall, and the
shareholders of the Company and each Subsidiary shall cause the Company and
each Subsidiary to, notify Parent immediately upon the commencement of any
claim, audit, examination or other proposed change or adjustment by any
taxing authority with respect to the Company or any Subsidiary. The Company
shall not, and the Company Shareholders and the shareholders of each
Subsidiary shall cause the Company and each Subsidiary not to, settle or
enter into any agreement with respect to any such claim, audit, examination,
change or adjustment without the consent of Parent.
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6.17 WAIVER OF CLAIMS UNDER THE FBCA. By his or her execution hereof,
each Company Shareholder acknowledges and agrees (a) to the fairness of the
Merger Consideration and (b) that he or she will not assert any claim or
right under, and hereby irrevocably waives any claims with respect to, the
dissenting stockholder provisions of the FBCA in connection with the
transactions contemplated hereby.
6.18 LIQUIDATION OF INTERNATIONAL. Immediately prior to and in
conjunction with the Closing, the Company and the other shareholders of
International shall cause International to liquidate and to distribute in
liquidation to each of the shareholders of International (including the
Company) their pro rata shares of the net assets of International (including
each shareholder's pro rata portion of the net account receivable owed to
International by the Company) and of obligations shown as dividends payable
on a certain Current Status of Financial Condition dated 8/27/96 in the
aggregate sum of $558,942. Notwithstanding anything to the contrary in this
Agreement, the Company and the other shareholders of International shall
cause International not to pay any dividend or other distribution to or on
behalf of its stockholders other than the distribution in liquidation
described in the immediately preceding sentence.
ARTICLE 7.
CLOSING CONDITIONS
7.1 CONDITIONS TO PARENT'S, SUB'S AND MERGER SUB'S OBLIGATION TO CLOSE.
The obligations of Parent, Sub and Merger Sub hereunder shall be subject to
the fulfillment (or written waiver) on or before the Closing Date of each of
the following conditions and delivery of the following:
7.1.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE COMPANY
SHAREHOLDERS; COMPLIANCE WITH AGREEMENT. The representations and
warranties of the Company, the Company Shareholders and the shareholders
of the Subsidiaries in this Agreement shall be true and correct in all
respects on and as of the Closing Date with the same effect as though all
such representations and warranties had been made as of such date. Each
and all of the covenants and agreements of the Company and/or the Company
Shareholders and the shareholders of the Subsidiaries to be performed by
any or all of them at or before the Closing shall have been performed. The
Company shall deliver to Parent, Sub and Merger Sub a
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certificate of its President and Secretary or Assistant Secretary, and
each of the Company Shareholders and the shareholders of the Subsidiaries
shall deliver to Parent, Sub and Merger Sub a certificate executed by such
Company Shareholder or Subsidiary shareholder, in each case, dated the
Closing Date, to that effect.
7.1.2 STOCK CERTIFICATES. The Company Shareholders and the
shareholders of each Subsidiary shall have surrendered to Parent the stock
certificates representing all of the Shares of Common Stock of the Company
and all shares of stock of the Subsidiaries, duly endorsed in blank, or,
with respect to uncertificated shares of TIMS, appropriate instruments of
transfer of ownership with respect thereto.
7.1.3 ESCROW AGREEMENT. Receipt by Parent of a fully executed copy
of the Escrow Agreement in form and substance reasonably acceptable to the
parties thereto.
7.1.4 WAIVER AGREEMENTS. Receipt by Parent of fully executed copies
of waiver agreements pursuant to which all persons with contractual or
statutory rights of indemnification against or from the Company agree to
waive such rights as against the Surviving Corporation, such waiver
agreements to be in form and substance reasonably acceptable to the parties
thereto.
7.1.5 NON-COMPETITION AGREEMENT. Receipt by Parent of fully
executed Non-Competition Agreements between Parent, Sub, the Surviving
Corporation and each of Frank C. Fisher and Paul G. Livernash, in form and
substance reasonably acceptable to the parties thereto, providing that each
of Messrs. Fisher and Livernash agree not to compete with the business of
the Surviving Corporation in the United States for a period of two years
from the Closing Date.
7.1.6 CONTRACTS. All of the Company's material contracts listed on
Schedule 7.1.6 attached hereto and made a part hereof shall remain in
substantial force and effect, it being understood that changes to such
contracts not materially adverse to the Surviving Corporation and the
Subsidiaries as a whole shall satisfy this condition.
7.1.7 ABSENCE OF MATERIAL CHANGE. The absence of any material
adverse change in the assets, liabilities,
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condition (financial or otherwise), operating results, business or
business prospects of the Company, except for those referred to in
Section 6.3(a) hereof, occurring between the date hereof and the Closing
Date.
7.1.8 REGULATORY APPROVALS. Receipt by Parent, Sub, Merger Sub, the
Company and the Company Shareholders of all regulatory approvals necessary
for consummation of the Merger, including, if applicable, the expiration
(or early termination) of waiting periods under the HSR Act, and
satisfaction of all other applicable legal requirements.
7.1.9 LEASES. With respect to the leases set forth on Schedule
7.1.9, receipt by Parent of written consents of the respective lessors
thereunder providing for continued occupancy by the Surviving Corporation
until at least December 31, 1997.
7.1.10 CONSENTS. Receipt by Parent of copies of all written consents,
including the Defined Consents, required for the Merger, shall have been
received by Parent, Sub and Merger Sub and must be in full force and
effect.
7.1.11 RESIGNATIONS. Receipt by Parent of written resignations of
each officer and director of the Company and any Subsidiary, and amended
authorized signatory resolutions for each bank account of the Company and
each Subsidiary, in each case, as requested by Parent, together with a
statement of the aggregate amount of all outstanding checks under any such
bank account.
7.1.12 FINANCING. (a) Parent, Sub and Merger Sub shall have received
financing from one or more financial institutions on terms and conditions
acceptable to them in their sole discretion in an amount sufficient, in
their sole discretion, to consummate the transactions contemplated under
this Agreement, the concurrent acquisition of the Aviall Assets, and to
provide adequate working capital to operate the business of the Surviving
Corporation thereafter, and (b) Parent shall have received a fully
executed copy of (i) the Subscription Agreement of an S corporation to be
formed by Richard P. Small subscribing for shares of Parent, in form and
substance reasonably acceptable to the parties thereto, together
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with payment of the subscription price specified therein in immediately
available funds, and (ii) a Stockholders' Agreement among Parent and its
stockholders in form and substance reasonably acceptable to the parties
thereto.
7.1.13 CONCURRENT CLOSING OF AVIALL TRANSACTION. The closing,
concurrently with or immediately following the Closing, of the acquisition
by Parent or an Affiliate of Parent of the Aviall Assets pursuant to that
certain Asset Purchase Agreement among Parent, Aviall Services, Inc. and
Aviall (Canada) Ltd.
7.1.14 CERTIFICATE OF GOOD STANDING. Receipt by Parent of a
Certificate of Good Standing with respect to the Company issued by the
Office of the Secretary of State of the State of Florida and dated not
more than ten (10) days prior to the Closing Date.
7.1.15 ARTICLES OF INCORPORATION; BY-LAWS. Receipt by Parent of
copies of the Articles of Incorporation of the Company certified by the
Secretary of State of the State of Florida and ByLaws of the Company,
certified by the Secretary or Assistant Secretary of the Company.
7.1.16 EMPLOYMENT CONTRACT. Receipt by Parent of a fully executed
copy of an employment contract between Parent and Richard P. Small in form
and substance reasonably acceptable to the parties thereto.
7.1.17 RESOLUTIONS; INCUMBENCY. Receipt by Parent of a copy of
resolutions adopted by the Board of Directors and stockholders of the
Company authorizing the execution and delivery of this Agreement and each
document to be executed by the Company and consummation of the
transactions contemplated hereby, in each case certified by the Secretary
or Assistant Secretary of the Company, together with customary
certifications as to the incumbency of relevant officers thereof.
7.1.18 OPINION OF COUNSEL. Receipt by Maple Leaf of an opinion of
McBride Baker & Coles, counsel for the Company and the Company
Shareholders, in form and substance reasonably acceptable to Maple Leaf.
7.1.19 FIRPTA AFFIDAVIT. Each Company Shareholder and the
shareholders of TIMS and Tri-Star
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U.K. shall have provided Parent with an affidavit of non-foreign status
that complies with Treasury Regulation Section 1.1445 promulgated pursuant
to the Code.
7.1.20 BOOKS AND RECORDS. Delivery to Maple Leaf of the books and
records described in Section 4.10.
7.1.21 NO INJUNCTION. At the Closing Date there shall be no
injunction, restraining order or decree, or pending or threatened
litigation, of any nature of any court, governmental authority of
competent jurisdiction or other third party that is in effect that
threatens, restrains, prohibits, or seeks to enjoin the consummation of
the transactions contemplated hereby.
7.1.22 SECTION 338(h) (10) ELECTION. Each Company Shareholder and
the shareholders of TIMS shall have delivered to Parent five (5) executed
copies of IRS Form 8023-A completed pursuant to Section 6.12 and in
conformity with the allocation of the purchase price set forth on Schedule
6.12 hereto, and such other documentation as shall be necessary to make a
valid election under Section 338(h) (10) of the Code with respect to the
Merger and the acquisition of the Company and TIMS pursuant hereto.
7.1.23 BASE AMOUNT CERTIFICATE. Receipt by Parent of a certificate
of the President and the Chief Financial Officer of the Company certifying
as to the Company's belief that its stockholders' equity as at the Closing
Date, after giving effect to the transactions contemplated by Section
6.3(a) hereof, is not less than the Base Amount (as defined in Section
3.3(f)).
7.1.24 LIQUIDATION OF INTERNATIONAL. The Company and the other
shareholders of International shall have caused the liquidation of
International as described in Section 6.18.
7.1.25 FURTHER INSTRUMENTS. Receipt by Maple Leaf of such further
instruments of assignment, conveyance or transfer or other documents of
further assurance as Parent, Sub or Merger Sub may reasonably request in
connection with the Merger.
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7.2 CONDITIONS TO THE COMPANY'S AND THE COMPANY SHAREHOLDERS'
OBLIGATION TO CLOSE. The obligations of the Company and the Company
Shareholders hereunder shall be subject to the fulfillment (or written
waiver) on or before the Closing Date of each of the following conditions and
delivery of the following:
7.2.1 REPRESENTATIONS AND WARRANTIES OF PARENT, SUB AND MERGER SUB;
COMPLIANCE WITH AGREEMENT. The representations and warranties of Parent,
Sub and Merger Sub in this Agreement shall be true and correct in all
respects on and as of the Closing Date with the same effect as though all
such representations and warranties had been made as of such date. Each
and all of the agreements of Parent, Sub and Merger Sub, to be performed
at or before the Closing shall have been performed. Each of Parent, Sub
and Merger Sub shall deliver to the Company and the Representative a
certificate of its President and Secretary, dated the Closing Date, to
that effect.
7.2.2 MERGER CONSIDERATION. Payment of the Fixed Merger
Consideration in the manner set forth in Section 3.2(a).
7.2.3 RESOLUTIONS; INCUMBENCY. Receipt by the Company and the
Company Shareholders of a copy of resolutions adopted by the Board of
Directors of each of Parent, Sub and Merger Sub authorizing the execution
and delivery of this Agreement and each document to be executed by Parent,
Sub and Merger Sub, respectively, and the consummation of the transactions
contemplated hereby, in each case, certified by the Secretary of Parent,
Sub and Merger Sub, respectively, together with customary certifications
as to the incumbency of relevant officers thereof.
7.2.4 CERTIFICATE OF GOOD STANDING. Receipt by the Company and the
Company Shareholders of a Certificate of Good Standing of (a) Parent and
Sub issued by the Office of the Secretary of State of the State of
Delaware and (b) Merger Sub issued by the Office of the Secretary of
State of the State of Florida, in each case, dated not more than ten
(10) days prior to the Closing Date.
7.2.5 CERTIFICATE OF INCORPORATION; BY-LAWS. Receipt by the Company
and the Company Shareholders of
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copies of (a) the Certificate of Incorporation of each of Parent and Sub
certified by the Secretary of State of the State of Delaware, (b) the
Articles of Incorporation of Merger Sub certified by the Secretary of
State of the State of Florida, and (c) the ByLaws of Parent, Sub and
Merger Sub certified by their respective Secretaries.
7.2.6 OPINION OF COUNSEL. Receipt by the Company and the Company
Shareholders of an opinion of Sherrard & Roe, PLC, counsel for Parent, Sub
and Merger Sub, in form and substance reasonably acceptable to the Company
and the Representative.
7.2.7 EMPLOYMENT CONTRACT; STOCKHOLDERS' AGREEMENT. Receipt by
Richard P. Small of a fully executed copy of (i) an employment contract
between Parent and Richard P. Small in form and substance reasonably
acceptable to the parties thereto, and (ii) a Stockholders' Agreement among
Parent and its stockholders in form and substance reasonably acceptable to
the parties thereto.
7.2.8 REGULATORY APPROVALS. Receipt by the Company, the Company
Shareholders, Parent, Sub and Merger Sub of all regulatory approvals
necessary for consummation of the Merger, including, if applicable, the
expiration (or early termination) of waiting periods under the HSR Act, and
satisfaction of all other applicable legal requirements.
7.3 POST-CLOSING ACTIONS. The following actions shall take place
immediately following, and in conjunction with, the Closing:
7.3.1 PAYMENT OF COMPANY RECEIVABLE. The Surviving Corporation
shall pay to the former shareholders of International (other than the
Company): (i) the obligations shown as dividends payable to minority for
1994 and 1995 on a certain Current Status of Financial Condition dated
8/27/96 in the aggregate sum of $145,083 (which sum is part of, and shall
be deemed paid upon payment of, the Fixed Merger Consideration), and (ii)
in full satisfaction thereof, the outstanding balance (but not more than
$1,121,972) of that portion of the net account receivable (which previously
was owed by the Company to International) that, as a result of the
liquidation of International
47
<PAGE>
described in Section 6.18, is then owed directly to the former shareholders
of International (other than the Company).
7.3.2 PURCHASE OF TIMS AND TRI-STAR U.K. Sub and each shareholder
of TIMS and Tri-Star U.K. shall execute an agreement, in form and substance
reasonably acceptable to the parties thereto, whereby Sub shall acquire all
of the outstanding shares of TIMS and Tri-Star U.K. for no consideration in
addition to the Merger Consideration.
ARTICLE 8.
INDEMNIFICATION
8.1 INDEMNITY BY THE COMPANY SHAREHOLDERS. Without limitation of any
other provision of this Agreement or any other rights and remedies available
to Parent, Sub, Merger Sub or the Surviving Corporation at law or in equity,
the Company Shareholders severally covenant and agree to indemnify, defend
and hold harmless Parent, Sub, Merger Sub, the Surviving Corporation, and
their respective successors, assigns, Affiliates, directors, officers,
stockholders, partners, employees and agents (the "ACQUIROR INDEMNIFIED
PARTIES") from and against any and all liabilities, losses, claims, demands,
damages, judgments, interest, penalties, fines, costs and expenses (including
reasonable attorneys' and accountants' fees and expenses) (collectively
"LOSSES") arising out of, in connection with, relating to or resulting from
(i) a breach by the Company or such Company Shareholder of any of the
representations and warranties or covenants made by it, him, her or them, as
appropriate, in this Agreement and/or in the documents delivered in
connection herewith; (ii) claims, lawsuits, actions, proceedings, obligations
and other liabilities under any of the Employee Benefit Plans, and claims,
lawsuits, actions, proceedings, and other liabilities of any current or
former employee of, or applicant for employment with, the Company or any
Subsidiary, or any beneficiary or executor of the estate of any of the
foregoing, arising out of events, acts or inactions occurring on or before
the Closing; (iii) claims, lawsuits, actions, proceedings, and other
liabilities arising out of the conduct of the Company's or any Subsidiary's
business, or their leasing, ownership or use of their properties or assets,
or any transaction entered into by any of them, or any liability for or in
respect of Taxes, in each case, for, attributable to or in respect of periods
48
<PAGE>
ending on or before the Closing; PROVIDED, HOWEVER, that with respect to
claims under clauses (i), (ii) and (iii), the Company Shareholders shall be
obligated hereunder only to the extent that such Losses (A) (with the
exception of Losses suffered as a result of a breach of the representations
and warranties set forth in Section 4.15(i), which shall be paid without
deductible) exceed $300,000 in the aggregate and do not exceed $30,500,000 in
the aggregate and as to each Company Shareholder his or her proportionate
share of the Merger Consideration, PROVIDED that such monetary limitations
shall not apply to Losses arising out of fraud, intentional misrepresentation
or intentional breach of any covenant, (B) are not covered by insurance (to
the extent the Acquiror Indemnified Party actually receives the proceeds of
any insurance payment in respect thereof), (C) are not specifically disclosed
in this Agreement or the schedules thereto, (D) have not been provided for in
the Latest Balance Sheet, and (E) have not been incurred in the ordinary
course of the Business, consistent with past custom and practice, since the
date of the Latest Balance Sheet; and (iv) the pending lawsuits between the
Company and Messrs. Rourke and Weber, respectively, as more specifically set
forth on Schedule 4.14 hereto and any other adverse claim (or corporate acts
undertaken to eliminate any such claim) asserted by or on behalf of such
persons with respect to (1) the Company Shareholders' ownership of all of the
Shares or (2) the ownership by the persons listed on Schedule 4.3(c) of all
the shares of TIMS.
8.2 INDEMNITY BY PARENT, SUB AND MERGER SUB. Without limitation of any
other provision of this Agreement, Parent, Sub and Merger Sub covenant and
agree to indemnify, defend and hold harmless the Company Shareholders from
all liabilities, losses, claims, demands, damages, judgments, interest,
penalties, fines, costs and expenses (including reasonable attorneys' and
accountants' fees and expenses) arising out of, or in connection with, or
relating to a breach by Parent, Sub or Merger Sub of any of the
representations and warranties or covenants made by them in this Agreement
and/or in the documents delivered in connection herewith.
8.3 PROCEDURE AND PAYMENT. If, after the Closing Date, either the
Company Shareholders, on the one hand, or the Acquiror Indemnified Parties,
on the other hand, ("INDEMNITEE") shall receive notice of any third-party
claim or alleged third-party claim asserting the existence of any matter of a
nature as to which the Indemnitee has been
49
<PAGE>
indemnified against under this Article 8 by the other party hereto
("INDEMNITOR"), Indemnitee shall promptly notify Indemnitor in writing with
respect thereto; provided that any delay or failure by Indemnitee to provide
such notice shall not impair or affect its rights hereunder or the obligation
of Indemnitor with respect to such claim except to the extent Indemnitor can
demonstrate that it was actually prejudiced by Indemnitee's delay in giving
or failure to give such notice. Indemnitor shall have the right to defend
against any such third-party claim (other than any claim in respect of
Taxes), provided that (i) Indemnitor shall, within ten (10) days after the
giving of such notice by Indemnitee, notify Indemnitee that it disputes such
claim, give reasons therefor, and that Indemnitor will, at its own cost and
expense, defend the same, and (ii) such defense is instituted and
continuously maintained in good faith by Indemnitor. In such event the
defense may, if necessary, be maintained in the name of Indemnitee.
Indemnitee may, if it so elects, designate its own counsel to participate
with the counsel selected by Indemnitor in the conduct of such defense.
Indemnitor shall not permit any Lien or execution to attach to the assets of
the Indemnitee as a result of such claim, and the Indemnitor shall provide
such bonds or deposits as shall be necessary to prevent the same. In any
event Indemnitee shall be kept fully advised as to the status of such
defense. If Indemnitor shall be given notice of a claim as aforesaid and
shall fail to notify Indemnitee of its election to defend such claim within
the time and as prescribed herein, or after having so elected to defend such
claim shall fail to institute and maintain such defense in accordance with
the foregoing, or if such defense shall be unsuccessful then, in any such
event, the Indemnitor shall fully satisfy and discharge the claim within ten
(10) days after notice from Indemnitee requesting Indemnitor to do so.
8.4 OTHER CLAIMS. In the event one party hereunder should have a claim
for indemnification that does not involve a claim or demand being asserted by
a third party, the party seeking indemnification shall promptly send notice
of such claim to the party from whom indemnification is sought. If the
latter disputes such claim, such dispute shall be resolved, to the extent
possible, by agreement of the parties.
8.5 SUBROGATION. The rights of any Indemnitor shall be subrogated to
any rights of action which the Indemnitee may have against any other person
or entity with respect to
50
<PAGE>
any matter giving rise to a claim for indemnification hereunder.
8.6 TAX CLAIMS. From and after the Closing, Parent or an Affiliate of
Parent shall have the sole right to represent the Company and each Subsidiary
in any Tax audit or administrative or court proceeding relating to Taxes of
the Company or any Subsidiary. Parent or such Affiliate shall not enter into
any settlement or closing or other agreement with respect to Taxes for which
a claim for indemnification will be made by the Acquiror Indemnified Parties
without the consent of the Representative, which consent will not be
unreasonably withheld.
8.7 PURCHASE PRICE ADJUSTMENT. The Company Shareholders and Parent
agree that any indemnity payment made under this Article 8 will be treated by
the parties on their respective Tax Returns as an adjustment to the purchase
price. If, notwithstanding such treatment by the parties, any indemnity
payment is determined by any taxing authority to be subject to Tax payable by
the Acquiror Indemnified Parties, the Company Shareholders also shall
indemnify the Acquiror Indemnified Parties for any increase in Tax liability
that is imposed on and paid by the Acquiror Indemnified Parties by reason of
the receipt of such indemnity payment. An indemnity payment otherwise due and
payable under this Article 8 shall be decreased (but not below zero) to take
into account any Tax benefit realized by the Indemnitee.
ARTICLE 9.
TERMINATION
9.1 TERMINATION DATE. In the event that the Closing has not occurred
on or before September 16, 1996, the rights, duties and obligations of the
parties under this Agreement, with the exception of (i) the obligations of
Parent and Sub under Section 6.1(b) and the parties' agreements set forth in
Sections 10.2 and 10.6, and (ii) a party's right to pursue all remedies
available to it for any breach by another party, shall be terminated, unless
the parties agree in writing to extend such date.
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<PAGE>
ARTICLE 10.
MISCELLANEOUS
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as provided in
the following sentence, the respective representations and warranties of each
party contained in this Agreement and in any instrument of sale, assignment,
conveyance and transfer executed and delivered pursuant to this Agreement
shall survive the Closing until the later of (i) eighteen months following
the Closing Date or (ii) April 30, 1998. Notwithstanding the foregoing, the
representations and warranties set forth in Section 4.15(i) shall survive the
Closing until the expiration of the relevant Tax statute of limitations
applicable to the third full taxable year ending after the Closing Date of
Parent, any subsidiary or affiliate of Parent or any combination thereof.
10.2 DISCLOSURE AND CONFIDENTIALITY. (a) The parties agree to hold the
terms and conditions of this Agreement, and all other agreements contemplated
herein (including the Letter of Intent dated May 30, 1996), in strict
confidence and not to make any disclosure with respect thereto, publicly or
privately, other than as jointly agreed by the parties. If a party is
required to make any such disclosure by applicable law or stock exchange
rules or regulations, it must first provide to the other party the content of
the proposed disclosure, the reasons that such disclosure is required by law
or stock exchange rules or regulations, and the time and place that the
disclosure will be made; provided that the other party shall have the right
to review and comment on such proposed disclosure statement prior to its
release.
10.3 BROKERS. Each party warrants to the other that it has not
employed or used the services of any broker or finder in connection with the
transaction contemplated by this Agreement except that Parent has used the
services of Equitable Securities Corporation and Parent shall pay all fees
and expenses due to Equitable Securities Corporation. Each party agrees to
indemnify and hold the other party harmless from any loss or damage arising
from any claim made by any broker or finder allegedly based on the actions of
such indemnifying party.
10.4 GOVERNING LAW; CONSTRUCTION; SUBMISSION TO JURISDICTION. This
Agreement and the rights and obligations of the parties hereunder shall be
governed by, construed and
52
<PAGE>
enforced in accordance with the laws of the State of Delaware without giving
effect to conflicts of law provisions. The parties hereto hereby irrevocably
submit to the exclusive jurisdiction of any federal or state court located
within the State of Delaware over any dispute arising out of or relating to
this Agreement or any of the transactions contemplated hereby and each party
hereby irrevocably agrees that all claims in respect of such dispute or any
suit, action or proceeding related thereto may be heard and determined in
such courts. The parties hereby irrevocably waive, to the fullest extent
permitted by applicable law, any objection which they may now or hereafter
have to the laying of venue of any such dispute brought in such court or any
defense of inconvenient forum for the maintenance of such dispute. Each of
the parties hereto agrees that a judgment in any such dispute may be enforced
in other jurisdictions by suit on the judgment or in any other manner
provided by law. Each of the parties hereto hereby consents to process being
served by any party to this Agreement in any suit, action or proceeding by
the mailing of a copy thereof in accordance with the provisions of Section
10.9.
10.5 AMENDMENTS. Subject to the applicable provisions of the FBCA, at
any time prior to the Effective Time, this Agreement may be modified or
amended by the Company, Parent, Sub and Merger Sub by written agreement
executed and delivered by their respective duly authorized officers;
PROVIDED, HOWEVER, that no amendment shall be made which pursuant to the FBCA
requires the approval of the Company Shareholders without such approval.
Subject to the preceding sentence, any provision of this Agreement may be
amended or waived, provided that any such amendment or waiver shall only be
binding on a party if set forth in a writing executed by such party.
10.6 EXPENSES. Except as set forth in Sections 3.3 and Article 8
hereof, each party hereto shall pay its own fees and expenses incurred in
connection with this transaction.
10.7 COMPLETENESS OF AGREEMENT. This Agreement, the Schedules, and
Exhibits hereto and the other documents referred to or provided for herein
represent the entire agreement among the parties with respect to the subject
matter hereof, and shall not be modified or affected by any offer, proposal,
statement or representation, oral or
53
<PAGE>
written, made by or for any party in connection with the negotiation of the
terms hereof.
10.8 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, personal
representatives, heirs and assigns, but neither this Agreement nor any of the
rights hereunder shall be assigned by any party hereto without the prior
written consent of the other party, provided that the Company and the Company
Shareholders hereby consent to the assignment by Parent, Sub and/or Merger
Sub of the rights and benefits hereunder of Parent, Sub and/or Merger Sub as
security for borrowings, or to any Affiliates of Parent.
10.9 NOTICES. Any notice, request, demand, waiver, consent, or other
communication required or permitted hereunder shall be in writing and shall
be deemed given when actually delivered, as follows:
(i) If to Parent
Sub or Merger
Sub to: Maple Leaf Aerospace, Inc.
1408 Northridge
South Lake, Texas 76052
Attention: Quentin P. Bourjeaurd,
President
With copies
(which shall
not constitute
notice) to: Sherrard & Roe, PLC
424 Church Street, Suite 2000
Nashville, Tennessee 37219
Attention: Donald I. N. McKenzie, Esq.
With copies
(which shall
not constitute
notice) to: Odyssey Partners, L.P.
31 West 52nd Street
New York, New York 10019
Attention: Mr. Stephen Berger
- and -
54
<PAGE>
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Simeon Gold, Esq.
(ii) If to
the Company to: Tri-Star Aerospace, Inc.
11535 East Pine Street
Tulsa, Oklahoma 74116
Attention: Richard P. Small, President
With a copy to: McBride Baker & Coles
500 West Madison Street, 40th Floor
Chicago, Illinois 60661-2511
Attention: G. Gale Roberson, Jr., Esq.
(iii) If to the
Representative,
to: Mr. Richard P. Small
c/o Tri-Star Aerospace, Inc.
11535 East Pine Street
Tulsa, Oklahoma 74116
(iv) If to a
Company
Shareholder to: Such Company Shareholder's address set forth on the
signature pages hereto.
With a copy to: McBride Baker & Coles at its address set forth above.
Notices may be delivered to such other person or address as a party may
furnish to the other parties in writing.
10.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and shall become
effective when one or more counterparts have been signed by each of the
parties hereto and delivered to the other.
10.11 NO BENEFIT TO OTHERS. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto and their respective successors, personal representatives,
heirs, and permitted assigns, and they shall not be construed as conferring
any rights on any other persons, including without limitation, any employees
of the Company.
55
<PAGE>
10.12 SCHEDULES AND HEADINGS. The information set forth in the
Schedules hereto is deemed to have been disclosed for all purposes of this
Agreement and is incorporated herein and made a part of this Agreement. The
headings contained in this Agreement are inserted for convenience only and
shall not constitute a part hereof.
10.13 CERTAIN DEFINITIONS. As used in this Agreement, "Affiliate"
shall mean, with respect to any person or entity, any other person or entity
controlling, controlled by or under common control with, in each case,
through the ownership of securities, by contract or otherwise, the first
mentioned person or entity.
[signature pages follow]
56
<PAGE>
IN WITNESS WHEREOF, the parties hereto have, as appropriate, executed or
caused this Agreement to be duly executed by their duly authorized
representatives, as of the day and year first above written.
[PARENT]
MAPLE LEAF AEROSPACE INC.
By: /s/ Quentin P. Bourjeaurd
--------------------------------------------
Quentin P. Bourjeaurd, President
By: /s/ Muzzafar Mirza
--------------------------------------------
Muzzafar Mirza, Vice President
[SUB]
AEROSPACE ACQUISITION CORP.
By: /s/ Quentin P. Bourjeaurd
--------------------------------------------
Quentin P. Bourjeaurd, President
By: /s/ Muzzafar Mirza
--------------------------------------------
Muzzafar Mirza, Vice President
[MERGER SUB]
AEROSPACE MERGER SUB I, INC.
By: /s/ Quentin P. Bourjeaurd
--------------------------------------------
Quentin P. Bourjeaurd, President
By: /s/ Muzzafar Mirza
--------------------------------------------
Muzzafar Mirza, Vice President
[THE COMPANY]
TRI-STAR AEROSPACE, INC.
By: /s/ Richard P. Small
--------------------------------------------
Richard P. Small, President
57
<PAGE>
[THE COMPANY SHAREHOLDERS]
/s/ Charles Balchunas
---------------------------------------------
Charles Balchunas
Address: c/o Tri-Star Aerospace, Inc.
3411 Southwest 11th Street
Deerfield Beach, Florida 33442
/s/ Joseph D. Colletti
---------------------------------------------
Joseph D. Colletti
Address: c/o Tri-Star Aerospace, Inc.
3411 Southwest 11th Street
Deerfield Beach, Florida 33442
/s/ Carl R. DeAngelo
---------------------------------------------
Carl R. DeAngelo
Address: 2421 Gravel Road
Fort Worth, Texas 76118
/s/ Frank C. Fisher
---------------------------------------------
Frank C. Fisher
Address: 22932 Lockness Avenue
Torrance, California 90501
/s/ Merritt B. Horrell, Jr.
---------------------------------------------
Merritt B. Horrell, Jr.
Address: P.O. Box 9056
Coral Springs, Florida 33075
/s/ Ned A. Kaled
---------------------------------------------
Ned A. Kaled
Address: c/o Tri-Star Aerospace, Inc.
11535 East Pine Street
Tulsa, Oklahoma 74116
/s/ David R. Little
---------------------------------------------
David R. Little
Address: c/o Tri-Star Aerospace, Inc.
3411 Southwest 11th Street
Deerfield Beach, Florida 33442
58
<PAGE>
/s/ Paul G. Livernash
---------------------------------------------
Paul G. Livernash
Address: 6642 South 193rd Place
Suite N-101
Kent, Washington 98032
/s/ Hector Sardinas
---------------------------------------------
Hector Sardinas
Address: 20941 National Lane
Huntington Beach, CA 92646
/s/ Norma T. Small
---------------------------------------------
Norma T. Small
Address: c/o Tri-Star Aerospace, Inc.
11535 East Pine Street
Tulsa, Oklahoma 74116
/s/ Richard P. Small
---------------------------------------------
Richard P. Small
Address: c/o Tri-Star Aerospace, Inc.
11535 East Pine Street
Tulsa, Oklahoma 74116
59
<PAGE>
===============================================================================
ASSET PURCHASE AGREEMENT
BY AND AMONG
MAPLE LEAF AEROSPACE, INC.
AVIALL SERVICES, INC.
AND
AVIALL (CANADA) LTD.
===============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
PAGE
<S> <C> <C>
ARTICLE 1. PURCHASE AND SALE OF THE PURCHASED ASSETS 1
1.1 Purchased Assets 1
1.2 Excluded Assets 2
1.3 Closing 3
ARTICLE 2. ASSUMPTION OF LIABILITIES AND CONTRACTS 3
2.1 Assumed Liabilities 3
2.2 Retained Liabilities 5
ARTICLE 3. PURCHASE PRICE 7
3.1 General 7
3.2 Payment of Purchase Price 8
3.3 Post-Closing Procedure 8
3.4 Allocation of Purchase Price 10
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLERS 10
4.1 Organization Corporate Power, Good Standing 10
4.2 Corporate Authorization 10
4.3 No Violation 10
4.4 Purchased Assets 11
4.5 [Intentionally omitted] 11
4.6 Financial Information 11
4.7 Accounts Receivable 11
4.8 Inventory 11
4.9 Books and Records 12
4.10 Licenses, Permits and Authorizations 12
4.11 No Undisclosed Liabilities, Etc. 12
4.12 Consents and Approvals of Governmental Authorities 12
4.13 Litigation 12
4.14 Tax Returns 12
4.15 Contracts and Agreements 12
4.16 Compliance with Laws 13
4.17 Environmental Matters 13
4.18 No Material Adverse Change 14
4.19 Title to Assets, Encumbrances 14
4.20 Employees 14
4.21 Labor, Employment Contracts and Employee Benefit Programs 14
4.22 Insurance Policies 15
4.23 Conduct in Ordinary Course of Business 15
4.24 Leases 16
4.25 Proprietary Rights 16
4.26 Disclosure 16
4.27 Schedules and Exhibits 16
4.28 Construction of Certain Provisions 17
4.29 Warranties 17
4.30 Affiliate Transactions 17
i
<PAGE>
4.31 Customers and Suppliers 17
4.32 Unlawful Payments and Contributions 17
4.33 Approvals 17
4.34 No Implied Representation 17
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF PURCHASER 18
5.1 Organization, Corporate Power and Good Standing 18
5.2 Corporate Authorization 18
5.3 No Violation 18
5.4 Licenses, Approvals Other Authorizations, Consents,
Reports, etc. 18
5.5 Availability of Financing 18
ARTICLE 6. OTHER COVENANTS 19
6.1 Access and Investigation 19
6.2 Agreement to Obtain Consents and Approvals 19
6.3 Operation of the Business 19
6.4 Negative Covenant 20
6.5 Notification 20
6.6 No Negotiation 20
6.7 Non-Competition Agreement 20
6.8 Further Assurances 20
6.9 Seller's Employees 21
6.10 Systems Transition 21
6.11 Sublease 21
6.12 Financing Arrangements 22
6.13 Records Retention by Purchaser 22
6.14 Records Retention by Sellers; Certain Access 22
6.15 Intracompany Accounts 22
6.16 Insurance 23
6.17 [Intentionally omitted.] 24
6.18 Non-Assignable Warranty 24
6.19 Tax Matters 24
6.20 Employees 25
6.21 401(k) Spinoff 25
6.22 Tri-Star Acquisition 26
6.23 Aerospace Severance Plan 26
ARTICLE 7. CLOSING CONDITIONS 26
7.1 Conditions to Purchaser's Obligation to Close 26
7.1.1 Representations and Warranties of Sellers, Compliance
with Agreement 26
7.1.2 Bill of Sale 26
7.1.3 Non-Competition Agreement 26
7.1.4 Assignment and Assumption Agreement 26
7.1.5 Required Contracts 26
7.1.6 [Intentionally omitted] 26
7.1.7 Absence of Material Change 26
7.1.8 Concurrent Closing of Tri-Star Transaction 27
7.1.9 Regulatory Approvals 27
7.1.10 Leases and Other Instruments of Conveyance 27
7.1.11 Consents 27
ii
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7.1.12 Resolutions; Incumbency 27
7.1.13 Evidence of No Liens 27
7.1.14 Certificate of Good Standing 27
7.1.15 Certificate of Incorporation; By-Laws 27
7.1.16 Management Information Systems Agreement 28
7.1.17 Sublease 28
7.1.18 No Injunction 28
7.1.19 Availability of Financing 28
7.1.20 Opinions of Counsel 28
7.1.21 Opinion of Delaware Counsel 28
7.1.22 Non-Foreign Status 28
7.1.23 Certificate of Sellers 28
7.2 Conditions to Sellers' Obligation to Close 28
7.2.1 Representations and Warranties of Purchaser;
Compliance with Agreement 28
7.2.2 Purchase Price 29
7.2.3 Assignment and Assumption Agreement 29
7.2.4 Resolutions, Incumbency 29
7.2.5 Certificate of Good Standing 29
7.2.6 Certificate of Incorporation; By-Laws 29
7.2.7 Sublease 29
7.2.8 [Intentionally omitted] 29
7.2.9 Regulatory Approvals 29
7.2.10 No Injunction 29
7.2.11 Leases and Other Instruments of Conveyance 29
7.2.12 Opinion of Counsel 29
7.2.13 Consent of Bank Lenders 29
7.2.14 Fairness Opinion 30
ARTICLE 8 INDEMNIFICATION 30
8.1 Indemnity by Sellers 30
8.2 Indemnity by Purchaser 30
8.3 Procedure and Payment 31
8.4 Other Claims 31
8.5 Subrogation 31
ARTICLE 9. TERMINATION 31
9.1 Termination Date 31
9.2 Termination Fee 31
ARTICLE 10. MISCELLANEOUS 32
10.1 Survival of Representations and Warranties 32
10.2 Disclosure and Confidentiality 32
10.3 Brokers 33
10.4 Construction 33
10.5 Bulk Sales 33
10.6 Amendments 33
10.7 Expenses 33
10.8 Completeness of Agreement 33
10.9 Assignment 33
10.10 Notices 34
iii
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10.11 Counterparts 34
10.12 No Benefit to Others 35
10.13 Headings 35
</TABLE>
Exhibit A - Defined Terms
Exhibit B - [Intentionally Omitted]
Exhibit C - Form of Non-Competition Agreement
Exhibit D - Form of Employee Waiver and Release
Exhibit E - Form of Management Services Agreement
Exhibit F - Form of Sublease
Exhibit G - Form of Bill of Sale
Exhibit H - Form of Assignment and Assumption Agreement (Contract Rights)
Exhibit I - Form of Assignment and Assumption of Leases
Exhibit J - Form of Estoppel Certificate
Exhibit K - Form of Opinion of Counsel - Haynes and Boone, LLP
Exhibit L - Form of Opinion of Counsel - Baker & McKenzie
Exhibit M - Form of Opinion of Counsel - Sherrard & Roe PLC
Exhibit N - Form of Bourjeaurd Certificate
Exhibit O- Form of Sellers' Certificate and Release
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INDEX OF SCHEDULES
Schedule 1.1(a) - Personal Property to be Purchased
Schedule 1.1(c) - Accounts Receivable to be Purchased
Schedule 1.1(f) - Proprietary Rights
Schedule 1.1(k) - Telephone Numbers
Schedule 1.2(c) - Excluded Inventory
Schedule 1.2(d) - Locations of Sellers' Facilities
Schedule 3.1(b) - March 31 Net Assets Statement
Schedule 3.4 - Allocation of Purchase Price
Schedule 4.1 - Foreign Jurisdictions in which Sellers are Qualified
to Transact Business
Schedule 4.3 - No Violations
Schedule 4.4 - Location of Purchased Assets
Schedule 4.6 - Financial Information
Schedule 4.7 - Accounts Receivable
Schedule 4.8 - Location of Inventory
Schedule 4.10 - Governmental Licenses, Permits and Authorizations
Schedule 4.11 - Undisclosed Liabilities
Schedule 4.12 - Required Filings with Governmental Authorities
Schedule 4.13 - Litigation
Schedule 4.14 - Tax Assessment Statute of Limitations Waivers
Schedule 4.15 - Contracts to be Purchased (with disclosure of assignment
restrictions)
Schedule 4.17 - Environmental Matters
Schedule 4.18 - No Material Adverse Change
Schedule 4.19 - Existing Liens
Schedule 4.20 - Employee and Independent Contractor Information
Schedule 4.21 - Employee Benefit Plans/Labor Matters
Schedule 4.21(g) - Aerospace Severance Plan
Schedule 4.22 - Insurance Policies
Schedule 4.23 - Conduct of Business in Ordinary Course
Schedule 4.24 - Leases
Schedule 4.25 - Proprietary Rights
Schedule 4.29 - Warranties
Schedule 4.30 - Affiliate Transactions
Schedule 4.31 - Significant Customers and Suppliers
Schedule 5.4 - Licenses, Approvals, Authorizations and Consents
Schedule 5.5 - Commitment Letter
Schedule 6.9 - Division Employees
Schedule 6.16 - Insurance
Schedule 7.13 - Permitted Liens
Schedule 7.1.5 - Required Consents
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "AGREEMENT"), dated September 5, 1996,
is by and among AVIALL (CANADA) LTD., an Ontario, Canada corporation ("AVIALL
CANADA"), AVIALL SERVICES INC., a Delaware corporation ("ASI") (ASI and Aviall
Canada being collectively referred to herein as the "SELLERS" and each
individually as a "SELLER"), and MAPLE LEAF AEROSPACE, INC. a Delaware
corporation ("PURCHASER"). Certain capitalized terms used herein shall have the
meanings ascribed to such terms in EXHIBIT A attached hereto or in the sections
of this Agreement referred to therein.
WITNESSETH:
WHEREAS, Aviall Canada is a wholly owned subsidiary of ASI;
WHEREAS, the Aviall Aerospace business unit (the "Division") based in
Dallas, Texas engages in the distribution of aerospace hardware products
primarily to manufacturers of commercial and military aircraft and other
original aviation equipment manufacturers, which distribution involves certain
personnel and assets of ASI in the United States and certain personnel and
assets of Aviall Canada in Canada (the "Business", which term excludes the
distribution of such products by Sellers' Distribution Services business unit);
WHEREAS, Quentin P. Bourjeaurd ("BOURJEAURD") the President of Purchaser,
currently is an employee of ASI and is the vice president of the Division; and
WHEREAS, Sellers desire to sell to Purchaser certain of the Sellers'
property and assets used in the conduct of the Business and Purchaser wishes to
purchase such property and assets and to assume certain liabilities relating to
the Business and such assets, all upon the terms and subject to the conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties hereto hereby agree as follows:
ARTICLE 1.
PURCHASE AND SALE OF THE PURCHASED ASSETS
1.1 PURCHASED ASSETS. Subject to the terms and conditions of this
Agreement, on the CLOSING DATE (as defined below), Sellers shall sell,
transfer, assign and deliver to Purchaser, and Purchaser shall purchase and
acquire from Sellers, all of Sellers' right, title and interest in and to all
property and assets, whether owned or leased and other than Excluded Assets,
which are used exclusively or held for use exclusively in connection with the
Business as of the Closing Date (collectively, the "PURCHASED ASSETS")
including, but not limited to, the following:
(a) TANGIBLE PERSONAL PROPERTY, INVENTORY AND SUPPLIES. All
fixtures, vehicles, office furniture, equipment, inventory, operating supplies
located at any of the facilities listed on SCHEDULE 4.24, and other similar
personal property, including without limitation the fixed assets and inventory
of the type listed on SCHEDULE 1.1(a) which Schedule lists the fixed assets and
the inventory of the Division as of July 31, 1996;
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(b) LEASES; LEASEHOLD IMPROVEMENTS. All real property leases listed
in SCHEDULE 4.24 hereto along with all leasehold improvements thereon:
(c) ACCOUNTS RECEIVABLE. All accounts receivable, notes, or other
evidences of indebtedness (collectively, the "ACCOUNTS RECEIVABLE") which are
reflected on the Closing Date Net Assets Statement (as hereinafter defined)
including, without limitation, those of the type contained on SCHEDULE 1.1(c)
which Schedule lists all of the accounts receivable, notes and other evidences
of indebtedness of the Division as of July 31, 1996, excluding any Intercompany
Receivables which shall be accounted for as set forth in SECTION 6.15 herein:
(d) PREPAID ASSETS, EXPENSES, SECURITY DEPOSITS. All prepaid
assets, expenses, and security deposits, excluding reimbursements for pre-paid
insurance premiums relating to the Division for periods after the Closing Date;
(e) CONTRACT RIGHTS; WARRANTIES. All agreements, contracts and
licenses, outstanding purchase orders, supplier agreements and equipment leases
relating to the Division, including but not limited to those of the type
specified on SCHEDULE 4.15 together with all assignable rights under product
warranties to the extent that Purchaser assumes any liability in respect
thereof;
(f) PROPRIETARY RIGHTS. Any and all trademarks, trademark
registrations and trademark applications listed on Schedule 1.1(f), trade-
names, logos, copyrights, computer software and programs, and other licenses
thereof, know-how, trade secrets, lists of past, present and potential
customers, sales data, sales and advertising materials, scheduling and service
methods, sales and service manuals and all other proprietary, confidential and
other similar information (in whatever form or medium), but excluding the use
of and rights to the name "Aviall," individually or in combination with any
other names and excluding any trademarks, servicemarks or tradenames
incorporating the name "Aviall" (collectively, "PROPRIETARY RIGHTS");
(g) RECORDS. With respect to the Purchased Assets and Assumed
Liabilities only, all original records, files, documents, papers,
certifications, and documents of origin (the "RECORDS");
(h) LICENSES, PERMITS AND APPROVALS. All transferable permits,
franchises, licenses, approvals and authorizations by or of governmental
authorities or third parties required to operate the Business or own the
Purchased Assets;
(i) CLAIMS. All causes of action, claims, rights of recovery and set-
off of every kind pertaining or relating to the Purchased Assets but only to
the extent the related liability, if any, is assumed by Purchaser, including
all insurance, warranty and condemnation proceeds, judgments and awards
received after the Closing Date with respect to damage, destruction or loss of
any Purchased Assets;
(j) GOODWILL. All goodwill associated with the Business, excluding
the use of the name "Aviall" individually or in connection with any other
names:
(k) TELEPHONE NUMBERS. Any of Sellers' assignable rights to the
telephone numbers listed on SCHEDULE 1.1(k), used by the Division; and
(l) OTHER ASSETS. All other assets of Sellers not specifically set
forth in this SECTION 1.1 if such asset is used exclusively or held for use
exclusively in connection with the Business.
1.2 EXCLUDED ASSETS. The following assets ("EXCLUDED ASSETS") shall be
retained by Sellers and shall not be sold and transferred to Purchaser
hereunder:
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(a) RECORDS. Each Seller's formal corporate records, including its
certificate of incorporation, by-laws, minute books, and other records having
exclusively to do with the corporate organization of such Seller, and such
other business records required in connection with Sellers filing of local,
state, provincial, or federal tax filings or related to Sellers' other past or
present lines of business;
(b) CASH AND CASH EQUIVALENTS. Any and all cash on hand and cash
equivalent assets of Sellers, including rights to tax refunds, insurance
deposits, duty drawbacks, or premiums and rights to return of premiums, in each
case for periods ending on or prior to the Closing Date;
(c) EXCLUDED INVENTORY. The inventory described on SCHEDULE 1.2(c),
which inventory has an aggregate book value of $1,750,000 (the "EXCLUDED
INVENTORY"); it being agreed that any expenses incurred in connection with such
transfer of the Excluded Inventory shall be paid by Sellers and shall not
affect the Purchase Price (as hereinafter defined) and shall not be an Assumed
Liability (as hereinafter defined);
(d) OTHER EXCLUDED ASSETS. All assets of Sellers not specifically
set forth in SECTION 1.1 and any asset described in SECTION 1.1 if such asset
is not used exclusively or held for use exclusively in connection with the
Business or does not arise out of the conduct of Business; it being understood
by the parties hereto that any asset which is used in connection with the
Business and with another business or activity of the Sellers or any of their
Affiliates shall be deemed an Excluded Asset. In connection with the foregoing,
there shall be a rebuttable presumption that any asset which is not located at
Sellers' facilities described in SCHEDULE 1.2(d) on the date hereof or on the
Closing Date shall be deemed an Excluded Asset. It is further understood that
there shall be a rebuttable presumption that any asset which is located at or
any purchased inventory in transit to, such locations (other than the Excluded
Inventory) shall be deemed to be a Purchased Asset, as contemplated by this
Agreement.
1.3 CLOSING. The closing of the sale and purchase of the Purchased Assets
(the "CLOSING") will take place beginning at 9:00 a.m. New York time, on
September 12, 1996. at the offices of Weil, Gotshal & Manges LLP, 767 Fifth
Ave., New York, New York 10153, or such other time or place as may be mutually
agreed upon. For the purposes hereof, the "CLOSING DATE" shall be deemed to be
11:59 p.m. New York New York time on such date.
ARTICLE 2.
ASSUMPTION OF LIABILITIES AND CONTRACTS
2.1 ASSUMED LIABILITIES. Subject to SECTION 2.2 of this Agreement, at the
Closing, Purchaser shall assume and shall agree to pay, perform and discharge,
the following specific liabilities and obligations of the Business
(collectively, the "ASSUMED LIABILITIES"):
(a) all obligations and liabilities accrued or reserved against on
the Closing Date Net Assets Statement which remain unpaid and/or open on the
Closing Date;
(b) all liabilities and obligations arising from commitments (in the
form of accepted purchase orders, or otherwise) to sell products or services,
or outstanding quotations, proposals or bids, arising from or related to the
Purchased Assets or the Business as of the Closing Date;
(c) all liabilities and obligations arising from commitments (in the
form of issued purchase orders or otherwise), or outstanding quotations,
proposals or bids, to purchase or acquire equipment, products, supplies or
services, arising from the Purchased Assets or the Business prior to or as of
the Closing Date;
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(d) all liabilities and obligations after the Closing Date under
existing licenses, real property and equipment leases, rental contracts or
other contracts to suppliers, customers, wholesalers, distributors, merchants
or end users arising from or related to the Purchased Assets or the Business as
of or after the Closing Date to which Sellers or the Division is a party and
which are to be assigned to Purchaser hereunder, including without limitation,
the contracts included within SECTION 1.1(e) of this Agreement;
(e) all liabilities and obligations relating to any accrued but
unpaid vacation entitlements of employees of the Division as of the Closing
Date who Purchaser employs as of the Closing Date pursuant to the offer of
employment to be made by Purchaser under SECTION 6.9;
(f) all liabilities and obligations of the Business in respect of
claims asserted after the Closing Date arising from warranties relating to the
sale of products and services by the Division prior to the Closing Date;
(g) any and all liabilities and obligations (including, without
limitation, bodily injury, death and property damages) arising out of or
relating to either (x) a product or equipment failure, or (y) an accident
(including injurious exposure to conditions) which results in bodily injury,
death, property damage or personal injury (an "OCCURRENCE") after the Closing
Date which relates to either (i) the sale of products by Purchaser or Sellers
or any Affiliate of Purchaser or Sellers in respect of the Business made prior
to or after the Closing Date, or (ii) the conduct by Purchaser or Sellers or
any Affiliate of Purchaser or Sellers of the Business prior to or after the
Closing Date, including, without limitation, liability of types customarily
covered by the following types of insurance coverage: (A) aviation liability;
(B) automobile liability; (C) workers compensation, but only if the event
giving rise to the claim occurs after the Closing Date; or (D) general
liability;
(h) all sales, transfer and similar Taxes resulting from the
conveyance of the Purchased Assets hereunder;
(i) any and all liabilities or obligations arising under the lease
of the facility at Irvine, California, formerly used in connection with the
Business;
(j) any and all liabilities or obligations relating to ASI's
obligation to provide continuing health care coverage (COBRA) under Sections
601 through 608 of ERISA or any state or local laws, but only with respect to
employees of the Business that Purchaser employs pursuant to the offer of
employment to be made by Purchaser under Section 6.9; and
(k) any liability of Sellers for the payment of a severance claim
under the Aviall Services, Inc. Severance Pay Plan, dated September 5, 1996
(the "Aerospace Severance Plan"), to a Transferred Employee covered by the
Aerospace Severance Plan who has not executed a waiver in the form of EXHIBIT D
attached hereto (the "WAIVER"). Purchaser's liability under this SECTION 2.1(k)
shall be limited to liability under the Aerospace Severance Plan and Purchaser
shall not assume and shall have no liability to Sellers with respect to
severance liability under any other severance plan or other arrangement or
under any statutory obligations of Sellers.
Without limiting the generality of the foregoing, and notwithstanding any other
provision contained herein to the contrary, Purchaser shall assume and shall
agree to pay, perform and discharge all of the liabilities and obligations
which relate to the Purchased Assets, the Business or the Division or any of
its operations as conducted after the Closing Date, including product, general
tort or environmental liability, or arise out of the conduct of the Business by
Purchaser after the Closing Date, except for, in each case, the Retained
Liabilities and Sellers' obligations under SECTION 8 hereof.
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2.2 RETAINED LIABILITIES. Except as specified in SECTION 2.1 above,
Purchaser will not assume, and will not pay, discharge, perform or otherwise be
liable for any liabilities, indebtedness or obligations of the Business or any
Seller of any nature whatsoever, whether known or unknown, no matter how or
when they may have arisen or arise. Without limiting the generality of the
foregoing, and notwithstanding any other provision contained herein to the
contrary, the Assumed Liabilities shall not include, and Purchaser shall not be
liable for:
(a) any and all liabilities in respect of Taxes (for periods ending
on or prior to the Closing Date, and whether or not assessed or payable prior
or subsequent thereto) which are imposed, levied, assessed or payable by,
against or attributable to the Division, the Purchased Assets, or Sellers;
(b) any and all liabilities or obligations of the Division or
Sellers in respect of criminal and civil fines, penalties and punitive damages
(including, without limitation, fines and penalties imposed in respect of
withholding, income, sales, payroll, franchise and other Taxes) arising out of
or relating to events occurring or actions taken by the Division or Sellers
prior to the Closing Date;
(c) any and all liabilities or obligations relating to claims made
by employees of the Division (including, without limitation, workers
compensation and employer's liability) relating to incidents or matters
occurring with respect to the Division solely prior to the Closing Date,
including, without limitation, any liability for retroactive premiums or other
adjustments due under any retrospectively rated insurance policies maintained
by Sellers or any of its Affiliates solely with respect thereto; it being
understood that any credit for premiums or other adjustments shall belong to
Sellers and be deemed Excluded Assets;
(d) any and all liabilities or obligations associated with or
relating to any of the Excluded Assets;
(e) any and all liabilities or obligations arising under any
Environmental Laws based upon any conduct, act or omission that occurred prior
to the Closing Date;
(f) any and all liabilities or obligations resulting from Sellers'
or the Division's failure to have obtained all necessary permits, licenses or
other authorizations required for the conduct of the Business prior to the
Closing Date, including, without limitation, permits, licenses or other
authorizations required under Environmental Laws;
(g) any and all liabilities or obligations in respect of accounts
payable and any other trade notes, accounts payable and other payables of the
Division not accrued, disclosed or reserved against on the Closing Date Net
Assets Statement;
(h) any and all liabilities or obligations in respect to or relating
to Intercompany Payables and Intercompany Receivables prior to the Closing Date
between the Business and Sellers, or between the Division and any other
Affiliate or division of Sellers;
(i) any and all liabilities or obligations relating to or arising
out of any contract, agreement or commitment not included in the Purchased
Assets;
(j) any and all obligations or liabilities of the Sellers under or
in connection with this Agreement or any of the transactions contemplated
hereby, including all other liabilities and obligations with respect to which
Sellers are obligated to indemnify Purchaser under this Agreement;
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(k) any and all liabilities or obligations relating to or arising
out of any dividends, notes or other indebtedness payable by Sellers to any
stockholder, director, officer, employee or Affiliate of the Division or
Sellers or any Affiliate of any such entity or person prior to the Closing
Date;
(l) any and all liabilities or obligations relating to or arising
out of any breach, default or nonperformance by the Division, occurring prior
to the Closing Date, under any of the contracts included within the Purchased
Assets, excluding any liabilities or obligations expressly assumed under
SECTION 2.1 by Purchaser hereunder;
(m) except as assumed by Purchaser pursuant to SECTION 2.1 hereof,
any and all liabilities or obligations relating to or arising out of any
employment agreement, status as an employee of Sellers (whether at-will or
otherwise), or employee personnel policy, or any pension, benefit or
compensation arrangement, including, without limitation any Employee Benefit
Plan (as defined in SECTION 4.21(d)), pension, retirement stock option, stock
purchase, savings, profit sharing, deferred compensation, consultant, bonus,
severance, including severance claims arising by reason of the transactions
contemplated by this Agreement, health, medical, dental, disability, group
insurance or other incentive benefit or welfare contract, plan or arrangement
(whether providing benefits pre or post-retirement) that the Sellers contribute
to, are obligated under, or maintain or have contributed to, have been
obligated under or have otherwise maintained for the benefit of current, former
or retired employees of the Division, Sellers or any ERISA Affiliate, or under
or in connection with which Sellers have any present or future obligation or
liability, not specifically assumed by Purchaser pursuant to SECTION 2.1 of
this Agreement;
(n) any and all claims and obligations for workers' compensation
arising from an event occurring as of or prior to the Closing Date;
(o) except as expressly assumed by Purchaser pursuant to SECTION
2.1(k) hereof, any and all liabilities or obligations relating to or arising
out of any severance payments, allowances or similar benefits to or for any
employees of the Division, or severance or termination charges of any agents or
distributors of the Division, or bonuses or compensation other than regular
wages or salaries payable to any employees, agents or distributors of the
Division, accrued or arising prior to the Closing Date or arising in connection
with this Agreement or the transactions contemplated hereby, or any grievances,
arbitrations, charges or demands of any nature whatsoever arising from any
event, action or omission to act occurring with respect to the Division solely
prior to the Closing Date and involving any employee, agent or distributor
of, or applicant for employment with the Division;
(p) any other obligation or liability (excluding Assumed
Liabilities) of any kind or nature whatsoever (whether absolute or contingent,
known or unknown, recorded or unrecorded) of the Business or Sellers arising
out of events occurring with respect to the Business prior to the Closing Date;
(q) any and all liabilities or obligations relating to Sellers'
obligations to provide continuing health care coverage (COBRA) under Sections
601 through 608 of ERISA or any state or local laws for former or retired
employees of the Division who are not employed by Purchaser subsequent to the
Closing Date; or
(r) any and all liabilities and obligations (including, without
limitation, bodily injury, death and property damages) arising out of or
relating to an Occurrence prior to the Closing Date which relates to either (i)
the sale of products by Sellers or any Affiliate of Sellers in respect of the
Business made prior to the Closing Date, or (ii) the conduct by Sellers or any
Affiliate of Sellers of the Business prior to the Closing Date.
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All liabilities retained by Sellers under this SECTION 2.2 are referred to
herein collectively as the "Retained Liabilities."
ARTICLE 3.
PURCHASE PRICE
3.1 GENERAL. The purchase price to be paid by Purchaser to ASI, for the
benefit of Sellers, for the Purchased Assets (the "PURCHASE PRICE") shall be
the sum of:
(a) $ 16,250.000, PLUS
(b) an amount equal to any increase in, or LESS an amount equal to
any reduction in, the combined net book value of the Purchased Assets and
Assumed Liabilities (the "NET ASSETS") determined by comparing the statement of
the Net Assets, excluding inventory, as of March 31, 1996, a copy of which is
attached hereto as SCHEDULE 3.1(b) (the "MARCH 31 NET ASSETS STATEMENT"), to a
statement of the Net Assets, excluding inventory, as of the Closing Date,
prepared in accordance with Section 3.3 below (the "CLOSING DATE NET ASSETS
STATEMENT"); PLUS
(c) the cost of any inventory acquired by the Division between April
1, 1996 and the Closing Date (the "ADJUSTMENT PERIOD"); LESS
(d) the cost of any inventory acquired by the Division between
January 1, 1996 and the Closing Date (the "1996 INVENTORY"), which was sold by
the Division during the Adjustment Period; LESS
(e) the amount actually received or to be received by the Division
from the sale during the Adjustment Period of any inventory, other than the
1996 Inventory, included in the March 31 Net Assets Statement.
Notwithstanding anything herein to the contrary, the calculation of the
Purchase Price and the Closing Date Payment (defined below), along with the
preparation of the March 31 Net Assets Statement, the Settlement Date Net
Assets Statement and the Closing Date Net Assets Statement, shall not take any
account of the Excluded Inventory, and the cost of the Excluded Inventory and
any amounts received or to be received by the Sellers from the sale of that
Excluded Inventory shall not be considered in such calculation.
The March 31 Net Assets Statement, the Settlement Date Net Assets
Statement and the Closing Date Net Assets Statement shall each be prepared in
accordance with generally accepted accounting principles, ("GAAP"), applied on
a consistent basis. GAAP will prevail over consistency in all accounting
matters, except that if Sellers consistently applied an accounting practice or
policy that is permissible under GAAP, such practice or policy shall be
applied. The Closing Date Net Asset Statement shall be audited by Price
Waterhouse LLP ("Sellers Accountants"). Seller shall bear the cost and expense
of the audit of the Closing Date Net Asset Statement. Notwithstanding the
foregoing, such statements shall not be based, in whole or in part, on a
physical inventory of the Purchased Assets and in connection with the Closing
Date Net Assets Statement, inventory at March 31, 1996 shall be valued as set
forth in the March 31, 1996 Net Assets Statement. The parties shall treat the
purchase and sale of assets under this Agreement as an "applicable asset
acquisition" within the meaning of Section 1060 of the Code and shall prepare
and timely file Internal Revenue Service Form 8594
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(and any required exhibits and amendments thereto) in a manner consistent with
the allocation of the Purchase Price under Section 3.4.
3.2 PAYMENT OF PURCHASE PRICE.
(a) SETTLEMENT DATE NET ASSETS STATEMENT. Sellers shall prepare a
statement of the Net Assets as of a date not more than fourteen (14) calendar
days prior to the Closing Date (the "SETTLEMENT DATE"), which shall be referred
to herein as the "SETTLEMENT DATE NET ASSETS STATEMENT," and shall deliver to
Purchaser such Settlement Date Net Assets Statement no less than three (3)
calendar days prior to the Closing Date.
(b) SETTLEMENT DATE INVENTORY CERTIFICATE. No less than three (3)
days prior to the Closing Date, Sellers shall deliver to Purchaser a
certificate executed by Sellers' Controller (the "SETTLEMENT DATE INVENTORY
CERTIFICATE") setting forth the information described in parts (iii), (iv) and
(v) of subparagraph (c) hereof, including the calculation of the adjustments
relating thereto.
(c) CLOSING DATE PAYMENT. At the Closing. Purchaser shall pay to
ASI, for the benefit of Sellers, an amount (the "CLOSING DATE PAYMENT") which
shall be the sum of:
(i) $16,250,000, PLUS
(ii) an amount equal to any increase in, or LESS an amount equal
to any reduction in, the book value of the Net Assets, excluding inventory,
determined by comparing the March 31 Net Assets Statement to the Settlement
Date Net Assets Statement; PLUS
(iii) the cost of any inventory acquired by the Division between
April 1, 1996 and the Settlement Date; LESS
(iv) the cost of any 1996 Inventory which was sold by the
Division between April 1, 1996 and the Settlement Date; LESS
(v) the amount actually received or to be received by the
Division from the sale between April 1, 1996 and the Settlement Date of any
inventory, other than the 1996 Inventory, included in the March 31 Net Assets
Statement.
(d) METHOD OF PAYMENT. The Closing Date Payment shall be made on the
Closing Date by wire transfer of immediately available funds to one or more
accounts to be designated by ASI in writing to Purchaser not less than one (1)
business day prior to the Closing Date.
3.3 POST-CLOSING PROCEDURE.
(a) SELLERS' STATEMENTS AND AUDIT. Within sixty (60) days after the
Closing Date, Sellers shall prepare and deliver to Purchaser the Closing Date
Net Assets Statement prepared in accordance with the provisions of Section 3.1
hereof. At the same time, Sellers shall also deliver to Purchaser a
certificate (the "CLOSING DATE INVENTORY CERTIFICATE") setting forth the
information described in parts (c), (d) and (e) of SECTION 3.1, including the
calculation of the adjustments relating thereto. Sellers shall, at their cost
and expense, use their best efforts to have Sellers' Accountants issue an
accountant's audit report on the Closing Date Net Assets Statement and to
review the Closing Date Inventory Certificate to determine that it was
calculated in accordance with parts (c), (d), and (e) of SECTION 3.1. Purchaser
shall provide to Sellers and Sellers' Accountant access to such of the books
and records of the Division as may reasonably be required for
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the audit of the Closing Date Net Assets Statement and the review of the
Closing Date Inventory Certificate. Sellers shall cause Sellers' Accountant to
give to Arthur Andersen LLP ("PURCHASER'S ACCOUNTANT") access to the
workpapers utilized in the preparation of the Closing Date Net Assets
Statement and the Closing Date Inventory Certificate in accordance with
established professional standards.
(b) RESOLUTION OF PURCHASE PRICE CALCULATION DISPUTES. Purchaser
and Purchaser's Accountant shall have thirty (30) days after delivery to
Purchaser of the Closing Date Net Assets Statement, Closing Date Inventory
Certificate and Sellers' Accountants audit report to review those documents and
to notify Sellers of any disputes Purchaser may have relating thereto, failing
which Purchaser shall be deemed to have irrevocably waived any dispute
regarding those documents. Purchaser's notice to Sellers of any dispute shall
specify in reasonable detail all points of disagreement and demand that a
review of such dispute (a "REVIEW") be conducted. Purchaser and Sellers, each
acting with or without the participation of their respective accountants as it
or they may elect, shall diligently attempt to resolve any such disputes. If
the parties are unable to resolve such disputes within fifteen (15) days of
Sellers' receipt of notice of a Review, the unresolved disputes shall be
referred by the parties to the national office of Ernst and Young, LLP, or if
such firm is unwilling or unable to act, to the national office of Coopers and
Lybrand to act as Arbitrator (the "ARBITRATOR"). In a manner of its own
choosing, the Arbitrator shall, within thirty (30) days after having agreed to
serve, finally determine all unresolved disputes with regard to the Closing
Date Net Assets Statement and the Closing Date Inventory Certificate, and shall
deliver a written notice of its determinations to the parties.
The parties agree that with respect to any issue as to which the parties
cannot agree, if the accounting practice or policy used or taken by Sellers is
permissible under GAAP and has been consistently applied in the preparation of
the March 31, 1996 Net Assets Statement and the Closing Date Net Assets
Statement, then the Arbitrator shall be required to uphold the Sellers'
position. The determinations of the Arbitrator shall be final, conclusive and
legally binding on all parties hereto with respect to the Closing Date Net
Assets Statement and the Closing Date Inventory Certificate, absent fraud or
material misrepresentation. Purchaser and Sellers shall each pay one-half of
the fees and expenses of the Arbitrator. Each party shall pay all other fees
and expenses incurred by it in connection with the activities described in this
paragraph including, without limitation, fees and expenses charged by its legal
counsel and accountants.
(c) POST-CLOSING PAYMENT. Based upon the Closing Date Net Assets
Statement and the Closing Date Inventory Certificate as modified to reflect the
settlement or determination of any disputes, the parties shall calculate the
Purchase Price in accordance with the provision of SECTION 3.1. On the Closing
Audit Payment Date (defined below), if the Purchase Price is greater than the
Closing Date Payment, then Purchaser shall pay to Sellers the amount of such
difference plus interest, and if the Closing Date Payment is greater than the
Purchase Price, then Sellers shall pay to Purchaser the amount of such
difference, plus interest. In any case, on the Closing Audit Payment Date, such
difference shall be paid by wire transfer of immediately available funds to the
account or accounts designated by the party entitled to receive such funds. The
amount of any such difference shall bear interest, at the rate of eight percent
(8%) per annum, from the Closing Date to, but excluding, the date of payment.
In the event any action or proceeding is brought to enforce the payment of such
adjustment amount, the prevailing party in such action shall be entitled to
recover all attorney's fees and other costs incurred in connection with such
action.
For purposes of the payment required to be made pursuant to this SECTION
33(c), "CLOSING AUDIT PAYMENT DATE" shall mean the date which is three (3)
business days after the earliest to occur of (i) thirty (30) days after
Purchaser receives the Closing Date Net Assets Statement, and the Closing Date
Inventory Certificate together with Sellers' Accountant's report thereon if
Sellers shall not have received a notice from Purchaser within such ten-day
period demanding a Review, (ii) the date on which the parties agree on a
resolution of any disputes regarding the Closing Date Net Assets Statement or
the Closing Date Inventory
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Certificate, or (iii) the date on which the party which is required to make
the payment described in the preceding paragraph receives written notice of
the determinations of the Arbitrator.
3.4 ALLOCATION OF PURCHASE PRICE. The parties agree that for the purposes
of (i) completing and filing IRS Form 8594, and (ii) filing all tax returns and
statements, forms and schedules in connection therewith, all of the Purchase
Price shall be allocated in accordance with SCHEDULE 3.4 attached hereto.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF SELLERS
The Sellers hereby jointly and severally represent and warrant to
Purchaser as follows:
4.1 ORGANIZATION, CORPORATE POWER, GOOD STANDING. ASI is a corporation
duly incorporated, validly existing, and in good standing under the laws of the
State of Delaware. Aviall Canada is a corporation duly incorporated, validly
existing and in good standing under the laws of the Province of Ontario, Canada
and is not a non-resident of Canada within the meaning of the Income Tax Act
(Canada). Sellers have the corporate power and authority to carry on the
Business as now conducted and to own and operate the Purchased Assets. Each
Seller has the corporate power and authority to execute and deliver this
Agreement and the other agreements contemplated hereby, to perform its
respective obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. Each Seller is qualified or
licensed to do business as a foreign corporation in each state or province
where such qualification is necessary to conduct the Business, as set forth in
SCHEDULE 4.1 hereto.
4.2 CORPORATE AUTHORIZATION. The execution and delivery of this
Agreement and the other agreements contemplated hereby and the performance by
each Seller of its obligations hereunder and thereunder have been duly
authorized by all necessary corporate action, and no other corporate act on the
part of either Seller, their respective Boards of Directors or their respective
stockholders is necessary to authorize the execution, delivery or performance
by Sellers of this Agreement or any other agreement contemplated hereby or
thereby. This Agreement has been duly executed by each Seller and constitutes,
and the other agreements contemplated hereby, and the instruments and documents
to be delivered by Sellers hereunder, also constitute, the legal, valid and
binding obligations of Sellers and are enforceable against Sellers in
accordance with their respective terms (subject to bankruptcy, reorganization,
insolvency, and other similar laws relating to or affecting the enforcement of
creditors' rights generally and to the availability of equitable remedies).
4.3 NO VIOLATION. Except as set forth on SCHEDULE 43, neither the
execution and delivery of this Agreement nor the performance by Sellers of
their obligations hereunder nor the consummation of the transactions
contemplated hereby (a) will violate, conflict with, result in any breach of,
constitute a default under, or result in the termination or acceleration of,
either Seller's certificate of incorporation or articles of incorporation, as
appropriate, or Bylaws, or any agreement indenture, license, obligation or
instrument to which either Seller is a party by which such Seller, or any of
the Purchased Asset, is bound or affected, the violation, conflict or breach of
which would, individually or in the aggregate, have a Material Adverse Effect;
(b) except as disclosed in SCHEDULE 4.15, would require the consent of any
other party to, or result in the creation or imposition of any Lien upon any of
the Purchased Assets under, any agreement or commitment to which either Seller
is a party or by which either Seller or any of the Purchased Asset is bound; or
(c) will result in a material violation of any law, judgment, decree, order,
regulation or rule of any court or governmental authority to which either of
the Sellers is subject.
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4.4 PURCHASED ASSETS. Except as set forth in SCHEDULE 4.4, Sellers own
all the assets (whether real, personal, or mixed and whether tangible or
intangible) that they purport to own located in the facilities owned or
operated by the Division or reflected as owned in the books and records of the
Division, including all of the properties and assets reflected in SCHEDULES
1.1(a), 1.1(c), 1.1(f), and 4.15.
4.5 [INTENTIONALLY OMITTED]
4.6 FINANCIAL INFORMATION. Attached hereto as SCHEDULE 3.1(b) is a true
and complete copy of the March 31 Net Assets Statement, which has been
prepared in accordance with the books and records of the Business and in
accordance with GAAP. The March 31 Net Assets Statement fairly presents all
of the assets and liabilities of the Business to be acquired on the date set
forth therein. The March 31 Net Assets Statement does not include or reflect
any Intercompany Payables or Intercompany Receivables. Attached hereto as
Schedule 4.6 is certain unaudited operating information relating to the
Division for each of the twelve month periods ended December 31, 1994, and
December 31, 1995, and for the three month period ended March 31, 1996 (the
"Financial Information"). The Financial Information (i) was derived from the
regularly kept books and records of the Division, (ii) was prepared in all
material respects in accordance with the accounting principles, policies and
practices of the Division consistently applied, excluding inventory
obsolescence and inventory and fixed asset write-downs resulting from the
transactions contemplated hereby, (iii) fairly presents the financial
position of the Division with respect to the line items presented for the
periods indicated, and (iv) was included within the Annual Reports on Form
10-K filed by Aviall, Inc. for its fiscal years ended December 31, 1994 and
December 31, 1995, and in the Quarterly Report on Form 10-Q filed by Aviall,
Inc. for its fiscal quarter ended March 31, 1996, respectively, excluding
inventory and fixed asset write-downs resulting from the transactions
contemplated hereby.
4.7 ACCOUNTS RECEIVABLE. Except as set forth on Schedule 4.7, (i) all
accounts receivable shown on the March 31 Net Assets Statement and all
accounts receivable thereafter created or acquired by Sellers and the
Division in connection with the operation of the Division prior to the
Closing Date, including the accounts receivable to be set forth on the
Closing Date Net Assets Statement, have arisen and will arise in the Ordinary
Course of Business, (ii) other than in the Ordinary Course of Business, no
amount of such accounts receivable are subject to any contra, setoffs,
allowances or discounts of any kind pursuant to any written, or, to Sellers'
Knowledge, other agreements with customers, which, in each case, have not
been adequately reserved for; and (iii) no written or, to Sellers' Knowledge,
other notice has been received from any account debtor that any amounts of
such accounts receivable are subject to any pending or threatened
counterclaims, set-offs, allowances or discounts of any kind, other than in
the Ordinary Course of Business.
4.8 INVENTORY. Except as set forth on SCHEDULE 4.8, all inventory of the
Division, whether or not reflected in the March 31 Net Assets Statement is
located at the addresses set forth on SCHEDULE 4.8, and consists of inventory
received, accepted, and maintained through the Division's quality procedures,
accompanied by documents stating that such products have been certified as
being in accordance with the specifications of the design authority for such
product. Without making any express or implied representation or warranty as
to the amount to be received from the sale of such inventory, the Purchased
Assets include Saleable (as defined) inventory with an aggregate original cost
not less than the net book value of the inventory as set forth on the Closing
Date Net Assets Statement (without any additional reserves taken against such
inventory beyond those reflected on the March 31 Net Assets Statement). Except
as set forth on SCHEDULE 4.8, Sellers possess and at Closing will transfer to
Purchaser all documentation (a) required by law to permit Purchaser to sell or
otherwise transfer substantially all the inventory and (b) necessary for the
certification of substantially all the inventory contained in the Purchased
Assets as required by the contractual obligations of Sellers. All inventory of
the Division as of March 31, 1996 plus all inventories thereafter acquired by
Sellers or the Division on or prior to the Closing Date, less all inventories
sold between April 1, 1996 and the Closing Date, shall be reflected on the
Closing Date Net Assets Statement. Except as set forth on SCHEDULE 4.8, all
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inventories shown as of March 31, 1996, and not disposed of prior to the
Closing Date and all inventories thereafter acquired by the Sellers or the
Division on or prior to the Closing Date have been acquired by the Division in
the Ordinary Course of Business.
4.9 BOOKS AND RECORDS. The records, files, documents and papers of
Sellers relating to the Business, which have been made available to Purchaser,
are complete and correct and have been maintained in accordance with sound
business practices in all material respects, except for any omission or error
which would not individually or in the aggregate, have a Material Adverse
Effect.
4.10 LICENSES, PERMITS AND AUTHORIZATIONS. Sellers have all approvals,
licenses and permits of all governmental authorities and agencies, necessary
for the conduct of the Business and the ownership and use of the Purchased
Assets, all of which are identified on SCHEDULE 4.10 ("PERMITS"). Sellers are
in material compliance with such Permits. Except as disclosed in SCHEDULE 4.10,
each of the Permit is freely transferable.
4.11 NO UNDISCLOSED LIABILITIES, ETC. Sellers have no debts, liabilities
or obligations of any nature (whether absolute, accrued, contingent or
otherwise) that would have a Material Adverse Effect except as disclosed on
SCHEDULE 4.11.
4.12 CONSENT AND APPROVALS OF GOVERNMENTAL AUTHORITIES. Except as
disclosed in SCHEDULE 4.12, no consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority is required to be made or obtained by Sellers in connection with the
execution, delivery and performance of this Agreement by Sellers and the
transactions contemplated hereby.
4.13 LITIGATION. Except as disclosed in SCHEDULE 4.13, there is no
action, proceeding or governmental investigation pending or, to the best
knowledge of Sellers, threatened against either of the Sellers or any
properties or rights of either of the Sellers relating to the Business,
Division or the Purchased Assets, before any court, arbitrator or
administrative or governmental body.
4.14 TAX RETURNS. Sellers have timely filed all tax reports and returns
required to be filed by them, except where the failure to so file will not
individually or in the aggregate have a Material Adverse Effect. Such returns
are complete and correct in all material respects, and all Taxes due and
payable thereon, and all Taxes due and payable before the Closing Date, have
been paid or provided for, except where such failure would not result in a
Material Adverse Effect. To the best knowledge of Sellers, no facts exist or
have existed which would constitute grounds for the assessment of any
additional Tax liability with respect to the Purchased Assets. Except as
disclosed in SCHEDULE 4.14, Sellers have not granted any waiver currently in
effect of the statute of limitations on the assessment of any Taxes or
assessments related to the Purchased Assets or the Business of the Division.
4.15 CONTRACTS AND AGREEMENTS. SCHEDULE 4.15 identifies every agreement,
license, lease and contract which provides for annual payment by either
Seller or any third party greater than $100,000 or which was entered into or
arose not in the Ordinary Course of Business, to which either Seller is a
party that relates to the Business and/or the Purchased Assets (the
"CONTRACTS"), and except as disclosed on SCHEDULE 4.15, all of such Contracts
may be assigned and transferred to Purchaser without the consent, approval,
or waiver of any other party to such Contract or any other third party or
governmental authority. Neither Seller nor, to Sellers' Knowledge, any other
party to any Contract is in default, and no event has occurred which with the
giving of notice or passage of time or both would constitute a default, under
any Contract or obligation owed by either Seller with respect to the Business
or the Purchased Assets, which default would have a Material Adverse Effect,
either individually or together with other defaults, and Sellers have not
received any notices of any breach, default, or termination of any Contract.
Sellers have furnished to Purchaser accurate and complete copies of all of
the Contracts referred to in the first sentence of this Section 4.15.
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4.16 COMPLIANCE WITH LAWS. The Division and the Purchased Assets are in
compliance with, and the manner in which the Sellers use the Purchased Assets
and conduct the Business of the Division do not violate, any applicable law,
ordinance or regulation of any federal, state or local government or agency
except for violations, if any, that would not reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect. Neither
Seller has received notice of any such violation or alleged violation from any
governmental agency relating thereto. The parties agree that this
representation does not relate to or cover environmental matters, and that the
Sellers make no representation or warranty with respect to environmental
matters, except as specifically set forth in SECTION 4.17.
4.17 ENVIRONMENTAL MATTERS. Except for such matters as are disclosed on
SCHEDULE 4.17, Sellers have conducted the Business, at all times, in material
compliance with, and have not been and are not currently in violation of or
liable under, any Environmental Law. Except as disclosed on SCHEDULE 4.17,
Sellers have no basis to expect, nor have they received, any order, written
notice, or other communication from (i) any governmental body or private
citizen, or (ii) the current or prior owner or operator of any facilities
utilized in the conduct of the Business (the "Facilities"), including any to
which materials have been delivered and/or transported by the Division for
off-site disposal, treatment or recycling, of any actual or potential
violation or failure to comply with any Environmental Law, or of any actual
or potential obligation to undertake or bear the cost of any environmental,
health, and safety liabilities with respect to any of the Facilities or with
respect to any Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by Sellers,
or by any other person in connection with the conduct of the Business for
whose conduct Sellers are responsible under law or contract or with respect
to any Facility from which Hazardous Materials have been transported treated,
stored, handled, transferred, disposed, recycled or received.
Except as disclosed on SCHEDULE 4.17, there are no pending or, to the
knowledge of Sellers, threatened claims, encumbrances, or other restrictions of
a material nature resulting from any environmental, health, and safety
liabilities or arising under or pursuant to any Environmental Law, with respect
to or affecting any of the Facilities in which Sellers have or had an interest.
Except as disclosed on SCHEDULE 4.17, to Sellers' Knowledge, there is no
basis to expect, nor have Sellers received, any citation, directive, inquiry,
notice, order, summons, warning, or other written communication that relates
to any alleged, actual, or potential violation or failure to comply with any
Environmental Law, or of any alleged, actual, or potential obligation to
undertake or bear the cost of any environmental, health, and safety
liabilities with respect to any of the Facilities in which Sellers had an
interest, or with respect to any Facility to which Hazardous Materials
generated, manufactured, refined, transferred, imported, used, or processed
by Sellers, or any other person in connection with the conduct of the
Business for whose conduct Sellers are responsible under law or contract,
have been transported, treated, stored, handled, transferred, disposed,
recycled, or received.
Except as disclosed on SCHEDULE 4.17, to Sellers' Knowledge, there is no
reasonable basis to expect that, Sellers have environmental, health, and safety
liabilities with respect to the Facilities, or with respect to any property
geologically or hydrologically adjoining the Facilities.
Sellers have made available to Purchaser complete copies and results of
any reports, studies, analyses, tests, or monitoring possessed by or within the
control of Sellers pertaining to Hazardous Materials or hazardous activities
in, on, or under the Facilities, or concerning compliance by Sellers or any
other person for whose conduct Sellers are responsible under law or contract,
with Environmental Laws in respect of the Division and the Purchased Assets.
Such reports and additional materials have been made available for the
convenience of Purchaser and Sellers are not aware of nor liable for any
material omission from or inaccuracy in any such reports or materials and make
no other representation as to any such report or material.
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4.18 NO MATERIAL ADVERSE CHANGE. Except as disclosed on SCHEDULE 4.8,
since March 31, 1996, there has been no Material Adverse Change. Sellers have
not received any written notice that any customers intend to discontinue or
substantially diminish or change its relationship with the Business on
account of the transaction contemplated hereby or otherwise, other than
Contracts expiring in the Ordinary Course of Business.
4.19 TITLE TO ASSETS, ENCUMBRANCES. The fixed assets included within the
Purchased Assets, other than inventory (the "Fixed Assets"), are in good
condition and repair, normal wear and tear excepted, for the purposes for
which they are used, and none of the Fixed Assets requires any repair or
replacement except for maintenance in the Ordinary Course of Business for
Sellers. Sellers have good and indefeasible title to the Purchased Assets
(including, without limitation, all inventory) and none of such Purchased
Assets is subject to any lien, mortgage, pledge, security interest
encumbrance, hypothecs, adverse claim, right of any third party, or charge of
any kind (collectively, "LIENS"), except as set forth in SCHEDULE 4.19. If
Purchaser obtains the financial systems not being sold hereunder either from
Sellers or from Tri-Star, as the case may be, the Purchased Assets will be
sufficient for the conduct of the Business in substantially the same manner
as conducted prior to Closing.
4.20 EMPLOYEES.
(a) SCHEDULE 4.20 is a true and complete list setting forth (a)
the names, current salaries of, and other compensation payable to, the
employees of the Division, regardless of the amount of annual compensation,
(b) the names and total annual compensation for all independent contractors
who render services on a regular basis to the Division or are currently under
contract to render services to the Division whose current annual compensation
is $10,000 or more, and (c) the names of each employee of the Division who is
party to an employment, confidentiality, non-compete, written agreement, or,
to Sellers' Knowledge, other agreement with a Seller, true and complete
copies of each of which have been provided to Purchaser.
(b) Other than as set forth in SCHEDULE 4.20, the Sellers are not
legally required (i) to pay to any employee of the Division pursuant to any
written, or to Sellers' Knowledge, any oral agreement, any bonus or increase in
compensation, (ii) to change any contract, plan or arrangement for employees of
the Division, or (iii) to create any new contract, plan or arrangement for
employees of the Division.
4.21 LABOR, EMPLOYMENT CONTRACTS AND EMPLOYEE BENEFIT PROGRAMS.
(a) [intentionally omitted]
(b) Neither Seller has any liability or obligation under a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA (as defined
below) in respect of the employees employed in the Division.
(c) The Seller 401(k) Plan (as defined in SECTION 621) is qualified
under Section 401(a) of the Code and nothing has occurred with respect to the
operation of the Seller 401(k) Plan which could cause the loss of such
qualification or the imposition of any liability, penalty or tax under the
Employee Retirement Income Security Act of 1974, as amended, and regulations
thereunder, ("ERISA") or the Code.
(d) SCHEDULE 4.21 sets forth a true and complete list of each
employee benefit plan of Sellers within the meaning of Section 3(3) of ERISA
and each other contact, plan or arrangement providing a benefit for employees
of the Division ("EMPLOYEE BENEFIT PLAN").
(e) At the Closing Date, there will be no contractual restrictions
with the Sellers which would restrict in any way the ability of the Purchaser
to offer employment pursuant to SECTION 6.9.
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(f) Sellers are not a party to or obligated in connection with the
Division under or with respect to any collective bargaining agreements,
arrangements or contracts with any labor union or other representative of
employees or any employee benefits provided by any such agreement. No
employees of the Division are represented by any labor organization. No labor
organization or group or employees has made a pending demand for recognition
or certification. Except as otherwise listed in SCHEDULE 4.21, no work
stoppage, shutdown, strike, union organizational activity, allegation, charge
or complaint of employment discrimination or other similar occurrence has
occurred with respect to employees of the Sellers engaged in the Business of
the Division during Sellers' past three completed fiscal years, or is pending
or threatened against Sellers; nor do Sellers know any basis for any such
allegation, charge or complaint. Sellers are in compliance and have complied
in all material respects with all applicable laws relating to the employment
of labor within the Division, including provisions thereof relating to wages,
hours, equal opportunity, Worker Adjustment Retraining Notification Act of
1988 and any similar state or local "plant closing" law, collective
bargaining and the payment of Social Security taxes, and any state taxes.
Except as otherwise listed in SCHEDULE 4.21, there are no administrative
charges or court complaints pending or, to the best knowledge of Sellers,
threatened against Sellers with respect to employees of Sellers engaged in
the business of the Division before the U.S. Equal Employment Opportunity
Commission or any state, federal or Canadian court or agency concerning
alleged employment discrimination or any other matter relating to the
employment of labor, within the Division. Except as otherwise listed in
SCHEDULE 4.21, there is no unfair labor practice charge or complaint
threatened or pending against Sellers before the National Labor Relations
Board ("NLRB") or any similar state, local or Canadian body with respect to
employees of Sellers engaged in the business of the Division.
(g) Attached hereto as SCHEDULE 4.21(g) is a true and complete
copy of the Aerospace Severance Plan. The Aerospace Severance Plan is the
only plan or arrangement applicable to the employees of the Division with
respect to severance payments.
4.22 INSURANCE POLICIES. Attached hereto as SCHEDULE 4.22 is a correct
and complete list and description of all insurance policies owned by Sellers
with respect to the Business or the Purchased Assets. Such policies are in
full force and effect, and Sellers are not in default under any of them.
Sellers have not received any notice of (a) cancellation or intent to cancel,
or (b) increase or intent to increase premiums, with respect to such
insurance policies and Sellers are not aware of any basis for any such
action. The policies are sufficient for compliance with all obligations of
Sellers under any Contracts, except to the extent that any non-compliance,
either individually or in the aggregate, would not have a Material Adverse
Effect.
4.23 CONDUCT IN ORDINARY COURSE OF BUSINESS. Except as set forth on
Schedule 4.23 since March 31, 1996, Sellers have conducted the Business only
in the Ordinary Course of Business, have incurred no liabilities with respect
to the Division other than in the Ordinary Course of Business, and there has
been no:
(a) except in the Ordinary Course of Business, payment or increase
by either Seller of any bonuses, salaries, or other compensation to any
employee, or entry into any employment, severance, or similar contract with
any director, officer, or employee engaged exclusively in the Business of the
Division;
(b) adoption of, or increase in the payments to or benefits under,
any Employee Benefit Plan for or with any employees engaged in the Business of
the Division;
(c) damage to or destruction or loss of any asset or property used
in the Business by the Division, whether or not covered by insurance, that has
a Material Adverse Effect on the properties, assets, business, financial
condition, or prospects of the Business of the Division, taken as a whole;
(d) entry into, termination of, or receipt of notice of termination
of (i) any license, distributorship, dealer, sales representative, joint
venture, loan, credit, guaranty, or similar agreement or any
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agreement with an Affiliate of a Seller, or (ii) any Contract or transaction
involving a total remaining commitment by or to the Division of at least
$200,000, other than Contracts expiring in the Ordinary Course of Business;
(e) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property used in the
conduct of the Business or mortgage, pledge, or imposition of any Lien or other
encumbrance on any Purchased Asset;
(f) cancellation or waiver of any claims or rights with a value to
the Division in excess of $200,000;
(g) disclosure of confidential or proprietary information except to
a party that is a party to a written agreement protecting such confidential
information;
(h) to Sellers' Knowledge, actual or threatened loss of customers or
key personnel of the Business, other than Quentin P. Bourjeaurd:
(i) material change in the tax or financial accounting methods used
by Sellers with respect to the Division; or
(j) agreement, whether oral or written, by either Seller to do any
of the foregoing.
4.24 LEASES. All leases of the real and personal property leased by ASI or
any Seller and utilized by the Division, including all such leases with related
parties or Affiliates (if any, which are identified as such), are listed on
SCHEDULE 4.24. ASI enjoys peaceful and undisturbed possession under all such
leases, and all of such leases are valid and in full force and effect. Neither
Seller nor, to Sellers' Knowledge, any other party to any such leases, is in
default, and no event has occurred which with the giving of notice or passage
of time or both would constitute a default, under any such lease, which default
would result in a Material Adverse Effect.
4.25 PROPRIETARY RIGHTS. Sellers have good title to all of the Proprietary
Rights of Sellers, subject to the licenses and matters set forth in SCHEDULE
4.25. The use of the Proprietary Rights by Sellers in connection with the
Division does not infringe on the rights of any person or entity and no person
or entity has asserted any such claim. SCHEDULE 4.25 lists all Proprietary
Rights included in the Purchased Assets and all agreements related thereto
which affect such Proprietary Rights. To Sellers' Knowledge, no person or
entity infringes on the Proprietary Rights.
4.26 DISCLOSURE. This ARTICLE 4 does not contain, and the certificates
to be delivered by each Seller pursuant to SECTION 7.1.1 will not contain,
any untrue statement of a material fact or omit, and such certificates will
not omit, any material fact necessary to make the statements contained herein
or therein, in light of the circumstances in which they were made, not
misleading.
4.27 SCHEDULES AND EXHIBITS. Disclosure of any fact or item in any
Schedule or Exhibit hereto referenced by a particular paragraph or section in
this Agreement shall, should the existence of the fact or item or its
contents be relevant to any other paragraph or section, be deemed to be
disclosed with respect to that other paragraph or section, but only to the
extent that it is apparent from the content of the disclosure that the fact
or item is relevant to such other paragraph or section.
4.28 CONSTRUCTION OF CERTAIN PROVISIONS. It is understood and agreed that
neither the specification of any dollar amount in the representations and
warranties contained in this Agreement nor the inclusion of any specific item
in the Schedules or Exhibits is intended to imply that such amounts, or the
items so included, are
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or are not material, and neither party shall use the fact of the setting of
such amounts or the fact of the inclusion of any such item in the Schedules
or Exhibits in any dispute or controversy between the parties as to whether
any obligation, item or matter is or is not material for purposes hereof;
PROVIDED, HOWEVER, that the representations and warranties which are
specifically included in this Agreement and which expressly are made with
respect to matters which are material to Sellers or the Business shall not be
affected by the foregoing.
4.29 WARRANTIES. SCHEDULE 4.29 summarizes all claims outstanding, pending
or, to the best knowledge of the Sellers, threatened under or for breach of any
warranty relating to any products sold or distributed by the Division. The
Sellers have made available to Purchaser copies of the product warranties of
products sold or distributed by the Division, all of which, to Sellers'
Knowledge, are assignable to Purchaser.
4.30 AFFILIATE TRANSACTIONS. Except as disclosed on SCHEDULE 4.30, no
Affiliate of a Seller has any agreement with a Seller (other than employment
agreements disclosed on SCHEDULE 4.20) relating to, or any interest in any
property used in or pertaining to, the Division, the Business or the
Purchased Assets (other than ownership of capital stock of a Seller).
4.31 CUSTOMERS AND SUPPLIERS. SCHEDULE 4.31 lists the 10 largest customers
and suppliers of the Division for the 12-month period ended December 31, 1995
and the six month period ending June 30, 1996, and sets forth opposite the name
of each such customer or supplier the approximate percentage of net sales or
purchases by the Division attributable to such customer or supplier for each
such period.
4.32 UNLAWFUL PAYMENTS AND CONTRIBUTIONS. Neither of the Sellers, any
Affiliate thereof, nor any of their respective directors, officers or, any of
their respective employees or agents has, with respect to the Business, (i)
used any funds for any unlawful contribution, endorsement, gift, entertainment
or other unlawful expense relating to political activity; (ii) made any direct
or indirect unlawful payment to any foreign or domestic government official or
employee; (iii) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or any other U.S. or applicable
foreign law relating to improper payments to governmental representatives; or
(iv) made any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any person or entity.
4.33 APPROVALS. The sale by Sellers of the Purchased Assets requires the
prior written consent of (a) the senior lenders to Aviall, Inc., and (b) the
Royal Bank of Canada (collectively, the "BANK LENDERS"). Sellers have no
reason to believe that any of the Bank Lenders will not consent to the
transactions contemplated hereby.
4.34 NO IMPLIED REPRESENTATION. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH
HEREIN, IT IS THE EXPLICIT INTENTION OF EACH PARTY HERETO THAT SELLERS ARE
NOT MAKING ANY REPRESENTATION, OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED,
BEYOND THOSE EXPRESSLY GIVEN IN THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO,
ANY IMPLIED WARRANTY OR REPRESENTATION AS TO CONDITION, MERCHANTABILITY,
SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO ANY OF THE PURCHASED
ASSETS; IT BEING UNDERSTOOD THAT EXCEPT FOR SELLERS' REPRESENTATIONS AND
WARRANTIES CONTAINED IN THIS AGREEMENT, PURCHASER IS ACCEPTING THE PURCHASED
ASSETS ON AN "AS IS" AND "WHERE IS" BASIS.
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ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to each of the Sellers as
follows:
5.1 ORGANIZATION, CORPORATE POWER AND GOOD STANDING. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has full corporate power and authority to
execute and deliver this Agreement and the other agreements contemplated
hereby, to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. Purchaser is qualified or
licensed to do business as a foreign corporation in the State of Texas and in
each other state or province where such qualification is necessary to conduct
its Business.
5.2 CORPORATE AUTHORIZATION. The execution and delivery of this
Agreement and the other agreements contemplated hereby and the performance by
Purchaser of its obligations hereunder and thereunder have been duly authorized
by all necessary corporate action and no other corporate act on the part of
Purchaser, its Board of Directors or its stockholders is necessary to authorize
the execution, delivery or performance by Purchaser of this Agreement or any
other agreement contemplated hereby or thereby. This Agreement has been duly
executed by Purchaser, and constitutes, and the other agreements contemplated
hereby, and the instruments and documents to be delivered by Purchaser
hereunder, also constitute, the legal, valid and binding obligations of
Purchaser enforceable against the Purchaser in accordance with their respective
terms (subject to bankruptcy, reorganization, insolvency, and other similar
laws relating to or affecting the enforcement of creditors' rights generally
and to the availability of equitable remedies).
5.3 NO VIOLATION. Neither the execution and delivery of this Agreement,
nor the performance by Purchaser of its obligations hereunder nor the
consummation of the transactions contemplated hereby (a) will violate, conflict
with, result in any breach of, constitute a default under, or result in the
termination or acceleration of, the Purchaser's certificate of incorporation,
or Bylaws, or any agreement indenture, license, obligation or instrument to
which Purchaser is a party or by which Purchaser or any of its subsidiaries, is
bound or affected, the violation, conflict or breach of which would,
individually or in the aggregate, have a Material Adverse Effect, (b) would
require the consent of any other party to, or result in the creation or
imposition of any Lien upon any of the assets of the Purchaser under, any
material agreement or commitment to which Purchaser is a party or by which
Purchaser is bound; or (c) will result in a material violation of any law,
judgment, decree, order, regulation or rule of any court or governmental
authority to which Purchaser is subject.
5.4 LICENSES, APPROVALS, OTHER AUTHORIZATIONS, CONSENTS, REPORTS, ETC.
Except as disclosed on SCHEDULE 5.4, no registrations, filings, declarations,
applications, notices, consents, approvals, authorizations, orders,
qualifications or waivers are required to be made, filed, given or obtained by
Purchaser or any of its subsidiaries with, to or from any person or
governmental authorities and agencies in connection with the execution,
delivery, and performance of this Agreement by Purchaser and the consummation
of the transactions contemplated hereby.
5.5 AVAILABILITY OF FINANCING. Purchaser has no reason to believe that
financing (including equity capital in an amount not less than $22 million)
sufficient to enable Purchaser to consummate the transactions contemplated by
this Agreement (including the acquisition by Purchaser or its Affiliates of
Tri-Star Aerospace, Inc. and its Affiliates ("TRI-STAR")) will not be
available to Purchaser on the Closing Date. Attached hereto as SCHEDULE 5.5
is a copy of a commitment letter (the "Commitment Letter") issued to
Purchaser in connection with obtaining debt financing necessary to consummate
the transactions contemplated by this Agreement. The amount of money to be
loaned to Purchaser pursuant to the Commitment Letter, together with the
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contemplated equity capital, is sufficient to enable Purchaser to consummate
the transactions contemplated by this Agreement and the acquisition of
Tri-Star and its Affiliates. The Commitment Letter is true and complete and
accurately describes the understanding between the Purchaser and its debt
financing source and has not been modified or amended. Purchaser shall
promptly deliver to Sellers a copy of any amendment or modification of the
Commitment Letter.
ARTICLE 6.
OTHER COVENANTS
6.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and the
Closing Date, Sellers will, subject to SECTION 102(b) hereof, (a) afford
Purchaser and its representatives and prospective lenders and their
representatives (collectively, "PURCHASER'S ADVISORS") reasonable access during
normal business hours to the Division's personnel, properties, contracts, books
and records, and other documents and data, (b) make available and furnish to
Purchaser and Purchaser's Advisors copies of all such contracts, books and
records, and other existing documents and data relating to the Business and the
Division as Purchaser may reasonably request, and (c) make available to
Purchaser and Purchaser's Advisors such additional financial, operating, and
other data and information relating to the Business and the Division as
Purchaser may reasonably request; provided, however, that, to the extent the
parties hereto subsequently agree and upon such terms and conditions as then
specified, subsurface or other environmental testing shall be limited to "Phase
1" environmental tests and prior to any such subsurface or other environmental
testing, Purchaser will provide Sellers with prior written notice and an
opportunity to participate in such testing and will provide copies of all
reports and other results of such investigations and testings to Sellers.
Notwithstanding the foregoing or any other provision of this Agreement, Sellers
shall not deliver nor provide Purchaser, Purchaser's employees, directors,
officer and agents, or any Affiliate with access to any workpapers, letters,
memoranda or other documents relating to the writedown of any inventory or
assets of the Business done prior to April 1, 1996 (the "Writedown Documents").
6.2 AGREEMENT TO OBTAIN CONSENTS AND APPROVALS. Purchaser, on the one
hand, and Sellers, on the other hand, each hereby agree to cooperate with one
another and to use all commercially reasonable efforts to obtain all
governmental and third party consents and approvals to the transfer and
assignment of the Purchased Assets and as otherwise necessary to complete the
transactions contemplated by this Agreement (including all filings, if any,
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR ACT")) and (including taking all actions requested by Purchaser to
cause early termination of any applicable waiting period under the HSR Act);
provided, however, that there shall be no obligation on either Purchaser or
Sellers in order to obtain any such consent to (i) make any payments to third
parties, or (ii) to divest any assets of the Division or Tri-Star.
6.3 OPERATION OF THE BUSINESS. Between the date of this Agreement and
the Closing Date, Sellers will:
(a) except for the transfer of the Excluded Inventory, conduct the
Business only in the Ordinary Course of Business;
(b) use its Best Efforts to preserve intact the current business
organization of the Division, keep available, except in connection with
non-performance or malfeasance, the services of the current officers,
employees, and agents of the Division, and maintain the relations and good
will with suppliers, customers, landlords, creditors, agents, and others
having business relationships with the Division;
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(c) inform the Purchaser concerning operational matters relating to
the Business of a material nature; and
(d) otherwise respond to reasonable requests of Purchaser requesting
information on the status of the business, operations and finances of the
Division.
6.4 NEGATIVE COVENANT. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, neither
Seller will, without the prior written consent of Purchaser, take any
affirmative action, or fail to take any reasonable action within its control,
as a result of which any of the changes or events listed in SECTION 4.23 is
likely to occur.
6.5 NOTIFICATION. Between the date of this Agreement and the Closing
Date, Sellers agree that Sellers will promptly notify Purchaser in writing if
either Seller becomes aware of any fact or condition that causes or constitutes
a breach of any of its representations and warranties hereunder as of the date
of this Agreement, or if Sellers become aware of the occurrence after the date
of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. During the same
period, Purchaser agrees that it will promptly notify Sellers in writing if it
becomes aware of any fact or condition that causes or constitutes a breach of
any of its representations and warranties hereunder as of the date of this
Agreement, or if Purchaser becomes aware of the occurrence after the date of
this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. During the same
period, each party hereto will promptly notify the remaining parties hereto of
the occurrence of any breach of any covenant in this SECTION 6 or of the
occurrence of any event that may make the satisfaction of the conditions in
SECTION 7 impossible or unlikely.
6.6 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to its terms, Sellers agree with Purchaser that neither of
the Sellers nor any of their Affiliates or their respective officers, directors
or employees, nor any investment banker, attorney, accountant or other
representative retained by Sellers or any such Affiliate, shall, directly or
indirectly, solicit offers from, negotiate with, or in any manner encourage,
discuss with the offeror, or accept any proposal of any other person relating
to the acquisition of the assets and business of the Division, in whole or in
part whether directly or indirectly, through purchase, merger, consolidation or
otherwise (other than sales of inventory in the Ordinary Course of Business)
subject to the fiduciary duties under applicable corporate law of the
respective Boards of Directors of Sellers. Sellers will promptly notify
Purchaser in the event that any Seller receives any proposal which Sellers
believe in the exercise of their reasonable judgment is bona fide.
6.7 NON-COMPETITION AGREEMENT. At the Closing, Sellers will enter into a
Non-Competition Agreement (the "NON-COMPETITION AGREEMENT") with Purchaser,
substantially in the form attached hereto as EXHIBIT C.
6.8 FURTHER ASSURANCES. Sellers and Purchaser agree that, from time to
time, whether before or after the Closing Date, each of them will, and will
cause their respective Affiliates to, execute and deliver such further
instruments of conveyance and transfer and take such other action as may be
necessary to carry out the purposes and intents hereof. Without limiting the
generality of the foregoing, Purchaser shall extend full cooperation to Sellers
to enable Sellers to obtain and take possession of the Excluded Assets after
the Closing. Neither Sellers or Purchaser shall take any actions which are
inconsistent with the purposes and intentions hereof Sellers shall, from time
to time after the Closing, upon the request of Purchaser, perform, execute and
deliver, or cause to be performed, executed, and delivered, all such further
acts and instruments as may be
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required for the better assigning, transferring, granting, conveying,
assuring and confirming to Purchaser the Purchased Assets sold to Purchaser
pursuant to this Agreement.
6.9 SELLER'S EMPLOYEES.
(a) Within ten (10) calendar days prior to the Closing Date, but
effective as of the Closing Date, Purchaser shall offer employment on an "at-
will" basis to those of the employees of Sellers exclusively employed in the
Division on the Closing Date who are listed on SCHEDULE 6.9. Such offer shall
state (i) that each such employee shall be compensated at the same base salary
as disclosed in SCHEDULE 4.20, (ii) that each such employee shall be allowed to
participate in the employee benefit plans and arrangements maintained for
similarly situated employees of Tri-Star, and (iii) without limiting or
restricting the foregoing, such other terms and conditions of employment as
determined by Purchaser, in its sole discretion. Purchaser may, in its sole
discretion, elect not to offer employment to up to three (3) of the employees
listed on SCHEDULE 6.9; provided, however, that Purchaser notifies Sellers of
such decision and such employees' names at least three (3) calendar days prior
to the Closing Date. Such employees receiving and accepting Purchaser's offer
of employment pursuant to the terms hereof shall hereinafter be referred to as
"TRANSFERRED EMPLOYEES". With respect to each Transferred Employee, Purchaser
agrees to use reasonable efforts to obtain prior to the Closing Date a Waiver,
in the form of EXHIBIT D attached hereto, of any and all rights and claims to
any severance package or other severance compensation, payments or benefits
under the Aerospace Severance Plan from Sellers as of the Closing Date for
periods of employment prior to the Closing Date (the "SEVERANCE CLAIMS");
PROVIDED, HOWEVER, that if Purchaser does not obtain such Waiver from any such
Transferred Employee, and Purchaser thereafter hires such employee, Purchaser
shall assume all liabilities relating to such Severance Claims as set forth in
Section 2.1(k) and indemnify Sellers with respect thereto as set forth in
Article 8 hereof. Sellers agree to give such reasonable assistance to Purchaser
as may be required to obtain the Waivers and Purchaser agrees to provide
originals of all Waivers so obtained to Sellers at the Closing. If any such
employees are subject to restrictive agreements with Sellers, Sellers agree to
release such employees from the provisions of such restrictive agreements so as
to enable Purchaser to employ these persons. In addition to SCHEDULE 4.20,
Sellers will provide such other information and access to work history records
relating to the Division's employees as Purchaser may reasonably request. For
purposes of Purchaser's vacation plan, each Transferred Employee shall receive
service credit for all service by such employee with Sellers or their
Affiliates and their predecessors. For purposes of Purchaser's medical plan,
Purchaser agrees to waive any limitations regarding pre-existing medical
conditions to the extent so waived in Sellers' medical plan as of the Closing
Date as to Transferred Employees, effective immediately after the Closing Date,
and as to other persons entitled to coverage under the terms of the Purchaser's
medical plan by virtue of their relationship to such employees.
(b) No provision of this Agreement, express or implied, shall create
any rights or remedies of any nature or kind whatsoever in any Transferred
Employee or in his or her beneficiaries and nothing in this Agreement shall in
any way hinder or prevent Purchaser from amending or terminating any pension,
compensation or employee benefit plan or from terminating any Transferred
Employee at any time.
6.10 SYSTEMS TRANSITION. At the Closing, ASI and Purchaser will enter into
a Management Services Agreement (the "MANAGEMENT SERVICES AGREEMENT")
substantially in the form attached hereto as EXHIBIT E, to enable Purchaser to
continue to utilize the information systems operated by Sellers in connection
with the Division, in the manner and for the period provided therein.
6.11 SUBLEASE. At the Closing, ASI and Purchaser will enter into a
sublease agreement (the "SUBLEASE"), for that space at the facility located at
2527 Willowbrook, Dallas, Texas, currently used by Sellers in the conduct of
the Business, which Sublease shall be substantially in the form attached hereto
as EXHIBIT F.
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6.12 FINANCING ARRANGEMENT. Purchaser shall use its reasonable
commercial efforts to obtain the debt financing and equity capital
contemplated pursuant to Section 5.5 to enable Purchaser to consummate the
transactions contemplated by this Agreement and the acquisition of Tri-Star
and its Affiliates and covenants and agrees to provide debt financing sources
or any equity investors promptly with all information and documentation
necessary in order to consummate such financing. Purchaser shall (a) give
prompt notice to the Sellers of any material development affecting the
ability of the Purchaser to consummate the transactions contemplated by this
Agreement and the acquisition of Tri-Star and its Affiliates, including any
material development or change relating to the Commitment Letter, and (b)
promptly notify the Sellers in writing of any events, facts and occurrences
arising subsequent to the date of this Agreement is signed by the parties
hereto (including any proposed revision or modification to the Commitment
Letter) which could materially and adversely affect the financing or the
consummation of the transactions contemplated hereby and the acquisition of
Tri-Star and its Affiliates, which could result in any breach of any
representation or warranty or any material covenant contained in, or which
could have the effect of making any representation and warranties in this
Agreement false or misleading in any material respect.
6.13 RECORDS RETENTION BY PURCHASER. Purchaser shall not dispose of or
destroy any books or records relating to the Purchased Assets or Sellers'
conduct of the Business that are located or stored at the site of the
Business as of the Closing Date without complying with applicable guidelines
promulgated by the Internal Revenue Service or Revenue Canada, as applicable
and without first offering, by written notice at least 60 days before the
date of intended disposition or destruction, to turn over possession thereof
to Sellers. Purchaser shall allow Sellers access to such books and records,
but only to those books and records and only during the normal working hours
of the facility where they are located or stored, and Sellers shall have the
right at its own expense to make copies of such books and records, provided,
however, that any such access or copying shall be had or done in such a
manner as not to interfere with the normal conduct of Purchaser's business.
6.14 RECORDS RETENTION BY SELLERS; CERTAIN ACCESS. Sellers shall not
dispose of or destroy any books or records relating to the Purchased Assets
or Sellers' conduct of the Business between January 1, 1994 and the Closing
Date (the "Books and Records") without complying with applicable guidelines
promulgated by the Internal Revenue Service or Revenue Canada, as applicable
and without first offering, by written notice at least 60 days before the
date of intended disposition or destruction, to turn over possession thereof
to Purchaser. Sellers shall allow Purchaser access to the Books and Records,
during the normal working hours of the facility where they are located or
stored and upon reasonable notice, and Purchaser shall have the right at its
own expense to make copies of the Books and Records, provided, however, that
any such access or copying shall be had or done in such a manner as not to
interfere with the normal conduct of Sellers' business. Sellers also agree to
allow Purchaser and Purchaser's independent public accountants to have access
to the Books and Records and such other information, excluding the Writedown
Documents, as shall be reasonably necessary for Purchaser to prepare, and for
such independent public accountants to audit such financial statements as may
be required to be presented for the Division as a "predecessor company," in a
registration statement filed by Purchaser or any successor corporation with
the Securities and Exchange Commission under the Securities Act.
6.15 INTRACOMPANY ACCOUNTS. Notwithstanding anything to the contrary set
forth herein all amounts owed or payable by the Business to, or to the
Business by, Sellers or any Affiliate of Sellers, including officers,
stockholders or employees Affiliated with the Division, shall be settled and
paid immediately prior to the Closing Date with no payment made by any party
to this Agreement.
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6.16 INSURANCE.
(a) For a period of five years following the Closing Date,
Purchaser shall, at its own expense, maintain insurance policies for
worldwide aviation products liability and general liability of types similar
to those currently maintained by Sellers and in amounts as set forth on
Schedule 6.16, it being agreed and understood that Purchaser shall, at its
own expense. increase the amount of its aviation liability insurance to not
less than $20 million within 90 days of Closing. All such policies shall be
endorsed as follows:
(i) To name Sellers, their Affiliates, and each of their
respective directors, officers, employees and agents, and each of their
heirs, executors, successors and assigns (collectively, the "Seller Insured
Parties") as additional insureds or named insureds (with respect to claims
made policies) with respect to claims and actions arising out of or relating
to:
(A) the conduct by Purchaser or Sellers or any Affiliate
of Purchaser or Sellers of the Business at any time prior to or after the
Closing Date, including, without limitation, liability of the types
customarily covered by the following types of insurance coverage (A) aviation
liability; (B) automobile liability; (C) workers' compensation; or (D)
general liability;
(B) the sale of products by Purchaser or Sellers or any
Affiliate of Purchaser or Sellers in respect of the Business made prior to or
after the Closing Date;
(ii) to provide that coverage is primary and without right of
contribution from any insurance that the Seller Insured Parties may now carry
or hereafter choose to carry;
(iii) to provide a severability of interest clause protecting
the Seller Insured Parties as though a separate policy had been issued to
each, but without increasing the overall limit of liability or aggregate:
(iv) to provide that if at any time Purchaser fails to
maintain the insurance as stated herein, then the Seller Insured Parties
shall have the right, but not the duty, to pay premiums in order to maintain
in effect the insurance required hereunder for the benefit of the Seller
Insured Parties; provided, however, that in the event that the Seller Insured
Parties pay such premiums as described above, Purchaser shall immediately
reimburse the Seller Insured Parties by wire transfer of immediately
available funds; and
(v) to provide that the Seller Insured Parties shall receive
sixty (60) days written notice of cancellation or material change in coverage
prior to such cancellation or material change being effective to the Seller
Insured Parties.
Purchaser shall provide, or shall cause to be provided a certificate of
insurance issued to the Seller Insured Parties prior to the Closing Date and
promptly upon each insurance renewal thereafter and upon the increase of the
aviation liability insurance described above, evidencing that the insurance
has been endorsed to include the provisions as required herein and such
certificate shall provide a waiver of subrogation rights of Tri-Star.
(b) For a period of five (5) years following the Closing Date,
Sellers shall, at their own expense, maintain insurance policies for
worldwide aviation products liability and general liability of types similar
to those currently maintained by Purchaser and in the same amounts, as set
forth on Schedule 6.16. All such policies shall be endorsed as follows:
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(i) To name Purchaser, its Affiliates, and each of their
respective directors, officers, employees and agents, and each of their
heirs, executors, successors and assigns (collectively, the "Purchaser
Insured Parties") as additional insureds or named insureds (with respect to
claims made policies) with respect to claims and actions arising out of or
relating to:
(A) the conduct by Sellers or any Affiliate of Sellers
of the Business at any time prior to the Closing Date, including, without
limitation, liability of the types customarily covered by the following types
of insurance coverage (A) aviation liability; (B) automobile liability; (C)
workman's compensation; or (D) general liability;
(B) the sale of products by Sellers or any Affiliate of
Sellers in respect of the Business made prior to the Closing Date;
(ii) to provide that coverage is primary and without right of
contribution from any insurance that the Seller Insured Parties may now carry
or hereafter choose to carry;
(iii) to provide a severability of interest clause protecting
the Purchaser Insured Parties as though a separate policy had been issued to
each, but without increasing the overall limit of liability or aggregate;
(iv) to provide that if at any time Sellers fail to maintain
the insurance as stated herein, then the Purchaser Insured Parties shall have
the right, but not the duty, to pay premiums in order to maintain in effect
the insurance required hereunder for the benefit of the Purchaser Insured
Parties; provided, however, that in the event that the Purchaser Insured
Parties pay such premiums as described above, Purchaser shall immediately
reimburse the Purchaser Insured Parties by wire transfer of immediately
available finds; and
(v) to provide that the Purchaser Insured Parties shall
receive sixty (60) days written notice of cancellation or material change in
coverage prior to such cancellation or material change being effective to the
Purchaser Insured Parties.
Sellers shall provide, or shall cause to be provided, a certificate of
insurance issued to the Purchaser Insured Parties on the Closing Date and
promptly upon each insurance renewal thereafter, evidencing that the
insurance has been endorsed to include the provisions as required herein.
6.17 [INTENTIONALLY OMITTED.]
6.18 NON-ASSIGNABLE WARRANTY. To the extent any third-party product
warranties are not assignable to, or enforceable by, Purchaser, Seller shall
at Purchaser's expense cooperate with Purchaser and use reasonable commercial
efforts to attempt to enforce any warranty claims thereunder on Purchaser's
behalf but shall not be obligated to file suit to enforce such warranty
claims.
6.19 TAX MATTERS. Sellers and Purchaser shall cooperate fully with each
other and make available or cause to be made available to each other in a
timely fashion such tax data, prior tax returns and filings and other
information as may be reasonably required for the preparation by Purchaser or
Sellers of any tax returns, elections, consent, certificates or other
documents required to be prepared or filed by Purchaser or Sellers and any
audit or other examination by any taxing authority, or judicial or
administrative proceeding relating to liability for Taxes. Purchaser and
Sellers will each retain and make available to the other party during normal
business hours and upon reasonable notice all records and other information
which may be relevant to any such tax return, document, audit or examination,
proceeding or determination, and will each provide the other party with any
final determination of any such audit or examination, proceeding or
determination that affects any
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amount required to be shown on any tax return of the other party for any
period. Sellers will retain copies of all tax returns supporting work
schedules and other records relating to tax periods or portions thereof
ending prior to or on the Closing Date.
At the Closing, Purchaser and Sellers shall deliver to each other such
properly completed resale exemption certificates and other similar
certificates or instruments as are necessary to claim available exemptions
from the payment of sales, transfer, use or other similar Taxes under
applicable law.
All real and personal property Taxes, state and local ad valorem Taxes
and assessments applicable to the Business or the Purchased Assets shall be
prorated by the parties as of the Closing Date, and all such Taxes applicable
to periods of time prior to the Closing Date shall be the sole obligation
responsibility and expense of Sellers. All such assessments and Taxes
applicable to periods after the Closing Date shall be the sole obligation,
responsibility and expense of Purchaser.
At its election, Purchaser may use the "Alternative Procedure" provided
in Section 5 of Revenue Procedure 84-77 with respect to filing and furnishing
Internal Revenue Service Forms W-2, W-3 and 941 to Transferred Employees for
the 1996 calendar year; PROVIDED, HOWEVER, that Purchaser shall provide
written notice to Sellers of such election at least five (5) calendar days
prior to Closing. Under such "Alternative Procedure", (i) Sellers and
Purchaser each shall report on a predecessor-successor basis as set forth in
such Revenue Procedure, (ii) Sellers shall be relieved from furnishing Forms
W-2 to all Transferred Employees and (iii) Purchaser shall assume the
obligations of Sellers to furnish such Forms W-2 to such Transferred
Employees for the full 1996 calendar year. Purchaser also shall use such
similar procedures and make similar elections under state or local tax laws.
Purchaser shall be responsible for filing and furnishing Internal Revenue
Service Forms W-2, W-3 and 941 for the full 1996 calendar year.
6.20 EMPLOYEES. For a period commencing on the date of this Agreement
and ending two (2) years following the Closing Date, (i) the Sellers shall
not, and shall cause their Affiliates not to, without the prior written
consent of Purchaser, offer employment, to any person currently employed by
the Division and (ii) Purchaser shall not, and shall cause its subsidiaries
not to, without the prior written consent of Sellers, offer employment to any
employee of Sellers not currently employed exclusively in connection with the
Division.
6.21 401(K) SPINOFF. As of the Closing Date, Sellers shall make all
contributions (including employee contributions within the control of Sellers
matching contributions and other employer contributions) provided for under
the Sellers' 401(k) Plan (the "Seller 401(k) Plan") to the Seller 401(k) Plan
attributable to service and compensation through the Closing Date, whether or
not such contributions are due under the terms of the Seller 401(k) Plan,
Sellers shall, to the extent legally permissible, cause a spinoff and
transfer in compliance with Section 414(1) of the Code from the trust for the
Seller 401(k) Plan to a trust established by and for a defined contribution
savings plan qualified under Section 401(a) of the Code maintained or
established by Purchaser ("Purchaser's 401(a) Plan") of an amount in cash
equal to the aggregate account balances, as of the date of such transfer, of
the Transferred Employees (as defined in Section 6.9(a)) who are participants
under the Purchaser's 401(a) Plan as of such transfer date; PROVIDED,
HOWEVER, that Purchaser shall assume no liability for the valuation of the
accounts of the Transferred Employees under the Seller 401(k) Plan. Any such
transfer shall occur as soon as practicable following the later of (i) the
Closing Date, (ii) the designation (or establishment or amendment, if
necessary) of Purchaser's 401(a) Plan, (iii) the receipt by Sellers of a
favorable determination letter issued by the Internal Revenue Service for the
Purchaser's 401(a) Plan or an opinion of counsel of Purchaser reasonably
satisfactory to Sellers opining that the Purchaser's 401(a) Plan is a
qualified plan under Sections 401(a) of the Code, (iv) an opinion of counsel
of Purchaser reasonably satisfactory to Sellers opining that the Purchaser's
401(a) Plan contains all provisions necessary to permit a transfer of assets
in accordance with Section 414(1) of the Code and the regulations thereunder,
from the Seller 401(k) Plan to Purchaser's 401(a) Plan, including, but not
limited to, for example an opinion that Purchaser's
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401(a) Plan contains all provisions necessary to avoid an impermissible
cutback under Section 411(d)(6) of the Code with respect to the benefits,
rights and features associated with the amounts transferred from the Seller
401(k) Plan, and, if applicable, (v) the expiration of thirty days after both
Purchaser and Sellers have filed Form 5310-A, if necessary, with the Internal
Revenue Service. The Purchaser's 401(a) Plan shall provide that any
Transferred Employee that was eligible to participate under the Seller 401(k)
Plan shall immediately be eligible to participate under the Purchaser's
401(a) Plan.
6.22 TRI-STAR ACQUISITION. Purchaser and its Affiliates shall promptly
notify Sellers of any indications that the Purchaser or one of its Affiliates
may not be able to consummate the acquisition of Tri-Star on the Closing Date.
6.23 AEROSPACE SEVERANCE PLAN. Sellers covenant and agree not to amend
or modify the Aerospace Severance Plan in any respect prior to or after
Closing without the prior written consent of Purchaser.
ARTICLE 7.
CLOSING CONDITIONS
7.1 CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE. The obligations of
Purchaser to consummate the transactions contemplated by this Agreement and
to pay the Purchase Price are subject to the fulfillment on or before the
Closing Date or waiver thereof of each of the following conditions:
7.1.1 REPRESENTATIONS AND WARRANTIES OF SELLERS, COMPLIANCE WITH
AGREEMENT. The representations and warranties of Sellers in this
Agreement shall be true and correct in all material respects on and as of
the Closing Date with the same effect as though all such representations
and warranties had been made as of such date, except for any such
representations and warranties that are expressly made as to time or a
specific date (which need only be true and correct in all material
respects as to such time or date). Sellers shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or
complied with by them on or before the Closing Date. Each Seller shall
deliver to Purchaser a certificate of an authorized officer and secretary,
dated the Closing Date, to that effect.
7.1.2 BILL OF SALE. Purchaser shall have received from Sellers a
Bill of Sale, executed by Sellers, covering the Purchased Assets in the
form of Exhibit G attached hereto.
7.1.3 NON-COMPETITION AGREEMENT. Purchaser shall have received
from Sellers a Non-Competition Agreement between Sellers and Purchaser,
executed by Sellers, substantially in the form of Exhibit C attached
hereto.
7.1.4 ASSIGNMENT AND ASSUMPTION AGREEMENT. Purchaser shall have
received an Assignment and Assumption Agreement, executed by Sellers,
substantially in the form of Exhibit H attached hereto, with respect to
the Purchased Assets.
7.1.5 REQUIRED CONTRACTS. Sellers shall have assigned to
Purchaser each of the contracts listed on Schedule 7.13 attached hereto
or, alternatively, the Purchaser shall have received satisfactory
assurances that it will be granted a new contract on terms substantially
as favorable, when taken as a whole, as that with the respective Seller,
of each such contract.
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7.1.6 [Intentionally omitted]
7.1.7 ABSENCE OF MATERIAL CHANGE. There shall have occurred no
Material Adverse Change between the date hereof and the Closing Date.
7.1.8 CONCURRENT CLOSING OF TRI-STAR TRANSACTION. The closing,
concurrently with or immediately following the Closing, of the acquisition
by Purchaser or one or more subsidiaries of Purchaser of Tri-Star pursuant
to that certain Agreement and Plan of Merger between Purchaser and Tri-Star
dated as of August 28, 1996.
7.1.9 REGULATORY APPROVALS. Receipt by Purchaser and Sellers of
all regulatory approvals necessary for consummation of the acquisition of
all of the Purchased Assets without any requirement to divest any assets
of the Division or Tri-Star, including, if applicable, the expiration (or
early termination) of waiting periods under the HSR Act and satisfaction
of all other applicable legal requirements.
7.1.10 LEASES AND OTHER INSTRUMENTS OF CONVEYANCE. With respect
to the leases included in the Purchased Assets Purchaser shall have
received from Sellers an Assignment and Assumption of Leases, executed by
Sellers, substantially in the form of Exhibit I attached hereto, together
with a Landlord's Estoppel Certificate executed by each landlord,
substantially in the form of Exhibit J attached hereto.
7.1.11 CONSENTS. Purchaser shall have received from Sellers copies of
all written consents, required for Sellers to transfer the Purchased
Assets, including specifically the consent of the Bank Lenders to Aviall,
Inc., to the sale of the Purchased Assets. With respect to any contract
listed on Schedule 7.1.5, for which no consent to assignment is
delivered, the Purchaser shall have received the assurances with respect
to the grant of new contracts as contemplated by Section 7.1.5.
7.1.12 RESOLUTIONS; INCUMBENCY. Purchaser shall have received from
Sellers copies of resolutions adopted by the Board of Directors and the
stockholder of each Seller, authorizing the execution and delivery of this
Agreement and each document to be executed by such Seller and the
consummation of the transactions contemplated hereby, in each case
certified by the Secretary or Assistant Secretary of such Seller, together
with customary certifications as to the incumbency of relevant officers
of such party.
7.1.13 EVIDENCE OF NO LIENS. Sellers shall deliver to Purchaser as
of the Closing Date, in form and substance satisfactory to counsel for
Purchaser, Forms UCC-3 or related termination statements, satisfactions
and releases, along with such other documents as Purchaser and its counsel
shall reasonably require to evidence the termination of all Liens related
to the Purchased Assets other than the liens set forth on Schedule 7.1.13.
7.1.14 CERTIFICATE OF GOOD STANDING. Purchaser shall have received
certificates of good standing (or equivalent certificates) with respect to
Sellers issued by the Office of the Secretary of State of Delaware in the
case of ASI and the appropriate governmental authority of the Province of
Ontario, Canada in the case of Aviall Canada, in each case dated not more
than ten (10) days prior to the Closing Date.
7.1.15 CERTIFICATE OF INCORPORATION; BY-LAWS. Purchaser shall have
received copies of the Certificates of Incorporation or equivalent charter
documents of Sellers certified by the Secretary of State of the State of
Delaware in the case of ASI and the appropriate governmental authority of
the
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Province of Ontario, Canada in the case of Aviall Canada, and Bylaws
of Sellers, certified by the Secretary or Assistant Secretary of each
Seller.
7.1.16 MANAGEMENT SERVICES AGREEMENT. Purchaser shall have received
from Sellers, the Management Services Agreement, executed by Sellers,
substantially in the form of Exhibit E attached hereto.
7.1.17 SUBLEASE. Purchaser shall have received from Sellers the
Sublease for the location at 2527 Willowbrook, Dallas, Texas, executed by
ASI, substantially in form of Exhibit F attached hereto.
7.1.18 NO INJUNCTION. At the Closing Date there shall be no pending
or threatened litigation by a governmental authority or a third party nor
shall be any injunction, restraining order or decree of any nature of any
court or governmental authority of competent jurisdiction that is in
effect that restrains or prohibits the consummation of the transactions
contemplated by this Agreement.
7.1.19 AVAILABILITY OF FINANCING. Purchaser shall have received
debt financing from one or more banks or other financial institutions on
terms and conditions acceptable to Purchaser which,, after giving effect
to the contemplated equity capital of up to $22 million, is in an amount
sufficient in Purchaser's sole discretion, to consummate the transactions
contemplated under this Agreement and the Tri-Star agreement referred to
in Section 7.1.8 and to provide adequate working capital to operate the
Business and the business of Tri-Star immediately thereafter, it being
understood that debt financing on the terms set forth in the Commitment
Letter shall be deemed to be acceptable to Purchaser.
7.1.20 OPINIONS OF COUNSEL. Purchaser shall have received an
opinion of Haynes and Boone, LLP, counsel for ASI, substantially in the
form attached hereto as Exhibit K and an opinion of Baker & McKenzie,
counsel for Aviall Canada, substantially in the form attached hereto as
Exhibit L.
7.1.21 OPINION OF DELAWARE COUNSEL. Purchaser shall have received
from Morris, Nichols, Arsht & Tunnell, counsel to Aviall, Inc. in
connection with this Agreement and the transactions contemplated hereby,
an opinion dated as of the Closing Date, to the effect that no approval of
the stockholders of Aviall, Inc. is required in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
7.1.22 NON-FOREIGN STATUS. Purchaser shall have received an
affidavit of non-foreign status from ASI pursuant to Treasury Regulation
Sec. 1.1445-2.
7.1.23 CERTIFICATE OF SELLERS. Bourjeaurd shall have received from
Sellers that certain Certificate and Release, dated as of the Closing Date,
substantially in the form attached hereto as Exhibit O.
7.2 CONDITIONS TO SELLERS' OBLIGATION TO CLOSE. The obligations of
Sellers to Co the transactions contemplated by this Agreement are subject to
the fulfillment on or before the Closing Date or waiver thereof of each of
the following conditions:
7.2.1 REPRESENTATIONS AND WARRANTIES OF PURCHASER; COMPLIANCE
WITH AGREEMENT. The representations and warranties of Purchaser in this
Agreement shall be true and correct in all material respects on and as of
the Closing Date with the same effect as though all such representations
and warranties had been made as of such date, except for any such
representations and warranties that are
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made as to time or a specific date (which need only be true and correct in
all material respects as to such time or date). Purchaser shall have
performed, satisfied and complied in all material respect with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by it on or before the Closing Date.
Purchaser shall deliver to Sellers a certificate of its President and
Secretary, dated the Closing Date, to that effect In addition, Bourjeaurd
will have delivered a certificate to the Sellers substantially in the form
of Exhibit N hereto on the date hereof and an update of such certificate
as of the Closing Date.
7.2.2 PURCHASE PRICE. Sellers shall have received confirmation of
federal funds wire transfer to the account or accounts designated by ASI,
for the benefit of Sellers, of funds in an amount equal to the Purchase
Price.
7.2.3 ASSIGNMENT AND ASSUMPTION AGREEMENT. Sellers shale have
received from Purchaser an Assignment and Assumption Agreement, executed
by Purchaser, with respect to the Assumed Liabilities which Purchaser has
agreed to assume hereunder, substantially in the form of Exhibit H hereto.
7.2.4 RESOLUTIONS, INCUMBENCY. Sellers shall have received from
Purchaser copies of resolutions adopted by the Board of Directors of
Purchaser authorizing the execution and delivery of this Agreement and
each document to be executed by Purchaser and the consummation of the
transactions contemplated hereby, in each case certified by the Secretary
of Purchaser, together with customary certifications as to the incumbency
of relevant officers thereof.
7.2.5 CERTIFICATE OF GOOD STANDING. Sellers shall have received a
Certificate of Good Standing of Purchaser issued by the Office of the
Secretary of State of Delaware dated not more than ten (10) days prior to
the Closing Date.
7.2.6 CERTIFICATE OF INCORPORATION; BY-LAWS. Sellers shall have
received copies of the Certificate of Incorporation of Purchaser certified
by the Secretary of State of the State of Delaware, and Bylaws of Purchaser
certified by the Secretary of Purchaser.
7.2.7 SUBLEASE. Sellers shall have received from Purchaser the
Sublease for the location at 2527 Willowbrook Dallas, Texas, executed by
Purchaser, substantially in form of Exhibit F attached hereto.
7.2.8 [Intentionally omitted]
7.2.9 REGULATORY APPROVALS. Receipt by Purchaser and Sellers of
all regulatory approvals necessary for consummation of the sale of the
Purchased Assets.
7.2.10 NO INJUNCTION. At the Closing Date there shall be no
injunction, restraining order or decree of any nature of any court or
governmental authority of competent jurisdiction that is in effect that
restrains or prohibits the consummation of the transactions contemplated
by this Agreement.
7.2.11 LEASES AND OTHER INSTRUMENTS OF CONVEYANCE. With respect to
the leases included in the Purchased Assets, Sellers shall have received
from Purchaser an Assignment and Assumption of Leases, executed by
Purchaser, substantially in the form of Exhibit 1 attached hereto.
7.2.12 OPINION OF COUNSEL. Sellers shall have received an opinion
of Sherrard & Roe, PLC, counsel for Purchaser, substantially in the form
attached hereto as Exhibit M.
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7.2.13 CONSENT OF BANK LENDERS. Sellers shall have received consent
of the Bank Lenders to the sale of the Purchased Assets.
7.2.14 FAIRNESS OPINION. Sellers shall have received from Merrill
Lynch & Co., Inc., financial advisor to Sellers, its opinion dated as of a
recent date, substantially to the effect that the consideration to be
received by Sellers hereunder in consideration for the Purchased Assets and
Assumed Liabilities as contemplated herein, is fair or reasonable from a
financial point of view, to the stockholders of Aviall, Inc.
ARTICLE 8
INDEMNIFICATION
8.1 INDEMNITY BY SELLERS. Without limitation of any other provision of
this Agreement or any other rights and remedies available to Purchaser at law
or in equity, Sellers, jointly and severally, covenant and agree to
indemnify, defend and hold harmless Purchaser and its Affiliates,
stockholders, officers, directors, employees, representatives, successors and
assigns (the "Purchaser Indemnified Parties") from all liabilities, losses,
claims, demands, damages, judgments, interest, penalties, fines, costs and
expenses, whether or not arising out of third-party claims (including without
limitation, diminution in value and consequential damages, reasonable
attorneys' and accountants' fees and expenses) (collectively, "Losses")
actually or allegedly arising out of, in connection with or relating to (i)
any breach of any covenant or agreement of Sellers or any inaccuracy in any
of the representations and warranties of Sellers in this Agreement or in any
certificate delivered by Sellers pursuant to this Agreement: (ii) claims,
lawsuits, actions and proceedings by Sellers' employees, former employees or
applicants to Sellers, or any beneficiary or executor of the estate of any of
the foregoing, relating to employment, except to the extent such claims and
liabilities are an Assumed Liability; (iii) claims, lawsuits, and other
liabilities arising out of Sellers' conduct of the Business of the Division
on or before the Closing Date, to the extent that such losses described in
clauses (i), (ii) and (iii) hereof are not an Assumed Liability and together
with amounts paid under Section 2.1 (f) and (g) exceed $300,000 in the
aggregate; (iv) all uninsured amounts paid or incurred by the Purchaser
Indemnified Patties pursuant to Section 2.1 (g), or any amounts paid to
customers by the Purchaser Indemnified Parties pursuant to Section 2.1(f),
for product warranty losses not paid by the applicable manufacturer but only
to the extent that such Losses, together with all Losses under clauses (i),
(ii), and (iii) exceed $300,000 in the aggregate and relate to products sold
by the Division prior to the Closing Date; or (v) the Excluded Assets or
Retained Liabilities. Purchaser, on behalf of itself and the Purchaser
Indemnified Parties, agrees to use reasonable commercial efforts to pursue
any warranty and/or insurance for claims under Sections 2.1 (f) and (g), but
shall not be obligated prior to seeking any indemnity from Sellers under the
provision of this Article 8 to file suit to enforce such warranty or
insurance claims. It is understood and agreed that Sellers' obligations in
the aggregate under clauses (i), (ii), (iii), (iv) and (v) of this Section
8.1 shall be limited to the amount of the Purchase Price. In addition, with
respect to Section 4.8 hereof, Sellers shall not be deemed to be in breach of
Section 4.8 and shall not indemnify Purchaser under the provisions of this
Article 8 for Sellers failure to possess or transfer to Purchaser
certificates of conformance with respect to any inventory item included
within the Purchased Assets on the Closing Date, unless Purchaser has
attempted to and failed to obtain such certificates of conformance using
reasonable commercial efforts following one hundred twenty (120) days after
Purchaser's written request for certification from the manufacturer of such
inventory item.
8.2 INDEMNITY BY PURCHASER. Without limitation of any other provision
of this Agreement or any other rights and remedies available to Sellers at
law or in equity, Purchaser covenants and agrees to indemnify, defend and
hold harmless Sellers and their Affiliates, stockholders, officers,
directors, employees. representatives, successors and assigns (the "Seller
Indemnified Parties") from all liabilities, losses, claims, demands, damages,
judgments, interest, penalties, fines, costs and expenses whether or not
arising out of third-party claims (including reasonable attorneys' and
accountants' fees and expenses) actually or allegedly arising
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out of, or in connection with, or relating to (i) any inaccuracy in any of
the representations and warranties of Purchaser in this Agreement or any
certificate delivered by Purchaser pursuant to this Agreement (other than
Exhibit N attached hereto) and (ii) the Assumed Liabilities.
8.3 PROCEDURE AND PAYMENT. If, after the Closing Date either Seller or
Purchaser (the "Indemnitee") shall receive notice of any third-party claim or
alleged third-party claim asserting the existence of any matter of a nature
as to which the Indemnitee has been indemnified against under this Article 8
by the other party hereto (the "Indemnitor"), or if such Indemnitee wishes to
assert the existence of any other matter as to which the Indemnitee has been
indemnified under this Article 8, Indemnitee shall promptly notify Indemnitor
in writing with respect thereto, which notice shall state the facts upon
which the Indemnitee makes such claim for indemnification, together with
reasonable documentation of such claim (the "Notice of Claim"). Such notice
shall be given within ninety (90) days of the date upon which the Indemnitee
becomes aware of the Claim, provided that no failure by an Indemnitee in
giving such Notice of Claim shall reduce or otherwise affect the obligation
of the Indemnitor to indemnify the Indemnitee with respect thereto, except to
the extent that the Indemnitor demonstrates that the defense of such action
is prejudiced by the Indemnitee's failure or delay to give such notice.
Indemnitor shall have the right to defend against any such third-party claim
provided (i) Indemnitor shall, within ten (10) days after the giving of such
Notice by Indemnitee, notify Indemnitee that it disputes such claim, give
reasons therefor, and that Indemnitor will, at its own cost and expense,
defend the same, and (ii) such defense is instituted and continuously
maintained in good faith by Indemnitor. In such event the defense may, if
necessary, be maintained in the name of Indemnitee. Indemnitee may, if it so
elects, designate its own counsel to participate with the counsel selected by
Indemnitor in the conduct of such defense. Indemnitor shall not permit any
lien or execution to attach to the assets of the Indemnitee as a result of
such claim, and the Indemnitor shall provide such bonds or deposits as shall
be necessary to prevent the same. In any event Indemnitee shall be kept fully
advised as to the status of such defense. If Indemnitor shall be given notice
of a claim as aforesaid and shall fail to notify Indemnitee of its election
to defend such claim within the time and as prescribed herein, or after
having so elected to defend such claim shall fail to institute and maintain
such defense in accordance with the foregoing, or if such defense shall be
unsuccessful then, in any such event, the Indemnitor shall fully satisfy and
discharge the claim within ten (10) days after notice from Indemnitee
requesting Indemnitor to do so.
8.4 OTHER CLAIMS. In the event one party hereunder should have a claim
for indemnification that does not involve a claim or demand being asserted by
a third party, the party seeking indemnification shall promptly send notice
of such claim to the party from whom indemnification is sought. If the latter
disputes such claim, such dispute shall be resolved by agreement of the
parties.
8.5 SUBROGATION. The rights of any Indemnitor shall be subrogated to
any rights of action which the Indemnitee may have against any other person
with respect to any matter giving rise to a claim for indemnification
hereunder.
ARTICLE 9.
TERMINATION
9.1 TERMINATION DATE. In the event that the Closing has not occurred on
or before September 16, 1996 (the "Termination Date"), the right, duties and
obligations of the parties under this Purchase Agreement other than the
duties and obligations set forth in Section 102 and 10.7 hereof, shall be
terminated (except for a breach occurring prior to termination), unless the
parties agree in writing to extend such date.
9.2 TERMINATION FEE. In the event Sellers do not consummate the
acquisition contemplated hereby because the conditions to the Closing set
forth in Section 7.2.13 or 7.2.14 have not been satisfied, or in the event
Sellers terminate this Agreement pursuant to the exercise of their fiduciary
duties in accordance with
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Section 6.6, then Sellers shall immediately pay to Purchaser an amount in
cash equal to the total amount of third-party fees and expenses directly
incurred by Purchaser solely in connection with the acquisition contemplated
hereby (including, without limitation, fees and expenses payable to Sherrard
& Roe. PLC, Weil, Gotshal & Manges LLP, Arthur Andersen LLP, Aon Risk
Services Inc., and Equitable Securities Corporation) not to exceed $350,000
in the aggregate. This fee shall serve as the exclusive remedy to Purchaser
for any failure by Sellers to close the transactions contemplated by this
Agreement as a result of the failure to satisfy the conditions to Closing set
forth in Sections 7.2.13 or 7.2.14 or as a result of termination of this
Agreement by Sellers pursuant to their exercise of their fiduciary duties in
accordance with Section 6.6 or for a breach of Sellers' representation and
warranty in Section 4.33 of this Agreement.
ARTICLE 10.
MISCELLANEOUS
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Unless otherwise stated
herein, each party hereto covenants and agrees that its representations and
warranties contained in this Agreement and in any instrument of sale,
assignment, conveyance and transfer executed and delivered pursuant to this
Agreement shall survive the Closing for a period of eighteen (18) months;
provided, however, that Sellers' representations and warranties in Sections
4.14, 4.17, and 421 (other than subparagraphs (c), (e) and (g) thereunder)
shall continue until the expiration of the applicable statute of limitations
and Sellers' representations and warranties in Sections 42 and 43 and
Purchaser's representations and warranties in Sections 52 and 53 shall
continue indefinitely and without limit.
10.2 DISCLOSURE AND CONFIDENTIALITY.
(a) The parties agree to hold the terms and conditions of this
Agreement and all other agreements contemplated herein, in strict confidence
and not to make any disclosure with respect thereto, publicly or privately,
other than as jointly agreed by the parties. If a party is required to make
any such disclosure by applicable law or stock exchange rules or regulations,
it must first provide to the other party the content of the proposed
disclosure, the reasons that such disclosure is required by law or stock
exchange rules or regulations, and the time and place that the disclosure
will be made; provided that the other party shall have the right to review
and comment on such proposed disclosure statement prior to its release.
(b) Except as reasonably necessary in connection with Purchaser's
efforts to obtain the financing needed to accomplish the transactions
contemplated by this Agreement, or to the extent required by law, Purchaser
shall not disclose or use, and it shall cause its directors, employees,
accountants and other agents and representatives and other person or
organization who is considering providing financing to the Purchaser in
connection with this Agreement and their respective employees, agents,
counsel, accountants and advisors (collectively, the "Representatives"), not
to disclose or use any information with respect to Sellers, the Division, or
its business or assets furnished, or to be furnished by Sellers to Purchaser
or any Representative of Purchaser in connection herewith or otherwise
obtained by Purchaser or any Representative of Purchaser pursuant to this
Agreement (collectively, ("Confidential Information"), at any time or in any
manner other than in connection with its evaluation of the completion of the
transactions contemplated by this Agreement; provided that Purchaser may
disclose Confidential Information to a person or organization which is
considering providing financing to Purchaser in connection with this
Agreement after such person or organization has entered into a
confidentiality agreement with Sellers on substantially the same terms as the
confidentiality agreement dated March 28, 1996 between ASI and Equitable
Securities, financial advisor to Purchaser; and further provided that the
obligation of Purchaser under this Section 10.2(b) shall not apply to any
information which Purchaser can demonstrate (i) is generally available to or
known by the public other than as a result of
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improper disclosure by Purchaser or (ii) is obtained by Purchaser from a
source other than Seller, provided that the source was not bound by a duty of
confidentiality to Seller or another party with respect to such information.
If this Agreement is terminated pursuant to its terms, Purchaser shall
promptly return to Sellers and shall insure that each of its Representatives
returns to Sellers, any Confidential Information in its or their possession.
In the event of any inconsistency between the provisions of this paragraph
and the terms of the confidentiality agreements between Sellers, on the one
hand, and Purchaser, Equitable Securities or other Representatives, on the
other hand, the terms of such confidentiality agreements shall prevail.
10.3 BROKERS. Each party warrants to the other that it has not employed
or used the services of any broker or finder in connection with the
transaction contemplated by this Agreement except that Purchaser has used the
services of Equitable Securities and Purchaser shall pay all fees and
expenses due to Equitable Securities. Each party agrees to indemnify and hold
the other party harmless from any loss or damage arising from any claim made
by any broker or finder allegedly based on the actions of such indemnifying
party.
10.4 CONSTRUCTION. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware without giving effect to
conflicts of law provisions. This Agreement and its subject matter have
substantial contacts with Delaware, and all actions, suits, or other
proceedings with respect to this Agreement shall be brought only in a court
of competent jurisdiction sitting in New Castle County, Delaware or in the
Federal District Court having jurisdiction over that County. In any such
action, suit, or proceeding, such court shall have personal jurisdiction of
all of the parties hereto, and service of process upon them under any
applicable statutes, laws, and rules shall be deemed valid and good.
10.5 BULK SALES. Sellers and Purchaser hereby waive compliance with the
Uniform Commercial Code Bulk Sales Act in effect in the State of Texas, to
the extent in effect or applicable. Sellers jointly and severally covenant
and agree to indemnify, hold harmless and defend Purchaser from, for and
against any liability, damage, loss, deficiency or expense (including
reasonable attorney's fees) which Purchaser may suffer or sustain as a result
of any claims made by creditors of Sellers against Purchaser as a direct
result of a failure of the Sellers to comply with the Uniform Commercial Code
Bulk Sales Acts to the extent in effect in the State of Texas. Sellers and
Purchaser hereby agree to pursue all available exemptions from the bulk sales
laws in effect in Ontario and, to the extent that such exemptions are
unavailable prior to Closing, Sellers and Purchaser hereby waive compliance
with such laws, with it being understood that Sellers shall jointly and
severally indemnify Purchaser for any losses arising as a result of the
non-compliance with such laws, excluding in all events any failure of
Purchaser to pay any Assumed Liability.
10.6 AMENDMENTS. Any provision of this Agreement may be amended or
waived provided that any such amendment or waiver shall only be binding on a
party if set forth in a writing executed by such party.
10.7 EXPENSES. Except as provided in Sections 3.3(b) and 9.2 hereof,
each party hereto shall pay its own fees and expenses incurred in connection
with this transaction.
10.8 COMPLETENESS OF AGREEMENT. This Agreement and the Schedules hereto
and the other documents referred to or provided for herein represent the
entire contract among the parties with respect to the subject matter hereof,
and shall not be modified or affected by any offer, proposal, statement or
representation, oral or written, made by or for any party in connection with
the negotiation of the terms hereof.
10.9 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, personal
representatives, heirs and assigns, but neither the Agreement nor any of the
rights hereunder shall be assigned by any party hereto without the prior
written consent of the other party, provided that Sellers hereby consent to
the assignment by Purchaser of its benefits hereunder to its financing
sources as security for borrowings, to Tri-Star, any Affiliate of Tri-Star or
to any Affiliates of
33
<PAGE>
Purchaser including assignment of Purchaser's right to acquire the Canadian
assets to a Canadian Affiliate of Purchaser; subject to the Canadian
Affiliate assuming jointly and severally with the Purchaser all liabilities
and obligations related to the Purchased Assets hereunder and to indemnify
Sellers under the provisions of Article 8 hereof.
10.10 NOTICES. Any notice, request, demand, waiver, consent or other
communication required or permitted hereunder shall be in writing and shall
be deemed given when actually delivered, as follows:
To Purchaser: Maple Leaf Aerospace, Inc.
1408 Northridge
South Lake, Texas 76052
Attention: Quentin P. Bourjeaurd, President
With a copy to: Sherrard & Roe, PLC
424 Church Street Suite 2000
Nashville, Tennessee 37219
Attention: Donald I. N. McKenzie, Esq.
With a copy (which
shall not constitute
notice) to: Odyssey Partners, L.P.
31 West 52nd Street
New York, New York 10019
Attention: Stephen Berger
With a copy (which
shall not constitute
notice) to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Simeon Gold, Esq.
To Sellers: Aviall Services, Inc.
2055 Diplomat Drive
Dallas, Texas 75234
Attention: Jeffrey J. Murphy, Esq.
and
Aviall (Canada) Ltd.
2055 Diplomat Drive
Dallas, Texas 75234
Attention: Jeffrey J. Murphy, Esq.
With a copy to: Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202
Attention: Janice V. Sharry, Esq.
34
<PAGE>
or to such other person or address as a party shall furnish the other parties
in writing.
10.11 COUNTERPARTS. This Agreement and any of the ancillary agreements
contemplated hereby may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument, and shall become effective when one or more
counterparts have been signed by each of the parties hereto and delivered to
the other.
10.12 NO BENEFIT TO OTHERS. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto and their respective successors, personal representatives,
heirs, and permitted assigns, and they shall not be construed as conferring
any rights on any other persons, including without limitation, any employees
of Sellers.
10.13 HEADINGS. Information set forth in the Schedules hereto is deemed
to have been disclosed for all purposes of this Agreement and is incorporated
herein and made a part of this Agreement the headings contained in this
Agreement are inserted for convenience only and shall not constitute a part
hereof.
* * * * *
35
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
MAPLE LEAF AEROSPACE INC.
By: /s/ Quentin P. Bourjeaurd
--------------------------------------------
Quentin P. Bourjeaurd, President
By: /s/ Muzzi Mirza
--------------------------------------------
Muzzi Mirza, Vice President
AVIALL SERVICES, INC.
By: /s/ Eric E. Anderson
--------------------------------------------
Eric E. Anderson
President
AVIALL (CANADA) LTD.
By: /s/ Eric E. Anderson
--------------------------------------------
Eric E. Anderson
President
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
MAPLE LEAF AEROSPACE INC.
By: /s/ Quentin P. Bourjeaurd
-------------------------------------------
Quentin P. Bourjeaurd, President
By: /s/ Muzzi Mirza
-------------------------------------------
Muzzi Mirza, Vice President
AVIALL SERVICES, INC.
By: /s/ Eric E. Anderson
-------------------------------------------
Eric E. Anderson
President
AVIALL (CANADA) LTD.
By: /s/ Eric E. Anderson
-------------------------------------------
Eric E. Anderson
President
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
MAPLE LEAF AEROSPACE INC.
By: /s/ Quentin P. Bourjeaurd
-------------------------------------------
Quentin P. Bourjeaurd, President
By: /s/ Muzzi Mirza
-------------------------------------------
Muzzi Mirza, Vice President
AVIALL SERVICES, INC.
By:
-------------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
AVIALL (CANADA) LTD.
By:
-------------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE>
MAPLE LEAF AEROSPACE, INC.
1408 Northridge
South Lake, Texas 76052
September 16, 1996
BY FACSIMILE:
Aviall Services, Inc.
Aviall (Canada) Ltd.
2055 Diplomat Drive
Dallas, Texas 75234
Ladies and Gentlemen:
Reference is made to that certain Asset Purchase Agreement, dated as of
September 5, 1996, by and among Maple Leaf Aerospace, Inc., Aviall Services,
Inc. and Aviall (Canada) Ltd. (the "Agreement"). This letter will confirm
our agreement that the "Termination Date" for purposes of Article IX of the
Agreement has been extended to 11:59 p.m., New York City time, on September
18, 1996.
MAPLE LEAF AEROSPACE, INC.
By: /s/ M. Mirza
-------------------------------------------
M. Mirza
Vice President
Acknowledged and Agreed
as of September 16, 1996:
AVIALL SERVICES, INC.
AVIALL (CANADA) LTD.
By: /s/ ILLEGIBLE
-------------------------
Name:
Title:
<PAGE>
EXHIBIT A
CERTAIN DEFINED TERMS
"ACCOUNTS RECEIVABLE": as defined in Section 1.1.
"ADJUSTMENT PERIOD": as defined in Section 3.1.
"AFFILIATE": with respect to any person, means any other person controlling,
controlled by, or under common control with such first person.
"AGREEMENT": as defined in the first paragraph of this Agreement.
"ASI": as defined in the first paragraph of this Agreement
"ASSUMED LIABILITIES": as defined in Section 2.1.
"AVIALL CANADA": as defined in the first paragraph of this Agreement.
"BEST EFFORTS": means the efforts that a prudent person desirous of achieving
a result would use in similar circumstances to ensure that such result is
achieved as expeditiously as possible; provided, however, that an obligation
to use Best Efforts under this Agreement does not require the person subject
to that obligation to take actions that would result in a materially adverse
change in the benefits to such person of this Agreement and the Contemplated
Transaction.
"BOURJEAURD": as defined in the third Whereas clause of this Agreement.
"BUSINESS": as defined in the first Whereas clause of this Agreement.
"CASH EQUIVALENT": those items specified in Section 1.2 or as listed on
Schedule 1.2.
"CODE": means the Internal Revenue Code of 1986 as amended.
"CLOSING": as defined in Section 1.3.
CLOSING DATE": as defined in Section 1.3.
"CONTRACTS": as defined in Section 4.13.
"DIVISION": as defined in the first Whereas clause of this Agreement.
"EMPLOYEE BENEFIT PLAN": as defined in Section 4.21.
"ENVIRONMENTAL LAWS" means all federal, state, provincial local or foreign
laws (including common law), statutes, codes, ordinances, rules, regulations
or other requirement relating to the environment, or natural resources and
any transfer of ownership notification or approval statutes, and includes,
but is not limited to, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.) ("CERCLA"),
the Resource Conservation and Recovery Act (42 U.S.C. Section 6901
37
<PAGE>
Purchased Assets, the Assumed Liabilities, condition (financial or
otherwise), operating results, employee or customer relations, business
activities or business prospects of the Division.
"OCCURRENCE". as defined in Section 2.1.
"ORDINARY COURSE OF BUSINESS": an action taken by Sellers or Purchaser, as
the case may be, will be deemed to have been taken in the "Ordinary Course of
Business" only if:
(a) such action is consistent with past practices and is taken in the
ordinary course of normal day-to-day operations;
(b) such action is not required to be authorized by the board of directors
of Sellers or Purchaser, as the case may be, (or by any person or group of
persons exercising similar authority) and is not required to be
specifically authorized by the parent company (if any) of Sellers or
Purchaser, as the case may be.
"1996 INVENTORY": as defined in Section 3.1.
"PREPAID ASSETS": as defined in Section 1.1.
"PROPRIETARY RIGHTS": as defined in Section 1.1.
"PURCHASE PRICE": as defined in Section 3.1.
"PURCHASED ASSETS": as defined in Section 1.1.
"PURCHASER": as defined in the first paragraph of this Agreement.
"RECORDS": as defined in Section 1.1.
"REDEEMED LIABILITIES": as defined in Section 2.2.
"RETAINED LIABILITIES": as defined in Section 2.2.
"SALABLE": means inventory that is not technically obsolete nor broken and
that has the necessary documentation and certificates for sale in the
Ordinary Course of Business.
"SECURITIES ACT": means the Securities Act of 1933, as amended
"SELLER": as defined in the first paragraph of this Agreement.
"SELLER INDEMNIFIED PARTIES": as defined in Section 8.2.
"SELLER INSURED PARTIES": as defined in Section 6.15.1.
"SELLERS": as defined in the first paragraph of this Agreement.
"SELLERS' KNOWLEDGE": shall mean the actual knowledge after due and
reasonable inquiry, including inquiry of Quentin P. Bourjeaurd, of Sellers or
their respective executive officers or directors.
39
<PAGE>
===============================================================================
EXHIBIT 10.1
CREDIT AGREEMENT
among
MAPLE LEAF AEROSPACE, INC.,
AEROSPACE ACQUISITION CORP.,
AEROSPACE MERGER SUB I, INC. (and TRI-STAR
AEROSPACE, INC. as its successor by merger),
TRI-STAR AEROSPACE CO.
VARIOUS LENDING INSTITUTIONS,
and
BANKERS TRUST COMPANY,
AS AGENT
-------------------------------
Dated as of September, 1996
-------------------------------
===============================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
----
SECTION I. Amount and Terms of Credit. . . . . . . . . . . . . . . . . 1
1.01 Commitments . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Minimum Borrowing Amounts, etc. . . . . . . . . . . . . . . 4
1.03 Notice of Borrowing . . . . . . . . . . . . . . . . . . . . 4
1.04 Disbursement of Funds . . . . . . . . . . . . . . . . . . . 5
1.05 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.06 Conversions . . . . . . . . . . . . . . . . . . . . . . . . 7
1.07 Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . 8
1.08 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.09 Interest Periods. . . . . . . . . . . . . . . . . . . . . . 9
1.10 Increased Costs; Illegality; etc. . . . . . . . . . . . . . 10
1.11 Compensation. . . . . . . . . . . . . . . . . . . . . . . . 13
1.12 Change of Lending Office. . . . . . . . . . . . . . . . . . 13
1.13 Replacement of Banks. . . . . . . . . . . . . . . . . . . . 13
SECTION 2. Letters of Credit . . . . . . . . . . . . . . . . . . . . . 15
2.01 Letters of Credit . . . . . . . . . . . . . . . . . . . . . 15
2.02 Letter of Credit Requests . . . . . . . . . . . . . . . . . 17
2.03 Letter of Credit Participations . . . . . . . . . . . . . . 17
2.04 Agreement to Repay Letter of Credit Drawings. . . . . . . . 20
2.05 Increased Costs . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3. Fees; Commitments . . . . . . . . . . . . . . . . . . . . . 21
3.01 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.02 Voluntary Termination or Reduction of Total Unutilized
Revolving Loan Commitment . . . . . . . . . . . . . . . . 23
3.03 Mandatory Reduction of Commitments. . . . . . . . . . . . . 24
SECTION 4. Payments. . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.01 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . 25
4.02 Mandatory Repayments and Commitment Reductions. . . . . . . 26
4.03 Method and Place of Payment . . . . . . . . . . . . . . . . 31
4.04 Net Payments. . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5. Conditions Precedent. . . . . . . . . . . . . . . . . . . . 34
5.01 Execution of Agreement; Notes . . . . . . . . . . . . . . . 34
(i)
<PAGE>
PAGE
----
5.02 Officer's Certificate . . . . . . . . . . . . . . . . . . . 34
5.03 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . 34
5.04 Corporate Documents; Proceedings. . . . . . . . . . . . . . 34
5.05 Adverse Change, etc.. . . . . . . . . . . . . . . . . . . . 35
5.06 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 35
5.07 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.08 Consummation of the Acquisition . . . . . . . . . . . . . . 36
5.09 Refinancing . . . . . . . . . . . . . . . . . . . . . . . . 37
5.10 Consummation of the Equity Financing. . . . . . . . . . . . 37
5.11 Security Documents; Etc.. . . . . . . . . . . . . . . . . . 38
5.12 Subsidiaries Guaranty . . . . . . . . . . . . . . . . . . . 39
5.13 Mortgages; Title Insurance. . . . . . . . . . . . . . . . . 39
5.14 Employee Benefit Plans; Shareholders' Agreements;
Management Agreements; Employment Agreements;
Collective Bargaining Agreements; Existing Indebtedness
Agreements; Material Contracts; Tax Allocation
Agreements; Transaction Documents . . . . . . . . . . . . 40
5.15 Solvency Certificate; Insurance Certificates;
Environmental Assessments; Financial Statements . . . . . 42
5.16 Existing Indebtedness . . . . . . . . . . . . . . . . . . . 43
5.17 Pro Forma Balance Sheet; Projections. . . . . . . . . . . . 44
5.18 Payment of Fees . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6. Conditions Precedent to All Credit Events . . . . . . . . . 44
6.01 No Default; Representations and Warranties. . . . . . . . . 44
6.02 Adverse Change; etc.. . . . . . . . . . . . . . . . . . . . 45
6.03 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 45
6.04 Notice of Borrowing; Letter of Credit Request . . . . . . . 45
SECTION 7. Representations, Warranties and Agreements. . . . . . . . . 46
7.01 Corporate Status. . . . . . . . . . . . . . . . . . . . . . 46
7.02 Corporate Power and Authority . . . . . . . . . . . . . . . 46
7.03 No Violation. . . . . . . . . . . . . . . . . . . . . . . . 46
7.04 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 47
7.05 Use of Proceeds; Margin Regulations . . . . . . . . . . . . 47
7.06 Governmental Approvals. . . . . . . . . . . . . . . . . . . 47
7.07 Investment Company Act. . . . . . . . . . . . . . . . . . . 48
7.08 Public Utility Holding Company Act. . . . . . . . . . . . . 48
7.09 True and Complete Disclosure. . . . . . . . . . . . . . . . 48
7.10 Financial Condition; Financial Statements . . . . . . . . . 48
7.11 Security Interests. . . . . . . . . . . . . . . . . . . . . 50
(ii)
<PAGE>
PAGE
----
7.12 Transaction . . . . . . . . . . . . . . . . . . . . . . . . 50
7.13 Compliance with ERISA . . . . . . . . . . . . . . . . . . . 50
7.14 Capitalization. . . . . . . . . . . . . . . . . . . . . . . 52
7.15 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 53
7.16 Intellectual Property, etc. . . . . . . . . . . . . . . . . 53
7.17 Compliance with Statutes, etc.. . . . . . . . . . . . . . . 53
7.18 Environmental Matters . . . . . . . . . . . . . . . . . . . 53
7.19 Properties. . . . . . . . . . . . . . . . . . . . . . . . . 54
7.20 Labor Relations . . . . . . . . . . . . . . . . . . . . . . 54
7.21 Tax Returns and Payments. . . . . . . . . . . . . . . . . . 55
7.22 Existing Indebtedness . . . . . . . . . . . . . . . . . . . 55
7.23 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.24 Representations and Warranties in Other Documents . . . . . 55
7.25 Special Purpose Corporations. . . . . . . . . . . . . . . . 56
SECTION 8. Affirmative Covenants . . . . . . . . . . . . . . . . . . . 56
8.01 Information Covenants . . . . . . . . . . . . . . . . . . . 57
8.02 Books, Records and Inspections. . . . . . . . . . . . . . . 61
8.03 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.04 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . 62
8.05 Corporate Franchises. . . . . . . . . . . . . . . . . . . . 62
8.06 Compliance with Statutes; etc.. . . . . . . . . . . . . . . 62
8.07 Compliance with Environmental Laws. . . . . . . . . . . . . 62
8.08 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.09 Good Repair . . . . . . . . . . . . . . . . . . . . . . . . 64
8.10 End of Fiscal Years; Fiscal Quarters. . . . . . . . . . . . 65
8.11 Additional Security; Further Assurances . . . . . . . . . . 65
8.12 Foreign Subsidiaries Security . . . . . . . . . . . . . . . 66
8.13 Ownership of Subsidiaries . . . . . . . . . . . . . . . . . 67
8.14 Permitted Acquisitions. . . . . . . . . . . . . . . . . . . 67
8.15 Maintenance of Corporate Separateness . . . . . . . . . . . 69
8.16 Performance of Obligations. . . . . . . . . . . . . . . . . 69
8.17 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . 69
8.18 Interest Rate Protection. . . . . . . . . . . . . . . . . . 69
8.19 Contributions; Payments; etc. . . . . . . . . . . . . . . . 69
SECTION 9. Negative Covenants. . . . . . . . . . . . . . . . . . . . . 70
9.01 Changes in Business . . . . . . . . . . . . . . . . . . . . 70
9.02 Consolidation; Merger; Sale or Purchase of Assets; etc. . . 70
9.03 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
9.04 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . 75
(iii)
<PAGE>
PAGE
----
9.05 Advances; investments; Loans. . . . . . . . . . . . . . . . 76
9.06 Dividends; etc. . . . . . . . . . . . . . . . . . . . . . . 78
9.07 Transactions with Affiliates. . . . . . . . . . . . . . . . 79
9.08 Capital Expenditures. . . . . . . . . . . . . . . . . . . . 79
9.09 Minimum Consolidated EBITDAR. . . . . . . . . . . . . . . . 80
9.10 Consolidated Interest Coverage Ratio. . . . . . . . . . . . 81
9.11 Leverage Ratio. . . . . . . . . . . . . . . . . . . . . . . 82
9.12 Limitation on Voluntary Payments and Modifications of
Indebtedness; Modifications of Certificate of
Incorporation, By-Laws and Certain Other Agreements;
Issuances of Capital Stock; etc.. . . . . . . . . . . . . 83
9.13 Limitation on Issuance of Capital Stock . . . . . . . . . . 83
9.14 Limitation on Certain Restrictions on Subsidiaries. . . . . 84
9.15 Limitation on the Creation of Subsidiaries and Joint
Ventures. . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 10. Events of Default . . . . . . . . . . . . . . . . . . . . . 85
10.01 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.02 Representations, etc. . . . . . . . . . . . . . . . . . . . 85
10.03 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.04 Default Under Other Agreements. . . . . . . . . . . . . . . 86
10.05 Bankruptcy, etc . . . . . . . . . . . . . . . . . . . . . . 86
10.06 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
10.07 Security Documents. . . . . . . . . . . . . . . . . . . . . 87
10.08 Guaranties. . . . . . . . . . . . . . . . . . . . . . . . . 88
10.09 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . 88
10.10 Ownership . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 11. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 12. The Agent . . . . . . . . . . . . . . . . . . . . . . . . . 116
12.01 Appointment . . . . . . . . . . . . . . . . . . . . . . . . 116
12.02 Delegation of Duties. . . . . . . . . . . . . . . . . . . . 117
12.03 Exculpatory Provisions. . . . . . . . . . . . . . . . . . . 117
12.04 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . 118
12.05 Notice of Default . . . . . . . . . . . . . . . . . . . . . 118
12.06 Nonreliance on Agent and Other Banks. . . . . . . . . . . . 118
12.07 Indemnification . . . . . . . . . . . . . . . . . . . . . . 119
12.08 Agent in its Individual Capacity. . . . . . . . . . . . . . 119
12.09 Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 120
12.10 Resignation of the Agent. . . . . . . . . . . . . . . . . . 120
(iv)
<PAGE>
PAGE
----
SECTION 13. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 120
13.01 Payment of Expenses, etc. . . . . . . . . . . . . . . . . . 120
13.02 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . 121
13.03 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 122
13.04 Benefit of Agreement. . . . . . . . . . . . . . . . . . . . 122
13.05 No Waiver; Remedies Cumulative. . . . . . . . . . . . . . . 124
13.06 Payments Pro Rata . . . . . . . . . . . . . . . . . . . . . 125
13.07 Calculations; Computations. . . . . . . . . . . . . . . . . 125
13.08 Governing Law; Submission to Jurisdiction; Venue. . . . . . 126
13.09 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 126
13.10 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . 127
13.11 Headings Descriptive. . . . . . . . . . . . . . . . . . . . 127
13.12 Amendment or Waiver; etc. . . . . . . . . . . . . . . . . . 127
13.13 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . 128
13.14 Domicile of Loans and Commitments . . . . . . . . . . . . . 128
13.15 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 129
13.16 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . 129
13.17 Register. . . . . . . . . . . . . . . . . . . . . . . . . . 129
SECTION 14. Parent Guaranty . . . . . . . . . . . . . . . . . . . . . . 130
14.01 The Guaranty. . . . . . . . . . . . . . . . . . . . . . . . 130
14.02 Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . 131
14.03 Nature of Liability . . . . . . . . . . . . . . . . . . . . 131
14.04 Independent Obligation. . . . . . . . . . . . . . . . . . . 131
14.05 Authorization . . . . . . . . . . . . . . . . . . . . . . . 131
14.06 Reliance. . . . . . . . . . . . . . . . . . . . . . . . . . 132
14.07 Subordination . . . . . . . . . . . . . . . . . . . . . . . 133
14.08 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . 133
14.09 Nature of Liability . . . . . . . . . . . . . . . . . . . . 135
ANNEX I List of Banks and Commitments
ANNEX II Bank Addresses
ANNEX III Real Properties
ANNEX IV Existing Indebtedness
ANNEX V Pension Plans
ANNEX VI Existing Investments
ANNEX VII Subsidiaries
ANNEX VIII Insurance
ANNEX IX Existing Liens
ANNEX X Exceptions to Tax Representations
(v)
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EXHIBIT A -- Form of Notice of Borrowing
EXHIBIT B-1 -- Form of Term Note
EXHIBIT B-2 -- Form of Revolving Note
EXHIBIT B-3 -- Form of Swing line Note
EXHIBIT C -- Form of Letter of Credit Request
EXHIBIT D -- Form of Section 4.04(b)(ii) Certificate
EXHIBIT E -- Form of Opinion of Weil, Gotshal & Manges LLP, special
counsel to the Credit Parties
EXHIBIT F -- Form of Officers' Certificate
EXHIBIT G -- Form of Pledge Agreement
EXHIBIT H -- Form of Security Agreement
EXHIBIT I -- Form of Subsidiaries Guaranty
EXHIBIT J -- Form of Solvency Certificate
EXHIBIT K -- Form of Assignment and Assumption Agreement
EXHIBIT L -- Form of Intercompany Note
EXHIBIT M -- Form of Shareholder Subordinated Note
EXHIBIT N -- Form of Assumption Agreement
(vi)
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CREDIT AGREEMENT, dated as of September 19, 1996, among MAPLE LEAF
AEROSPACE, INC., a Delaware corporation ("Parent"), AEROSPACE ACQUISITION
CORP., a Delaware corporation ("Holdings"), AEROSPACE MERGER SUB I, INC., a
Florida corporation (and TRI-STAR AEROSPACE, INC. as its successor by merger
after the consummation of the Merger as hereinafter defined), TRI-STAR
AEROSPACE CO., a Delaware corporation (the "Borrower"), the lenders from time
to time party hereto (each, a "Bank" and, collectively, the "Banks"), and
BANKERS TRUST COMPANY, as Agent (in such capacity, the "Agent"). Unless
otherwise defined herein, all capitalized terms used herein and defined in
Section 11 are used herein as so defined.
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions herein set
forth, the Banks are willing to make available to the Borrower the credit
facilities provided for herein; and
NOW, THEREFORE, IT IS AGREED:
SECTION 1. AMOUNT AND TERMS OF CREDIT.
1.01 COMMITMENTS. (a) Subject to and upon the terms and conditions
set forth herein, each Bank with a Term Loan Commitment severally agrees to
make a term loan or term loans (each, a "Term Loan" and, collectively, the
"Term Loans") to the Borrower, which Term Loans:
(i) shall be incurred pursuant to a single drawing on the Initial
Borrowing Date;
(ii) shall be denominated in U.S. Dollars;
(iii) except as hereafter provided, shall, at the option of the
Borrower, be incurred and maintained as, and/or converted into, Base Rate
Loans or Eurodollar Loans, PROVIDED, that (x) all Term Loans made as part
of the same Borrowing shall, unless otherwise specifically provided herein,
consist of Term Loans of the same Type and (y) unless the Agent has
determined that the Syndication Date has occurred (at which time this
clause (y) shall no longer be applicable), no
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Borrowings of Term Loans to be maintained as Eurodollar Loans may be
incurred prior to the 60th day after the initial Borrowing Date; and
(iv) shall not exceed for any Bank at the time of incurrence thereof
on the Initial Borrowing Date that aggregate principal amount as is equal
to the Term Loan Commitment of such Bank as in effect on the Initial
Borrowing Date (before giving effect to any reductions thereto on such date
pursuant to Section 3.03(b)(i) but after giving effect to any reductions
thereto prior to such date pursuant to Section 3.03(b)(ii)).
Once repaid, Term Loans incurred hereunder may not be reborrowed.
(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
the Initial Borrowing Date and 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 Borrower, which Revolving Loans
(i) shall be denominated in U.S. Dollars, (ii) except as hereinafter
provided, shall, at the option of the Borrower, be incurred and maintained as
and/or converted into Base Rate Loans or Eurodollar Loans, PROVIDED, that (x)
all Revolving Loans made as part of the same Borrowing shall, unless
otherwise specifically provided herein, consist of Revolving Loans of the
same Type and (y) unless the Agent has determined that the Syndication Date
has occurred (at which time this clause (y) shall no longer be applicable),
no Borrowings of Revolving Loans to be maintained as Eurodollar Loans may be
incurred prior to the 60th day after the Initial Borrowing Date, (iii) may be
repaid and reborrowed in accordance with the provisions hereof and (iv) shall
not exceed for any Bank at any time outstanding that aggregate principal
amount which, when combined with such Bank's Percentage of the 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.
(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 the Initial Borrowing Date and prior to the Swingline
Expiry Date, a loan or loans to the Borrower (each, a "Swingline Loan" and,
collectively, the "Swingline Loans"), which Swingline Loans (i) shall be made
and maintained as Base Rate Loans, (ii) shall be denominated in U.S. Dollars,
(iii) may be repaid and reborrowed in accordance with the provisions hereof,
(iv) 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,
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the respective incurrence of Revolving Loans) at such time, an amount equal
to the Total Revolving Loan Commitment then in effect and (v) shall not
exceed in aggregate principal amount at any time outstanding the Maximum
Swingline Amount. BTCo shall not be obligated to make any Swingline Loans at
a time when a Bank Default exists unless BTCo has entered into arrangements
satisfactory to it and the 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 the 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.
(d) 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 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. 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 the 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
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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 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.
1.02 MINIMUM BORROWING AMOUNTS, ETC. The aggregate principal amount
of each Borrowing of Loans shall not be less than the Minimum Borrowing
Amount applicable to such Loans, PROVIDED that Mandatory Borrowings shall be
made in the amounts required by Section 1.01(d). More than one Borrowing may
be incurred on any day, PROVIDED, that at no time shall there be outstanding
more than eight Borrowings of Eurodollar Loans.
1.03 NOTICE OF BORROWING. (a) Whenever the Borrower desires to
make a Borrowing hereunder (excluding Borrowings of Swingline Loans and
Mandatory Borrowings), it shall give the Agent at its Notice Office, prior to
11:00 A.M. (New York time), at least three Business Days' prior written
notice (or telephonic notice promptly confirmed in writing) of each Borrowing
of Eurodollar Loans and at least one Business Day's prior written notice (or
telephonic notice promptly confirmed in writing) of each Borrowing of Base
Rate Loans to be made hereunder. Each such notice (each, a "Notice of
Borrowing") shall, except as otherwise expressly provided in Section 1.10, be
irrevocable, and, in the case of each written notice and each confirmation of
telephonic notice, shall be in the form of Exhibit A, appropriately completed
to specify: (i) the aggregate principal amount of the Loans to be made
pursuant to such Borrowing, (ii) the date of such Borrowing (which shall be a
Business Day), (iii) whether the respective Borrowing shall consist of Term
Loans or Revolving Loans, (iv) whether the respective Borrowing shall consist
of Base Rate Loans or, to the extent permitted hereunder, Eurodollar Loans
and, if Eurodollar Loans, the Interest Period to be initially applicable
thereto and (v) in the case of a Borrowing of Revolving Loans the proceeds of
which are to be utilized to finance, in whole or in part, the purchase price
of a Permitted Acquisition, (x) a reference to the officer's certificate, if
any, delivered in accordance with Section 8.14, (y) the aggregate principal
amount of such Revolving Loans to be utilized in connection with such
Permitted Acquisition and (z) the aggregate principal amount of all Revolving
Loans relating to Permitted Acquisitions then outstanding after giving effect
to the incurrence of such Revolving Loans. The Agent shall promptly give each
Bank which is required to make Loans of the Tranche specified in the
respective Notice of Borrowing, written notice (or telephonic notice promptly
confirmed in writing) of each proposed Borrowing, of such Bank's
proportionate share thereof and of the other matters required by the
immediately preceding sentence to be specified in the Notice of Borrowing.
(b) (i) Whenever the Borrower desires to incur Swingline Loans
hereunder, it shall give BTCo not later than 12:00 Noon (New York time) on
the day such Swingline
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Loan is to be made, written notice (or telephonic notice promptly confirmed
in writing) of each Swingline Loan to be made hereunder. Each such notice
shall be irrevocable and shall specify in each case (x) the date of such
Borrowing (which shall be a Business Day) and (y) the aggregate principal
amount of the Swingline Loan to be made pursuant to such Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice specified
in Section 1.01(d), with the Borrower irrevocably agreeing, by its incurrence
of any Swingline Loan, to the making of Mandatory Borrowings as set forth in
such Section 1.01(d).
(c) Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice permitted to be given hereunder, the
Agent or BTCo (in the case of a Borrowing of Swingline Loans) or the Letter
of Credit Issuer (in the case of the issuance of Letters of Credit), as the
case may be, may prior to receipt of written confirmation act without
liability upon the basis of such telephonic notice, believed by the Agent,
BTCo or the Letter of Credit Issuer, as the case may be, in good faith to be
from an Authorized Officer of the Borrower. in each such case, the Borrower
hereby waives the right to dispute the Agent's, BTCo's or the Letter of
Credit Issuer's record of the terms of such telephonic notice.
1.04 DISBURSEMENT OF FUNDS. (a) Not later than 1:00 P.M. (New York
time) on the date specified in each Notice of Borrowing (or (x) in the case
of Swingline Loans, not later than 2:00 P.M. (New York time) on the date
specified in Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings,
not later than 12:00 Noon (New York time) oh the date specified in Section
1.01(d)), each Bank with a Commitment of the respective Tranche will make
available its PRO RATA share, if any, of each Borrowing requested to be made
on such date (or in the case of Swingline Loans, BTCo shall make available
the full amount thereof) in the manner provided below. All amounts shall be
made available to the Agent in U.S. Dollars and in immediately available
funds at the Payment Office and the Agent promptly will make available to the
Borrower by depositing to its account at the Payment Office the aggregate of
the amounts so made available in the type of funds received. Unless the Agent
shall have been notified by any Bank prior to the date of Borrowing that such
Bank does not intend to make available to the Agent its portion of the
Borrowing or Borrowings to be made on such date, the Agent may assume that
such Bank has made such amount available to the Agent on such date of
Borrowing, and the Agent, in reliance upon such assumption, may (in its sole
discretion and without any obligation to do so) make available to the
Borrower a corresponding amount. If such corresponding amount is not in fact
made available to the Agent by such Bank and the Agent has made available
same to the Borrower, the Agent shall be entitled to recover such
corresponding amount on demand from such Bank. If such Bank does not pay such
corresponding amount forthwith upon the Agent's demand therefor, the Agent
shall promptly notify the Borrower, and the Borrower shall immediately pay
such corresponding amount to the Agent. The Agent shall also be
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entitled to recover on demand from such Bank or the Borrower, as the case may
be, interest on such corresponding amount in respect of each day from the
date such corresponding amount was made available by the Agent to the
Borrower to the date such corresponding amount is recovered by the Agent, at
a rate per annum equal to (x) if paid by such Bank, the overnight Federal
Funds Rate or (y) if paid by the Borrower, the then applicable rate of
interest, calculated in accordance with Section 1.08.
(b) Nothing in this Agreement shall be deemed to relieve any Bank
from its obligation to fulfill its commitments hereunder or to prejudice any
rights which the Borrower may have against any Bank as a result of any
default by such Bank hereunder.
1.05 NOTES. (a) The Borrower's obligation 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 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 a
promissory note 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 a
promissory note substantially in the form of Exhibit B-3 with blanks
appropriately completed in conformity herewith (the "Swingline Note").
(b) The Term Note issued to each Bank shall (i) be executed by the
Borrower, (ii) be payable to such Bank or its registered assigns and be dated
the Initial Borrowing Date, (iii) be in a stated principal amount equal to
the Term Loans made by such Bank and be payable in the principal amount of
Term Loans evidenced thereby, (iv) mature on the Final Maturity Date, (v)
bear interest as provided in the appropriate clause of Section I .08 in
respect of the Base Rate Loans and Eurodollar Loans, as the case may be,
evidenced thereby, (vi) be subject to voluntary repayment as provided in
Section 4.01 and mandatory repayment as provided in Section 4.02 and (vii) be
entitled to the benefits of this Agreement and the other Credit Documents.
(c) The Revolving Note issued to each Bank shall (i) be executed
by the Borrower, (ii) be payable to such Bank or its registered assigns and
be dated the Initial Borrowing Date, (iii) 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 evidenced thereby, (iv)
mature on the Revolving Loan Maturity Date, (v) 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, (vi) be subject to
voluntary prepayment as provided in Section 4.01 and mandatory repayment as
provided in Section 4.02 and (vii) be entitled to the benefits of this
Agreement and the other Credit Documents.
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(d) The Swingline Note issued to BTCo shall (i) be executed by
the Borrower, (ii) be payable to BTCo or its registered assigns and be dated
the Initial Borrowing Date, (iii) be in a stated principal amount equal to
the Maximum Swingline Amount and be payable in the principal amount of the
outstanding Swingline Loans evidenced thereby, (iv) mature on the Swingline
Expiry Date, (v) bear interest as provided in Section 1.08 in respect of the
Base Rate Loans evidenced thereby, (vi) be subject to voluntary prepayment as
provided in Section 4.01 and mandatory repayment as provided in Section 4.02
and (vii) be entitled to the benefits of this Agreement and the other Credit
Documents.
(e) Each Bank will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes endorse on the reverse side thereof the
outstanding principal amount of Loans evidenced thereby. Failure to make any
such notation or any error in such notation shall not affect the Borrower's
obligations in respect of such Loans.
1.06 CONVERSIONS. The Borrower shall have the option to convert on
any Business Day occurring on or after the Initial Borrowing Date, all or a
portion at least equal to the applicable Minimum Borrowing Amount of the
outstanding principal amount of Loans (other than Swingline Loans which shall
at all times be maintained as Base Rate Loans) made pursuant to one or more
Borrowings of one or more Types of Loans under a single Tranche into a
Borrowing or Borrowings of another Type of Loan under such Tranche; PROVIDED,
that (i) except as otherwise provided in Section 1.10(b), Eurodollar Loans
may be converted into Base Rate Loans only on the last day of an Interest
Period applicable to the Loans being converted and no partial conversion of a
Borrowing of Eurodollar Loans shall reduce the outstanding principal amount
of the Eurodollar Loans made pursuant to such Borrowing to less than the
Minimum Borrowing Amount applicable thereto, (ii) Base Rate Loans may only be
converted into Eurodollar Loans if no Default or Event of Default is in
existence on the date of the conversion, (iii) unless the Agent has
determined that the Syndication Date has occurred (at which time this clause
(iii) shall no longer be applicable), conversions of Base Rate Loans into
Eurodollar Loans may not be made prior to the 60th day after the Initial
Borrowing Date and (iv) Borrowings of Eurodollar Loans resulting from this
Section 1.06 shall be limited in number as provided in Section 1.02. Each
such conversion shall be effected by the Borrower by giving the Agent at its
Notice Office, prior to 11:00 A.M. (New York time), at least three Business
Days' (or one Business Day's in the case of a conversion into Base Rate
Loans) prior written notice (or telephonic notice promptly confirmed in
writing) (each, a "Notice of Conversion") specifying the Loans to be so
converted, the Borrowing(s) pursuant to which the Loans were made and, if to
be converted into a Borrowing of Eurodollar Loans, the Interest Period to be
initially applicable thereto. The Agent shall give each Bank prompt notice of
any such proposed conversion affecting any of its Loans. Upon any such
conversion, the proceeds thereof will be deemed to be applied directly on the
day of such conversion to prepay the outstanding principal amount of the
Loans being converted.
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1.07 PRO RATA BORROWINGS. All Borrowings of Term Loans and
Revolving Loans under this Agreement shall be incurred by the Borrower from
the Banks PRO RATA on the basis of their Term Loan Commitments or Revolving
Loan Commitments, as the case may be; PROVIDED that all Borrowings of
Revolving Loans made pursuant to a Mandatory Borrowing shall be incurred from
the Banks PRO RATA on the basis on their Percentages, It is understood that
no Bank shall be responsible for any default by any other Bank of its
obligation to make Loans hereunder and that each Bank shall be obligated to
make the Loans to be made by it hereunder, regardless of the failure of any
other Bank to fulfill its commitments hereunder.
1.08 INTEREST. (a) The unpaid principal amount of each Base Rate
Loan shall bear interest from the date of the Borrowing thereof until the
earlier of (i) the maturity (whether by acceleration or otherwise) of such
Base Rate Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar
Loan pursuant to Section 1.06, at a rate per annum which shall at all times
be the relevant Applicable Base Rate Margin Plus the Base Rate in effect from
time to time.
(b) The unpaid principal amount of each Eurodollar Loan shall bear
interest from the date of the Borrowing thereof until the earlier of (i) the
maturity (whether by acceleration or otherwise) of such Eurodollar Loan and
(ii) the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to
Section 1.06, 1.09 or 1.10(13), as applicable, at a rate per annum which
shall at all times be the relevant Applicable Eurodollar Margin plus the
Eurodollar Rate for such Interest Period.
(c) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan shall bear interest at a rate per annum
equal to the greater of (x) the rate which is 2 % in excess of the rate borne
by the respective such Loans immediately prior to the respective payment
default and (y) the rate which is 2% in excess of the rate otherwise
applicable to Base Rate Loans from time to time. Interest which accrues under
this Section 1.08(c) shall be payable on demand.
(d) interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, quarterly in arrears on each
Quarterly Payment Date, (ii) in respect of each Eurodollar Loan, on (x) the
date of any prepayment or repayment thereof (on the amount prepaid or
repaid), (y) the date of any conversion into a Base Rate Loan pursuant to
Section 1.06, 1.09 or 1.10(13), as applicable (on the amount convened) and
(z) the last day of each Interest Period applicable thereto and, in the case
of an Interest Period in excess of three months, on each date occurring at
three month intervals after the first day of such Interest Period and (iii)
in respect of each Loan, at maturity (whether by acceleration or otherwise)
and, after such maturity, on demand.
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(e) All computations of interest hereunder shall be made in
accordance with Section 13.07(13).
(f) Upon each Interest Determination Date, the Agent shall
determine the Eurodollar Rate for the respective Interest Period or Interest
Periods and shall promptly notify the Borrower and the Banks thereof. Each
such determination shall, absent manifest error, be final and conclusive and
binding on all parties hereto.
1.09 INTEREST PERIODS. At the time the Borrower gives a Notice of
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, a Borrowing of Eurodollar Loans (in the case of the initial Interest
Period applicable thereto) or prior to 11:00 A.M. (New York time) on the
third Business Day prior to the expiration of an Interest Period applicable
to a Borrowing of Eurodollar Loans (in the case of any subsequent Interest
Period), the Borrower shall have the right to elect by giving the Agent
written notice (or telephonic notice promptly confirmed in writing) of the
Interest Period applicable to such Borrowing, which Interest Period shall, at
the option of the Borrower (but otherwise subject to clause (y) of the
proviso to Section 1 .01(a)(iii) and to clause (iii) of the proviso to
Section 1.06), be a one, two, three or six month period or, to the extent
approved by all Banks with a Commitment or outstanding Loans, as the case may
be, under the respective Tranche, a nine or twelve month period.
Notwithstanding anything to the contrary contained above:
(i) all Eurodollar Loans comprising a Borrowing shall at all times
have the same Interest Period;
(ii) the initial Interest Period for any Borrowing of Eurodollar
Loans shall commence on the date of such Borrowing (including the date of
any conversion from a Borrowing of Base Rate Loans) and each Interest
Period occurring thereafter in respect of such Borrowing shall commence on
the day on which the next preceding Interest Period applicable thereto
expires;
(iii) if any Interest Period for any Borrowing of Eurodollar Loans
begins on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period, such Interest Period
shall end on the last Business Day of such calendar month;
(iv) if any Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, PROVIDED, that if any Interest Period for any
Borrowing of Eurodollar Loans would otherwise expire on a day which is not
a Business Day but is a day of the month after which no further Business
Day occurs in such month, such Interest Period shall expire on the next
preceding Business Day;
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(v) no interest Period for a Borrowing under a Tranche shall be
elected which would extend beyond the respective Maturity Date for such
Tranche;
(vi) no Interest Period may be elected at any time when a Default,
or any Event of Default, is then in existence;
(vii) no Interest Period in respect of any Borrowing of Revolving
Loans shall be elected which extends beyond any date upon which a Scheduled
Commitment Reduction will be required to be made under Section 3.03(c) if
the aggregate principal amount of such Revolving Loans which have Interest
Periods which will expire after such date, when added to the Stated Amount
of all Letters of Credit which by their terms expire after such date, will
be in excess of the Total Revolving Loan Commitment as same will be in
effect after giving effect to the respective Scheduled Commitment
Reduction; and
(viii) no interest Period in respect of any Borrowing of Term Loans
shall be elected which extends beyond any date upon which a Scheduled
Repayment will be required to be made under Section 4.02(b) if, after
giving effect to the election of such Interest Period, the aggregate
principal amount of such Term Loans which have Interest Periods which will
expire after such date will be in excess of the aggregate principal amount
of such Term Loans then outstanding less the aggregate amount of such
required Scheduled Repayment.
If upon the expiration of any Interest Period applicable to a
Borrowing of Eurodollar Loans, the Borrower has failed to elect, or is not
permitted to elect, a new interest Period to be applicable to the respective
Borrowing of Eurodollar Loans as provided above, the Borrower shall be deemed
to have elected to convert such Borrowing into a Borrowing of Base Rate Loans
effective as of the expiration date of such current Interest Period.
1.10 INCREASED COSTS; ILLEGALITY; ETC. (a) In the event that (x) in
the case of clause (i) below, the Agent or (y) in the case of clauses (ii)
and (iii) below, any Bank, shall have determined (which determination shall,
absent manifest error, be final and conclusive and binding upon all parties
hereto):
(i) on any Interest Determination Date, that, by reason of any
changes arising after the date of this Agreement affecting the interbank
Eurodollar market, adequate and fair means do not exist for ascertaining
the applicable interest rate on the basis provided for in the definition of
Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar
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Loans because of (x) any change since the date of this Agreement in any
applicable law, governmental rule, regulation, guideline, order or request
(whether or not having the force of law), or in the interpretation or
administration thereof and including the introduction of any new law or
governmental rule, regulation, guideline, order or request (such as, for
example, but not limited to, (A) without duplication of any amounts payable
under Section 4.04(a) hereof, a change in the basis of taxation or payment
to any Bank of the principal of or interest on such Eurodollar Loans or any
other amounts payable hereunder (except for changes with respect to any tax
imposed on, or determined by reference to, the net income or net profits
of such Bank pursuant to the laws of the jurisdiction in which such Bank
is organized, or in which such Bank's principal office or applicable
lending office is located or any subdivision thereof or Therein), or (B)
a change in official reserve requirements, but, in all events, excluding
reserves required under Regulation D to the extent included in the
computation of the Eurodollar Rate and/or (y) other circumstances
affecting such Bank, the interbank Eurodollar market or the position of
such Bank in such market; or
(iii) at any time since the date of this Agreement, that the making or
continuance of any Eurodollar Loan has become unlawful by compliance by
such Bank with any law, governmental rule, regulation, guideline or order
(or would conflict with any governmental rule, regulation, guideline,
request or order not having the force of law but with which such Bank
customarily complies even though the failure to comply therewith would not
be unlawful), or has become impracticable as a result of a contingency
occurring after the date of this Agreement which materially and adversely
affects the interbank Eurodollar market;
then, and in any such event, such Bank (or the Agent in the case of clause
(i) above) shall promptly give notice (by telephone confirmed in writing) to
the Borrower and (except in the case of clause (i)) to the Agent of such
determination (which notice the Agent shall promptly transmit to each of the
other Banks). Thereafter, (x) in the case of clause (i) above, Eurodollar
Loans shall no longer be available until such time as the Agent notifies the
Borrower and the Banks that the circumstances giving rise to such notice by
the Agent no longer exist, and any Notice of Borrowing or Notice of
Conversion given by the Borrower with respect to Eurodollar Loans which have
not yet been incurred (including by way of conversion) shall be deemed
rescinded by the Borrower, (y) in the case of clause (ii) above, the Borrower
agrees to pay to such Bank, upon written demand therefor, such additional
amounts (in the form of an increased rate of, or a different method of
calculating, interest or otherwise as such Bank in its sole discretion shall
determine) as shall be required to compensate such Bank for such increased
costs or reductions in amounts received or receivable hereunder (a written
notice as to the additional amounts owed to such Bank, showing the basis for
the calculation thereof, submitted to the Borrower by such Bank shall, absent
manifest error, be final and conclusive and binding upon all parties hereto,
although
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the failure to give any such notice shall not release or diminish any of the
Borrower's obligations to pay additional amounts pursuant to this Section
1.10(a) upon the subsequent receipt of such notice) and (z) in the case of
clause (iii) above, the Borrower shall take one of the actions specified in
Section 1.10(13) as promptly as possible and, in any event, within the time
period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may
(and in the case of a Eurodollar Loan affected pursuant to Section
1.10(a)(iii) the Borrower shall) either (i) if the affected Eurodollar Loan
is then being made pursuant to a Borrowing, cancel said Borrowing by giving
the Agent telephonic notice (confirmed promptly in writing) thereof on the
same date that the Borrower was notified by a Bank pursuant to Section
1.10(a)(ii) or (iii)), or (ii) if the affected Eurodollar Loan is then
outstanding, upon at least three Business Days' notice to the Agent, require
the affected Bank to convert each such Eurodollar Loan into a Base Rate Loan;
PROVIDED, that if more than one Bank is affected at any time, then all
affected Banks must be treated the same pursuant to this Section 1.10(b).
(c) If any Bank shall have determined that after the date hereof,
the adoption or effectiveness of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Bank or any corporation
controlling such Bank with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing
the rate of return on such Bank's or such other corporation's capital or
assets as a consequence of such Bank's Commitment or Commitments hereunder or
its obligations hereunder to a level below that which such Bank or such other
corporation could have achieved but for such adoption, effectiveness, change
or compliance (taking into consideration such Bank's or such other
corporation's policies with respect to capital adequacy), then from time to
time, upon written demand by such Bank (with a copy to the Agent),
accompanied by the notice referred to in the last sentence of this clause
(c), the Borrower shall pay to such Bank such additional amount or amounts as
will compensate such Bank or such other corporation for such reduction. Each
Bank, upon determining in good faith that any additional amounts will be
payable pursuant to this Section 1.10(c), will give prompt written notice
thereof to the Borrower (a copy of which shall be sent by such Bank to the
Agent), which notice shall set forth the basis of the calculation of such
additional amounts, although the failure to give any such notice shall not
release or diminish the Borrower's obligations to pay additional amounts
pursuant to this Section 1.10(c) upon the subsequent receipt of such notice.
A Bank's reasonable good faith determination of compensation owing under this
Section 1.10(c) shall, absent manifest error, be final and conclusive and
binding on all the parties hereto.
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1.11 COMPENSATION. The Borrower shall compensate each Bank, promptly
upon its written request (which request shall set forth the basis for
requesting such compensation), for all losses, expenses and liabilities
(including, without limitation, any loss, expense or liability incurred by
reason of the liquidation or reemployment of deposits or other funds required
by such Bank to fund its Eurodollar Loans) which such Bank may sustain: (i)
if for any reason (other than a default by such Bank or the Agent) a
Borrowing of, or conversion from or into, Eurodollar Loans does not occur on
a date specified therefor in a Notice of Borrowing or Notice of Conversion
(whether or not withdrawn by the Borrower or deemed withdrawn pursuant to
Section 1.10(a)); (ii) if any repayment (including any repayment made
pursuant to Section 4.01 or 4.02 or as a result of an acceleration of the
Loans pursuant to Section 9 or as a result of the replacement of a Bank
pursuant to Section 1.13 or 13.12(b)) or conversion of any Eurodollar Loans
occurs on a date which is not the last day of an Interest Period applicable
thereto; (iii) if any prepayment of any Eurodollar Loans is not made on any
date specified in a notice of prepayment given by the Borrower; or (iv) as a
consequence of (x) any other default by the Borrower to repay its Eurodollar
Loans when required by the terms of this Agreement or (y) an election made
pursuant to Section 1.10(b). A Bank's basis for requesting compensation
pursuant to this Section 1.11 and a Bank's calculation of the amount thereof,
shall, absent manifest error, be final and conclusive and binding on all
parties hereto.
1.12 CHANGE OF LENDING OFFICE. Each Bank agrees that, upon the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii)
or (iii), 1.10(c), 2.05 or 4.04 with respect to such Bank, it will, if
requested by the Borrower, use reasonable efforts (subject to overall policy
considerations of such Bank) to designate another lending office for any
Loans or Letters of Credit affected by such event; PROVIDED, that such
designation is made on such terms that, in the sole judgment of such Bank,
such Bank and its lending office suffer no economic, legal or regulatory
disadvantage, with the object of avoiding the consequences of the event
giving rise to the operation of any such Section. Nothing in this Section
1.12 shall affect or postpone any of the obligations of the Borrower or the
right of any Bank provided in Section 1.10, 2.05 or 4.04.
1.13 REPLACEMENT OF BANKS. (x) If any Bank becomes a Defaulting Bank,
(y) upon the occurrence of any event giving rise to the operation of Section
1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or Section 4.04 with
respect to any Bank which results in such Bank charging to the Borrower
increased costs in a material amount in excess of those being generally
charged by the other Banks or (z) in the case of a refusal by a Bank to
consent to a proposed change, waiver, discharge or termination with respect
to this Agreement which has been approved by the Required Banks as provided
in Section 13.12(b), the Borrower shall have the right, in accordance with
Section 13.04(b), if no Default or Event of Default then exists or would
exist after giving effect to such replacement, to replace such Bank (the
"Replaced Bank") with one or more other Eligible Transferee or Transferees,
none of whom shall constitute a Defaulting Bank at the time of
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such replacement (collectively, the "Replacement Bank") and each of whom
shall be reasonably acceptable to the Agent or, at the option of the
Borrower, to replace only (a) the Revolving Loan Commitment (and outstandings
pursuant thereto) of the Replaced Bank with an identical Revolving Loan
Commitment provided by the Replacement Bank or (b) in the case of a
replacement as provided in Section 13.12(b) where the consent of the
respective Bank is required with respect to less than all Tranches of its
Loans or Commitments, the Commitments and/or outstanding Loans of such Bank
in respect of each Tranche where the consent of such Bank would otherwise be
individually required, with identical Commitments and/or Loans of the
respective Tranche provided by the Replacement Bank; PROVIDED that:
(i) at the time of any replacement pursuant to this Section 1.13, the
Replacement Bank shall enter into one or more Assignment and Assumption
Agreements pursuant to Section 13.04(b) (and with all fees payable pursuant
to said Section 13.04(b) to be paid by the Replacement Bank) pursuant to
which the Replacement Bank shall acquire all of the Commitments and
outstanding Loans (or, in the case of the replacement of only (a) the
Revolving Loan Commitment, the Revolving Loan Commitment and outstanding
Revolving Loans and participations in Letter of Credit Outstandings and/or
(b) Term Loans, the outstanding Term Loans) of, and in each case (except
for the replacement of only the outstanding Term Loans of the respective
Bank) participations in Letters of Credit by, the Replaced Bank and, in
connection therewith, shall pay to (x) the Replaced Bank in respect thereof
an amount equal to the sum of (A) an amount equal to the principal of, and
all accrued interest on, all outstanding Loans (or, in the case of the
replacement of only (I) the Revolving Loan Commitment, the outstanding
Revolving Loans or (II) the Term Loans, the outstanding Term Loans) of the
Replaced Bank, (B) except in the case of the replacement of only the
outstanding Term Loans of a Replaced Bank, an amount equal to all Unpaid
Drawings that have been funded by (and not reimbursed to) such Replaced
Bank, together with all then unpaid interest with respect thereto at such
time and (C) an amount equal to all accrued, but theretofore unpaid, Fees
owing to the Replaced Bank (but only with respect to the relevant Tranche,
in the case of the replacement of less than all Tranches of Loans then held
by the respective Replaced Bank) pursuant to Section 3.01, (y) except in
the case of the replacement of only the outstanding Term Loans of a
Replaced Bank, each Letter of Credit Issuer an amount equal to such
Replaced Bank's Percentage of any Unpaid Drawing relating to Letters of
Credit issued by such Letter of Credit Issuer (which at such time remains
an Unpaid Drawing) to the extent such amount was not theretofore funded by
such Replaced Bank and (z) in the case of any replacement of Revolving Loan
Commitments, BTCo an amount equal to such Replaced Bank's Percentage of any
Mandatory Borrowing to the extent such amount was not theretofore funded by
such Replaced Bank; and
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(ii) all obligations of the Borrower then owing to the Replaced Bank
(other than those (a) specifically described in clause (i) above in respect
of which the assignment purchase price has been, or is concurrently being,
paid, but including all amounts, if any, owing under Section 1.11 or (b)
relating to any Tranche of Loans and/or Commitments of the respective
Replaced Bank which will remain outstanding after giving effect to the
respective replacement) shall be paid in full to such Replaced Bank
concurrently with such replacement.
Upon the execution of the respective Assignment and Assumption Agreements,
the payment of amounts referred to in clauses (i) and (ii) above, recordation
of the assignment on the Register by the Agent pursuant to Section 13.17 and,
if so requested by the Replacement Bank, delivery to the Replacement Bank of
the appropriate Note or Notes executed by the Borrower, (x) the Replacement
Bank shall become a Bank hereunder and, unless the respective Replaced Bank
continues to have outstanding Term Loans or a Revolving Loan Commitment
hereunder, the Replaced Bank shall cease to constitute a Bank hereunder,
except with respect to indemnification provisions under this Agreement
(including, without limitation, Sections 1.10, 1.11, 2.05, 4.04, 13.01 and
13.06), which shall survive as to such Replaced Bank and (y) in the case of
the replacement of a Defaulting Bank with a Non-Defaulting Bank, the
Percentages of the Banks shall be automatically adjusted at such time to give
effect to such replacement.
SECTION 2. LETTERS OF CREDIT.
2.01 LETTERS OF CREDIT. (a) Subject to and upon the terms and
conditions herein set forth, the Borrower may request a Letter of Credit
Issuer at any time and from time to time on or after the Initial Borrowing
Date and prior to the tenth Business Day (or the 30th day in the case of
trade Letters of Credit) preceding the Revolving Loan Maturity Date to issue,
for the account of the Borrower and in support of (x) trade obligations of
the Borrower or any of its Subsidiaries that arise in the ordinary course of
business and/or (y) on a standby basis, L/C Supportable Indebtedness of the
Borrower or any of its Subsidiaries to any other Person, irrevocable sight
letters of credit in such form as may be approved by such Letter of Credit
Issuer (each such letter of credit, a "Letter of Credit" and, collectively,
the "Letters of Credit"). Notwithstanding the foregoing, no Letter of Credit
Issuer shall be under any obligation to issue any Letter of Credit if at the
time of such issuance:
(i) any order, judgment or decree of any governmental authority or
arbitrator shall purport by its terms to enjoin or restrain such Letter of
Credit Issuer from issuing such Letter of Credit or any requirement of law
applicable to such Letter of Credit Issuer or any request or directive
(whether or not having the force of law) from any governmental authority
with jurisdiction over such Letter of Credit
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issuer shall prohibit, or request that such Letter of Credit Issuer
refrain from, the issuance of letters of credit generally or such Letter
of Credit in particular or shall impose upon such Letter of Credit Issuer
with respect to such Letter of Credit any restriction or reserve or
capital requirement (for which such Letter of Credit Issuer is not
otherwise compensated) not in effect on the date hereof, or any
unreimbursed loss, cost or expense which was not applicable, in effect or
known to such Letter of Credit Issuer as of the date hereof and which such
Letter of Credit Issuer in good faith deems material to it; or
(ii) such Letter of Credit Issuer shall have received notice from the
Borrower or the Required Banks prior to the issuance of such Letter of
Credit of the type described in clause (vi) of Section 2.01(b).
(b) Notwithstanding the foregoing, (i) no Letter of Credit shall be
issued the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of,
and prior to the issuance of, the respective Letter of Credit) at such time,
would exceed either (x) $5,000,000 or (y) when added to the aggregate
principal amount of all Revolving Loans and Swingline Loans then outstanding,
the Total Revolving Loan Commitment at such time; (ii) (x) each standby
Letter of Credit shall have an expiry date occurring not later than one year
after such Letter of Credit's date of issuance, PROVIDED, that any such
Letter of Credit may be extendable for successive periods of up to one year,
but not beyond the tenth business day preceding the Revolving Loan Maturity
Date, on terms acceptable to the Letter of Credit Issuer and (y) each trade
Letter of Credit shall have an expiry date occurring not later than 180 days
after such Letter of Credit's date of issuance; (iii) (x) no standby Letter
of Credit shall have an expiry date occurring later than the tenth Business
Day preceding the Revolving Loan Maturity Date and (y) no trade Letter of
Credit shall have an expiry date occurring later than 30 days prior to the
Revolving Loan Maturity Date; (iv) each Letter of Credit shall be denominated
in U.S. Dollars; (v) the Stated Amount of each Letter of Credit shall not be
less than $100,000 or such lesser amount as is acceptable to the respective
Letter of Credit Issuer; and (vi) no Letter of Credit Issuer will issue any
Letter of Credit after it has received written notice from the Borrower or
the Required Banks stating that a Default or an Event of Default exists until
such time as such Letter of Credit Issuer shall have received a written
notice of (x) rescission of such notice from the party or parties originally
delivering the same or (y) a waiver of such Default or Event of Default by
the Required Banks.
(c) Notwithstanding the foregoing, in the event a Bank Default
exists, no Letter of Credit Issuer shall be required to issue any Letter of
Credit unless the respective Letter of Credit Issuer has entered into
arrangements satisfactory to it and the Borrower to eliminate such Letter of
Credit Issuer's risk with respect to the participation in Letters of
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Credit of the Defaulting Bank or Banks, including by cash collateralizing
such Defaulting Bank's or Banks' Percentage of the Letter of Credit
Outstandings, as the case may be.
2.02 LETTER OF CREDIT REQUESTS. (a) Whenever the Borrower desires that
a Letter of Credit be issued, the Borrower shall give the Agent and the
respective Letter of Credit Issuer written notice (or telephonic notice
confirmed in writing) thereof prior to 12:00 Noon (New York time) at least
five Business Days (or such shorter period as may be acceptable to the
respective Letter of Credit Issuer) prior to the proposed date of issuance
(which shall be a Business Day) which written notice shall be in the form of
Exhibit C (each, a "Letter of Credit Request"). Each Letter of Credit Request
shall include any other documents as such Letter of Credit Issuer customarily
requires in connection therewith.
(b) The making of each Letter of Credit Request shall be deemed to be a
representation and warranty by the Borrower that such Letter of Credit may be
issued in accordance with, and it will not violate the requirements of,
Section 2.01(a). Unless the respective Letter of Credit Issuer has received
notice from the Required Banks before it issues a Letter of Credit that one
or more of the applicable conditions specified in Section 5 or 6, as the case
may be, are not then satisfied, or that the issuance of such Letter of Credit
would violate Section 2.01(a), then such Letter of Credit Issuer may issue
the requested Letter of Credit for the account of the Borrower in accordance
with such Letter of Credit Issuer's usual and customary practice.
2.03 LETTER OF CREDIT PARTICINATIONS. (a) Immediately upon the
issuance by a Letter of Credit Issuer of any Letter of Credit, such Letter of
Credit Issuer shall be deemed to have sold and transferred to each other RL
Bank, and each such RL Bank (each, a "Participant") shall be deemed
irrevocably and unconditionally to have purchased and received from such
Letter of Credit Issuer, without recourse or warranty, an undivided interest
and participation, to the extent of such Participant's Percentage, in such
Letter of Credit, each substitute Letter of Credit, each drawing made
thereunder and the obligations of the Borrower under this Agreement with
respect thereto (although Letter of Credit Fees shall be payable directly to
the Agent for the account of the RL Banks as provided in Section 3.01(b) and
the Participants shall have no right to receive any portion of any Facing
Fees with respect to such Letters of Credit) and any security therefor or
guaranty pertaining thereto. Upon any change in the Revolving Loan
Commitments of the RL Banks pursuant to Section 1.13 or 13.04(b), it is
hereby agreed that, with respect to all outstanding Letters of Credit and
Unpaid Drawings with respect thereto, there shall be an automatic adjustment
to the participations pursuant to this Section 2.03 to reflect the new
Percentages of the assigning and assignee Bank.
(b) In determining whether to pay under any Letter of Credit, no Letter
of Credit Issuer shall have any obligation relative to the Participants other
than to determine
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that any documents required to be delivered under such Letter of Credit have
been delivered and that they appear to substantially comply on their face
with the requirements of such Letter of Credit. Any action taken or omitted
to be taken by any Letter of Credit Issuer under or in connection with any
Letter of Credit issued by it if taken or omitted in the absence of gross
negligence or willful misconduct, shall not create for such Letter of Credit
Issuer any resulting liability.
(c) In the event that any Letter of Credit Issuer makes any payment
under any Letter of Credit issued by it and the Borrower shall not have
reimbursed such amount in full to the Letter of Credit Issuer pursuant to
Section 2.04(a), such Letter of Credit Issuer shall promptly notify the
Agent, and the Agent shall promptly notify each Participant of such failure,
and each such Participant shall promptly and unconditionally pay to the Agent
for the account of such Letter of Credit Issuer, the amount of such
Participant's Percentage of such payment in U.S. Dollars and in same day
funds. If the Agent so notifies any Participant required to fund a payment
under a Letter of Credit prior to 11:00 A.M. (New York time) on any Business
Day, such Participant shall make available to the Agent at the Payment Office
for the account of the respective Letter of Credit Issuer such Participant's
Percentage of the amount of such payment on such Business Day in same day
funds (and, to the extent such notice is given after 11:00 A.M. (New York
time) on any Business Day, such Participant shall make such payment on the
immediately following Business Day). If and to the extent such Participant
shall not have so made its Percentage of the amount of such payment available
to the Agent for the account of the respective Letter of Credit Issuer, such
Participant agrees to pay to the Agent for the account of such Letter of
Credit Issuer, forthwith on demand such amount, together with interest
thereon, for each day from such date until the date such amount is paid to
the Agent for the account of the Letter of Credit Issuer at the overnight
Federal Funds Rate. The failure of any Participant to make available to the
Agent for the account of the respective Letter of Credit Issuer its
Percentage of any payment under any Letter of Credit issued by it shall not
relieve any other Participant of its obligation hereunder to make available
to the Agent for the account of such Letter of Credit Issuer its applicable
Percentage of any payment under any such Letter of Credit on the date
required, as specified above, but no Participant shall be responsible for the
failure of any other Participant to make available to the Agent for the
account of such Letter of Credit Issuer such other Participant's Percentage
of any such payment.
(d) Whenever any Letter of Credit Issuer receives a payment of a
reimbursement obligation as to which the Agent has received for the account
of such Letter of Credit Issuer any payments from the Participants pursuant
to clause (c) above, such Letter of Credit Issuer shall pay to the Agent and
the Agent shall promptly pay to each Participant which has paid its
Percentage thereof, in U.S. Dollars and in same day funds, an amount equal to
such Participant's Percentage of the principal amount thereof and interest
thereon accruing after the purchase of the respective participations.
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(e) Each Letter of Credit Issuer shall, promptly after each issuance
of, or amendment or modification to, a standby Letter of Credit issued by it,
give the Agent, each Participant and the Borrower written notice of the
issuance of, or amendment or modification to, such Letter of Credit, which
notice shall be accompanied by a copy of the standby Letter of Credit or
standby Letters of Credit issued by it and each such amendment or
modification thereto.
(f) Each Letter of Credit Issuer (other than BTCo) shall deliver to the
Agent, promptly on the first Business Day of each week, by facsimile
transmission, the daily aggregate Stated Amount available to be drawn under
the outstanding trade Letters of Credit issued by such Letter of Credit
Issuer for the previous week. The Agent shall, within 10 days after the last
Business Day of each calendar month, deliver to each Participant a report
setting forth for such preceding calendar month the daily aggregate Stated
Amount available to be drawn under all outstanding trade Letters of Credit
during such calendar month.
(g) The obligations of the Participants to make payments to the Agent
for the account of the respective Letter of Credit Issuer with respect to
Letters of Credit issued by it shall be irrevocable and not subject to
counterclaim, set-off or other defense or any other qualification or
exception whatsoever and shall be made in accordance with the terms and
conditions of this Agreement under all circumstances, including, without
limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement or any
of the other Credit Documents;
(ii) the existence of any claim, set-off, defense or other right
which the Borrower or any of its Subsidiaries may have at any time against
a beneficiary named in a Letter of Credit, any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), the
Agent, any Letter of Credit Issuer, any Bank, or other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transaction between the Borrower or any of its Subsidiaries and the
beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or other document presented under the
Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect;
(iv) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Credit Documents; or
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(v) the occurrence of any Default or Event of Default.
2.04 AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. (a) The Borrower
hereby agrees to reimburse each Letter of Credit Issuer, by making payment to
the Agent in immediately available funds at the Payment Office, for any
payment or disbursement made by such Letter of Credit issuer under any Letter
of Credit issued by it (each such amount so paid or disbursed until
reimbursed, an "Unpaid Drawing") no later than one Business Day following the
date of such payment or disbursement, with interest on the amount so paid or
disbursed by such Letter of Credit Issuer, to the extent not reimbursed prior
to 1:00 P.M. (New York time) on the date of such payment or disbursement,
from and including the date paid or disbursed to but not including the date
such Letter of Credit Issuer is reimbursed therefor at a rate per annum which
shall be the Base Rate plus the Applicable Base Rate Margin for Revolving
Loans maintained as Base Rate Loans as in effect from time to time (plus an
additional 2% per annum if not reimbursed by the third Business Day after the
date of such payment or disbursement), such interest also to be payable on
demand; PROVIDED, that it is understood and agreed, however, that the notices
referred to below in this clause (a) shall not be required to be given if a
Default or an Event of Default under Section 10.05 shall have occurred and be
continuing (in which case the Unpaid Drawings shall be due and payable
immediately without presentment, demand, protest or notice of any kind (all
of which are hereby waived by each Credit Party) and shall bear interest at a
rate per annum which shall be the Base Rate plus the Applicable Base Rate
Margin for Revolving Loans maintained as Base Rate Loans plus 2% on and after
the third Business Day following the respective Drawing). Each Letter of
Credit Issuer shall provide the Borrower prompt notice of any payment or
disbursement made by it under any Letter of Credit issued by it, although the
failure of, or delay in, giving any such notice shall not release or diminish
the obligations of the Borrower under this Section 2.04(a) or under any other
Section of this Agreement.
(b) The Borrower's obligation under this Section 2.04 to reimburse the
respective Letter of Credit issuer with respect to Unpaid Drawings
(including, in each case, interest thereon) shall be absolute and
unconditional under any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment which the Borrower or any of its
Subsidiaries may have or have had against such Letter of Credit Issuer, the
Agent or any Bank, including, without limitation, any defense based upon the
failure of any drawing under a Letter of Credit issued by it to conform to
the terms of the Letter of Credit or any nonapplication or misapplication by
the beneficiary of the proceeds of such drawing; PROVIDED, HOWEVER, that the
Borrower shall not be obligated to reimburse such Letter of Credit Issuer for
any wrongful payment made by such Letter of Credit Issuer under a Letter of
Credit issued by it as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of such Letter of Credit issuer as
determined by a court of competent jurisdiction.
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2.05 INCREASED COSTS. If after the date hereof, the adoption or
effectiveness of any applicable law, rule or regulation, order, guideline or
request or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof,
or compliance by any Letter of Credit Issuer or any Participant with any
request or directive (whether or not having the force of law) by any such
authority, central bank or comparable agency shall either (i) impose, modify
or make applicable any reserve, deposit, capital adequacy or similar
requirement against Letters of Credit issued by such Letter of Credit Issuer
or such Participant's participation therein, or (ii) impose on any Letter of
Credit Issuer or any Participant any other conditions directly or indirectly
affecting this Agreement, any Letter of Credit or such Participant's
participation therein; and the result of any of the foregoing is to increase
the cost to such Letter of Credit Issuer or such Participant of issuing,
maintaining or participating in any Letter of Credit, or to reduce the amount
of any sum received or receivable by such Letter of Credit Issuer or such
Participant hereunder or reduce the rate of return on its capital with
respect to Letters of Credit, then, upon written demand to the Borrower by
such Letter of Credit Issuer or such Participant (a copy of which notice
shall be sent by such Letter of Credit Issuer or such Participant to the
Agent), accompanied by the certificate described in the last sentence of this
Section 2.05, the Borrower shall pay to such Letter of Credit Issuer or such
Participant such additional amount or amounts as will compensate such Letter
of Credit Issuer or such Participant for such increased cost or reduction. A
certificate submitted to the Borrower by such Letter of Credit Issuer or such
Participant, as the case may be (a copy of which certificate shall be sent by
such Letter of Credit Issuer or such Participant to the Agent), setting forth
the basis for the determination of such additional amount or amounts
necessary to compensate such Letter of Credit Issuer or such Participant as
aforesaid shalt be final and conclusive and binding on the Borrower absent
manifest error, although the failure to deliver any such certificate shall
not release or diminish the Borrower's obligations to pay additional amounts
pursuant to this Section 2.05 upon subsequent receipt of such certificate.
SECTION 3. FEES; COMMITMENTS.
3.01 FEES. (a) The Borrower shall pay to the Agent for distribution to
each Non-Defaulting Bank with a Revolving Loan Commitment a commitment fee
(the "Commitment Fee") for the period from the Effective Date to but not
including Revolving Loan Maturity Date (or such earlier date as the Total
Revolving Loan Commitment shall have been terminated), computed at a rate of
1/2 of 1% per annum on the daily average Unutilized Revolving Loan Commitment
of such Non-Defaulting Bank. Accrued Commitment Fees shall be due and
payable quarterly in arrears on each Quarterly Payment Date and on the
Revolving Loan Maturity Date (or such earlier date upon which the Total
Revolving Loan Commitment is terminated).
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(b) The Borrower shall pay to the Agent for PRO RATA distribution to
each Non-Defaulting Bank with a Revolving Loan Commitment (based on their
respective Percentages), a fee in respect of each Letter of Credit (the
"Letter of Credit Fee") computed at a rate per annum equal to the Applicable
Eurodollar Margin then in effect on the daily Stated Amount of such Letter of
Credit. Accrued Letter of Credit Fees shall be due and payable quarterly in
arrears on each Quarterly Payment Date and upon the first day on or after the
termination of the Total Revolving Loan Commitment upon which no Letters of
Credit remain outstanding.
(c) The Borrower shall pay to each Letter of Credit Issuer a fee in
respect of each Letter of Credit issued by such Letter of Credit Issuer (the
"Facing Fee") computed at the rate of 1/4 of 1% per annum on the daily Stated
Amount of such Letter of Credit; PROVIDED, that in no event shall the annual
Facing Fee with respect to each Letter of Credit be less than $500; it being
agreed that (x) on the date of issuance of any Letter of Credit and on each
anniversary thereof prior to the termination of such Letter of Credit, if
$500 will exceed the amount of Facing Fees that will accrue with respect to
such Letter of Credit for the immediately succeeding 12-month period, the
full $500 shall be payable on the date of issuance of such Letter of Credit
and on each such anniversary thereof prior to the termination of such Letter
of Credit and (y) if on the date of the termination of any Letter of Credit,
$500 actually exceeds the amount of Facing Fees paid or payable with respect
to such Letter of Credit for the period beginning on the date of the issuance
thereof (or if the respective Letter of Credit has been outstanding for more
than one year, the date of the last anniversary of the issuance thereof
occurring prior to the termination of such Letter of Credit) and ending on
the date of the termination thereof, an amount equal to such excess shall be
paid as additional Facing Fees with respect to such Letter of Credit on the
next date upon which Facing Fees are payable in accordance with the
immediately succeeding sentence. Except as provided in the immediately
preceding sentence, accrued Facing Fees shall be due and payable quarterly in
arrears on each Quarterly Payment Date and upon the first day on or after the
termination of the Total Revolving Loan Commitment upon which no Letters of
Credit remain outstanding.
(d) The Borrower shall pay directly to each Letter of Credit Issuer
upon each issuance of, payment under, and/or amendment of, a Letter of Credit
issued by such Letter of Credit Issuer such amount as shall at the time of
such issuance, payment or amendment be the administrative charge which such
Letter of Credit Issuer is customarily charging for issuances of, payments
under or amendments of, letters of credit issued by it, plus any expenses
relating to such transactions.
(e) The Borrower shall pay to the Agent, for its own account, such fees
as may be agreed to in writing from time to time between the Borrower and the
Agent, when and as due.
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(f) All computations of Fees shall be made in accordance with Section
13.07(b).
3.02 VOLUNTARY TERMINATION OR REDUCTION OF TOTAL UNUTILIZED REVOLVING
LOAN COMMITMENT. (a) Upon at least three Business Days' prior notice to the
Agent at its Notice Office (which notice the Agent shall promptly transmit to
each of the Banks), the Borrower shall have the right, without premium or
penalty, to terminate or partially reduce the Total Unutilized Revolving Loan
Commitment, PROVIDED that (v) any such termination or partial reduction shall
apply to proportionately and permanently reduce the Revolving Loan Commitment
of each of the RL Banks, (w) any reduction to the Total Unutilized Revolving
Loan Commitment prior to the Initial Borrowing Date may only be made in
connection with a termination in full of the Total Revolving Loan Commitment,
(x) any partial reduction pursuant to this Section 3.02(a) shall be in
integral multiples of $1,000,000, (y) the reduction to the Total Unutilized
Revolving Loan Commitment shall in no case be in an amount which would cause
the Revolving Loan Commitment of any RL Bank to be reduced (as required by
the preceding clause (v)) by an amount which exceeds the remainder of (A) the
Unutilized Revolving Loan Commitment of such RL Bank as in effect immediately
before giving effect to such reduction minus (B) such RL Bank's Percentage
of the aggregate principal amount of Swingline Loans then outstanding and
(z) any partial reduction to Total Revolving Loan Commitment pursuant to this
Section 3.02(a) shall apply to reduce the remaining Scheduled Commitment
Reductions on a pro-rata basis (based upon the then remaining amount of each
such Scheduled Commitment Reduction).
(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, Waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in
Section 13.12(b), the Borrower shall have the right, subject to obtaining the
consents required by Section 13.12(b), upon five Business Days' prior written
notice to the Agent at its Notice Office (which notice the Agent shall
promptly transmit to each of the Banks), to terminate the entire Revolving
Loan Commitment of such Bank, so long as all Loans, together with accrued and
unpaid interest, Fees and all other amounts, owing to such Bank (including
all amounts, if any, owing pursuant to Section 1.11 but excluding amounts
owing in respect of Term Loans maintained by such Bank, if such Term Loans
are not being repaid pursuant to Section 13.12(b)) are repaid concurrently
with the effectiveness of such termination (at which time Annex 1 shall be
deemed modified to reflect such changed amounts) and at such time, unless the
respective Bank continues to have outstanding Term Loans hereunder, such Bank
shall no longer constitute a "Bank" for purposes of this Agreement, except
with respect to indemnifications under this Agreement (including, without
limitation, Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06), which shall
survive as to such repaid Bank. Unless otherwise specifically agreed in
writing by the Required Banks, any reduction to the Total Revolving Loan
Commitment pursuant to this Section 3.02(b) shall apply to reduce the
remaining Scheduled Commitment Reductions on a PRO RATA basis (based upon the
then
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remaining amount of each such Scheduled Commitment Reduction after giving
effect to all prior reductions thereto).
3.03 MANDATORY REDUCTION OF COMMITMENTS. (a) The Total Commitment (and
the Term Loan Commitment and the Revolving Loan Commitment of each Bank)
shall terminate in its entirety on September 30, 1996 (or such earlier date
as the Borrower shall have notified the Agent in Writing that it has
terminated discussions regarding the Acquisition) unless the Initial
Borrowing Date has occurred on or before such date.
(b) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Term Loan Commitment (and the Term Loan
Commitment of each Bank) shall (i) terminate in its entirety on the Initial
Borrowing Date (after giving effect to the incurrence of Term Loans on such
date) and (ii) prior to the termination of the Total Term Loan Commitment as
provided in clause (i) above, be reduced from time to time to the extent
required by Section 4.02.
(c) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, on each date set forth below (each, a "Scheduled
Commitment Reduction Date"), the Total Revolving Loan Commitment shall be
permanently reduced by the amount set forth opposite such Scheduled
Commitment Reduction Date below (each such reduction, as the same may be
reduced as provided in Sections 3.02, 3.03(f) and 4.02(i), a "Scheduled
Commitment Reduction"):
<TABLE>
Scheduled Commitment
Reduction Date Amount
-------------------- ------
<S> <C>
September 19, 2000 $15 million
September 19, 2001 $15 million
</TABLE>
(d) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Revolving Loan Commitment (and the Revolving
Loan Commitment of each RL Bank) shall terminate in its entirety on the
Revolving Loan Maturity Date.
(e) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Revolving Loan Commitment shall be reduced
from time to time to the extent required by Section 4.02.
(f) Any amount required to be applied to reduce the Total Revolving
Loan Commitment pursuant to this Section 3.03 (or pursuant to Section 4.02)
shall be applied to reduce the then remaining Scheduled Commitment Reductions
PRO RATA based upon the then
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remaining amount of such Scheduled Commitment Reductions after giving effect
to all prior reductions thereto.
(g) Each reduction to the Total Term Loan Commitment or Total Revolving
Loan Commitment pursuant to this Section 3.03 (or pursuant to Section 4.02)
shall be applied proportionately to reduce the Term Loan Commitment or the
Revolving Loan Commitment, as the case may be, of each Bank with such a
Commitment.
SECTION 4. PAYMENTS.
4.01 VOLUNTARY PREPAYMENTS. (a) The Borrower shall have the right to
prepay the Loans, and the right to allocate such prepayments to Revolving
Loans, Swingline Loans and/or Term Loans as the Borrower elects, in whole or
in part, without premium or penalty except as otherwise provided in this
Agreement, from time to time on the following terms and conditions:
(i) the Borrower shall give the Agent at its Notice Office written
notice (or telephonic notice promptly confirmed in writing) of its intent
to prepay the Loans, whether such Loans are Term Loans, Revolving Loans or
Swingline Loans, the amount of such prepayment, the Type of Loans to be
repaid and (in the case of Eurodollar Loans) the specific Borrowing(s)
pursuant to which made, which notice shall be given by the Borrower prior
to 12:00 Noon (New York time) (x) at least one Business Day prior to the
date of such prepayment in the case of Base Rate Loans, (y) on the date of
such prepayment in the case of Swingline Loans and (z) at least three
Business Days prior to the date of such prepayment in the case of
Eurodollar Loans, which notice shall, except in the case of Swingline
Loans, promptly be transmitted by the Agent to each of the Banks;
(ii) each prepayment (other than prepayments in full of (x) all
outstanding Base Rate Loans or (y) any outstanding Borrowing of Eurodollar
Loans) shall be in an aggregate principal amount of at least (x)
$1,000,000, in the case of Eurodollar Loans, (y) $500,000, in the case of
Revolving Loans and Term Loans maintained as Base Rate Loans and (z)
$100,000, in the case of Swingline Loans and, in each case, if greater, in
integral multiples of $100,000, PROVIDED, that no partial prepayment of
Eurodollar Loans made pursuant to a Borrowing shall reduce the aggregate
principal amount of the Eurodollar Loans outstanding pursuant to such
Borrowing to an amount less than the Minimum Borrowing Amount applicable
thereto;
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(iii) at the time of any prepayment of Eurodollar Loans pursuant to
this Section 4.01 on any date other than the last day of the Interest
Period applicable thereto, the Borrower shall pay the amounts required
pursuant to Section 1.11;
(iv) each prepayment in respect of any Loans made pursuant to a
Borrowing shall be applied PRO RATA among such Loans, provided, that at the
Borrower's election in connection with any prepayment of Revolving Loans
pursuant to this Section 4.01(a), such prepayment shall not be applied to
any Revolving Loans of a Defaulting Bank; and
(v) each prepayment of principal of Term Loans pursuant to this
Section 4.01(a) shall be applied to reduce the then remaining Scheduled
Repayments on a PRO RATA basis (based upon the then remaining amount of
each such Scheduled Repayment after giving affect to all prior reductions
thereto).
(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
13.12(b), the Borrower shall have the right, upon five Business Days' prior
written notice to the Agent at its Notice Office (which notice the Agent shall
promptly transmit to each of the Banks), to repay all Loans of such Bank
(including all amounts, if any, owing pursuant to Section 1.11), together with
accrued and unpaid interest, Fees and all other amounts then owing to such Bank
(or owing to such Bank with respect to Tranche which gave rise to the need to
obtain such Bank's individual consent) in accordance with said Section 13.12(b),
so long as (A) in the case of the repayment of Revolving Loans of any Bank
pursuant to this clause (b), the Revolving Loan Commitment of such Bank is
terminated concurrently with such repayment (at which time Annex I shall be
deemed modified to reflect the changed Revolving Loan Commitments), and (B) the
consents required by Section 13.12(b) in connection with the repayment pursuant
to this clause (b) shall have been obtained.
4.02 MANDATORY REPAYMENTS AND COMMITMENT REDUCTIONS. (a) If on any
date the sum of (i) the aggregate outstanding principal amount of Revolving
Loans and Swing line Loans (after giving effect to all other repayments thereof
on such date) and (ii) the Letter of Credit Outstandings on such date exceeds
the Total Revolving Loan Commitment as then in effect, the Borrower shall repay
on such date the principal of Swingline Loans, and if no Swingline Loans are or
remain outstanding, Revolving Loans in an aggregate amount equal to such excess.
If, after giving effect to the prepayment of all outstanding Swingline Loans and
Revolving Loans, the aggregate amount of Letter of Credit Outstandings exceeds
the Total Revolving Loan Commitment as then in effect, the Borrower shall pay to
the Agent on such date an amount in cash and/or Cash Equivalents equal to such
excess (up to the aggregate amount of Letter of Credit Outstandings at such
time) and the Agent shall hold such payment as security for the obligations of
the Borrower
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hereunder pursuant to a cash collateral agreement to be entered into in form
and substance satisfactory to the Agent.
(b) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date set forth below, the
Borrower shall be required to repay that principal amount of Term Loans, to the
extent then outstanding, as is set forth opposite such date (each such
repayment, as the same may be reduced as provided in Sections 4.01 and 4.02(i),
a "Scheduled Repayment"):
SCHEDULED REPAYMENT DATE AMOUNT
------------------------ ------
last Business Day in September 1997 $500,000
last Business Day in September 1998 $500,000
last Business Day in September 1999 $500,000
last Business Day in September 2000 $500,000
last Business Day in September 2001 $500,000
last Business Day in September 2002 $500,000
Final Maturity Date $47,000,000
(c) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date on or after the Effective
Date upon which Parent or any of its Subsidiaries receives Net Sale Proceeds
from any Asset Sale, an amount equal to 100% of the Net Sale Proceeds from such
Asset Sale shall be applied as a mandatory repayment and/or commitment
reduction, as the case may be, of outstanding Term Loans and the Total Revolving
Loan Commitment in accordance with the requirements of Sections 4.02(i) and (j);
PROVIDED that during any fiscal year of the Borrower ending after September 30,
1996, up to $1,000,000 in aggregate Net Sale Proceeds received during such
fiscal year may be retained by Parent and its Subsidiaries without giving rise
to a mandatory repayment (and/or commitment reduction, as the case may be) to
the extent that no Default or Event of Default exists at the time such Net Sale
Proceeds are received, and PROVIDED FURTHER that (i) additional Net Sale
Proceeds of up to $250,000 in the aggregate received by Parent or its
Subsidiaries on or after the Effective Date shall not give rise to a mandatory
repayment (and/or commitment reduction, as the case may be) on such date to the
extent that no Default or Event of Default then exists and the Borrower delivers
a certificate to the Agent on or prior to such date stating that such Net Sale
Proceeds shall be used to purchase assets used or to be used in the businesses
permitted pursuant to Section 9.01 (including, without limitation (but only to
the extent permitted by Section 9.02), the purchase of the capital stock of a
Person engaged in such businesses) within one year following the date of receipt
of such Net Sale Proceeds from such Asset Sale (which certificate shall set
forth the estimates of the proceeds to be so expended) and (ii) that (x) if all
or any portion of such Net Sale Proceeds are not so used
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(or contractually committed to be used) within such one year period, such
remaining portion shall be applied on the last day of such period as a
mandatory repayment and/or commitment reduction, as the case may be, of
outstanding Term Loans and the Total Revolving Loan Commitment as provided
above and (y) if all or any portion of such Net Sale Proceeds are not so used
within such one year period referred to in clause (x) above because such
amount is contractually committed to be used and subsequent to such date such
contract is terminated or expires without such portion being so used, such
remaining portion shall be applied on the date of such termination or
expiration as a mandatory repayment and/or commitment reduction, as the case
may be, of outstanding Term Loans and the Total Revolving Loan Commitment as
provided above.
(d) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date on or after the Effective
Date on which Parent or any of its Subsidiaries receives any cash proceeds from
any incurrence of Indebtedness (other than Indebtedness permitted to be incurred
pursuant to Section 9.04 as in effect on the Effective Date) by Parent or any of
its Subsidiaries, an amount equal to 100% of the cash proceeds (net of all
underwriting discounts, fees and commissions and other costs and expenses
associated therewith) of the respective incurrence of Indebtedness shall be
applied as a mandatory repayment and/or commitment reduction, as the case may
be, of outstanding Term Loans and the Total Revolving Loan Commitment in
accordance with the requirements of Sections 4.02(i) and (j).
(e) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date on or after the Effective
Date on which Parent or any of its Subsidiaries receives any cash proceeds from
any sale or issuance of preferred or common equity of (or cash capital
contributions to) Parent or any of its Subsidiaries (other than proceeds
received from (x) the Equity Financing (including up to $1,000,000 in proceeds
received within 90 days after the Initial Borrowing Date from certain Management
Participants, to the extent the amount of such proceeds are used within 120 days
of the Initial Borrowing Date to repay, in full or in part, the Odyssey
Convertible Note), (y) equity contributions to any Subsidiary of Parent made by
Parent or any other Subsidiary of Parent and (z) any employee, officer or
director, or from the exercise of options granted pursuant to the Stock Option
Plan, PROVIDED that this clause (z) shall apply only to the first $250,000 in
the aggregate of such proceeds received in any fiscal year of Parent, commencing
with the fiscal year beginning October 1, 1996), an amount equal to 25% of such
cash proceeds (net of all underwriting discounts, fees and commissions and other
costs and expenses associated therewith) of the respective equity issuance or
capital contribution shall be applied as a mandatory repayment and/or commitment
reduction, as the case may be, of outstanding Terms Loan and the Total Revolving
Loan Commitment in accordance with the requirements of Sections 4.02(i) and (j).
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(f) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, within 10 days following each date on
or after the Effective Date on which Parent or any of its Subsidiaries receives
any proceeds from any Recovery Event (other than proceeds from Recovery Events
in an amount less than $100,000 per Recovery Event), an amount equal to 100% of
the proceeds of such Recovery Event (net of reasonable costs including, without
limitation, legal costs and expenses, and taxes incurred in connection with such
Recovery Event) shall be applied as a mandatory repayment and/or commitment
reduction, as the case may be, of outstanding Term Loans and the Total Revolving
Loan Commitment in accordance with the requirements of Sections 4.02(i) and (j);
PROVIDED that (x) so long as no Default or Event of Default then exists and such
proceeds do not exceed $250,000, such proceeds shall not be required to be so
applied on such date to the extent that an Authorized Officer of the Borrower
has delivered a certificate to the Agent on or prior to such date stating that
such proceeds shall be used or shall be committed to be used to replace or
restore any properties or assets in respect of which such proceeds were paid
within one year following the date of such Recovery Event (which certificate
shall set forth the estimates of the proceeds to be so expended) and (y) so long
as no Default or Event of Default then exists and if (a) the amount of such
proceeds exceeds $250,000, (b) the amount of such proceeds, together with other
cash available to the Borrower and its Subsidiaries and permitted to be spent by
them on Capital Expenditures during the relevant period pursuant to Section
9.08, equals at least 100% of the cost of replacement or restoration of the
properties or assets in respect of which such proceeds were paid as determined
by the Borrower and as supported by such estimates or bids from contractors or
subcontractors or such other supporting information as the Agent may reasonably
request, (c) an Authorized Officer of the Borrower has delivered to the Agent a
certificate on or prior to the date the application would otherwise be required
pursuant to this Section 4.02(f) in the form described in clause (x) above and
also certifying its determination as required by preceding clause (b) and
certifying the sufficiency of business interruption insurance as required by
succeeding clause (d), and (d) an Authorized Officer of the Borrower has
delivered to the Agent such evidence as the Agent may reasonably request in form
and substance reasonably satisfactory to the Agent establishing that the
Borrower has sufficient business interruption insurance and that the Borrower
will receive payment thereunder in such amounts and at such times as are
necessary to satisfy all obligations and expenses of the Borrower (including,
without limitation, all debt service requirements, including pursuant to this
Agreement), without any delay or extension thereof, for the period from the date
of the respective casualty, condemnation or other event giving rise to the
Recovery Event and continuing through the completion of the replacement or
restoration of respective properties or assets, then the entire amount of the
proceeds of such Recovery Event and not just the portion in excess of $250,000
shall be deposited with the Agent pursuant to a cash collateral arrangement
reasonably satisfactory to the Agent whereby such proceeds shall be disbursed to
the Borrower from time to time as needed to pay actual costs incurred by them in
connection with the replacement or restoration of the respective properties or
assets (pursuant to such certification requirements as may be
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established by the Agent), PROVIDED FURTHER that at any time while an Event of
Default has occurred and is continuing, the Required Banks may direct the
Agent (in which case the Agent shall, and is hereby authorized by the Borrower
to, follow said directions) to apply any or all proceeds then on deposit in
such collateral account to the repayment of Obligations hereunder, and
PROVIDED FURTHER, that if all or any portion of such proceeds not required to
be applied as a mandatory repayment and/or commitment reduction pursuant to
the second preceding proviso (whether pursuant to clause (x) or (y) thereof)
are either (A) not so used or committed to be so used within one year after
the date of the respective Recovery Event or (B) if committed to be used
within one year after the date of receipt of such net proceeds and not so used
within 18 months after the date of respective Recovery Event then, in either
such case, such remaining portion not used or committed to be used in the case
of preceding clause (A) and not used in the case of preceding clause (B) shall
be applied on the date which is the first anniversary of the date of the
respective Recovery Event in the case of clause (A) above or the date
occurring 18 months after the date of the respective Recovery Event in the
case of clause (B) above as a mandatory repayment and/or commitment reduction,
as the case may be, of outstanding Terms Loans and the Total Revolving Loan
Commitment in accordance with the requirements of Sections 4.02(i) and (j).
(g) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each Excess Cash Payment Date, an
amount equal to the Applicable Excess Cash Flow Percentage of the Excess Cash
Flow for the relevant Excess Cash Flow Payment Period shall be applied as a
mandatory repayment and/or commitment reduction, as the case may be, of
outstanding Term Loans and the Total Revolving Loan Commitment in accordance
with the requirements of Sections 4.02(i) and (j).
(h) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, at such time as a final determination
is made with respect to both (i) the Merger Consideration Adjustment (as defined
in the Merger Agreement) and (ii) the amount of payments owing pursuant to
Section 3.3(c) of the Asset Purchase Agreement, the aggregate net amount (if
any) of proceeds received by Parent or any of its Subsidiaries pursuant thereto
shall be applied as a mandatory repayment and/or commitment reduction, as the
case may be, of outstanding Term Loans and the Total Revolving Loan Commitment
in accordance with the requirements of Section 4.02(i) and (j).
(i) Each amount required to be applied pursuant to Sections 4.02(c),
(d), (e), (f), (g) and (h) in accordance with this Section 4.02(i) shall be
applied (i) first, to repay the outstanding principal amount of Term Loans (or,
if prior to the Initial Borrowing Date, to reduce the Total Term Loan
Commitment) and (ii) second, to the extent in excess of the amounts required to
be applied pursuant to preceding clause (i), to reduce the Total
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Revolving Loan Commitment (it being understood and agreed that (i) the amount
of any reduction to the Total Revolving Loan Commitment (or the Total Term
Loan Commitment, as the case may be) as provided above in this Section 4.02(i)
shall be deemed to be an application of proceeds for purposes of this Section
4.02(i) even though cash is not actually applied and (ii) any cash received by
Parent or such Subsidiary will be retained by such Person except to the extent
that such cash is otherwise required to be applied as provided in Section
4.02(a) as a result of any reduction to the Total Revolving Loan Commitment).
All repayments or commitment reductions, as the case may be, of (x)
outstanding Term Loans (or, if prior to the Initial Borrowing Date, Term Loan
Commitments), on the one hand and (y) Revolving Loan Commitments, on the other
hand, pursuant to Sections 4.02(c), (d), (e), (f), (g) and (h) shall be
applied to reduce the then remaining Scheduled Repayments (in the case of
preceding clause (x)) or Scheduled Commitment Reductions (in the case of
preceding clause (y)), PRO RATA based upon the then remaining Scheduled
Repayments or Scheduled Commitment Reductions, as the case may be, after
giving effect to all prior reductions thereto.
(j) With respect to each repayment of Loans required by this Section
4.02, the Borrower may designate the Types of Loans of the respective Tranche
which are to be repaid and, in the case of Eurodollar Loans, the specific
Borrowing or Borrowings of the respective Tranche pursuant to which made,
PROVIDED that: (i) repayments. of Eurodollar Loans pursuant to this Section 4.02
may only be made on the last day of an Interest Period applicable thereto unless
all Eurodollar Loans of the respective Tranche with Interest Periods ending on
such date of required repayment and all Base Rate Loans of the respective
Tranche have been paid in full; (ii) if any repayment of Eurodollar Loans made
pursuant to a single Borrowing shall reduce the outstanding Eurodollar Loans
made pursuant to such Borrowing to an amount less than the Minimum Borrowing
Amount applicable thereto, such Borrowing shall be converted at the end of the
then current Interest Period into a Borrowing of Base Rate Loans; and (iii) each
repayment of any Tranche of Loans made pursuant to a Borrowing shall be applied
PRO RATA among such Tranche of Loans. In the absence of a designation by the
Borrower as described in the preceding sentence, the Agent shall, subject to the
above, make such designation in its sole discretion with a view, but no
obligation, to minimize breakage costs owing under Section 1.11.
(k) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, (i) all then outstanding Swingline Loans shall be repaid in full
on the Swingline Expiry Date and (ii) all other then outstanding Loans shall be
repaid in full on the respective Maturity Date for such Loans.
4.03 METHOD AND PLACE OF PAYMENT. Except as otherwise specifically
provided herein, all payments under this Agreement or any Note shall be made to
the Agent for the ramble account of the Bank or Banks entitled thereto not later
than 12:00 Noon (New York time) on the date when due and shall be made in
immediately available funds
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and in U.S. Dollars at the Payment Office. Any payments under this Agreement
or under any Note which are made later than 12:00 Noon (New York time) shall
be deemed to have been made on the next succeeding Business Day. Whenever any
payment to be made hereunder or under any Note shall be stated to be due on a
day which is not a Business Day, the due date thereof shall be extended to the
next succeeding Business Day and, with respect to payments of principal,
interest shall be payable during such extension at the applicable rate in
effect immediately prior to such extension.
4.04 NET PAYMENTS. (a) All payments made by the Borrower hereunder or
under any Note will be made without setoff, counterclaim or other defense.
Except as provided in Section 4.04(b), all such payments will be made free and
clear of, and without deduction or withholding for, any present or future taxes,
levies, imposts, duties, fees, assessments or other charges of whatever nature
now or hereafter imposed by any jurisdiction or by any political subdivision or
taxing authority thereof or therein with respect to such payments (but
excluding, except as provided in the second succeeding sentence, any tax imposed
on or measured by the net income or net profits of a Bank pursuant to the laws
of the jurisdiction in which it is organized or the jurisdiction in which the
principal office or applicable lending office of such Bank is located or any
subdivision thereof or therein) and all interest, penalties or similar
liabilities with respect to such non excluded taxes, levies, imposts, duties,
fees, assessments or other charges (all such nonexcluded taxes, levies, imposts,
duties, fees, assessments or other charges being referred to collectively as
"Taxes"). Except as provided in Sections 4.04(b) and 13.04(b), if any Taxes are
so levied or imposed, the Borrower agrees to pay the full amount of such Taxes,
and such additional amounts as may be necessary so that every payment of all
amounts due under this Agreement or under any Note, after withholding or
deduction for or on account of any Taxes, will not be less than the amount
provided for herein or in such Note. If any amounts are payable in respect of
Taxes pursuant to the preceding sentence, the Borrower agrees to reimburse each
Bank, upon the written request of such Bank, for taxes imposed on or measured by
the net income or net profits of such Bank pursuant to the laws of the
jurisdiction in which such Bank is organized or in which the principal office or
applicable lending office of such Bank is located or under the laws of any
political subdivision or taxing authority of any such jurisdiction in which such
Bank is organized or in which the principal office or applicable lending office
of such Bank is located and for any withholding of taxes as such Bank shall
determine are payable by, or withheld from, such Bank in respect of such amounts
so paid to or on behalf of such Bank pursuant to the preceding sentence and in
respect of any amounts paid to or on behalf of such Bank pursuant to this
sentence. The Borrower will furnish to the Agent within 45 days after the date
the payment of any Taxes is due pursuant to applicable law certified copies of
tax receipts evidencing such payment by the Borrower. The Borrower agrees to
indemnify and hold harmless each Bank, and reimburse such Bank upon its written
request, for the amount of any Taxes so levied or imposed and paid by such Bank.
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(b) Each Bank that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for U.S Federal income tax purposes
agrees to deliver to the Borrower and the Agent on or prior to the Effective
Date, or in the case of a Bank that is an assignee or transferee of an interest
under this Agreement pursuant to Section 1.13 or 13.04 (unless the respective
Bank was already a Bank hereunder immediately prior to such assignment or
transfer), on the date of such assignment or transfer to such Bank, (i) two
accurate and complete original signed copies of Internal Revenue Service Form
4224 or 1001 (or successor forms) certifying to such Bank's entitlement to a
complete exemption from United States withholding tax with respect to payments
to be made under this Agreement and under any Note, or (ii) if the Bank is not a
"bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver
either Internal Revenue Service Form 1001 or 4224 pursuant to clause (i) above,
(x) a certificate substantially in the form of Exhibit D (any such certificate,
a "Section 4.04(b)(ii) Certificate") and (y) two accurate and complete original
signed copies of Internal Revenue Service Form W-8 (or successor form)
certifying to such Bank's entitlement to a complete exemption from United States
withholding tax with respect to payments of interest to be made under this
Agreement and under any Note. In addition, each Bank agrees that from time to
time after the Effective Date, when a lapse in time or change in circumstances
renders the previous certification obsolete or inaccurate in any material
respect, it will deliver to the Borrower and the Agent two new accurate and
complete original signed copies of Internal Revenue Service Form 4224 or 1001,
or Form W-8 and a Section 4.04(b)(ii) Certificate, as the case may be, and such
other forms as may be required in order to confirm or establish the entitlement
of such Bank to a continued exemption from or reduction in United States
withholding tax with respect to payments under this Agreement and any Note, or
it shall immediately notify the Borrower and the Agent of its inability to
deliver any such Form or Certificate in which case such Bank shall not be
required to deliver any such Form or Certificate pursuant to this Section
4.04(b). Notwithstanding anything to the contrary contained in Section 4.04(a),
but subject to Section 13.04(b) and the immediately succeeding sentence, (x) the
Borrower shall be entitled, to the extent it is required to do so by law, to
deduct or withhold income or similar taxes imposed by the United States (or any
political subdivision or taxing authority thereof or therein) from interest,
fees or other amounts payable hereunder for the account of any Bank which is not
a United States person (as such term is defined in Section 7701(a)(30) of the
Code) for U.S. Federal income tax purposes to the extent that such Bank has not
provided to the Borrower U.S. Internal Revenue Service Forms that establish a
complete exemption from such deduction or withholding and (y) the Borrower shall
not be obligated pursuant to Section 4.04(a) hereof to gross-up payments to be
made to a Bank in respect of income or similar taxes imposed by the United
States (or any political subdivision or taxing authority thereof or therein) if
(I) such Bank has not provided to the Borrower the Internal Revenue Service
Forms required to be provided to the Borrower pursuant to this Section 4.04(b)
or (II) in the case of a payment, other than interest, to a Bank described in
clause (ii) above, to the extent that such Forms do not establish a complete
exemption from withholding of such taxes. Notwithstanding anything to the
contrary contained in the
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preceding sentence or elsewhere in this Section 4.04 and except as set forth
in Section 13.04(b), the Borrower agrees to pay additional amounts and to
indemnify each Bank in the manner set forth in Section 4.04(a) (without regard
to the identity of the jurisdiction requiring the deduction or withholding) in
respect of any Taxes deducted or withheld by it as described in the
immediately preceding sentence as a result of any changes after the Effective
Date in any applicable law, treaty, governmental rule, regulation, guideline
or order, or in the interpretation thereof, relating to the deducting or
withholding of such Taxes (or, if later, the date such Bank became party to
this Agreement).
SECTION 5. CONDITIONS PRECEDENT. The obligation of each Bank to make
each Loan to the Borrower hereunder, and the obligation of the Letter of Credit
Issuer to issue each Letter of Credit hereunder, is subject, at the time of the
making of such Loans or the Issuance of such Letters of Credit to the
satisfaction of the following conditions:
5.01 EXECUTION OF AGREEMENT: NOTES. On or prior to the Initial
Borrowing Date, (i) the Effective Date shall have occurred and (ii) there shall
have been delivered to the Agent for the account of each Bank the appropriate
Term Note and/or Revolving Note and to BTCo the Swingline Note, in each case
executed by the Borrower and in the amount, maturity and as otherwise provided
herein.
5.02 OFFICER'S CERTIFICATE. On the Initial Borrowing Date, the Agent
shall have received a certificate dated such date signed by an appropriate
officer of the Borrower stating that all of the applicable conditions set forth
in Sections 5.04 through 5.10, 5.16, 6.01, 6.02 and 6.03 have been satisfied on
such date.
5.03 OPINIONS OF COUNSEL. On the Initial Borrowing Date, the Agent
shall have received opinions, addressed to the Agent, the Collateral Agent and
each of the Banks and dated the Initial Borrowing Date, from (i) Weil, Gotshal &
Manges LLP, special counsel to the Credit Parties, which opinion shall cover the
matters contained in Exhibit E and such other matters incident to the
transactions contemplated herein as the Agent may reasonably request and (ii)
local and other counsel to the Credit Parties and/or the Agent reasonably
satisfactory to the Agent, which opinions shall cover such matters incident to
the transactions contemplated herein and in the other Credit Documents as the
Agent may reasonably request and shall be in form and substance satisfactory to
the Agent.
5.04 CORPORATE DOCUMENTS: PROCEEDINGS. (a) On the Initial Borrowing
Date, the Agent shall have received from each Credit Party a certificate, dated
the Initial Borrowing Date, signed by the chairman, a vice-chairman, the
president or any vice-president of such Credit Party, and attested to by the
secretary or any assistant secretary of such Credit Party, in the form of
Exhibit F with appropriate insertions, together with copies of the Certificate
of Incorporation and By-Laws of such Credit Party and the
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resolutions of such Credit Party referred to in such certificate and all of
the foregoing (including each such Certificate of Incorporation and By-Laws)
shall be reasonably satisfactory to the Agent.
(b) On the Initial Borrowing Date, all corporate and legal
proceedings and all instruments and agreements in connection with the
transactions contemplated by this Agreement and the other Documents shall be
reasonably satisfactory in form and substance to the Agent, and the Agent shall
have received all information and copies of all certificates, documents and
papers, including good standing certificates, bring-down certificates and any
other records of corporate proceedings and governmental approvals, if any, which
the Agent reasonably may have requested in connection therewith, such documents
and papers, where appropriate, to be certified by proper corporate or
governmental authorities.
(c) On the Initial Borrowing Date and after giving effect to the
Transaction, the capital structure (including, without limitation, the terms of
any capital stock, options, warrants or other securities issued by Parent or
any of its Subsidiaries) of Parent and each of its Subsidiaries shall be in form
and substance satisfactory to the Agent, and the management of Parent and its
Subsidiaries shall be satisfactory to the Agent.
5.05 ADVERSE CHANGE. ETC. (a) On or prior to the Initial Borrowing
Date, nothing shall have occurred since December 31, 1995 (and neither the Banks
nor the Agent shall have become aware of any facts or conditions not previously
known) which the Required Banks or the Agent shall determine has, or could
reasonably be expected to have (i) a material adverse effect on the rights or
remedies of the Banks or the Agent, or on the ability of any Credit Party to
perform its obligations to them hereunder or under any other Credit Document,
(ii) a material adverse effect on the Transaction, or (iii) a Material Adverse
Effect.
(b) On the Initial Borrowing Date, there shall not have occurred and
be continuing a material disruption or a material adverse change in financial,
banking or capital markets that would have a material adverse effect on the
syndication, in each case as determined by the Agent in its sole discretion.
5.06 LITIGATION. On the Initial Borrowing Date, there shall be no
actions, suits, proceedings or investigations pending or threatened (a) with
respect to this Agreement or any other Document or the Transaction or any
documentation executed in connection therewith or the transactions contemplated
thereby or with respect to any Existing Indebtedness or (b) which the Agent or
the Required Banks shall determine could reasonably be expected to (i) have a
Material Adverse Effect or (ii) have a material adverse effect on the
Transaction, the rights or remedies of the Banks or the Agent hereunder or under
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any other Credit Document or on the ability of any Credit Party to perform its
respective obligations to the Banks or the Agent hereunder or under any other
Credit Document.
5.07 APPROVALS. On or prior to the Initial Borrowing Date, (i) all
necessary governmental (domestic and foreign), regulatory and third party
approvals in connection with the Credit Documents and otherwise referred to
herein or therein shall have been obtained and remain in full force and effect,
(ii) all necessary material governmental (domestic and foreign) and third party
approvals in connection with any Existing Indebtedness, the Transaction, the
transactions contemplated by the Transaction Documents and otherwise referred to
therein shall have been obtained and remain in full force and effect and
evidence thereof shall have been provided to the Agent, and (iii) 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 the Transaction, the making of the Loans,
the issuance of Letters of Credit and the transactions contemplated by the
Documents or otherwise referred to herein or therein. Additionally, there shall
not exist any judgment, order, injunction or other restraint issued or filed or
a hearing seeking injunctive relief or other restraint pending or notified
prohibiting or imposing materially adverse conditions upon, or materially
delaying, or making economically unfeasible, the consummation of the Transaction
or the making of the Loans, the issuance of Letters of Credit or the
transactions contemplated by the Documents.
5.08 CONSUMMATION OF THE ACQUISITION. (a) On or prior to the Initial
Borrowing Date, (i) all terms and conditions of the Acquisition Documents shall
be in form and substance satisfactory to the Agent and the Required Banks, (ii)
the Acquisition, including all of the terms and conditions thereof, shall have
been duly approved by the board of directors and (if required by applicable law)
the shareholders of Parent, Holdings, Tri-Star Holdings, the Borrower, Tri-Star
Aerospace and Aviall, and all Acquisition Documents shall have been duly
executed and delivered by the parties thereto and shall be in full force and
effect, (iii) the representations and warranties set forth in the Acquisition
Documents shall be true and correct in all material respects as if made on and
as of the Initial Borrowing Date, (iv) each of the conditions precedent to the
obligations of each of Tri-Star Holdings and the Borrower to consummate the
Acquisition as set forth in the Acquisition Documents shall have been satisfied
to the satisfaction of the Agent and the Required Banks or waived with the
consent of the Agent and the Required Banks, (v) the Acquisition shall have been
consummated in accordance with all applicable laws and the Acquisition Documents
and (vi) Tri-Star Aerospace, Inc., as the surviving corporation of the Merger,
shall have executed and delivered the Assumption Agreement. On the Initial
Borrowing Date, the assets comprising the Acquired Business shall be owned by
(i) in the case of assets held by Tri-Star Aerospace, Tri-Star Holdings and (ii)
in the case of assets formerly held by Aviall, the Borrower; in each case free
and clear of all Liens other than Permitted Liens.
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(b) The total consideration for the Acquisition, including all fees
and expenses owing in connection with the Transaction, shall not exceed
$81,000,000, of which (i) no more than $76,200,000 shall be paid in cash in
respect of the Acquisition and (ii) no more than $4,800,000 shall be paid in
cash in respect of fees.
5.09 REFINANCING. (a)(i) On the Initial Borrowing Date and
concurrently with the Credit Events then occurring, (x) all Indebtedness of Tri-
Star Aerospace and its Subsidiaries remaining outstanding pursuant to the
proviso contained in Section 4.12 of the Merger Agreement (the "Designated
Indebtedness") shall have been repaid in full, together with all accrued and
unpaid interest and fees thereon (and all other amounts then owing pursuant to
the documentation governing the Designated Indebtedness), (y) no more than
$22,000,000 shall have been paid to effect the Refinancing and (z) the Agent
shall have received evidence in form, scope and substance reasonably
satisfactory to it that the matters set forth in this Section 5.09(a)(i) have
been satisfied at such time.
(ii) On the Initial Borrowing Date and concurrently with the Credit
Events then occurring, all security interests in respect of, and Liens securing,
Designated Indebtedness shall have been terminated and released, and the Agent
shall have received all such releases as may have been requested by the Agent,
which releases shall be in form and substance reasonably satisfactory to the
Agent. Without limiting the foregoing, there shall have been delivered (w)
proper termination statements (Form UCC-3 or the appropriate equivalent) for
filing under the UCC of each jurisdiction where a financing statement Form UCC-1
or the appropriate equivalent was filed with respect to Tri-Star Aerospace,
Aviall and their respective Subsidiaries in connection with the security
interests created with respect to the Designated Indebtedness and the
documentation related thereto, (x) termination or reassignment of any security
interest in, or Lien on, any patents, trademarks, copyrights or similar
interests of Tri-Star Aerospace, Aviall and their respective Subsidiaries on
which filings have been made to secure obligations under the Designated
Indebtedness and (y) terminations of all mortgages, leasehold mortgages and
deeds of trusts created with respect to property of Tri-Star Aerospace, Aviall
and their respective Subsidiaries, in each case, to secure the obligations under
the Designated Indebtedness, all of which shall be in form and substance
satisfactory to the Agent and the Required Banks.
(b) All obligations of Tri-Star Aerospace and its Subsidiaries with
respect to the Designated Indebtedness being repaid or satisfied in connection
with the Refinancing shall be terminated to the satisfaction of the Agent. All
terms and conditions of the Refinancing and the documentation in connection
therewith shall be required to be satisfactory to the Agent.
5.10 CONSUMMATION OF THE EQUITY FINANCING. On the Initial Borrowing
Date, (i) Parent shall have received gross cash proceeds of at least $22,000,000
in
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connection with the Equity Financing, of which (x) not less than $17,000,000
shall have been contributed to Parent by Odyssey and its Affiliates, of which
$1,000,000 shall be in the form of a loan from Odyssey to Parent, which loan
shall be evidenced by the Odyssey Convertible Note and (y) not less than
$4,000,000 shall have been contributed to Parent by Bourjeaurd and the
Management Participants, (ii) Parent shall have contributed the full amount of
the gross cash proceeds received by it from the Equity Financing to the capital
of Holdings as a common equity contribution in exchange for common stock of
Holdings, (iii) Holdings shall have contributed the full amount received by it
pursuant to clause (ii) above to the capital of Tri-Star Holdings as a common
equity contribution in exchange for common stock of Tri-Star Holdings, (iv) Tri-
Star Holdings shall have contributed the full amount received by it pursuant to
clause (iii) above to the capital of the Borrower as a common equity
contribution in exchange for common stock of the Borrower and (v) the Borrower
shall have utilized the full amount of such cash contribution to make the
Intercompany Acquisition Loan (as herein defined) and payments owing in
connection with the Transaction prior to utilizing any proceeds of Loans for
such purpose, and (vi) after giving effect to the Equity Financing and the
contributions described in clauses (ii)-(iv) above, each of Parent, Holdings,
Tri-Star Holdings and the Borrower shall have stockholders' equity of at least
$22,000,000. All of the terms and conditions of the Equity Financing Documents
shall be reasonably satisfactory to the Agent and the Required Banks, and all
conditions precedent to the consummation of the Equity Financing as set forth in
the Equity Financing Documents shall have been satisfied, and not waived unless
consented to by the Agent and the Required Banks, to the reasonable satisfaction
of the Agent and the Required Banks. The Equity Financing shall have occurred in
accordance with the terms and conditions of the Equity Financing Documents and
all applicable law.
5.11 SECURITY DOCUMENTS: ETC. (a) On the Initial Borrowing Date, each
Credit Party shall have duly authorized, executed and delivered a Pledge
Agreement in the form of Exhibit G (as amended, modified or supplemented from
time to time in accordance with the terms thereof and hereof, the "Pledge
Agreement") and shall have delivered to the Collateral Agent, as pledgee
thereunder, all of the Pledged Securities referred to therein, endorsed in blank
in the case of promissory notes or accompanied by executed and undated stock
powers in the case of capital stock, along with evidence that all other actions
necessary or, in the reasonable opinion of the Collateral Agent, desirable, to
perfect the security interests purported to be created by the Pledge Agreement
have been taken and the Pledge Agreement shall be in full force and effect.
(b) On the Initial Borrowing Date, each Credit Party shall have duly
authorized, executed and delivered a Security Agreement in the form of Exhibit H
(as amended, modified or supplemented from time to time in accordance with the
terms thereof and hereof, the "Security Agreement") covering all of the Security
Agreement Collateral, together with:
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(A) executed copies of Financing Statements (Form UCC-1) or
appropriate local equivalent in appropriate form for filing under the UCC
or appropriate local equivalent of each jurisdiction as may be necessary
or, in the reasonable opinion of the Collateral Agent, desirable to perfect
the security interests purported to be created by the Security Agreement;
(B) certified copies of Requests for Information or Copies
(Form UCC-11), or equivalent reports, each of a recent date listing all
effective financing statements that name Parent, Holdings, Tri-Star
Holdings, the Borrower or any of their respective Subsidiaries as debtor or
otherwise relate to the Acquired Business and that are filed in the
jurisdictions referred to in clause (A) above, together with copies of such
financing statements (none of which shall cover the Collateral except (x)
those with respect to which appropriate termination statements executed by
the secured lender thereunder have been delivered to the Agent and (y) to
the extent evidencing Permitted Liens);
(C) evidence of the completion of all other recordings and filings
of, or with respect to, the Security Agreement as may be necessary or, in
the reasonable opinion of the Collateral Agent, desirable, to perfect the
security interests purported to be created by the Security Agreement; and
(D) evidence that all other actions necessary or, in the reasonable
opinion of the Collateral Agent, desirable, to perfect the security
interests purported to be created by the Security Agreement have been
taken;
and the Security Agreement shall be in full force and effect.
5.12 SUBSIDIARIES GUARANTY. On the Initial Borrowing Date, each
Wholly-Owned Domestic Subsidiary of Tri-Star Holdings (other than the Borrower)
and/or of the Borrower shall have duly authorized, executed and delivered a
Subsidiaries Guaranty in the form of Exhibit I (as amended, modified or
supplemented from time to time in accordance with the terms thereof and hereof,
the "Subsidiaries Guaranty"), and the Subsidiaries Guaranty shall be in full
force and effect.
5.13 MORTGAGES; TITLE INSURANCE. (a) On the Initial Borrowing Date,
the Collateral Agent shall have received fully executed counterparts of deeds of
trust, mortgages and similar documents in each case in form and substance
satisfactory to the Collateral Agent (as amended, modified or supplemented from
time to time in accordance with the terms thereof and hereof, each a "Mortgage"
and, collectively, the "Mortgages") with respect to each of the Mortgaged
Properties, if any, and arrangements reasonably satisfactory to the Collateral
Agent shall be in place to provide that counterparts of such Mortgages shall be
recorded on the Initial Borrowing Date in all places to the extent
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necessary or desirable, in the judgment of the Collateral Agent, effectively
to create a valid and enforceable first priority mortgage Lien, subject only
to Permitted Encumbrances, on each such Mortgaged Property in favor of the
Collateral Agent (or such other trustee as may be required or desired under
local law) for the benefit of the Secured Creditors.
(b) On the Initial Borrowing Date, the Collateral Agent shall have
received mortgagee title insurance policies (or binding commitments to issue
such title insurance policies) issued by title insurers reasonably satisfactory
to the Collateral Agent (the "Mortgage Policies") in amounts reasonably
satisfactory to the Collateral Agent and assuring the Collateral Agent that the
Mortgages are valid and enforceable first priority mortgage Liens on the
respective Mortgaged Properties, free and clear of all defects and encumbrances
except Permitted Encumbrances. Such Mortgage Policies shall be in form and
substance reasonably satisfactory to the Collateral Agent and (i) shall include
(to the extent available in the respective jurisdiction of each Mortgaged
Property) an endorsement for future advances under this Agreement, the Notes and
the Mortgages, and for such other matters that the Collateral Agent in its
discretion may reasonably request, (ii) shall not include an exception for
mechanics' liens, and (iii) shall provide for affirmative insurance and such
reinsurance (including direct access agreements) as the Collateral Agent in its
discretion may reasonably request.
(c) On the Initial Borrowing Date, the Collateral Agent shall have
received surveys in form and substance satisfactory to the Collateral Agent of
each Mortgaged Property, if any, designated as "Owned" on Annex III hereto,
dated a recent date acceptable to the Collateral Agent and certified in a manner
satisfactory to the Collateral Agent by a licensed professional surveyor
satisfactory to the Agent.
(d) On the Initial Borrowing Date, the Collateral Agent shall have
received duly authorized, fully executed, acknowledged and delivered
subordination, non-disturbance and attornment agreements, assignment of leases,
landlord consents, tenant estoppel certificates and such other documents
relating to the Mortgages that the Collateral Agent may request, and all the
foregoing shall be in form and substance reasonably satisfactory to the
Collateral Agent.
5.14 EMPLOYEE BENEFIT PLANS; SHAREHOLDERS' AGREEMENTS; MANAGEMENT
AGREEMENTS; EMPLOYMENT AGREEMENTS; COLLECTIVE BARGAINING AGREEMENTS; EXISTING
INDEBTEDNESS AGREEMENTS; MATERIAL CONTRACTS; TAX ALLOCATION AGREEMENTS;
TRANSACTION DOCUMENTS. On or prior to the Initial Borrowing Date, there shall
have been delivered to the Agent true and correct copies, certified as true and
complete by an appropriate officer of the Borrower of:
(i) all Plans (and for each Plan that is required to file an annual
report on Internal Revenue Service Form 5500-series, a copy of the most
recent such
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report (including, to the extent required, the related financial and
actuarial statements and opinions and other supporting statements,
certifications, schedules and information), and for each Plan that is a
"single-employer plan," as defined in Section 4001(a)(15) of ERISA, the
most recently prepared actuarial valuation therefor) and any other
"employee benefit plans," as defined in Section 3(3) of ERISA, and any
other material agreements, plans or arrangements, with or for the benefit
of current or former employees of Parent or any of its Subsidiaries or any
ERISA Affiliate (provided that the foregoing shall apply in the case of any
multiemployer plan, as defined in 4001(a)(3) of ERISA, only to the extent
that any document described therein is in the possession of Parent or any
Subsidiary of Parent or any ERISA Affiliate or reasonably available thereto
from the sponsor or trustee of any such plan) (collectively, the "Employee
Benefit Plans");
(ii) all agreements (including, without limitation, shareholders'
agreements, subscription agreements and registration rights agreements)
entered into by Parent or any of its Subsidiaries governing the terms and
relative rights of its capital stock and any agreements entered into by
shareholders relating to any such entity with respect to its capital stock,
in each case, that are to remain in effect after giving effect to the
consummation of the Transaction (collectively, the "Shareholders'
Agreements");
(iii) all material agreements with members of, or with respect to, the
management of Parent or any of its Subsidiaries that are to remain in
effect after giving effect to the consummation of the Transaction
(collectively, the "Management Agreements");
(iv) any material employment agreements entered into by Parent or any
of its Subsidiaries (collectively, the "Employment Agreements");
(v) all collective bargaining agreements applying or relating to any
employee of Parent or any of its Subsidiaries that are to remain in effect
after giving effect to the consummation of the Transaction (collectively,
the "Collective Bargaining Agreements");
(vi) all agreements evidencing or relating to Existing Indebtedness of
Parent that are to remain in effect after giving effect to the consummation
of the Transaction (collectively, the "Existing Indebtedness Agreements");
(vii) all other material contracts and licenses of Parent and any of
its Subsidiaries that are to remain in effect after giving effect to the
consummation of the Transaction (collectively, the "Material Contracts");
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(viii) any tax sharing or tax allocation agreements entered into by
Parent or any of its Subsidiaries (collectively, the "Tax Allocation
Agreements"); and
(ix) all Transaction Documents;
all of which Employee Benefit Plans, Shareholders' Agreements, Management
Agreements, Employment Agreements, Collective Bargaining Agreements, Existing
Indebtedness Agreements, Material Contracts, Tax Allocation Agreements and
Transaction Documents shall be in form and substance satisfactory to the Agent
and the Required Banks and shall be in full force and effect on the Initial
Borrowing Date.
5.15 SOLVENCY CERTIFICATE; INSURANCE CERTIFICATES; ENVIRONMENTAL
ASSESSMENTS; FINANCIAL STATEMENTS. On or before the Initial Borrowing Date, the
Agent shall have received:
(a) a solvency certificate in the form of Exhibit J from the chief
financial officer of Parent and dated the Initial Borrowing Date and
supporting the conclusions, that, after giving effect to the Transaction
and the incurrence of all financings contemplated herein, the Borrower and
each Parent Guarantor is not insolvent (taking into account all of its
assets (including capital stock and promissory notes) and liabilities) and
will not be rendered insolvent by the indebtedness incurred in connection
herewith, will not be left with unreasonably small capital with which to
engage in its respective business and will not have incurred debts beyond
its ability to pay such debts as they mature and become due;
(b) evidence of insurance complying with the requirements of Section
8.03 for the business and properties of Parent and its Subsidiaries, in
scope, form and substance reasonably satisfactory to the Agent and the
Required Banks and naming the Collateral Agent as an additional insured
and/or loss payee, and stating that such insurance shall not be cancelled
or revised without at least 30 days' prior written notice by the insurer to
the Collateral Agent;
(c) the annual audited consolidated financial statements for Tri-Star
Aerospace for the two most recently completed fiscal years, including
balance sheets and income statements and cash flow statements, and all of
the foregoing shall have been audited by independent public accountants of
recognized national standing and prepared in accordance with GAAP (and
containing an unqualified opinion of such accountants) and shall be in form
and substance satisfactory to the Agent and the Required Banks;
(d) the unaudited annual operating information relating to the Aviall
Business for each of the twelve month periods ended December 31, 1994 and
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December 31, 1995, and all of the foregoing shall be (i) derived from the
regularly kept books and records of the Aviall Business, (ii) prepared in
all material respects in accordance with the accounting principles,
policies and practices of the Aviall Business consistently applied,
excluding inventory obsolescence and inventory and fixed asset write-downs
resulting from the transactions contemplated hereby, (iii) representative
of the financial position of the Aviall Business with respect to the line
items presented for the periods indicated, (iv) included within the Annual
Reports on Form 10-K filed by Aviall for its fiscal years ended December
31, 1994 and December 31, 1995 excluding inventory and fixed asset
write-downs resulting from the transactions contemplated hereby; and (v) in
form and substance satisfactory to the Agent and the Required Banks;
(e) the unaudited income statements and consolidated balance sheet of
Tri-Star Aerospace for the fiscal quarters ending March 31, 1996 and June
30, 1996, and all of the foregoing shall be in form and substance
satisfactory to the Agent and the Required Banks; and
(f) the unaudited March 31, 1996 Net Assets Statement of the Aviall
Business, which has been prepared in accordance with the books and records
of the Aviall Business and in accordance with GAAP and which fairly
presents all of the assets and liabilities of the Aviall Business on the
date set forth therein, excluding any intercompany payables or intercompany
receivables, and the unaudited operating information relating to the Aviall
Business for the three month period ended March 31, 1996, and all of the
foregoing shall be (i) derived from the regularly kept books and records of
the Aviall Business, (ii) prepared in all material respects in accordance
with the accounting principles, policies and practices of the Aviall
Business consistently applied, excluding inventory obsolescence and
inventory and fixed asset write-downs resulting from the transactions
contemplated hereby, (iii) representative of the financial position of the
Aviall Business with respect to the line items presented for the periods
indicated, (iv) included within the Quarterly Report on Form 10-Q filed by
Aviall for its fiscal quarter ended March 31, 1996, excluding inventory and
fixed asset write-downs resulting from the transactions contemplated
hereby, and (v) in form and substance satisfactory to the Agent and the
Required Banks.
5.16 EXISTING INDEBTEDNESS. On the Initial Borrowing Date and after
giving effect to the Transaction and the Loans incurred on the Initial Borrowing
Date, neither Parent nor any of its Subsidiaries shall have any preferred stock
or Indebtedness outstanding except for (i) the Loans and (ii) certain
intercompany indebtedness and other indebtedness as is listed on Annex IV (with
the Indebtedness described in this clause (ii) being herein called "Existing
Indebtedness"). On and as of the Initial Borrowing Date, all of the Existing
Indebtedness shall remain outstanding after giving effect to the Transaction and
the
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other transactions contemplated hereby without any default or events of
default existing thereunder or arising as a result of the Transaction and the
other transactions contemplated hereby, and there shall not be any amendments
or modifications to the Existing Indebtedness Agreements other than as
requested or approved by the Agent or the Required Banks. On and as of the
Initial Borrowing Date, the Agent and the Required Banks shall be satisfied
with the amount of and the terms and conditions of all Existing Indebtedness.
5.17 PRO FORMA BALANCE SHEET; PROJECTIONS. (a) On or prior to the
Initial Borrowing Date, there shall have been delivered to the Agent an
unaudited PRO FORMA consolidated balance sheet of Parent and its Subsidiaries
and Tri-Star Holdings and its Subsidiaries after giving effect to the
Transaction and, the incurrence of all Indebtedness (including the Loans)
contemplated herein, together with a related funds flow statement, which PRO
FORMA balance sheet and funds flow statement shall (i) to the extent they are
not prepared in accordance with GAAP, fairly reflect the financial condition of
the Parent and its Subsidiaries, after giving effect to the Transaction and the
incurrence of Indebtedness (including the Loans) contemplated herein and (ii) be
reasonably satisfactory to the Agent and the Required Banks and
(b) On or prior to the Initial Borrowing Date, there shall have been
delivered to the Agent detailed projected consolidated financial statements of
Parent and its Subsidiaries certified by the chief financial officer or
treasurer of Parent for the five fiscal years ended after the Initial Borrowing
Date (the "Projections"), which Projections (x) shall reflect the forecasted
consolidated financial conditions and income and expenses of Parent and its
Subsidiaries after giving effect to the Transaction and the related financing
thereof and the other transactions contemplated hereby and (y) shall be
satisfactory in form and substance to the Agent and the Required Banks.
5.18 PAYMENT OF FEES. On the Initial Borrowing Date, all costs, fees
and expenses, and all other compensation due to the Agent or the Banks
(including, without limitation, legal fees and expenses) shall have been paid to
the extent due.
SECTION 6. CONDITIONS PRECEDENT TO ALL CREDIT EVENTS. The obligation
of each Bank to make Loans (including Loans made on the Initial Borrowing Date
but excluding Mandatory Borrowings made thereafter, which shall be made as
provided in Section 1.01(d)), and the obligation of a Letter of Credit Issuer to
issue any Letter of Credit, is subject, at the time of each such Credit Event
(except as hereinafter indicated), to the satisfaction of the following
conditions:
6.01 NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time of each
such Credit Event and also after giving effect thereto (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties
contained herein or in any other Credit
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Document shall be true and correct in all material respects with the same
effect as though such representations and warranties had been made on the
date of the making of such Credit Event (it being understood and agreed that
any representation or warranty which by its terms is made as of a specified
date shall be required to be true and correct in all material respects only
as of such specified date).
6.02 ADVERSE CHANGE; ETC. At the time of each such Credit Event and
also after giving effect thereto, nothing shall have occurred (and the Banks
shall have become aware of no facts or conditions not previously known) which
the Agent or the Required Banks shall determine (i) has, or could reasonably be
expected to have, a material adverse effect on the rights or remedies of the
Banks or the Agent, or on the ability of the Borrower or any other Credit Party
to perform its obligations to the Agent or the Banks under this Agreement or any
other Credit Document or (ii) has, or could reasonably be expected to have, a
Material Adverse Effect.
6.03 LITIGATION. At the time of each such Credit Event and also after
giving effect thereto, no litigation or investigation by any entity (private or
governmental) shall be pending or threatened in writing with respect to this
Agreement, any other Document or any documentation executed in connection
herewith or the transactions contemplated hereby or thereby, or which the Agent
or the Required Banks shall determine could reasonably be expected to have a
Material Adverse Effect.
6.04 NOTICE OF BORROWING; LETTER OF CREDIT REQUEST. (a) Prior to the
making of each Loan (excluding Swingline Loans and Mandatory Borrowings), the
Agent shall have received a Notice of Borrowing meeting the requirements of
Section 1.03(a). Prior to the making of any Swingline Loan, BTCo shall have
received the notice required by Section 1.03(b)(i).
(b) Prior to the issuance of each Letter of Credit, the Agent and the
respective Issuing Bank shall have received a Letter of Credit Request meeting
the requirements of Section 2.02(a).
The occurrence of the Initial Borrowing Date and the acceptance of the
benefits or proceeds of each Credit Event shall constitute a representation and
warranty by each of Parent and the Borrower to the Agent and each of the Banks
that all the conditions specified in Section 5 and in this Section 6 and
applicable to such Credit Event exist as of that time. All of the Notes,
certificates, legal opinions and other documents and papers referred to in
Section 5 and in this Section 6, unless otherwise specified, shall be delivered
to the Agent at the Notice Office for the account of each of the Banks and,
except for the Notes, in sufficient counterparts or copies for each of the Banks
and shall be in form and substance satisfactory to the Banks.
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SECTION 7. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In order to
induce the Banks to enter into this Agreement and to make the Loans and issue
and/or participate in the Letters of Credit provided for herein, each Parent
Guarantor and the Borrower makes the following representations, warranties and
agreements with the Banks, in each case after giving effect to the Transaction,
all of which shall survive the execution and delivery of this Agreement, the
making of the Loans and the issuance of the Letters of Credit (with the
occurrence of each Credit Event being deemed to constitute a representation and
warranty that the matters specified in this Section 7 are true and correct in
all material respects on and as of the date of each such Credit Event, unless
stated to relate to a specific earlier date in which case such representations
and warranties shall be true and correct in all material respects as of such
earlier date):
7.01 CORPORATE STATUS. Each of Parent and each of its Subsidiaries (i)
is a duly organized and validly existing corporation in good standing under the
laws of the jurisdiction of its organization, (ii) has the corporate power and
authority to own its property and assets and to transact the business in which
it is engaged and presently proposes to engage and (iii) is duly qualified and
is authorized to do business and is in good standing in all jurisdictions where
it is required to be so qualified and where the failure to be so qualified would
have a Material Adverse Effect.
7.02 CORPORATE POWER AND AUTHORITY. Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Documents to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Documents to which it is a party. Each Credit Party has duly executed and
delivered each Document to which it is a party and each such Document
constitutes the legal, valid and binding obligation of such Credit Party
enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws generally affecting creditors' rights
and by equitable principles (regardless of whether enforcement is sought in
equity or at law).
7.03 NO VIOLATION. Neither the execution, delivery or performance by
any Credit Party of the Documents to which it is a party, nor compliance by any
Credit Party with the terms and provisions thereof, nor the consummation of the
transactions contemplated herein or therein, (i) will contravene any applicable
provision of any law, statute, rule or regulation, or any order, writ,
injunction or decree of any court or governmental instrumentality, (ii) will
conflict or be inconsistent with or result in any breach of, any of the terms,
covenants, conditions or provisions of, or constitute a default under, or (other
than pursuant to the Security Documents) result in the creation or imposition of
(or the obligation to create or impose) any Lien upon any of the property or
assets of Parent or any of its Subsidiaries pursuant to the terms of any
indenture, mortgage, deed of trust, loan agreement, credit agreement or any
other material agreement or instrument to which Parent
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or any of its Subsidiaries is a party or by which it or any of its property
or assets are bound or to which it may be subject (including, without
limitation, the Existing Indebtedness) or (iii) will violate any provision of
the Certificate of Incorporation or By-Laws of Parent or any of its
Subsidiaries.
7.04 LITIGATION. There are no actions, suits, proceedings or
investigations pending or threatened, with respect to Parent or any of its
Subsidiaries (i) that are likely to have a Material Adverse Effect or (ii) that
could reasonably be expected to have a material adverse effect on the rights or
remedies of the Agent or the Banks or on the ability of any Credit Party to
perform its respective obligations to the Agent or the Banks hereunder and under
the other Credit Documents to which it is, or will be, a party. Additionally,
there does not exist any judgment, order or injunction prohibiting or imposing
material adverse conditions upon the occurrence of any Credit Event.
7.05 USE OF PROCEEDS; MARGIN REGULATIONS. (a) The proceeds of all Term
Loans incurred on the Initial Borrowing Date shall be utilized to finance the
Transaction and to pay the fees and expenses incurred in connection therewith.
(b) The proceeds of all Revolving Loans and Swingline Loans shall be
utilized for the general corporate and working capital purposes of the Borrower
and its Subsidiaries (including to effect Permitted Acquisitions and make
Capital Expenditures, in each case to the extent permitted by this Agreement),
PROVIDED that (x) proceeds of Revolving Loans in an amount not to exceed
$7,000,000 may be used to finance the Transaction and to pay the fees and
expenses incurred in connection therewith and (y) the amount of outstanding
Revolving Loans incurred to effect Permitted Acquisitions shall not exceed
$15,000,000 at any time.
(c) Neither the making of any Loan, nor the use of the proceeds
thereof, nor the occurrence of any other Credit Event, will violate or be
inconsistent with the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System and no part of any Credit Event (or the
proceeds thereof) will be used to purchase or carry any Margin Stock or to
extend credit for the purpose of purchasing or carrying any Margin Stock.
7.06 GOVERNMENTAL APPROVALS. Except as may have been obtained or made
on or prior to the Initial Borrowing Date (and which remain in full force and
effect on the Initial Borrowing Date), no order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by, any foreign or domestic governmental or public body or authority,
or any subdivision thereof, is required to authorize or is required in
connection with (i) the execution, delivery and performance of any Document or
(ii) the legality, validity, binding effect or enforceability of any Document.
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7.07 INVESTMENT COMPANY ACT. Neither Parent nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the investment Company Act of 1940,
as amended.
7.08 PUBLIC UTILITY HOLDING COMPANY ACT. Neither Parent nor any of
its Subsidiaries is a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
7.09 TRUE AND COMPLETE DISCLOSURE. All factual information (excluding
the Projections, which are subject to Section 7.10(e)) (taken as a whole)
heretofore or contemporaneously furnished by or on behalf of Parent or any of
its Subsidiaries in writing to the Agent or any Bank (including, without
limitation, all information contained in the Documents) for purposes of or in
connection with this Agreement or any transaction contemplated herein or therein
is, and all other such factual information (taken as a whole) hereafter
furnished by or on behalf of any such Persons in writing to the Agent or any
Bank will be, true and accurate in all material respects on the date as of
which such information is dated or certified and not incomplete by omitting to
state any material fact necessary to make such information (taken as a whole)
not misleading at such time in light of the circumstances under which such
information was provided.
7.10 FINANCIAL CONDITION; FINANCIAL STATEMENTS. (a) On and as of the
Initial Borrowing Date, on a PRO FORMA basis after giving effect to the
Transaction and all other transactions contemplated by the Documents and to all
Indebtedness incurred, and to be incurred, and Liens created, and to be created,
by each Credit Party in connection therewith, with respect to each of Parent,
Holdings, Tri-Star Holdings and the Borrower (x) the sum of the assets
(including capital stock and promissory notes), at a fair valuation, of each of
Parent and the Borrower will exceed its debts, (y) it has not incurred nor
intended to, nor believes that it will, incur debts beyond its ability to pay
such debts as such debts mature and (z) it will have sufficient capital with
which to conduct its business. For purposes of this Section 7.10(a), "debt"
means any liability on a claim, and "claim" means (i) right to payment, whether
or not such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured
or unsecured or (ii) right to an equitable remedy for breach of performance if
such breach gives rise to a payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured.
(b) (i) The statements of financial condition of each of Tri-Star
Aerospace and the Aviall Business furnished to each Bank pursuant to Section
5.15(c) through (f), present fairly in all material respects the consolidated
financial condition of Tri-Star
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Aerospace and the condition of the Aviall Business at the dates of said
statements and the results for the periods covered thereby (subject, in the
case of unaudited financial statements, to normal year-end adjustments). All
such financial statements relating to Tri-Star Aerospace have been prepared
in accordance with GAAP consistently applied except to the extent provided in
the notes to said financial statements and subject, in the case of the
three-month and six-month statements, to normal year-end audit adjustments
and the absence of footnotes (all of which are of a recurring nature and none
of which, individually or in the aggregate, would be material). The March 31,
1996 Net Asset Statement of the Aviall Business furnished to the Banks has
been prepared in accordance with GAAP consistently applied, and all other
such financial statements relating to the Aviall Business (i) have been
derived from the regularly kept books and records of the Aviall Business,
(ii) have been prepared in all material respects in accordance with the
accounting principles, policies and practices of the Aviall Business
consistently applied, excluding inventory obsolescence and inventory and
fixed asset write-downs resulting from the transactions contemplated hereby,
(iii) are representative of the financial position of the Aviall Business
with respect to the line items presented for the periods indicated and (iv)
have been included within the Annual Reports on Form 10-K filed by Aviall for
its fiscal years ended December 31, 1994 and December 31, 1995, and in the
Quarterly Report on Form 10-Q filed by Aviall for its fiscal quarter ended
March 31, 1996, respectively, excluding Inventory and fixed asset write-downs
resulting from the transactions contemplated hereby.
(c) Since December 31, 1995 (but after giving effect to the
Transaction as if same had occurred prior thereto), nothing has occurred that
has had or could reasonably be expected to have a Material Adverse Effect.
(d) Except as fully reflected in the financial statements described
in Section 7.10(b) and the Indebtedness incurred under this Agreement, (i) there
were as of the Initial Borrowing Date (and after giving effect to any Loans made
on such date), no liabilities or obligations (excluding current obligations
incurred in the ordinary course of business) with respect to Parent or any of
its Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent
or otherwise and whether or not due) and (ii) neither Parent nor the Borrower
knows of any basis for the assertion against Parent or any of its Subsidiaries
of any such liability or obligation which as to clauses (i) and (ii) above,
either individually or in the aggregate, are or would be reasonably likely to
have, a Material Adverse Effect.
(e) The Projections have been prepared on a basis consistent with the
financial statements referred to in Section 7.10(b) (except as may otherwise be
indicated in the Projections), and are based on good faith estimates and
assumptions made by the management of Parent. On the Initial Borrowing Date,
such management believed that the Projections were reasonable and attainable.
There is no fact known to Parent or any of its Subsidiaries which could have a
Material Adverse Effect, which has not been disclosed
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herein or in such other documents, certificates and statements furnished to
the Banks for use in connection with the transactions contemplated hereby.
7.11 SECURITY INTERESTS. On and after the Initial Borrowing Date,
each of the Security Documents creates (or after the execution and delivery
thereof will create), as security for the Obligations, a valid and enforceable
perfected security interest in and Lien on all of the Collateral subject
thereto, superior to and prior to the rights of all third Persons, and subject
to no other Liens (except that (i) the Security Agreement Collateral, the
Mortgaged Properties and any additional Mortgaged Properties may be subject to
Permitted Liens relating thereto and (ii) the Pledge Agreement Collateral may be
subject to the Liens described in clauses (a) and (e) of Section 9.03), in favor
of the Collateral Agent. No filings or recordings are required in order to
perfect the security interests created under any Security Document except for
filings or recordings required in connection with any such Security Document
which shall have been made on or prior to the Initial Borrowing Date as
contemplated by Section 5.11(b) or 5.13 or on or prior to the execution and
delivery thereof as contemplated by Sections 8.11, 8.12 and 9.15.
7.12 TRANSACTION. At the time of consummation thereof the Transaction
shall have been consummated in accordance with the terms of the respective
Documents and all applicable laws. At the time of consummation thereof, all
consents and approvals of, and filings and registrations with, and all other
actions in respect of, all governmental agencies, authorities or
instrumentalities required to make or consummate the Transaction have been
obtained, given, filed or taken or waived and are or will be in full force and
effect (or effective judicial relief with respect thereto has been obtained).
All applicable waiting periods with respect thereto have or, prior to the time
when required, will have, expired without, in all such cases, any action being
taken by any competent authority which restrains, prevents, or imposes material
adverse conditions upon the Transaction. Additionally, there does not exist any
judgment, order or injunction prohibiting or imposing material adverse
conditions upon the Transaction, or the occurrence of any Credit Event or the
performance by Parent and its Subsidiaries of their obligations under the
Documents and all applicable laws. The Transaction has been consummated in
accordance with the respective Documents and all applicable laws.
7.13 COMPLIANCE WITH ERISA. (i) Annex V sets forth each Plan; each
Plan (and each related trust, insurance contract or fund) is in substantial
compliance with its terms and with all applicable laws, including without
limitation ERISA and the Code; each Plan (and each related trust, if any) which
is intended to be qualified under Section 401(a) of the Code has received a
determination letter from the Internal Revenue Service to the effect that it
meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable
Event has occurred; no Plan which is a multiemployer plan (as defined in Section
4001(a)(3) of ERISA) is insolvent or in reorganization; no Plan has a material
Unfunded Current Liability; no Plan which is subject to Section 412 of the Code
or Section
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302 of ERISA has an accumulated funding deficiency, within the meaning of
such sections of the Code or ERISA, or has applied for or received a waiver
of an accumulated funding deficiency or an extension of any amortization
period, within the meaning of Section 412 of the Code or Section 303 or 304
of ERISA; all contributions required to be made with respect to a Plan have
been timely made; neither Parent nor any Subsidiary of Parent nor any ERISA
Affiliate has incurred any material liability (including any indirect,
contingent or secondary liability) to or on account of a Plan pursuant to
Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212
of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or expects to incur
any such liability under any of the foregoing sections with respect to any
Plan; no condition exists which presents a material risk to Parent or any
Subsidiary of Parent or any ERISA Affiliate of incurring a material liability
to or on account of a Plan pursuant to the foregoing provisions of ERISA and
the Code; no proceedings have been instituted to terminate or appoint a
trustee to administer any Plan which is subject to Title IV of ERISA; no
action, suit, proceeding, hearing, audit or investigation with respect to the
administration, operation or the investment of assets of any Plan (other than
routine claims for benefits) is pending, expected or threatened; using
actuarial assumptions and computation methods consistent with Part 1 of
subtitle E of Title IV of ERISA, the Parent and its Subsidiaries and its
ERISA Affiliates have no material liabilities to any Plans which are
multiemployer plans (as defined in Section 4001(a)(3) of ERISA) in the event
of a complete withdrawal therefrom, as of the close of the most recent fiscal
year of each such Plan ended prior to the date of the most recent Credit
Event; each group health plan (as defined in Section 607(1) of ERISA or
Section 4980B(g)(2) of the Code) which covers or has covered employees or
former employees of Parent, any Subsidiary of Parent or any ERISA Affiliate
has at all times been operated in substantial compliance with the provisions
of Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code; no
lien imposed under the Code or ERISA on the assets of Parent or any
Subsidiary of Parent or any ERISA Affiliate exists or is likely to arise on
account of any Plan; and Parent and its Subsidiaries may cease contributions
to or terminate any employee benefit plan maintained by any of them without
incurring any material liability.
(ii) Each Foreign Pension Plan has been maintained in substantial
compliance with its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations and orders and has been maintained, where
required, in good standing with applicable regulatory authorities. All
contributions required to be made with respect to a Foreign Pension Plan have
been timely made. Neither Parent nor any of its Subsidiaries has incurred any
obligation in connection with the termination of or withdrawal from any Foreign
Pension Plan. The present value of the accrued benefit liabilities (whether or
not vested) under each Foreign Pension Plan, determined as of the end of the
Borrower's most recently ended fiscal year on the basis of actuarial
assumptions, each of which is reasonable, did not exceed the current value of
the assets of such Foreign Pension Plan allocable to such benefit liabilities.
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7.14 CAPITALIZATION. (a) On the Initial Borrowing Date and after
giving effect to the Transaction and the other transactions contemplated
hereby, the authorized capital stock of Parent shall consist of 200,000
shares of common stock, $.01 par value per share (the "Parent Common Stock"),
of which 95,682 shares shall be issued and outstanding and owned by the
Equity Investors. All such outstanding shares have been duly and validly
issued and are fully paid and nonassessable. On the Initial Borrowing Date,
except as provided in the Stock Option Plan or the Odyssey Convertible Note,
Parent does not have outstanding any securities convertible into or
exchangeable for its capital stock or outstanding any rights to subscribe for
or to purchase, or any options for the purchase of, or any agreement
providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any character relating to, its capital stock.
(b) On the Initial Borrowing Date and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of Holdings shall consist of 1,000 shares of common stock, $.01
par value per share, of which one share shall be issued and outstanding and
owned by Parent and pledged by it pursuant to the Pledge Agreement. All such
outstanding shares have been duly and validly issued and are fully paid and
nonassessable. Holdings does not have outstanding any securities convertible
into or exchangeable for its capital stock or outstanding any rights to
subscribe for or to purchase, or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, its capital stock.
(c) On the Initial Borrowing Date and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of Tri-Star Holdings shall consist of 1,000 shares of common
stock, $.01 par value per share, of which one share shall be issued and
outstanding and owned by Holdings and pledged by it pursuant to the Pledge
Agreement. All such outstanding shares have been duly and validly issued and are
fully paid and nonassessable. Tri-Star Holdings does not have outstanding any
securities convertible into or exchangeable for its capital stock or outstanding
any rights to subscribe for or to purchase, or any options for the purchase of,
or any agreement providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, its capital stock.
(d) On the Initial Borrowing Date and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of the Borrower shall consist of 1,000 shares of common stock,
$.01 par value per share, all of which shares shall be issued and outstanding
and owned by Tri-Star Holdings and pledged by it pursuant to the Pledge
Agreement. All such outstanding shares have been duly and validly issued and are
fully paid and nonassessable. The Borrower does not have outstanding any
securities convertible into or exchangeable for its capital stock or outstanding
any rights to subscribe for or to purchase, or any options for the purchase of,
or any agreement
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providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any character relating to, its capital stock.
7.15 SUBSIDIARIES. (a) Prior to the consummation of the Transaction,
(i) Parent has no Subsidiaries other than Holdings, Tri-Star Holdings, and the
Borrower and (ii) the Borrower has no Subsidiaries other than the Canadian
Subsidiary.
(b) On and as of the Initial Borrowing Date and after giving effect
to the consummation of the Transaction, Parent has no Subsidiaries other than
Holdings and its Subsidiaries, Holdings has no Subsidiaries other than Tri-Star
Holdings and its Subsidiaries and Tri-Star Holdings and the Borrower have no
Subsidiaries other than those Subsidiaries of Tri-Star Holdings or the Borrower,
as the case may be, listed on Annex VII. Annex VII correctly sets forth, as of
the Initial Borrowing Date and after giving effect to the Transaction, the
percentage ownership (direct and indirect) of Tri-Star Holdings and the Borrower
in each class of capital stock of each of its Subsidiaries and also identifies
the direct owner thereof. All outstanding shares of capital stock of each
Subsidiary of Tri-Star Holdings have been duly and validly issued, are fully
paid and non-assessable and have been issued free of preemptive rights. No
Subsidiary of Tri-Star Holdings has outstanding any securities convertible into
or exchangeable for its capital stock or outstanding any right to subscribe for
or to purchase, or any options or warrants for the purchase of, or any agreement
providing for the issuance (contingent or otherwise) of or any calls,
commitments or claims of any character relating to, its capital stock or any
stock appreciation or similar rights.
7.16 INTELLECTUAL PROPERTY, ETC. Each of Parent and each of its
Subsidiaries owns all patents, trademarks, permits, service marks, trade names,
technology copyrights, licenses, franchises and formulas, or other rights with
respect to the foregoing, and has obtained assignments of all leases and other
rights of whatever nature, and has in full force and effect all accreditations
and certifications, reasonably necessary for the conduct of its business,
without any known conflict with the rights of others which, or the failure to
obtain which, as the case may be, would result in a Material Adverse Effect.
7.17 COMPLIANCE WITH STATUTES. ETC. Each of Parent and each of its
Subsidiaries is in compliance with all applicable statutes, regulations, rules
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property, except such noncompliance as is not likely to,
individually or in the aggregate, have a Material Adverse Effect.
7.18 ENVIRONMENTAL MATTERS. (a) Each of Parent and each of its
Subsidiaries has complied with, and on the date of each Credit Event is in
compliance with, all applicable Environmental Laws and the requirements of any
permits issued under such
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Environmental Laws and neither Parent nor any of its Subsidiaries is liable
for any material penalties, fines or forfeitures for failure to comply with
any of the foregoing. There are no pending or past or threatened
Environmental Claims against Parent or any of its Subsidiaries or any Real
Property owned or operated by Parent or any of its Subsidiaries. There are no
facts, circumstances, conditions or occurrences on any Real Property owned or
operated by Parent or any of its Subsidiaries or on any property adjoining or
in the vicinity of any such Real Property that would reasonably be expected
(i) to form the basis of an Environmental Claim against Parent or any of its
Subsidiaries or any such Real Property or (ii) to cause any such Real
Property to be subject to any restrictions on the ownership, occupancy, use
or transferability of such Real Property by Parent or any of its Subsidiaries
under any applicable Environmental Law.
(b) Hazardous Materials have not at any time been generated, used,
treated or stored on, or transported to or from, any Real Property owned or
operated by Parent or any of its Subsidiaries except in compliance with all
applicable Environmental Laws and reasonably required in connection with the
operation, use and maintenance of such Real Property by Parent's or such
Subsidiary's business. Hazardous Materials have not at any time been Released on
or from any Real Property owned or operated by Parent or any of its
Subsidiaries. There are not now any underground storage tanks located on any
Real Property owned or operated by Parent or any of its Subsidiaries.
(c) Notwithstanding anything to the contrary in this Section 7.18,
the representations made in this Section 7.18 shall only be untrue if the
aggregate effect of all conditions, failures, noncompliances, Environmental
Claims, Releases and presence of underground storage tanks, in each case of the
types described above, would reasonably be expected to have a Material Adverse
Effect.
7.19 PROPERTIES. All Real Property owned by Parent or any of its
Subsidiaries and all material Leaseholds leased by Parent or any of its
Subsidiaries, in each case as of the Initial Borrowing Date and after giving
effect to the Transaction, and the nature of the interest therein, is correctly
set forth in Annex III. Each of Parent and each of its Subsidiaries has good and
marketable title to, or a validly subsisting leasehold interest in, all material
properties owned or leased by it, including all Real Property reflected in Annex
III or in the financial statements referred to in Section 7.10(b) or in the pro
forma balance sheet referred to in Section 5.17(a), free and clear of all Liens,
other than Permitted Liens.
7.20 LABOR RELATIONS. Neither Parent nor any of its Subsidiaries is
engaged in any unfair labor practice that could reasonably be expected to have a
Material Adverse Effect. There is (i) no unfair labor practice complaint pending
against Parent or any of its Subsidiaries or threatened against any of them,
before the National Labor Relations Board, and no grievance or arbitration
proceeding arising out of or under any collective bargaining
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agreement is so pending against Parent or any of its Subsidiaries or
threatened against any of them, (ii) no strike, labor dispute, slowdown or
stoppage pending against Parent or any of its Subsidiaries or threatened
against Parent or any of its Subsidiaries and (iii) no union representation
question existing with respect to the employees of Parent or any of its
Subsidiaries and no union organizing activities are taking place, except
(with respect to any matter specified in clause (i), (ii) or (iii) above,
either individually or in the aggregate) such as is not reasonably likely to
have a Material Adverse Effect.
7.21 TAX RETURNS AND PAYMENTS. Each of Parent and each of its
Subsidiaries has filed all federal income tax returns and all other material
tax returns, domestic and foreign, required to be filed by it and has paid
all material taxes and assessments payable by it which have become due,
except for those contested in good faith and adequately disclosed and fully
provided for on the financial statements of Parent and its Subsidiaries in
accordance with generally accepted accounting principles. Each of Parent and
each of its Subsidiaries has at all times paid, or has provided adequate
reserves (in the good faith judgment of the management of Parent) for the
payment of, all federal, state and foreign income taxes applicable for all
prior fiscal years and for the current fiscal year to date. Except as set
forth on Annex X, there is no material action, suit, proceeding,
investigation, audit, or claim now pending or, to the knowledge of Parent or
any of its Subsidiaries, threatened by any authority regarding any taxes
relating to Parent or any of its Subsidiaries. As of the Initial Borrowing
Date, neither Parent nor any of its Subsidiaries has entered into an
agreement or waiver or been requested to enter into an agreement or waiver
extending any statute of limitations relating to the payment or collection of
taxes of Parent or any of its Subsidiaries, or is aware of any circumstances
that would cause the taxable years or other taxable periods of Parent or any
of its Subsidiaries not to be subject to the normally applicable statute of
limitations.
7.22 EXISTING INDEBTEDNESS. Annex IV sets forth a true and complete
list of all Indebtedness of Parent and its Subsidiaries as of the Initial
Borrowing Date and which is to remain outstanding after giving effect to the
Transaction and the incurrence of Loans on such date, in each case showing the
aggregate principal amount thereof and the name of the respective borrower and
any other entity which directly or indirectly guaranteed such debt.
7.23 INSURANCE. Set forth on Annex VIII hereto is a true, correct and
complete summary of all insurance carried by each Credit Party on and as of the
Initial Borrowing Date, with the amounts insured set forth therein.
7.24 REPRESENTATIONS AND WARRANTIES IN OTHER DOCUMENTS. All
representations and warranties set forth in the other Documents were true and
correct in all material respects at the time as of which such representations
and warranties were made (or deemed made) and shall be true and correct in all
material respects as of the Initial Borrowing Date
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as if such representations or warranties were made on and as of such date,
unless stated to relate to a specific earlier date, in which case such
representations or warranties shall be true and correct in all material
respects as of such earlier date.
7.25 SPECIAL PURPOSE CORPORATIONS. (a) Parent, Holdings, Tri-Star
Holdings and the Borrower were formed to effect the Transaction. Prior to the
consummation of the Transaction, (i) Parent had no significant assets (other
than the capital stock of Holdings) or liabilities (other than those liabilities
under the Acquisition Documents), (ii) Holdings had no significant assets (other
than the capital stock of Tri-Star Holdings) or liabilities (other than those
liabilities under the Acquisition Documents), (iii) Tri-Star Holdings had no
significant assets (other than the capital stock of the Borrower) or liabilities
(other than those liabilities under the Acquisition Documents) and (iv) the
Borrower had no significant assets (other than the capital stock of the Canadian
Subsidiary) or liabilities (other than those liabilities under the Acquisition
Documents).
(b) After the consummation of the Transaction, (i) Parent has no
significant assets (other than the capital stock of Holdings and immaterial
assets used for the performance of those activities permitted to be performed by
Parent pursuant to Section 9.01(b)(i)) or liabilities (other than under this
Agreement and the other Documents to which it is a party and those liabilities
permitted to be incurred by Parent pursuant to Section 9.01(b)(i)), (ii)
Holdings has no significant assets (other than the capital stock of Tri-Star
Holdings and immaterial assets used for the performance of those activities
permitted to be performed by Holdings pursuant to Section 9.01(b)(i)) or
liabilities (other than under this Agreement and the other Documents to which it
is a party and those liabilities permitted to be incurred by Holdings pursuant
to Section 9.01(b)(i)) and (iii) Tri-Star Holdings has no significant assets
(other than the capital stock of the Borrower and those permitted to be held by
it under Section 9.01(b)(ii)) or liabilities (other than under this Agreement
and the other Documents to which it is a party and those liabilities permitted
to be incurred by Tri-Star Holdings pursuant to Section 9.01(b)(ii)).
(c) Tri-Star Inventory Management Service, Inc. does not own any
significant assets.
SECTION 8. AFFIRMATIVE COVENANTS. Each Parent Guarantor and the
Borrower hereby covenant and agree that as of the Effective Date and thereafter
for so long as this Agreement is in effect and until the Total Commitment has
terminated, no Letters of Credit or Notes are outstanding and the Loans and
Unpaid Drawings, together with interest, Fees and all other Obligations (other
than any indemnities described in Section 13.13 which are not then due and
payable) incurred hereunder, are paid in full:
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8.01 INFORMATION COVENANTS. Parent will furnish, or will cause to be
furnished, to each Bank:
(a) MONTHLY REPORTS. Within 30 days after the end of each fiscal
month of Parent, the consolidated balance sheet of Parent and its
Subsidiaries as at the end of such fiscal month and the related
consolidated statements of income and retained earnings of cash flows for
such fiscal month and for the elapsed portion of the fiscal year ended with
the last day of such fiscal month, in each case setting forth comparative
figures for the corresponding fiscal month in the prior fiscal year and
comparable budgeted figures for such fiscal month as set forth in the
respective budget delivered pursuant to Section 8.01(d), all of which shall
be certified by the chief financial officer or other Authorized Officer of
Parent, subject to normal year-end audit adjustments and the absence of
footnotes; PROVIDED that for the fiscal months of September, October and
November 1996 such monthly reports may be furnished consistent in form with
those historically prepared, prior to the consummation of the Acquisition,
by Tri-Star Aerospace and with respect to the Aviall Business.
(b) QUARTERLY FINANCIAL STATEMENTS. Within 45 days after the close of
the first three quarterly accounting periods in each fiscal year of Parent,
(i) the consolidated balance sheet of Parent and its Subsidiaries as at the
end of such quarterly accounting period and the related consolidated
statements of income and retained earnings and of cash flows for such
quarterly accounting period and for the elapsed portion of the fiscal year
ended with the last day of such quarterly accounting period and the
budgeted figures for such quarterly period as set forth in the respective
budget delivered pursuant to Section 8.01(d) and (ii) management's
discussion and analysis of the most important operational and financial
developments during such quarterly period, all of which shall be in
reasonable detail and certified by the chief financial officer or other
Authorized Officer of Parent that they fairly present in all material
respects the financial condition of Parent and its Subsidiaries as of the
dates indicated and the results of their operations and changes in their
cash flows for the periods indicated, subject to normal year-end audit
adjustments and the absence of footnotes.
(c) ANNUAL FINANCIAL STATEMENTS. Within 90 days after the close of
each fiscal year of Parent, beginning with the fiscal year ending September
30, 1997, the consolidated balance sheet of Parent and its Subsidiaries as
at the end of such fiscal year and the related consolidated statements of
income and retained earnings and of cash flows for such fiscal year and
setting forth comparative consolidated figures for the preceding fiscal
year and comparable budgeted figures for such fiscal year as set forth in
the respective budget delivered pursuant to Section 8.01(d) and (except for
such comparable budgeted figures) certified by Arthur Andersen or such
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other independent certified public accountants of recognized national
standing as shall be reasonably acceptable to the Agent, in each case to
the effect that such statements fairly present in all material respects the
financial condition of Parent and its Subsidiaries as of the dates
indicated and the results of their operations and changes in its financial
position for the periods indicated in conformity with GAAP applied on a
basis consistent with prior years, together with a certificate of such
accounting firm stating that in the course of its regular audit of the
business of Parent and its Subsidiaries, which audit was conducted in
accordance with generally accepted auditing standards, no Default or Event
of Default which has occurred and is continuing has come to their attention
or, if such a Default or an Event of Default has come to their attention a
statement as to the nature thereof.
(d) CLOSING DATE NET ASSET STATEMENT, ETC. At such time as the
Closing Date Net Asset Statement (as defined in the Asset Purchase
Agreement) has been prepared and audited by Price Waterhouse LLP, a true
and correct copy thereof, as well as copies of all other post-closing
financial statements and notices provided to or by any of the Credit
Parties pursuant to the Acquisition Documents.
(e) BUDGETS, ETC. Not more than 30 days after the commencement of
each fiscal year of Parent beginning with the fiscal year commencing on
October 1, 1997, a budget of Parent and its Subsidiaries (x) in reasonable
detail for each of the twelve months of such fiscal year and (y) in summary
form for each of the four fiscal years immediately following such fiscal
year, in each case as customarily prepared by management for its internal
use setting forth, with appropriate discussion, the principal assumptions
upon which such budgets are based. Together with each delivery of financial
statements pursuant to Sections 8.01(a), (b) and (c), a comparison of the
current year to date financial results (other than in respect of the
balance sheets included therein) against the budgets required to be
submitted pursuant to this clause (e) shall be presented.
(f) OFFICER'S CERTIFICATES. At the time of the delivery of the
financial statements provided for in Sections 8.01(a), (b) and (c), a
certificate of the chief financial officer or other Authorized Officer of
Parent to the effect that no Default or Event of Default exists or, if any
Default or Event of Default does exist, specifying the nature and extent
thereof, which certificate shall, if delivered in connection with the
financial statements in respect of a period ending on the last day of a
fiscal quarter or fiscal year of Parent, set forth the calculations
required to establish whether Parent and its Subsidiaries were in
compliance with the provisions of Sections 3.03, 4.02, 8.14, 9.02, 9.04,
9.05 and 9.08 through and including 9.11, as at the end of such fiscal
quarter or year, as the case may be. In addition, at the time of the
delivery of the financial statements provided for in Section 8.01(c), a
certificate of the chief financial officer or other Authorized Officer of
Parent setting
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forth (in reasonable detail) the amount of, and calculations required to
establish the amount of, Excess Cash Flow for the Excess Cash Flow Payment
Period ending on the last day of the respective fiscal year.
(g) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any event
within three Business Days after an officer of Parent or any of its
Subsidiaries obtains knowledge thereof, notice of (i) the occurrence of any
event which constitutes a Default or an Event of Default, which notice
shall specify the nature and period of existence thereof and what action
Parent or the Borrower proposes to take with respect thereto, (ii) any
litigation or proceeding pending or threatened (x) against Parent or any of
its Subsidiaries which could reasonably be expected to have a Material
Adverse Effect, (y) with respect to any material Indebtedness of Parent or
any of its Subsidiaries or (z) with respect to any Document, (iii) any
material governmental investigation pending or threatened against Parent or
any of its Subsidiaries and (iv) any other event which could reasonably be
expected to have a Material Adverse Effect.
(h) AUDITORS' REPORTS. Promptly upon receipt thereof, a copy of each
report or "management letter" submitted to Parent or any of its
Subsidiaries by its independent accountants in connection with any annual,
interim or special audit made by them of the books of Parent or any of its
Subsidiaries and the management's non-privileged responses thereto.
(i) ENVIRONMENTAL MATTERS. Promptly after obtaining knowledge of any
of the following (but only to the extent that any of the following could
reasonably be expected to (x) have a Material Adverse Effect, either
individually or in the aggregate, or (y) result in a remedial cost to
Parent or any of its Subsidiaries in excess of $200,000), written notice
of:
(i) any pending or threatened Environmental Claim against Parent
or any of its Subsidiaries or any Real Property owned or operated by
Parent or any of its Subsidiaries;
(ii) any condition or occurrence on any Real Property owned or
operated by Parent or any of its Subsidiaries that (x) results in
noncompliance by Parent or any of its Subsidiaries with any applicable
Environmental Law or (y) could reasonably be anticipated to form the
basis of an Environmental Claim against Parent or any of its
Subsidiaries or any such Real Property;
(iii) any condition or occurrence on any Real Property owned or
operated by Parent or any of its Subsidiaries that could reasonably be
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pated to cause such Real Property to be subject to any restrictions
on the ownership, occupancy, use or transferability by Parent or its
Subsidiary, as the case may be, of its interest in such Real Property
under any Environmental Law; and
(iv) the taking of any removal or remedial action in response to
the actual or alleged presence of any Hazardous Material on any Real
Property owned or operated by Parent or any of its Subsidiaries.
All such notices shall describe in reasonable detail the nature of the
claim, investigation, condition, occurrence or removal or remedial action
and Parent' or the Borrower's response or proposed response thereto. In
addition, Parent agrees to provide the Banks with copies of all material
communications by Parent or any of its Subsidiaries with any Person,
government or governmental agency relating to any of the matters set forth
in clauses (i)-(iv) above, and such detailed reports relating to any of the
matters set forth in clauses (i)-(iv) above as may reasonably be requested
by the Agent or the Required Banks.
(j) ANNUAL MEETINGS WITH BANKS. At the request of the Agent, Parent
shall within 120 days after the close of each of its fiscal years, hold a
meeting (at a mutually agreeable location and time) with all of the Banks
at which meeting shall be reviewed the financial results of the previous
fiscal year and the financial condition of Parent and its Subsidiaries and
the budgets presented for the current fiscal year of Parent and its
Subsidiaries.
(k) NOTICE OF COMMITMENT REDUCTIONS AND MANDATORY REPAYMENTS. On or
prior to the date of any reduction to the Total Commitment or any mandatory
repayment of outstanding Term Loans pursuant to any of Sections 4.02(c)
through (h), inclusive, the Borrower shall provide written notice of the
amount of the respective reduction or repayment, as the case may be, to
each of the Total Revolving Loan Commitment or the outstanding Term Loans,
as applicable, and the calculation thereof (in reasonable detail).
(l) OTHER INFORMATION. Promptly upon transmission thereof, copies of
any filings and registrations with, and reports to, the SEC by Parent or
any of its Subsidiaries and copies of all financial statements, proxy
statements, notices and reports as Parent or any of its Subsidiaries shall
send generally to analysts and the holders of their capital stock in their
capacity as such holders (to the extent not theretofore delivered to the
Banks pursuant to this Agreement) and, with reasonable promptness, such
other information or documents (financial or otherwise) as the Agent on its
own behalf or on behalf of the Required Banks may reasonably request from
time to time.
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8.02 BOOKS, RECORDS AND INSPECTIONS. Each Parent Guarantor and the
Borrower will, and will cause each of its Subsidiaries to, keep proper books of
record and account in which full, true and correct entries in conformity with
GAAP and all requirements of law shall be made of all dealings and transactions
in relation to its business and activities. Each Parent Guarantor and the
Borrower will, and will cause each of its Subsidiaries to, permit, upon notice
to the chief financial officer or other Authorized Officer of the Borrower,
officers and designated representatives of the Agent or the Required Banks to
visit and inspect any of the properties or assets of Parent and any of its
Subsidiaries in whomsoever's possession, and to examine the books of account of
Parent and any of its Subsidiaries and discuss the affairs, finances and
accounts of Parent and of any of its Subsidiaries with, and be advised as to the
same by, their officers and independent accountants, all at such reasonable
times and intervals and to such reasonable extent as the Agent or the Required
Banks may desire.
8.03 INSURANCE. (a) Each Parent Guarantor and the Borrower will, and
will cause each of its Subsidiaries to (i) maintain, with financially sound and
reputable insurance companies, insurance on all its property in at least such
amounts and against at least such risks as is consistent and in accordance with
industry practice and (ii) furnish to the Agent and each of the Banks, upon
request, full information as to the insurance carried. In addition to the
requirements of the immediately preceding sentence, each Parent Guarantor and
the Borrower will at all times cause insurance of the types described in Annex
VIII to be maintained (with the same scope of coverage as that described in
Annex VIII) at levels which are at least as great as the respective amount
described opposite the respective type of insurance on Annex VIII. Such
insurance shall include physical damage insurance on all real and personal
property (whether now owned or hereafter acquired) on an all risk basis,
covering the full repair and replacement costs of all such property and business
interruption insurance for the actual loss sustained. The provisions of this
Section 8.03 shall be deemed supplemental to, but not duplicative of, the
provisions of any Security Documents that require the maintenance of insurance.
(b) Each Parent Guarantor and the Borrower will, and will cause each
of its Subsidiaries to, at all times keep the respective property of Parent and
its Subsidiaries insured in favor of the Collateral Agent, and all policies
(including Mortgage Policies) or certificates with respect to such insurance
(and any other insurance maintained by, or on behalf of, Parent or any
Subsidiary of Parent) (i) shall be endorsed to the Collateral Agent's
satisfaction for the benefit of the Collateral Agent (including, without
limitation, by naming the Collateral Agent as certificate holder, mortgagee and
loss payee with respect to real property, certificate holder and loss payee with
respect to personal property, additional insured with respect to general
liability and umbrella liability coverage and certificate holder with respect to
workers' compensation insurance), (ii) shall state that such insurance policies
shall not be cancelled or materially changed without at least 30 days' prior
written
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notice thereof by the respective insurer to the Collateral Agent and (iii)
shall be deposited with the Collateral Agent.
(c) If Parent or any of its Subsidiaries shall fail to maintain all
insurance in accordance with this Section 8.03, or if Parent or any of its
Subsidiaries shall fail to so name the Collateral Agent as an additional
insured, mortgagee or loss payee, as the case may be, or so deposit all
certificates with respect thereto, the Agent and/or the Collateral Agent shall
have the right (but shall be under no obligation) to procure such insurance, and
the Credit Parties agree to jointly and severally reimburse the Agent or the
Collateral Agent, as the case may be, for all costs and expenses of procuring
such insurance.
8.04 PAYMENT OF TAXES. Each Parent Guarantor and the Borrower will
pay and discharge, and will cause each of its Subsidiaries to pay and
discharge, all taxes, assessments and governmental charges or levies imposed
upon it or upon its income or profits, or upon any properties belonging to
it, prior to the date on which penalties attach thereto, and all lawful
claims for sums that have become due and payable which, if unpaid, might
become a Lien not otherwise permitted under Section 9.03(a); PROVIDED, that
neither Parent nor any of its Subsidiaries shall be required to pay any such
tax, assessment, charge, levy or claim which is being contested in good faith
and by proper proceedings if it has maintained adequate reserves with respect
thereto in accordance with GAAP.
8.05 CORPORATE FRANCHISES. Each Parent Guarantor and the Borrower will
do, and will cause each of its Subsidiaries to do, or cause to be done, all
things necessary to preserve and keep in full force and effect its existence and
its material rights, franchises, authority to do business, licenses,
certifications, accreditations and patents; PROVIDED, HOWEVER, that any
transaction permitted by Section 9.02 will not constitute a breach of this
Section 8.05.
8.06 COMPLIANCE WITH STATUTES; ETC. Each Parent Guarantor and the
Borrower will, and will cause each of its Subsidiaries to, comply with all
applicable statutes, regulations and orders of, and all applicable
restrictions imposed by, all governmental bodies, domestic or foreign, in
respect of the conduct of its business and the ownership of its property
except for such noncompliance as would not have a Material Adverse Effect or
a material adverse effect on the ability of any Credit Party to perform its
obligations under any Credit Document to which it is a party.
8.07 COMPLIANCE WITH ENVIRONMENTAL LAWS. (a) (i) Each Parent Guarantor
and the Borrower will comply, and will cause each of its Subsidiaries to comply,
in all material respects with all Environmental Laws applicable to the ownership
or use of its Real Property now or hereafter owned or operated by Parent or any
of its Subsidiaries, will promptly pay or cause to be paid all costs and
expenses incurred in connection with such compliance, and will keep or cause to
be kept all such Real Property free and clear of any
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Liens imposed pursuant to such Environmental Laws and (ii) neither Parent nor
any of its Subsidiaries will generate, use, treat, store, Release or dispose
of, or permit the generation, use, treatment, storage, release or disposal
of, Hazardous Materials on any Real Property owned or operated by Parent or
any of its Subsidiaries, or transport or permit the transportation of
Hazardous Materials to or from any such Real Property, unless the failure to
comply with the requirements specified in clause (i) or (ii) above, either
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. If Parent or any of its Subsidiaries, or any tenant
or occupant of any Real Property owned or operated by Parent or any of its
Subsidiaries, cause or permit any intentional or unintentional act or
omission resulting in the presence or Release of any Hazardous Material
(except in compliance with applicable Environmental Laws), each Parent
Guarantor and the Borrower agrees to undertake, and/or to cause any of its
Subsidiaries, tenants or occupants to undertake, at their sole expense, any
clean up, removal, remedial or other action required pursuant to
Environmental Laws to remove and clean up any Hazardous Materials from any
Real Property except where the failure to do so would not reasonably be
expected to have a Material Adverse Effect; PROVIDED that neither Parent nor
any of its Subsidiaries shall be required to comply with any such order or
directive which is being contested in good faith and by proper proceedings so
long as it has maintained adequate reserves with respect to such compliance
to the extent required in accordance with GAAP.
(b) At the written request of the Agent or the Required Banks, which
request shall specify in reasonable detail the basis therefor, at any time and
from time to time, the Borrower will provide, at its sole cost and expense, an
environmental site assessment report concerning any Real Property now or
hereafter owned or operated by Parent or any of its Subsidiaries, prepared by an
environmental consulting firm approved by the Agent, which approval shall not be
unreasonably withheld, addressing the matters in clause (i), (ii) or (iii) below
which gives rise to such request (or, in the case of a request pursuant to
following clause (i), addressing such matter as may be requested by the Agent or
the Required Banks) and estimating the range of the potential costs of any
removal, remedial or other corrective action in connection with any such matter,
provided that in no event shall such request be made unless (i) an Event of
Default has occurred and is continuing, (ii) the Banks receive notice under
Section 8.01(i) for any event for which notice is required to be delivered for
any such Real Property or (iii) the Agent or the Required Banks reasonably
believe that there was a breach of any representation, warranty or covenant
contained in Section 7.18 or 8.07(a). If Parent fails to provide the same within
60 days after such request was made, the Agent may order the same, and Parent
shall grant and hereby grants, to the Agent and the Banks and their agents
access to such Real Property and specifically grants, the Agent and the Banks
and their agents an irrevocable non-exclusive license, subject to the rights of
tenants, to undertake such an assessment, all at Parent's expense.
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8.08 ERISA. As soon as possible and, in any event, within fifteen days
after Parent, any Subsidiary of Parent or any ERISA Affiliate knows or has
reason to know of the occurrence of any of the following, Parent will deliver,
or cause to be delivered, to each of the Banks a certificate of the chief
financial officer of Parent setting forth the full details as to such occurrence
and the action, if any, that Parent, Borrower, such Subsidiary or such ERISA
Affiliate is required or proposes to take, together with any notices required or
proposed to be given to or filed with or by Parent, the Subsidiary, the ERISA
Affiliate, the PBGC, a Plan participant or the Plan administrator with respect
thereto: that a Reportable Event has occurred; that an accumulated funding
deficiency, within the meaning of Section 412 of the Code or Section 302 of
ERISA, has been incurred or an application may be or has been made for a
waiver or modification of the minimum funding standard (including any
required installment payments) or an extension of any amortization period
under Section 412 of the Code or Section 303 or 304 of ERISA with respect to
a Plan; that any contribution required to be made with respect to a Plan or
Foreign Pension Plan has not been timely made; that a Plan has been or may be
terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA; that a Plan has a material Unfunded Current Liability; that
proceedings may be or have been instituted to terminate or appoint a trustee
to administer a Plan which is subject to Title IV of ERISA; that a proceeding
has been instituted pursuant to Section 515 of ERISA to collect a delinquent
contribution to a Plan; that Parent, any Subsidiary of Parent or any ERISA
Affiliate will or may incur any material liability (including any indirect,
contingent, or secondary liability) to or on account of the termination of or
withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or
4212 of ERISA or with respect to a Plan under Section 401(a)(29), 4971, 4975
or 4980 of the Code or Section 409 or 502(i) or 502(l) of ERISA or with
respect to a group health plan (as defined in Section 607(1) of ERISA or
Section 4980B(g)(2) of the Code) under Section 4980B of the Code; or that
Parent or any Subsidiary of Parent may incur any material liability pursuant
to any employee welfare benefit plan (as defined in Section 3(1) of ERISA)
that provides benefits to retired employees or other former employees (other
than as required by Section 601 of ERISA) or any Plan or any Foreign Pension
Plan. Parent will deliver to each of the Banks a complete copy of the annual
report (on Internal Revenue Service Form 5500-series) of each Plan
(including, to the extent required, the related financial and actuarial
statements and opinions and other supporting statements, certifications,
schedules and information) required to be filed with the Internal Revenue
Service. In addition to any certificates or notices delivered to the Banks
pursuant to the first sentence hereof, copies of annual reports and any
material notices received by Parent, any Subsidiary of Parent or any ERISA
Affiliate with respect to any Plan or Foreign Pension Plan shall be delivered
to the Banks no later than fifteen days after the date such report has been
filed with the Internal Revenue Service or such notice has been received by
Parent, such Subsidiary or such ERISA Affiliate, as applicable.
8.09 GOOD REPAIR. Each Parent Guarantor and the Borrower will, and
will cause each of its Subsidiaries to, ensure that its material properties and
equipment used in
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its business are kept in good repair, working order and condition, and that
from time to time there are made in such properties and equipment all needful
and proper repairs, renewals, replacements, extensions, additions, betterments
and improvements thereto, to the extent and in the manner useful or customary
for companies in similar businesses.
8.10 END OF FISCAL YEARS: FISCAL QUARTERS. Parent will, for financial
reporting purposes, cause (i) each of its, and each of its Subsidiaries', fiscal
years to end on September 30 of each year and (ii) each of its, and each of its
Subsidiaries', fiscal quarters to end on December 31, March 31, June 30 and
September 30 of each year.
8.11 ADDITIONAL SECURITY: FURTHER ASSURANCES. (a) Parent will, and
will cause each of its Domestic Subsidiaries (and to the extent Section 8.12 is
operative, each of its Foreign Subsidiaries) to, grant to the Collateral Agent
security interests and mortgages in such assets and real property (it being
understood that Real Property having a fair market value of less than $500,000
shall not be subject to this Section 8.11(a)) of Parent and its Subsidiaries as
are not covered by the original Security Documents, and as may be requested from
time to time by the Agent or the Required Banks (collectively, the "Additional
Security Documents"). All such security interests and mortgages shall be
granted (i) in the case of Real Property, pursuant to the documentation and
applicable terms set forth in Section 5.13 and (ii) in the case of other assets,
pursuant to documentation reasonably satisfactory in form and substance to the
Agent; in each case constituting valid and enforceable perfected security
interests and/or mortgages superior to and prior to the rights of all third
Persons and subject to no other Liens except for Permitted Liens. The
Additional Security Documents or instruments related thereto shall have been
duly recorded or filed in such manner and in such places as are required by law
to establish, perfect, preserve and protect the Liens in favor of the Collateral
Agent required to be granted pursuant to the Additional Security Documents and
all taxes, fees and other charges payable in connection therewith shall have
been paid in full.
(b) Parent will, and will cause each of its Subsidiaries to, at the
expense of the Borrower, make, execute, endorse, acknowledge, file and/or
deliver to the Collateral Agent from time to time such vouchers, invoices,
schedules, confirmatory assignments, conveyances, financing statements, transfer
endorsements, powers of attorney, certificates, real property surveys, reports
and other assurances or instruments and take such further steps relating to the
Collateral covered by any of the Security Documents as the Collateral Agent may
reasonably require. Furthermore, Parent shall cause to be delivered to the
Collateral Agent such opinions of counsel, title insurance and other related
documents as may be reasonably requested by the Agent to assure themselves that
this Section 8.11 has been complied with.
(c) If the Agent or the Required Banks determine that they are
required by law or regulation to have appraisals prepared in respect of the Real
Property of Parent
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and its Subsidiaries constituting Collateral, Parent shall provide to the
Agent appraisals which satisfy the applicable requirements of the Real Estate
Appraisal Reform Amendments of the Financial Institution Reform, Recovery and
Enforcement Act of 1989 and which shall be in form and substance reasonably
satisfactory to the Agent.
(d) Each of the Credit Parties agrees that each action required above
by this Section 8.11 shall be completed as soon as possible, but in no event
later than 90 days after such action is either requested to be taken by the
Agent or the Required Banks or required to be taken by Parent and its
Subsidiaries pursuant to the terms of this Section 8.11.
8.12 FOREIGN SUBSIDIARIES SECURITY. If following a change in the
relevant sections of the Code or the regulations, rules, rulings, notices or
other official pronouncements issued or promulgated thereunder, counsel for the
Borrower reasonably acceptable to the Agent does not within 30 days after a
request from the Agent or the Required Banks deliver evidence, in form and
substance mutually satisfactory to the Agent and the Borrower, with respect to
any Foreign Subsidiary of Parent which has not already had all of its stock
pledged pursuant to the Pledge Agreement that (i) a pledge (x) of 66-2/3% or
more of the total combined voting power of all classes of capital stock of such
Foreign Subsidiary entitled to vote, and (y) of any promissory note issued by
such Foreign Subsidiary to Parent or any of its Domestic Subsidiaries, (ii) the
entering into by such Foreign Subsidiary of a security agreement in
substantially the form of the Security Agreement and (iii) the entering into by
such Foreign Subsidiary of a guaranty in substantially the form of the
Subsidiaries Guaranty, in any such case could reasonably be expected to cause
(I) any undistributed earnings of such Foreign Subsidiary as determined for
Federal income tax purposes to be treated as a deemed dividend to such Foreign
Subsidiary's United States parent for Federal income tax purposes or (II) other
Federal income tax consequences to the Credit Parties having a Material Adverse
Effect, then in the case of a failure to deliver the evidence described in
clause (i) above, that portion of such Foreign Subsidiary's outstanding capital
stock or any promissory notes so issued by such Foreign Subsidiary, in each case
not theretofore pledged pursuant to the Pledge Agreement shall be pledged to the
Collateral Agent for the benefit of the Secured Creditors pursuant to the Pledge
Agreement (or another pledge agreement in substantially similar form, if
needed), and in the case of a failure to deliver the evidence described in
clause (ii) above, such Foreign Subsidiary shall execute and deliver the
Security Agreement (or another security agreement in substantially similar form,
if needed), granting the Secured Creditors a security interest in all of such
Foreign Subsidiary's assets and securing the Obligations of the Borrower under
the Credit Documents and under any Interest Rate Protection Agreement or Other
Hedging Agreement and, in the event the Subsidiaries Guaranty shall have been
executed by such Foreign Subsidiary, the obligations of such Foreign Subsidiary
thereunder, and in the case of a failure to deliver the evidence described in
clause (iii) above, such Foreign Subsidiary shall execute and deliver the
Subsidiaries Guaranty (or another guaranty in substantially similar form, if
needed), guaranteeing the Obligations of the Borrower under the Credit Documents
and
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under any Interest Rate Protection Aagreement or Other Hedging Agreement, in
each case to the extent that the entering into such Security Agreement or
Subsidiaries Guaranty is permitted by the laws of the respective foreign
jurisdiction and with all documents delivered pursuant to this Section 8.12 to
be in form and substance reasonably satisfactory to the Agent.
8.13 OWNERSHIP OF SUBSIDIARIES. Except to the extent otherwise
expressly consented in writing by the Required Banks, the Credit Parties shall
directly or indirectly own 100% of the capital stock or partnership interests of
each of their Subsidiaries.
8.14 PERMITTED ACQUISITIONS. (a) Subject to the provisions of this
Section 8.14 and the requirements contained in the definition of Permitted
Acquisition, the Borrower may from time to time after December 31, 1996 effect
Permitted Acquisitions, so long as (in each case except to the extent the
Required Banks otherwise specifically agree in writing in the case of a specific
Permitted Acquisition): (i) no Default or Event of Default shall be in existence
at the time of the consummation of the proposed Permitted Acquisition or
immediately after giving effect thereto; (ii) the Borrower shall have given the
Agent and the Banks at least 10 Business Days' prior written notice of any
Permitted Acquisition; (iii) calculations are made by the Borrower of compliance
with the covenants contained in Sections 9.09, 9.10 and 9.11 for the Test Period
(taken as one accounting period) most recently ended prior to the date of such
Permitted Acquisition (each, a "Calculation Period"), on a PRO FORMA Basis as if
the respective Permitted Acquisition (as well as all other Permitted
Acquisitions theretofore consummated after the first day of such Calculation
Period) had occurred on the first day of such Calculation Period, and such
recalculations shall show that such financial covenants would have been complied
with if the Permitted Acquisition had occurred on the first day of such
Calculation Period; (iv) based on good faith projections prepared by the
Borrower for the period from the date of the consummation of the Permitted
Acquisition to the date which is one year thereafter, the level of financial
performance measured by the covenants set forth in Sections 9.09, 9.10 and 9.11
shall be better than or equal to such level as would be required to provide that
no Default or Event of Default would exist under the financial covenants
contained in Sections 9.09, 9.10 and 9.11 of this Agreement as compliance with
such covenants would be required through the date which is one year from the
date of the consummation of the respective Permitted Acquisition; (v) the
Borrower shall certify, and the Agent shall have been satisfied in its
reasonable discretion, that the proposed Permitted Acquisition could not
reasonably be expected to result in materially increased tax, ERISA,
environmental or other contingent liabilities with respect to Parent or any of
its Subsidiaries; (vi) all representations and warranties contained herein and
in the other Credit Documents shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the date of such Permitted Acquisition (both before and after
giving effect thereto), unless stated to relate to a specific earlier date, in
which case such representations and warranties shall be true and correct in all
material respects as of such
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earlier date; (vii) the Borrower provides to the Agent and the Banks as soon
as available but not later than 5 Business Days after the execution thereof, a
copy of any executed purchase agreement or similar agreement with respect to
such Permitted Acquisition; (viii) the aggregate consideration (including,
without limitation, (I) the aggregate principal amount of any Indebtedness
assumed or issued in connection therewith, (II) the greater of the aggregate
liquidation preference and the fair market value (as determined in good faith
by the Board of Directors of Parent) of any stock issued (other than common
stock of Parent, provided that no Default or Event of Default under Section
10.10 exists or would result therefrom) as part of the purchase price therefor
and (III) the aggregate amount paid and to be paid pursuant to any earn-out,
non-compete or deferred compensation or purchase price arrangements, but
excluding common stock of the Parent referenced in the immediately preceding
parenthetical, for (x) any such proposed Permitted Acquisition shall not
exceed $5,000,000 and (y) any such proposed Permitted Acquisition and all
other Permitted Acquisitions consummated prior to such Permitted Acquisition
shall not exceed $15,000,000; (ix) after giving effect to each Permitted
Acquisition (and all payments to be made in connection therewith), the Total
Unutilized Revolving Loan Commitment shall equal or exceed $15,000,000; and
(x) the Borrower shall have delivered to the Agent an officer's certificate
executed by an Authorized Officer of the Borrower, certifying to the best of
his knowledge, compliance with the requirements of preceding clauses (i)
through (vi), inclusive, (viii) and (ix) and containing the calculations
required by the preceding clauses (iii), (iv), (viii) and (ix).
(b) At the time of each Permitted Acquisition involving the creation
or acquisition of a Subsidiary, or the acquisition of capital stock or other
equity interest of any Person, all capital stock or other equity interests
thereof created or acquired in connection with such Permitted Acquisition shall
be pledged for the benefit of the Secured Creditors pursuant to the Pledge
Agreement.
(c) Parent shall cause each Subsidiary which is formed to effect, or
is acquired pursuant to, a Permitted Acquisition to comply with, and to execute
and deliver, all of the documentation required by, Sections 8.11 and 9.15, to
the satisfaction of the Agent.
(d) The consummation of each Permitted Acquisition shall be deemed to
be a representation and warranty by each Parent Guarantor and the Borrower that
the certifications by the Borrower (or by one or more of its Authorized
Officers) pursuant to Section 8.14(a) are true and correct and that all
conditions thereto have been satisfied and that same is permitted in accordance
with the terms of this Agreement, which representation and warranty shall be
deemed to be a representation and warranty for all purposes hereunder,
including, without limitation, Sections 6 and 10.
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8.15 MAINTENANCE OF CORPORATE SEPARATENESS. Each Parent Guarantor and
the Borrower will, and will cause each of its Subsidiaries to, satisfy customary
corporate formalities, including the holding of regular board of directors' and
shareholders' meetings or action by directors or shareholders without a meeting
and the maintenance of corporate offices and records. Neither Parent nor any of
its Subsidiaries shall take any action, or conduct its affairs in a manner,
which is likely to result in the corporate existence of Parent or any of its
Subsidiaries being ignored, or in the assets and liabilities of Parent or any of
its Subsidiaries being substantively consolidated with those of any other such
Person in a bankruptcy, reorganization or other insolvency proceeding.
8.16 PERFORMANCE OF OBLIGATIONS. Each Parent Guarantor and the
Borrower will, and will cause each of its Subsidiaries to, perform all of its
obligations under the terms of each mortgage, deed of trust, indenture, loan
agreement or credit agreement and each other material agreement, contract or
instrument by which it is bound, except such non-performances as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
8.17 USE OF PROCEEDS. All proceeds of the Loans shall be used as
provided in Section 7.05.
8.18 INTEREST RATE PROTECTION. No later than 90 days following the
Initial Borrowing Date, the Borrower shall enter into Interest Rate Protection
Agreement, satisfactory to the Borrower and the Agent.
8.19 CONTRIBUTIONS: PAYMENTS: ETC. (a) Parent, Holdings and Tri-Star
Holdings will contribute, directly in the case of Tri-Star Holdings, or by way
of downstream contributions in the case of Parent and Holdings, as an equity
contribution to the capital of the Borrower upon its receipt thereof, any cash
proceeds received by Parent (other than proceeds received from Management
Participants which are used to repay the Odyssey Convertible Note), Holdings, or
Tri-Star Holdings from any asset sale, any incurrence of Indebtedness, any
Recovery Event, any sale or issuance of its preferred or common equity or any
cash capital contributions received by Parent.
(b) The Borrower will use the proceeds of all equity contributions
received by it from Parent, Holdings and/or Tri-Star Holdings as provided in
clause (a) above toward the repayment of Term Loans (or the reduction of the
Total Revolving Loan Commitment) to the extent required by Section 4.02.
8.20 CORPORATE NAMES. On the Initial Borrowing Date, and after giving
effect to the Acquisition, Parent shall be named "Maple Leaf Aerospace, Inc.",
Holdings shall be named "Aerospace Acquisition Corp.", Tri-Star Holdings shall
be named "Tri-Star Aerospace, Inc.", and the Borrower shall be named "Tri-Star
Aerospace Co.".
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SECTION 9. NEGATIVE COVENANTS. Parent and the Borrower hereby covenant
and agree that as of the Effective Date and thereafter for so long as this
Agreement is in effect and until the Total Commitment has terminated, no Letters
of Credit or Notes are outstanding and the Loans, together with interest, Fees
and all other Obligations (other than any indemnities described in Section 13.13
which are not then due and payable) incurred hereunder, are paid in full:
9.01 CHANGES IN BUSINESS. (a) Parent and its Subsidiaries will not
engage in any business other than the businesses in which the Acquired Business
is engaged in as of the Effective Date and activities directly related thereto,
and similar or related businesses.
(b) Notwithstanding the foregoing, (i) neither Parent nor Holdings
will engage in any business other than its ownership of the capital stock of
Holdings or Tri-Star Holdings, 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 and (ii) Tri-Star
Holdings will not engage in any business other than (x) its ownership of the
capital stock of the Borrower, (y) the operation of the business acquired by it
on the Initial Borrowing Date and (z) having those liabilities for which it is
responsible (or permitted to incur) under this Agreement or the other Documents
to which it is a party; provided that each of Parent, Holdings and Tri-Star
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.
9.02 CONSOLIDATION: MERGER: SALE OR PURCHASE OF ASSETS: ETC. Parent
will not, and will not permit any of its Subsidiaries to, wind up, liquidate or
dissolve its affairs or enter into any transaction of merger or consolidation,
or convey, sell, lease or otherwise dispose of all or any part of its property
or assets (other than inventory in the ordinary course of business), or enter
into any partnerships, joint ventures or sale-leaseback transactions, or
purchase or otherwise acquire (in one or a series of related transactions)
any part of the property or assets (other than purchases or other acquisitions
of inventory, materials and equipment in the ordinary course of business) of
any Person or agree to do any of the foregoing at any future time, except
that the following shall be permitted:
(a) the Borrower and its Subsidiaries may, as lessee, enter into
operating leases in the ordinary course of business with respect to real or
personal property to the extent permitted by Section 9.04;
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(b) Capital Expenditures by the Borrower and its Subsidiaries to the
extent not in violation of Section 9.08;
(c) the advances, investments and loans permitted pursuant to Section
9.05;
(d) the Borrower and any of its Subsidiaries may sell or otherwise
dispose of assets (excluding capital stock of Subsidiaries) which, in the
reasonable opinion of such Person, are obsolete, uneconomic or no longer
useful in the conduct of such Person's business, PROVIDED that (w) each
such sale or disposition shall be for an amount at least equal to the fair
market value thereof (as determined in good faith by senior management of
the Borrower), (x) each such sale results in consideration at least 80% of
which (taking the amount of cash, the principal amount of any promissory
notes and the fair market value, as determined by the Borrower in good
faith, of any other consideration) shall be in the form of cash and (y) the
aggregate Net Sale Proceeds of all assets sold or otherwise disposed of
pursuant to this clause (d) shall be applied, to the extent required or
permitted under Section 4.02(c), to repay Term Loans (or reduce the Total
Revolving Loan Commitment) or make reinvestments in assets;
(e) any Subsidiary of the Borrower may transfer assets (other than
accounts receivable and inventory) to the Borrower or to any other Wholly-
Owned Subsidiary of the Borrower which is a Subsidiary Guarantor, so long
as the security interests granted to the Collateral Agent for the benefit
of the Secured Creditors pursuant to the Security Documents in the assets
so transferred shall remain in full force and effect and perfected (to at
least the same extent as in effect immediately prior to such transfer);
(f) any Subsidiary of the Borrower may merge with and into, or be
dissolved or liquidated into, the Borrower, so long as (i) the Borrower is
the surviving corporation of any such merger, dissolution or liquidation
and (ii) the security interests granted to the Collateral Agent for the
benefit of the Secured Creditors pursuant to the Security Documents in the
assets of such Subsidiary shall remain in full force and effect and
perfected (to at least the same extent as in effect immediately prior to
such merger, dissolution or liquidation);
(g) any Subsidiary of the Borrower may merge with and into, or be
dissolved or liquidated into, any Wholly-Owned Domestic Subsidiary of the
Borrower, so long as (i) such Wholly-Owned Domestic Subsidiary is the
surviving corporation of any such merger, dissolution or liquidation and
(ii) the security interests granted to the Collateral Agent for the benefit
of the Secured Creditors pursuant to the Security Documents in the assets
of such Subsidiary shall remain in full force
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and effect and perfected (to at least the same extent as in effect
immediately prior to such merger, dissolution or liquidation);
(h) the Borrower and its Subsidiaries may sell or exchange specific
items of equipment, so long as the purpose of each such sale or exchange is
to acquire (and results within 90 days of such sale or exchange in the
acquisition of) replacement items of equipment which are the functional
equivalent of the item of equipment so sold or exchanged;
(i) the Borrower shall be permitted to make Permitted Acquisitions,
so long as such Permitted Acquisitions are effected in accordance with the
requirements of Section 8.14;
(j) the Acquisition shall be permitted in accordance with the
requirements of Section 5.08 and the component definitions contained
therein;
(k) sales of Excess Inventory (whether or not in the ordinary course
of business) shall be permitted for cash at fair market value (as
determined in good faith by the Borrower); and
(l) Tri-Star Holdings may contribute assets to the Borrower from time
to time (each a "Tri-Star Holdings Asset Contribution") in satisfaction, to
the extent of the value of the assets received, of the Intercompany Note
representing the Intercompany Acquisition Loans and/or as a contribution to
the capital of the Borrower.
To the extent the Required Banks waive the provisions of this Section 9.02 with
respect to the sale or other disposition of any Collateral, or any Collateral is
sold or otherwise disposed of as permitted by this Section 9.02, such Collateral
(unless transferred to the Borrower or a Subsidiary thereof) shall be sold or
otherwise disposed of free and clear of the Liens created by the Security
Documents and the Agent shall take such actions (including, without limitation,
directing the Collateral Agent to take such actions) as are appropriate in
connection therewith.
9.03 LIENS. Parent will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets of any kind (real or personal, tangible or
intangible) of Parent or any of its Subsidiaries, whether now owned or hereafter
acquired, or sell any such property or assets subject to an understanding or
agreement, contingent or otherwise, to repurchase such property or assets
(including sales of accounts receivable or notes with recourse to Parent or any
of its Subsidiaries) or assign any right to receive income, except for the
following (collectively, the "Permitted Liens"):
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(a) inchoate Liens for taxes, assessments or governmental charges or
levies not yet due and payable or Liens for taxes, assessments or
governmental charges or levies being contested in good faith and by
appropriate proceedings for which adequate reserves have been established
in accordance with GAAP;
(b) Liens in respect of property or assets of the Borrower or any of
its Subsidiaries imposed by law which were incurred in the ordinary course
of business and which have not arisen to secure Indebtedness for borrowed
money, such as carriers', warehousemen's and mechanics' Liens, statutory
landlord's Liens, and other similar Liens arising in the ordinary course of
business, and which either (x) do not in the aggregate materially detract
from the value of such property or assets or materially impair the use
thereof in the operation of the business of the Borrower or any of its
Subsidiaries or (y) are being contested in good faith by appropriate
proceedings, which proceedings have the effect of preventing the forfeiture
or sale of the property or asset subject to such Lien;
(c) Liens created by or pursuant to this Agreement and the Security
Documents;
(d) Liens in existence on the Initial Borrowing Date which are
listed, and the property subject thereto described, in Annex IX, without
giving effect to any extensions or renewals thereof;
(e) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 10.09,
PROVIDED that no cash or other property shall be pledged by Parent or any
of its Subsidiaries as security therefor;
(f) Liens (other than any Lien imposed by ERISA) (x) incurred or
deposits made in the ordinary course of business of the Borrower and its
Subsidiaries in connection with workers' compensation, unemployment
insurance and other types of social security, (y) to secure the performance
by the Borrower and its Subsidiaries of tenders, statutory obligations
(other than excise taxes), surety, stay, customs and appeal bonds,
statutory bonds, bids, leases, government contracts, trade contracts;
performance and return of money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money) or (z) to
secure the performance by the Borrower and its Subsidiaries of leases of
Real Property, to the extent incurred or made in the ordinary course of
business consistent with past practices, PROVIDED that the aggregate amount
of deposits at any time pursuant to sub-clause (y) and sub-clause (z) shall
not exceed $250,000 in the aggregate;
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(g) licenses, leases or subleases granted to third Persons in the
ordinary course of business not interfering in any material respect with
the business of the Borrower or any of its Subsidiaries;
(h) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances, in each
case not securing Indebtedness and not interfering in any material respect
with the ordinary conduct of the business of the Borrower or any of its
Subsidiaries;
(i) Liens arising from precautionary UCC financing statements
regarding operating leases permitted by this Agreement;
(j) Liens created pursuant to Capital Leases permitted pursuant to
Section 9.04(d), PROVIDED that (x) such Liens only serve to secure the
payment of Indebtedness arising under such Capitalized Lease Obligation and
(y) the Lien encumbering the asset giving rise to the Capitalized Lease
Obligation does not encumber any other asset of the Borrower or any of its
Subsidiaries;
(k) Permitted Encumbrances;
(l) Liens arising pursuant to purchase money mortgages or security
interests securing Indebtedness representing the purchase price (or
financing of the purchase price within 30 days after the respective
purchase) of assets acquired after the Initial Borrowing Date, PROVIDED
that (i) any such Liens attach only to the assets so purchased, (ii) the
Indebtedness secured by any such Lien does not exceed 100%, nor is less
than 80%, of the lesser of the fair market value or the purchase price of
the property being purchased at the time of the incurrence of such
Indebtedness and (iii) the Indebtedness secured thereby is permitted to be
incurred pursuant to Section 9.04(d);
(m) Liens on property or assets acquired pursuant to a Permitted
Acquisition, or on property or assets of a Subsidiary of the Borrower in
existence at the time such Subsidiary is acquired pursuant to a Permitted
Acquisition, PROVIDED that (i) any Indebtedness that is secured by such
Liens is permitted to exist under Section 9.04(f), and (ii) such Liens are
not incurred in connection with, or in contemplation or anticipation of,
such Permitted Acquisition and do not attach to any other asset of the
Borrower or any of its Subsidiaries;
(n) restrictions imposed in the ordinary course of business and
consistent with past practices on the sale or distribution' of designated
inventory pursuant to agreements with customers under which such inventory
is consigned by the customer or such inventory is designated for sale to
one or more customers; and
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(o) liens on common stock of Parent or options to purchase common
stock of Parent securing Shareholder Subordinated Notes, as provided
pursuant to clause (i) of Section 9.16.
9.04 INDEBTEDNESS. Parent will not, and will not permit any of its
Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(b) Existing Indebtedness outstanding on the Initial Borrowing Date
and listed on Annex IV, without giving effect to any subsequent extension,
renewal or refinancing thereof;
(c) Indebtedness under Interest Rate Protection Agreements entered
into to protect the Borrower against fluctuations in interest rates in
respect of the Obligations otherwise permitted under this Agreement;
(d) Capitalized Lease Obligations and Indebtedness of the Borrower
and its Subsidiaries representing purchase money Indebtedness secured by
Liens permitted pursuant to Section 9.03(1), PROVIDED, that (i) all such
Capitalized Lease Obligations are permitted under Section 9.08, and (ii)
the sum of (x) the aggregate Capitalized Lease Obligations outstanding at
any time plus (y) the aggregate principal amount of such purchase money
Indebtedness outstanding at such time shall not exceed $750,000;
(e) Indebtedness constituting Intercompany Loans to the extent
permitted by Section 9.05(f), and Indebtedness of Tri-Star Holdings
constituting Intercompany Acquisition Loans to the extent permitted by
Section 9.05(1);
(f) Indebtedness of a Subsidiary acquired pursuant to a Permitted
Acquisition (or Indebtedness assumed at the time of a Permitted Acquisition
of an asset securing such Indebtedness) (the "Permitted Acquired Debt");
PROVIDED that such Indebtedness was not incurred in connection with, or in
anticipation or contemplation of, such Permitted Acquisition;
(g) Indebtedness of the Parent under Shareholder Subordinated Notes
issued pursuant to the Management Stockholders' and Optionholders'
Agreement and permitted under Section 9.16, and the odyssey Convertible
Note; provided that the indebtedness pursuant to the Odyssey Convertible
Note shall not be permitted beyond the 90th day following the Initial
Borrowing Date; and
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(h) additional Indebtedness of the Borrower and its Subsidiaries not
otherwise permitted hereunder not exceeding $100,000 in aggregate principal
amount at any time outstanding.
9.05 ADVANCES; INVESTMENTS; LOANS. Parent will not, and will not permit
any of its Subsidiaries to, lend money or extend credit or make advances to
any Person, or purchase or acquire any stock, obligations or securities of,
or any other interest in, or make any capital contribution to, any Person, or
purchase or own a futures contract or otherwise become liable for the
purchase or sale of currency or other commodities at a future date in the
nature of a futures contract, or hold any cash or Cash Equivalents, except:
(a) Parent and its Subsidiaries may hold or invest in cash and Cash
Equivalents, PROVIDED that during any time that Revolving Loans or
Swingline Loans are outstanding the aggregate amount of cash and Cash
Equivalents held by Parent and its Subsidiaries shall not exceed $1,500,000
for any period of three consecutive Business Days;
(b) the Borrower and its Subsidiaries may acquire and hold
receivables owing to it, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade
terms (including the dating of receivables) of the Borrower or such
Subsidiary;
(c) the Borrower and its Subsidiaries may acquire and own investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, Customers and suppliers arising in
the ordinary course of business;
(d) interest Rate Protection Agreements entered into in compliance
with Section 9.04(c) shall be permitted;
(e) advances, loans and investments in existence on the Initial
Borrowing Date and listed on Annex VI shall be permitted, without giving
effect to any additions thereto or replacements thereof;
(f)(i) the Borrower may make intercompany loans and advances to any
Subsidiary Guarantor, (ii) any Subsidiary Guarantor may make intercompany
loans and advances to the Borrower or any other Subsidiary Guarantor and
(iii) the Borrower may make intercompany loans to the Parent for the
purpose of making payments permitted pursuant to Section 9.06(ii) (loans
pursuant to clauses (i) (ii) and (iii) of this clause (f) collectively,
"Intercompany Loans"), PROVIDED, that (x) each Intercompany Loan shall be
evidenced by an Intercompany Note and (y) each
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such Intercompany Note shall be pledged to the Collateral Agent pursuant
to the Pledge Agreement;
(g) loans and advances by the Borrower and its Subsidiaries to
employees of Parent and its Subsidiaries for moving and travel expenses and
other similar expenses, in each case incurred in the ordinary course of
business, in an aggregate outstanding principal amount not to exceed
$500,000 at any time (determined without regard to any write-downs or
write-offs of such loans and advances), shall be permitted; PROVIDED that
up to $300,000 at any time of such outstanding principal amount may
constitute loans to employees for purposes of exercising rights to purchase
common stock of Parent and/or to make payments with respect to any tax
liabilities.
(h) Parent may acquire and hold obligations of one or more officers
or other employees of Parent or its Subsidiaries in connection with such
officers' or employees' acquisition of shares of Parent Common Stock, so
long as no cash is actually advanced by Parent or any of its Subsidiaries
to such officers or employees in connection with the acquisition of any
such obligations;
(i) (x) Parent, Holdings, and Tri-Star Holdings may make equity
contributions, directly in the case of Tri-Star Holdings, or by way of
downstream contributions in the case of Parent and or Holdings to the
capital of the Borrower and (y) Tri-Star Holdings may make Tri-Star
Holdings Asset Contributions;
(j) the Borrower may make Permitted Acquisitions in accordance with
the relevant requirements of Section 8.14 and the component definitions as
used therein;
(k) Parent and its Subsidiaries may own the capital stock of their
respective Subsidiaries created or acquired in accordance with the terms of
this Agreement;
(l) the Borrower may make intercompany loans (collectively, the
"Intercompany Acquisition Loans") to enable Tri-Star Holdings to pay the
merger consideration owing pursuant to the Merger Agreement, so long as (x)
Tri-Star Holdings utilizes all of the proceeds of such loans to consummate
the merger pursuant to the Merger Agreement and (y) such loans are
extinguished, to the extent of the value of the assets contributed,
immediately following any Tri-Star Holdings Asset Contribution;
(m) the Borrower may make investments in Wholly Owned Foreign
Subsidiaries which are not Subsidiary Guarantors not to exceed $10,000,000
in the aggregate, net of any repayments to the Borrower; and
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(n) in addition to investments permitted by clauses (a) through (m)
of this Section 9.05, the Borrower and its Subsidiaries may make additional
loans, advances and investments to or in a Person not an Affiliate in an
aggregate amount for all loans, advances and investments made pursuant to
this clause (n) (determined without regard to any write-downs or write-offs
thereof), net of cash repayments of principal in the case of loans and cash
equity returns (whether as a dividend or redemption) in the case of equity
investments, not to exceed $100,000.
9.06 DIVIDENDS: ETC. Parent will not, and will not permit any of its
Subsidiaries to, declare or pay any dividends (other than dividends payable
solely in common stock of Parent or any such Subsidiary, as the case may be)
or return any capital to, its stockholders or authorize or make any other
distribution, payment or delivery of property or cash to its stockholders as
such, or redeem, retire, purchase or otherwise acquire, directly or
indirectly, for a consideration, any shares of any class of its capital
stock, now or hereafter outstanding (or any warrants for or options or stock
appreciation rights in respect of any of such shares), or set aside any funds
for any of the foregoing purposes, and Parent will not permit any of its
Subsidiaries to purchase or otherwise acquire for consideration any shares of
any class of the capital stock of Parent or any other Subsidiary, as the case
may be, now or hereafter outstanding (or any options or warrants or stock
appreciation rights issued by such Person with respect to its capital stock)
(all of the foregoing "Dividends"), except that:
(i) any Subsidiary of the Borrower may pay Dividends to the Borrower
or any Wholly-Owned Subsidiary of the Borrower;
(ii) Parent may redeem or purchase shares of Parent Common Stock or
options to purchase Parent Common Stock, as the case may be, held by former
employees of Parent or any of its Subsidiaries (or corporations owned by
former employees) following the termination of their employment, provided
that (w) the only consideration paid by Parent in respect of such
redemptions and/or purchases shall be cash and Shareholder Subordinated
Notes, (x) the sum of (A) the aggregate amount paid by Parent in cash in
respect of all such redemptions and/or purchases plus (B) the aggregate
amount of all cash payments made on Shareholder Subordinated Notes shall
not exceed $150,000 in any fiscal year of Parent, and (y) at the time of
any cash payment permitted to be made pursuant to this Section 9.06(ii),
including any cash payment under a Shareholder Subordinated Note, no
Default or Event of Default shall then exist or result therefrom;
(iii) so long as no Default or Event of Default then exists or would
result therefrom, the Borrower may pay cash Dividends to Tri-Star Holdings,
which in turn shall pay such amounts to Holdings, which in turn shall pay
such amounts to
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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 Tri-Star Holdings, Holdings and/or
Parent so long as the cash 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
Borrower exceed $200,000; and
(v) cash Dividends may be paid to Parent, Holdings and Tri-Star
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, Holdings or Tri-Star
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, Holdings or Tri-Star Holdings shall
promptly be returned by such Person to the Borrower.
9.07 TRANSACTIONS WITH AFFILIATES. Parent will not, and will not permit
any of its Subsidiaries to, enter into any transaction or series of
transactions with any Affiliate other than on terms and conditions
substantially as favorable to Parent or such Subsidiary as would be
reasonably expected to be obtainable by Parent or such Subsidiary at the time
in a comparable arm's-length transaction with a Person other than an
Affiliate; PROVIDED, that the following shall in any event be permitted: (i)
the Transaction; (ii) intercompany transactions among Parent and its
Subsidiaries to the extent expressly permitted by Sections 8.19, 9.02, 9.04,
9.05 and 9.06; (iii) the Employment Agreements, (iv) the Maple Leaf Aerospace
Bonus Plan and (v) so long as no Default or Event of Default exists or would
result therefrom, Odyssey may be paid a management fee of up to $250,000 per
fiscal year of the Borrower, beginning with the fiscal year commencing
October 1, 1997. In no event shall any management, consulting or similar fee
be paid or payable by Parent or any of its Subsidiaries to any Affiliate
(other than the Borrower) except as specifically provided in clause (v) of
this Section 9.07.
9.08 CAPITAL EXPENDITURES. (a) (i) Parent will not, and will not permit
any of its Subsidiaries to, make any Capital Expenditures, except that during
any fiscal year of the Borrower beginning on or after October 1, 1996 (taken
as one accounting period), the Borrower and its Subsidiaries may make Capital
Expenditures so long as the aggregate amount of such Capital Expenditures
does not exceed $2,000,000 for any such fiscal year and (ii) in addition to
Capital Expenditures made pursuant to clause (i) above, during the
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period commencing on the initial Borrowing Date through and including the
Final Maturity Date, the Borrower and its Subsidiaries may make additional
Capital Expenditures not to exceed, in the aggregate, $1,000,000.
(b) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make additional Capital Expenditures (which Capital Expenditures will not
be included in any determination under Section 9.08(a)) with the Net Sale
Proceeds of Asset Sales to the extent such proceeds are not required to be
applied to repay Term Loans (or reduce the Total Revolving Loan Commitment)
pursuant to the second proviso to Section 4.02(c) and such proceeds are
reinvested as required by Section 4.02(c).
(c) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make additional Capital Expenditures (which Capital Expenditures will not
be included in any determination under Section 9.08(a)) with the insurance
proceeds received by the Borrower or any of its Subsidiaries from any
Recovery Event so long as such Capital Expenditures are to replace or restore
any properties or assets in respect of which such proceeds were paid within
one year following the date of the receipt of such insurance proceeds to the
extent such insurance proceeds are not required to be applied to repay Term
Loans (or reduce the Total Revolving Loan Commitment) pursuant to Section
4.02(f).
(d) Notwithstanding the foregoing, the Borrower may make additional
Capital Expenditures (which Capital Expenditures will not be included in any
determination under Section 9.08(a)) constituting Permitted Acquisitions
effected in accordance with the requirements of Section 8.14.
9.09 MINIMUM CONSOLIDATED EBITDAR. Parent will not permit Consolidated
EBITDAR for any Test Period ended on the last day of a fiscal quarter
described below to be less than the respective amount set forth opposite such
period below:
<TABLE>
FISCAL
QUARTER ENDED
CLOSEST TO AMOUNT
------------- ------
<S> <C>
March 31, 1997 $12,900,000
June 30, 1997 $14,000,000
September 30, 1997 $15,500,000
December 31, 1997 $17,400,000
March 31, 1998 $18,400,000
June 30, 1998 $19,500,000
September 30, 1998 $20,700,000
December 31, 1998 $22,100,000
March 31, 1999 $23,200,000
</TABLE>
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<TABLE>
<S> <C>
June 30, 1999 $24,400,000
September 30, 1999 $25,600,000
December 31, 1999 $26,800,000
March 31, 2000 $28,200,000
June 30, 2000 $29,600,000
September 30, 2000 $30,900,000
December 31, 2000 $32,300,000
March 31, 2001 $33,800,000
June 30, 2001 $35,400,000
September 30, 2001 $36,900,000
December 31, 2001 $38,500,000
March 31, 2002 $38,500,000
June 30, 2002 $38,500,000
September 30, 2002 $38,500,000
December 31, 2002 $38,500,000
and the last day of each fiscal
quarter ended thereafter
</TABLE>
9.10 CONSOLIDATED INTEREST COVERAGE RATIO. Parent will not permit the
Consolidated Interest Coverage Ratio for any Test Period ending on the last
day of a fiscal quarter described below to be less than the ratio set forth
opposite such period below:
<TABLE>
FISCAL PERIOD
ENDED CLOSEST TO RATIO
---------------- -----
<S> <C>
March 31, 1997 2.60:1.00
June 30, 1997 2.80:1.00
September 30, 1997 2.90:1.00
December 31, 1997 3.10:1.00
March 31, 1998 3.30:1.00
June 30, 1998 3.50:1.00
September 30, 1998 3.50:1.00
December 31, 1998 3.50:1.00
March 31, 1999 3.50:1.00
June 30, 1999 3.50:1.00
September 30, 1999 3.50:1.00
December 31, 1999 3.50:1.00
March 31, 2000 3.50:1.00
June 30, 2000 3.50:1.00
September 30, 2000 3.50:1.00
December 31, 2000 3.50:1.00
March 31, 2001 3.50:1.00
June 30, 2001 3.50:1.00
</TABLE>
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<TABLE>
<S> <C>
September 30, 2001 3.50:1.00
December 31, 2001 3.50:1.00
March 31, 2002 3.50:1.00
June 30, 2002 3.50:1.00
September 30, 2002 3.50:1.00
December 31, 2002 3.50:1.00
and the last day of each
fiscal quarter ended
thereafter
</TABLE>
9.11 LEVERAGE RATIO. Parent will not permit the Leverage Ratio at any
date specified below to exceed the respective ratio set forth opposite such
date below:
<TABLE>
DATE RATIO
---- -----
<S> <C>
March 31, 1997 4.375:1.00
June 30, 1997 4.375:1.00
September 30, 1997 4.20:1.00
December 31, 1997 4.00:1.00
March 31, 1998 4.00:1.00
June 30, 1998 3.80:1.00
September 30, 1998 3.60:1.00
December 31, 1998 3.60:1.00
March 31, 1999 3.40:1.00
June 30, 1999 3.20:1.00
September 30, 1999 3.10:1.00
December 31, 1999 2.90:1.00
March 31, 2000 2.80:1.00
June 30, 2000 2.70:1.00
September 30, 2000 2.5:1.00
December 31, 2000 2.5:1.00
March 31, 2001 2.5:1.00
June 30, 2001 2.5:1.00
September 30, 2001 2.5:1.00
December 31, 2001 2.5:1.00
March 31, 2002 2.5:1.00
June 30, 2002 2.5:1.00
September 30, 2002 2.5:1.00
December 31, 2002 2.5:1.00
</TABLE>
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<PAGE>
by the Pledge Agreement, be delivered to the Collateral Agent for pledge
pursuant to the Pledge Agreement.
9.14 LIMITATION ON CERTAIN RESTRICTIONS ON SUBSIDIARIES. Parent will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective, any
encumbrance or restriction on the ability of any such Subsidiary to (x) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by Parent or any Subsidiary of
Parent, or pay any Indebtedness owed to Parent or a Subsidiary of Parent, (y)
make loans or advances to Parent or any Subsidiary of Parent or (z) transfer
any of its properties or assets to Parent or any of its Subsidiaries, except
for such encumbrances or restrictions existing under or by reason of (i)
applicable law, (ii) this Agreement and the other Credit Documents, (iii) the
provisions contained in the Existing Indebtedness, (iv) customary provisions
restricting subletting or assignment of any lease governing a leasehold
interest of the Borrower or a Subsidiary of the Borrower and (v) customary
provisions restricting assignment of any licensing agreement entered into by
the Borrower or any Subsidiary of the Borrower in the ordinary course of
business.
9.15 LIMITATION ON THE CREATION OF SUBSIDIARIES AND JOINT VENTURES. (a)
Notwithstanding anything to the contrary contained in this Agreement, Parent
will not, and will not permit any of its Subsidiaries to, establish, create
or acquire after the Effective Date any Subsidiary; PROVIDED that, the (A)
Borrower and its Wholly-Owned Subsidiaries shall be permitted to establish or
create Wholly-Owned Subsidiaries so long as, in each case, (i) at least 15
days' prior written notice thereof is given to the Agent (or such shorter
period of time as is acceptable to the Agent), (ii) the capital stock of such
new Subsidiary is promptly pledged pursuant to, and to the extent required
by, this Agreement and the Pledge Agreement and the certificates, if any,
representing such stock, together with stock powers duly executed in blank,
are delivered to the Collateral Agent, (iii) such new Subsidiary (other than
a Foreign Subsidiary except to the extent otherwise required pursuant to
Section 8.12) promptly executes a counterpart of the Subsidiaries Guaranty,
the Pledge Agreement and the Security Agreement, and (iv) to the extent
requested by the Agent or the Required Banks, takes all actions required
pursuant to Section 8.11, (B) Subsidiaries may be acquired pursuant to
Permitted Acquisitions so long as, in each such case (i) with respect to each
Wholly-Owned Subsidiary acquired pursuant to a Permitted Acquisition, the
actions specified in preceding clause (A) shall be taken and (ii) with
respect to each Subsidiary which is not a Wholly-Owned Subsidiary and is
acquired pursuant to a Permitted Acquisition, all capital stock thereof owned
by any Credit Party shall be pledged pursuant to the Pledge Agreement and (c)
the Borrower may acquire Subsidiaries from Tri-Star Holdings as a result of
Tri-Star Holdings Asset Contributions. In addition, each new Subsidiary that
is required to execute any Credit Document shall execute and deliver, or
cause to be executed and delivered, all other relevant documentation of the
type described
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9.12 LIMITATION ON VOLUNTARY PAYMENTS AND MODIFICATIONS OF
INDEBTEDNESS; MODIFICATIONS OF CERTIFICATE OF INCORPORATION, BY-LAWS AND
CERTAIN OTHER AGREEMENTS; ISSUANCES OF CAPITAL STOCK; ETC. Parent will not,
and will not permit any of its Subsidiaries to:
(i) amend or modify, or permit the amendment or modification of, any
provision of the Existing Indebtedness (other than Intercompany Loans, it
being understood that no changes may be made to the terms and conditions of
any Intercompany Note without the consent of the Required Banks) or of any
agreement (including, without limitation, any purchase agreement,
indenture, loan agreement, or security agreement) relating thereto;
(ii) make (or give any notice in respect of) any voluntary or
optional payment or prepayment on or redemption, repurchase or acquisition
for value of any of the Existing Indebtedness (other than Intercompany
Loans); or
(iii) amend, modify or change in any way adverse to the interests of
the Bank any Tax Allocation Agreement, any Management Agreement, any Equity
Financing Document, any Acquisition Document, its Certificate of
Incorporation (including, without limitation, by the filing or modification
of any certificate of designation), By-Laws, or any agreement entered into
by it, with respect to its capital stock (including any Shareholders'
Agreement), or enter into any new Tax Allocation Agreement, Management
Agreement or agreement with respect to its capita! stock (other than the
Stock Option Plan) which could in any way be adverse (or in the case of
Management Agreements, materially adverse) to the interests of the Banks.
9.13 LIMITATION ON ISSUANCE OF CAPITAL STOCK. (a) Parent will not, and
will not permit any of its Subsidiaries to, issue (i) any preferred stock (or
any options, warrants or rights to purchase preferred stock) or (ii) any
redeemable common stock unless, in either case, the issuance thereof is, and
all terms thereof are, satisfactory to the Required Banks in their sole
discretion.
(b) Parent shall not permit any of its Subsidiaries to issue any
capital stock (including by way of sales of treasury stock) or any options or
warrants to purchase, or securities convertible into, capital stock, except
(i) for transfers and replacements of then outstanding shares of capital
stock, (ii) for stock splits, stock dividends and additional issuances which
do not decrease the percentage ownership of Parent or any of its Subsidiaries
in any class of the capital stock of such Subsidiaries, (iii) to qualify
directors to the extent required by applicable law and (iv) Subsidiaries
formed after the Effective Date pursuant to Section 9.15 may issue capital
stock in accordance with the requirements of Section 9.15. All capital stock
issued in accordance with this Section 9.13(b) shall, to the extent required
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in Section 5 as such new Subsidiary would have had to deliver if such new
Subsidiary were a Credit Party on the Initial Borrowing Date.
(b) Parent will not, and will not permit any of its Subsidiaries to,
enter into any partnerships or joint ventures.
9.16 SHAREHOLDER SUBORDINATED NOTES; ODYSSEY CONVERTIBLE NOTE. (a)
Parent will not, and will not permit any of its Subsidiaries, to issue any
Shareholder Subordinated Note except in payment for purchases of common stock
or options to purchase common stock of the Parent pursuant to the Management
Stockholders' and Optionholders' Agreement, in each case in accordance with
the provisions of Section 4.2 thereof. In connection with repurchases
pursuant to said Section 4.2 of the Management Stockholders' and
Optionholders' Agreement, except as permitted by Section 9.06(ii), no portion
of the purchase price shall be paid in cash and the entire portion not so
paid in cash shall be paid through the issuance of one or more Shareholder
Subordinated Notes of the Parent. In connection with the issuance of such
Shareholder Subordinated Notes, it is understood and agreed that,
notwithstanding anything to the contrary contained in this Agreement, (i) the
respective Shareholder Subordinated Note may be secured by (and only by) a
pledge of the repurchased shares of common stock of the Parent, (ii) no
acceleration of any payments owing pursuant to any Shareholder Subordinated
Note shall be permitted so long as the covenants contained in this Section 9
remain in effect as provided in the introductory paragraph of Section 9 and
(iii) all cash payments with respect to the Shareholder Subordinated Notes
(including without limitation cash payments of principal and interest) shall
be limited to the amounts permitted to be paid pursuant to the provisions of
clause (ii) of Section 9.06 of this Agreement.
(b) The Odyssey Subordinated Note shall not be amended and all payments
thereon shall be limited in form and amount to those permitted under the
proviso to the definition thereof.
SECTION 10. EVENTS OF DEFAULT. Upon the occurrence of any of the
following specified events (each, an "Event of Default"):
10.01 PAYMENTS. The Borrower shall (i) default in the payment when due
of any principal of the Loans or (ii) default, and such default shall
continue for three or more days, in the payment when due of any Unpaid
Drawing, any interest on the Loans or any Fees or any other amounts owing
hereunder or under any other Credit Document; or
10.02 REPRESENTATIONS. ETC. Any representation, warranty or statement
made by any Credit Party herein or in any other Credit Document or in any
statement or certificate delivered pursuant hereto or thereto shall prove to
be untrue in any material respect on the date as of which made or deemed
made; or
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<PAGE>
10.03 COVENANTS. Any Credit Party shall (a) default in the due
performance or observance by it of any term, covenant or agreement contained
in Sections 8.01(f)(i), 8.10, 8.13, 8.14 or 9, or (b) default in the due
performance or observance by it of any term, covenant or agreement (other
than those referred to in Section 10.01, 10.02 or clause (a) of this Section
10.03) contained in this Agreement and such default shall continue unremedied
for a period of at least 30 days after notice to the defaulting party by the
Agent or the Required Banks; or
10.04 DEFAULT UNDER OTHER AGREEMENTS. (a) Parent or any of its
Subsidiaries shall (i) default in any payment with respect to any
Indebtedness (other than the Obligations) beyond the period of grace, if any,
provided in the instrument or agreement under which Indebtedness was created
or (ii) default in the observance or performance of any agreement or
condition relating to any such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause (determined without regard to whether any notice is required), any such
Indebtedness to become due prior to its stated maturity; or (b) any
Indebtedness (other than the Obligations) of Parent or any of its
Subsidiaries shall be declared to be due and payable, or shall be required to
be prepaid other than by a regularly scheduled required prepayment or as a
mandatory prepayment (unless such required prepayment or mandatory prepayment
results from a default thereunder or an event of the type that constitutes an
Event of Default), prior to the stated maturity thereof; PROVIDED, that it
shall not constitute an Event of Default pursuant to clause (a) or (b) of
this Section 10.04 unless the principal amount of any one issue of such
Indebtedness, or the aggregate amount of all such Indebtedness referred to in
clauses (a) and (b) above, exceeds $500,000 at any one time; or
10.05 BANKRUPTCY, ETC, Parent or any of its Subsidiaries shall commence
a voluntary case concerning itself under Title 11 of the United States Code
entitled "Bankruptcy," as now or hereafter in effect, or any successor
thereto (the "Bankruptcy Code"); or an involuntary case is commenced against
Parent or any of its Subsidiaries and the petition is not controverted within
10 days, or is not dismissed within 60 days, after commencement of the case;
or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes
charge of, all or substantially all of the property of Parent or any of its
Subsidiaries; or Parent or any of its Subsidiaries commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to Parent or any of
its Subsidiaries; or there is commenced against Parent or any of its
Subsidiaries any such proceeding which remains undismissed for a period of 60
days; or Parent or any of its Subsidiaries is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or Parent or any of
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its Subsidiaries suffers any appointment of any custodian or the like for it
or any substantial part of its property to continue undischarged or unstayed
for a period of 60 days; or Parent or any of its Subsidiaries makes a general
assignment for the benefit of creditors; or any corporate action is taken by
Parent or any of its Subsidiaries for the purpose of effecting any of the
foregoing; or
10.06 ERISA. (a) (i) Any Plan shall fail to satisfy the minimum funding
standard required for any plan year or part thereof under Section 412 of the
Code or Section 302 of ERISA or a waiver of such standard or extension of any
amortization period is sought or granted under Section 412 of the Code or
Section 303 or 304 of ERISA, a Reportable Event shall have occurred, (ii) any
Plan which is subject to Title IV of ERISA shall have had or is likely to
have a trustee appointed to administer such Plan, any Plan which is subject
to Title IV of ERISA is, shall have been or is likely to be terminated or to
be the subject of termination proceedings under ERISA, (iii) any Plan shall
have an Unfunded Current Liability, (iv) a contribution required to be made
with respect to a Plan or a Foreign Pension Plan has not been timely made,
(v) Parent or any Subsidiary of Parent or any ERISA Affiliate has incurred or
is likely to incur any liability to or on account of a Plan under Section
409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA
or Section 401(a)(29), 4971 or 4975 of the Code or on account of a group
health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of
the Code) under Section 4980B of the Code, or (vi) Parent or any Subsidiary
of Parent has incurred or is likely to incur liabilities pursuant to one or
more employee welfare benefit plans (as defined in Section 3(1) of ERISA)
that provide benefits to retired employees or other former employees (other
than as required by Section 601 of ERISA) or Plans or Foreign Pension Plans;
(b) there shall result from any such event or events as described in
subsection (a) of this section the imposition of a lien, the granting of a
security interest, or a liability or a material risk of incurring a
liability; and (c) such lien, security interest or liability, individually,
and/or in the aggregate, in the opinion of the Required Banks, has had, or
could reasonably be expected to have, a Material Adverse Effect; or
10.07 SECURITY DOCUMENTS. (a) Except in each case to the extent
resulting from the failure of the Collateral Agent to retain possession of
the applicable Pledged Securities, any Security Document shall cease to be in
full force and effect, or shall cease to give the Collateral Agent the Liens,
rights, powers and privileges purported to be created thereby in favor of the
Collateral Agent, superior to and prior to the rights of all third Persons
(except as permitted by Section 9.03), and subject to no other Liens (except
as permitted by Section 9.03), or (b) any Credit Party shall default in the
due performance or observance of any term, covenant or agreement on its part
to be performed or observed pursuant to any such Security Document and such
default shall continue beyond any cure or grace period specifically
applicable thereto pursuant to the terms of any such Security Document; or
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10.08 GUARANTIES. The Guaranties or any provision thereof shall cease to
be in full force and effect, or any Guarantor or any Person acting by or on
behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations
under any Guaranty or any Guarantor shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed or
observed pursuant to any Guaranty; or
10.09 JUDGMENTS. One or more judgments or decrees shall be entered
against Parent or any of its Subsidiaries involving a liability (to the
extent not paid or not fully covered by insurance) in excess of $500,000 for
all such judgments and decrees and all such judgments or decrees shall not
have been vacated, discharged or stayed or bonded pending appeal within 30
days from the entry thereof; or
10.10 OWNERSHIP. A Change of Control Event shall have occurred;
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 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 the 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 the
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 the 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 Borrower to pay (and the 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 Payment Office such additional amounts of cash, to be held as security
for the 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.
SECTION 11. DEFINITIONS. As used herein, the following terms shall have
the meanings herein specified unless the context otherwise requires. Defined
terms in this Agreement shall include in the singular number the plural and
in the plural the singular:
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"Acquired Business" shall mean all of the businesses acquired by
Tri-Star Holdings and its Subsidiaries from the former shareholders of
Tri-Star Aerospace and its Subsidiaries and Aviall and Aviall Canada pursuant
to the Acquisition Documents.
"Acquisition" shall mean (i) the acquisition by Tri-Star Holdings of
100% of the equity interests in Tri-Star Aerospace as a result of the merger
pursuant to the Merger Agreement and (ii) the acquisition by the Borrower of
certain assets and liabilities of Aviall and Aviall Canada, in each case
pursuant to, and in accordance with the terms of, the Acquisition Documents.
"Acquisition Agreements" shall mean, collectively, (i) the Asset
Purchase Agreement and (ii) the Merger Agreement.
"Acquisition Documents" shall mean the Acquisition Agreements and all
other agreements and documents relating to the Acquisition.
"Additional Security Documents" shall have the meaning provided in
Section 8.11.
"Adjusted Certificate of Deposit Rate" shall mean, on any day, the sum
(rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing (x)
the most recent weekly average dealer offering rate for negotiable
certificates of deposit with a three-month maturity in the secondary market
as published in the most recent Federal Reserve System publication entitled
"Select Interest Rates," published weekly on Form H.15 as of the date hereof,
or if such publication or a substitute containing the foregoing rate
information shall not be published by the Federal Reserve System for any
week, the weekly average offering rate determined by the Agent on the basis
of quotations for such certificates received by it from three certificate of
deposit dealers in New York of recognized standing or, if such quotations are
unavailable, then on the basis of other sources reasonably selected by the
Agent, by (y) a percentage equal to 100% minus the stated maximum rate of all
reserve requirements as specified in Regulation D applicable on such day to a
three-month certificate of deposit of a member bank of the Federal Reserve
System in excess of $100,000 (including, without limitation, any marginal,
emergency, supplemental, special or other reserves), plus (2) the then daily
net annual assessment rate as estimated by the Agent for determining the
current annual assessment payable by BTCo to the Federal Deposit Insurance
Corporation for insuring three month certificates of deposit.
"Adjusted Consolidated Working Capital" at any time shall mean
Consolidated Current Assets (but excluding therefrom all Excess Inventory)
less Consolidated Current Liabilities.
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"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all
directors and officers of such Person), controlled by, or under direct or
indirect common control with such Person; PROVIDED, HOWEVER, that for
purposes of Section 9.07, an Affiliate of the Borrower shall include any
Person that directly or indirectly owns more than 5% of any class of the
capital stock of the Borrower and any officer or director of the Borrower or
any such Person.
"Agent" shall have the meaning provided in the first paragraph of this
Agreement and shall include any successor to the Agent appointed pursuant to
Section 12.10.
"Agreement" shall mean this Credit Agreement, as the same may be from
time to time modified, amended and/or supplemented.
"Applicable Excess Cash Flow Percentage" shall mean, with respect to any
Excess Cash Flow Payment Date, the percentage set forth below opposite the
Leverage Ratio as determined on the last day of the respective Excess Cash
Flow Payment Period:
Applicable Excess Cash
Leverage Ratio Flow Percentage
-------------- ----------------------
Greater than 3.0:1.0 75%
Greater than 2.5:1.0 50%
but less than or equal to 3.0:1.0
Greater than 2.0:1.0 25%
but less than or equal to 2.5:1.0
Less than or equal to 2.0:1.0 0%
; provided, that the Leverage Ratio shall be determined for the relevant
Excess Cash Flow Payment Period by delivery of an officer's certificate of
the Borrower to the Banks, which certificate shall be signed by an Authorized
Officer of the Borrower and set forth the calculations required to establish
the Leverage Ratio. Notwithstanding anything to the contrary contained
above, the Applicable Excess Cash Flow Percentage shall be 75% (i) if no
officer's certificate has been delivered to the Banks on or prior to the
respective Excess Cash Flow Payment Date as required by this definition and
(ii) at all times when there shall exist a Default under Section 10.01 or
10.05 or any Event of Default.
"Applicable Margin" shall mean a percentage per annum equal to (i) in
the case of Revolving Loans (x) maintained as Base Rate Loans, 1.50% and (y)
maintained as Eurodollar Loans, 2.50% and (ii) in the case of Term Loans (x)
maintained as Base Rate Loans, 2.00% and (y) maintained as Eurodollar Loans,
3.00%.
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"Asset Purchase Agreement" shall mean the Asset Purchase Agreement,
dated September 5, 1996, among Parent, Aviall Canada and Aviall, as the same
may be amended, modified or supplemented from time to time in accordance with
the terms hereof and thereof.
"Asset Sale" shall mean any sale, transfer or other disposition by
Parent or any of its Subsidiaries to any Person other than Parent or any
Wholly Owned Subsidiary of Parent of any asset (including, without
limitation, any capital stock or other securities of another Person, but
excluding the sale by such Person of its own capital stock) of Parent or such
Subsidiary other than (i) sales, transfers or other dispositions of inventory
made in the ordinary course of business, (ii) sales of assets pursuant to
Section 9.02(h) and (iii) sales of Excess Inventory pursuant to Section
9.02(k).
"Assignment and Assumption Agreement" shall mean the Assignment and
Assumption Agreement substantially in the form of Exhibit K (appropriately
completed).
"Assumption Agreement" shall mean the Assumption Agreement, in the form
of Exhibit N, to be executed by Tri-Star Aerospace, Inc. on the Initial
Borrowing Date after the consummation of the Merger.
"Authorized Officer" shall mean, with respect to (i) delivering Notices
of Borrowing, Notices of Conversion, Letter of Credit Requests and similar
notices, and delivering financial information and officer's certificates
pursuant to this Agreement, any treasurer or other financial officer of the
Borrower and (ii) 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 Borrower, in each case to the extent
reasonably acceptable to the Agent.
"Aviall" shall mean Aviall Services Inc., a Delaware corporation.
"Aviall Business" shall mean the Aviall business unit (including assets,
liabilities and personnel) acquired or to be acquired pursuant to the Asset
Purchase Agreement.
"Aviall Canada" shall mean Aviall (Canada) Ltd., a Canadian corporation
and a Wholly-Owned Subsidiary of Aviall.
"Bank" shall have the meaning provided in the first paragraph of this
Agreement.
"Bank Default" shall mean (i) the refusal (which has not been retracted)
of a Bank to make available its portion of any Borrowing (including any
Mandatory
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Borrowing) or to fund its portion of any unreimbursed payment under Section
2.03 or (ii) a Bank having notified the Agent and/or the Borrower that it
does not intend to comply with the obligations under Section 1.01(b), 1.01(d)
or 2.03, in the case of either clause (i) or (ii) above as a result of the
appointment of a receiver or conservator with respect to such Bank at the
direction or request of any regulatory agency or authority.
"Bankruptcy Code" shall have the meaning provided in Section 10.05.
"Base Rate" at any time shall mean the highest of (x) the rate which is
1/2 of 1% in excess of the Adjusted Certificate of Deposit Rate, (y) the rate
which is 1/2 of 1% in excess of the Federal Funds Rate and (z) the Prime
Lending Rate.
"Base Rate Loan" shall mean each Loan bearing interest at the rates
provided in Section 1.08(a).
"Borrower" shall have the meaning provided in the first paragraph of
this Agreement.
"Borrowing" shall mean and include (i) the borrowing of Swingline Loans
from BTCo on a given date and (ii) the borrowing of one Type of Loan pursuant
to a single Tranche by the 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.
"Bourjeaurd" shall mean Mr. Quentin Bourjeaurd, the President of Parent
and, prior to the Initial Borrowing Date, the general manager of the Aviall
Business.
"BTCo" shall mean Bankers Trust Company, in its individual capacity, and
any successor corporation thereto by merger, consolidation or otherwise.
"Business Day" shall mean (i) for all purposes other than as covered by
clause (ii) below, any day excluding Saturday, Sunday and any day which shall
be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close and
(ii) with respect to all notices and determinations in connection with, and
payments of principal and interest on, Eurodollar Loans, any day which is a
Business Day described in clause (i) and which is also a day for trading by
and between banks in U.S. dollar deposits in the interbank Eurodollar market.
"Calculation Period" shall have the meaning provided in Section 8.14.
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"Canadian Subsidiary" shall mean Tri-Star Aerospace (Canada) Ltd., an
Ontario corporation and Wholly Owned Subsidiary of the Borrower.
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures by such Person which should be capitalized in accordance with
GAAP, including all such expenditures with respect to fixed or capital assets
(including, without limitation, expenditures for maintenance and repairs
which should be capitalized in accordance with GAAP) and the amount of all
Capitalized Lease Obligations incurred by such Person.
"Capital Lease," as applied to any Person, shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance
sheet of that Person.
"Capitalized Lease Obligations" shall mean, with respect to any Person,
all obligations under Capital Leases of such Person and or any of its
Subsidiaries in each case taken at the amount thereof accounted for as
liabilities in accordance with GAAP.
"Cash Equivalents" shall mean, as to any Person, (i) securities issued
or directly and fully guaranteed or insured by the United States or any
agency or instrumentality thereof (PROVIDED that the full faith and credit of
the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (ii) time deposits,
certificates of deposit and bankers' acceptances of any Bank or any
commercial bank having, or which is the principal banking subsidiary of a
bank holding company organized under the laws of the United States, any State
thereof, the District of Columbia or any foreign jurisdiction having capital,
surplus and undivided profits aggregating in excess of $500,000,000 and
having a long-term unsecured debt rating of at least "A" or the equivalent
thereof from S&P's or "A2" or the equivalent thereof from Moody's, with
maturities of not more than six months from the date of acquisition by such
Person, (iii) repurchase agreements with a term of not more than 30 days,
involving securities of the types described in preceding clause (i), and
entered into with commercial banks meeting the requirements of preceding
clause (ii), (iv) commercial paper issued by any Person incorporated in the
United States rated at least A-1 or the equivalent thereof by S&P's or at
least P-1 or the equivalent thereof by Moody's and in each case maturing not
more than six months after the date of acquisition by such Person, (v)
investments in money market funds substantially all of whose assets are
comprised of securities of the types described in clauses (i) through (iv)
above and (vi) demand deposit accounts maintained in the ordinary course of
business.
"Change of Control Event" shall mean, at any time and for any reason
whatsoever, (a) Parent shall cease to own directly 100% on a fully diluted
basis of the economic and voting interest in Holdings' capital stock or (b)
Holdings shall cease to own directly 100% on a fully diluted basis of the
economic and voting interest in Tri-Star
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Holdings' capital stock or (c) Tri-Star Holdings shall cease to own directly
100% on a fully diluted basis of the economic and voting interest in the
Borrower's capital stock or (d) Odyssey and its Affiliates shall cease to own
on a fully diluted basis in the aggregate at least 30% of the economic and
voting interest in Parent's capital stock or (e) Odyssey and its Affiliates
and the Management Participants shall cease collectively to own on a fully
diluted basis in the aggregate at least 51% of the economic and voting
interest in Parent's capital stock or (f) any Person or "group" (within the
meaning of Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934,
as in effect on the Effective Date, other than Odyssey and its Affiliates and
the Management Participants, shall (A) have acquired beneficial ownership of
20% or more on a fully diluted basis of the voting and/or economic interest
in Parent's capital stock or (B) obtained the power (whether or not
exercised) to elect a majority of Parent's directors or (g) the Board of
Directors of Parent shall cease to consist of a majority of Continuing
Directors or (h) a "change of control" or similar event shall occur as
provided in any Existing Indebtedness Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the date of
this Agreement and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"Collateral" shall mean all of the Collateral as defined in each of the
Security Documents.
"Collateral Agent" shall mean the Agent acting as collateral agent for
the Secured Creditors.
"Collective Bargaining Agreements" shall have the meaning provided in
Section 5.14.
"Commitment Fee" shall have the meaning provided in Section 3.01(a).
"Consolidated Current Assets" shall mean, at any time, the current
assets (other than cash, Cash Equivalents and deferred income taxes to the
extent included in current assets) of Parent and its Subsidiaries at such
time determined on a consolidated basis.
"Consolidated Current Liabilities" shall mean, at any time, the current
liabilities of Parent and its Subsidiaries determined on a consolidated
basis, but excluding deferred income taxes, restructuring costs or reserves,
litigation costs or reserves and the current portion of and accrued but
unpaid interest on any Indebtedness under this
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Agreement and any other long-term Indebtedness which would otherwise be
included therein.
"Consolidated Debt" shall mean, at any time, the sum of (without
duplication) (i) all Indebtedness of Parent and its Subsidiaries as would be
required to be reflected on the liability side of a balance sheet of such
Person in accordance with GAAP as determined on a consolidated basis, (ii)
all Indebtedness of Parent and its Subsidiaries of the type described in
clause (iii) of the definition of Indebtedness and (iii) all Contingent
Obligations of Parent and its Subsidiaries in respect of Indebtedness of
other Persons of the type referred to in preceding clauses (i) and (ii) of
this definition; PROVIDED, that for purposes of this definition, (i) the
amount of Indebtedness in respect of Interest Rate Protection Agreements
shall be at any time the unrealized net loss position, if any, of Parent
and/or its Subsidiaries thereunder on a marked-to market basis determined no
more than one month prior to such time and (ii) any preferred stock of Parent
or any of its Subsidiaries shall be treated as Indebtedness, with an amount
equal to the greater of the liquidation preference or the maximum fixed
repurchase price of any such outstanding preferred stock deemed to be a
component of Consolidated Debt.
"Consolidated EBIT" shall mean, for any period, the Consolidated Net
Income of Tri-Star Holdings and its Subsidiaries, determined on a
consolidated basis, before Consolidated Interest Expense (to the extent
deducted in arriving at Consolidated Net Income) and provision for taxes
based on income or gains or losses from sales of assets other than inventory
sold in the ordinary course of business, in each case that were included in
arriving at Consolidated Net Income.
"Consolidated EBITDAR" shall mean, for any period, Consolidated EBIT,
adjusted by (i) adding thereto the amount of all amortization and
depreciation, in each case that were deducted in arriving at Consolidated
EBIT for such period and (ii) excluding therefrom the effects of any increase
or decrease in inventory reserves to the extent such respective change to
inventory reserves decreased or increased, as the case may be, Consolidated
EBIT for the respective period. To the extent Excess Inventory is sold for
cash at any time prior to September 30, 1999, an amount equal to 15% of the
cash proceeds so received from such sales of Excess Inventory shall be added
to Consolidated EBITDAR for the fiscal quarter in which the respective sale
occurs; provided that in no event shall the amount added to Consolidated
EBITDAR in any fiscal quarter pursuant to this sentence exceed $250,000 and,
to the extent the amount that would be added to Consolidated EBITDAR for any
fiscal quarter would exceed $250,000 in the absence of this proviso, such
excess amount may be carried forward to successive fiscal quarters ended on
or prior to September 30, 1999, so long as the maximum amount added to
Consolidated EBITDAR for any such fiscal quarter pursuant to this sentence
does not exceed $250,000; provided further that no amounts shall be added to
Consolidated EBITDAR pursuant to this sentence for any fiscal quarter ended
after September 30, 1999.
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"Consolidated Interest Coverage Ratio" for any period shall mean the
ratio of Consolidated EBITDAR to Consolidated Interest Expense for such period.
"Consolidated Interest Expense" shall mean, for any period, the total
consolidated interest expense of Parent and its Subsidiaries for such period
(calculated without regard to any limitations on the payment thereof) plus,
without duplication, that portion of Capitalized Lease Obligations of Parent and
its Subsidiaries representing the interest factor for such period, and
capitalized interest expense, plus the amount of all cash Dividend requirements
(whether or not declared or paid) on preferred stock paid or accrued or
scheduled to be paid or accrued during such period, but excluding the
amortization of any deferred financing costs or of any costs in respect of any
Interest Rate Protection Agreement.
"Consolidated Net Income" shall mean, for any period, the net after
tax income of Parent and its Subsidiaries determined on a consolidated basis,
without giving effect to any extraordinary non-cash gains or non-cash losses,
any other non-cash expenses incurred or payments made in connection with the
Transaction, and without giving effect to net gains and losses from the sale or
disposition of assets (other than sales or dispositions of inventory, equipment,
raw materials and supplies) or Excess Inventory by the Borrower and its
Subsidiaries.
"Contingent Obligations" shall mean as to any Person any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(a) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (b) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y)to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (d) otherwise to assure or hold harmless the owner of
such primary obligation against loss in respect thereof; PROVIDED, HOWEVER, that
the term Contingent Obligation shall not include endorsements of instruments for
deposit or collection or standard contractual indemnities entered into, in each
case in the ordinary course of business. The amount of any Contingent Obligation
shall be deemed to be an amount equal to the stated or determinable amount of
the primary obligation in respect of which such Contingent Obligation is made
or, if not stated or determinable, the maximum reasonably anticipated liability
in respect thereof (assuming such Person is required to perform thereunder) as
determined by such Person in good faith.
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"Continuing Directors" shall mean the directors of Parent on the
Effective Date and each other director if such director's nomination for the
election to the Board of Directors of Parent is recommended by a majority of the
then Continuing Directors.
"Credit Documents" shall mean this Agreement, the Notes, the
Guaranties, each Security Document and the Assumption Agreement.
"Credit Event" shall mean the making of a Loan (other than a Revolving
Loan made pursuant to a Mandatory Borrowing) or the issuance of a Letter of
Credit.
"Credit Party" shall mean Parent, Holdings, Tri-Star Holdings,
Tri-Star Inventory Management Service, Inc., the Borrower and each Subsidiary
Guarantor.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
"Designated Indebtedness" shall have the meaning provided in Section
5.09.
"Dividend" shall have the meaning provided in Section 9.06.
"Documents" shall mean the Credit Documents, the Acquisition
Documents, the Refinancing Documents and the Equity Financing Documents.
"Domestic Subsidiary" shall mean each Subsidiary of Parent
incorporated or organized in the United States or any State or territory
thereof.
"Effective Date" shall have the meaning provided in Section 13.10.
"Eligible Transferee" shall mean and include a commercial bank,
financial institution or other "accredited investor" (as defined in Regulation D
of the Securities Act).
"Employee Benefit Plans" shall have the meaning set forth in Section
5.14.
"Employment Agreements" shall have the meaning set forth in Section
5.14.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-compliance or violation, investigations or proceedings relating
in any way to any violation (or alleged violation) by Parent or any of its
Subsidiaries under any Environmental Law (hereafter
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"Claims") or any permit issued to Parent or any of its Subsidiaries under any
such law, including, without limitation, (a) any and all Claims by
governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and (b) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
"Environmental Law" shall mean any applicable federal, state or local
statute, law, rule, regulation, ordinance, code or rule of common law now or
hereafter in effect and in each case as amended, and any legally binding
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment (for purposes of this
definition (collectively, "Laws")), relating to the environment, or Hazardous
Materials or health and safety to the extent such health and safety issues
relate to the occupational exposure to Hazardous Materials, or any such similar
Laws.
"Equity Financing" shall mean the issuance by Parent of Parent Common
Stock to the Equity Investors on the Initial Borrowing Date, or in the case of
certain Management Participants (or Odyssey, in connection with the conversion
of the Odyssey Convertible Note), within 90 days thereafter.
"Equity Financing Documents" shall mean all of the agreements
governing, or relating to, the Equity Financing.
"Equity Investors" shall mean and include (i) Odyssey and its
Affiliates, (ii) Bourjeaurd (iii) the Management Participants and (iv) BT
Investment Partners, Inc.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA, as in effect at
the date of this Agreement and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with Parent or a Subsidiary of the Parent would be
deemed to be a "single employer" (i) within the meaning of Section 414(b), (c),
(m) or (o) of the Code or (ii) as a result of Parent or a Subsidiary of Parent
being or having been a general partner of such person.
"Eurodollar Loans" shall mean each Loan bearing interest at the rates
provided in Section 1.08(b).
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"Eurodollar Rate" shall mean with respect to each Interest Period for
a Eurodollar Loan, (i) the arithmetic average (rounded to the nearest 1/100 of
1%) of the offered quotation to first-class banks in the interbank Eurodollar
market by BTCo for U.S. dollar deposits of amounts in same day funds comparable
to the outstanding principal amount of the Eurodollar Loan of BTCo for which an
interest rate is then being determined with maturities comparable to the
Interest Period to be applicable to such Eurodollar Loan, determined as of 10:00
A.M. (New York time) on the date which is two Business Days prior to the
commencement of such Interest Period divided (and rounded upward to the next
whole multiple of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then
stated maximum rate of all reserve requirements (including, without limitation,
any marginal, emergency, supplemental, special or other reserves) applicable to
any member bank of the Federal Reserve System in respect of Eurocurrency
liabilities as defined in Regulation D (or any successor category of liabilities
under Regulation D).
"Event of Default" shall have the meaning provided in Section 10.
"Excess Cash Flow" shall mean, for any period, the remainder of (a)
the sum of (i) Consolidated Net Income for such period, and (ii) the decrease,
if any, in Adjusted Consolidated Working Capital from the first day to the last
day of such period, minus (b) the sum of (i) the amount of Capital Expenditures
made by the Borrower and its Subsidiaries on a consolidated basis during such
period pursuant to and in accordance with Sections 9.08(a) and (d), except to
the extent financed with the proceeds of Indebtedness or pursuant to Capitalized
Lease Obligations, (ii) the aggregate amount of permanent principal payments of
Indebtedness for borrowed money of the Borrower and its Subsidiaries and the
permanent repayment of the principal component of Capitalized Lease Obligations
of the Borrower and its Subsidiaries (excluding (1) payments with proceeds of
asset sales, (2) payments with the proceeds of Indebtedness or equity and (3)
payments of Loans or other Obligations, PROVIDED that repayments of Loans shall
be deducted in determining Excess Cash Flow if such repayments were (x)
required as a result of a Scheduled Commitment Reduction under Section 3.03 or a
Scheduled Repayment under Section 4.02 or (y) made as a voluntary prepayment
pursuant to Section 4.01 with internally generated funds (but in the case of a
voluntary prepayment of Revolving Loans, only to the extent accompanied by a
voluntary reduction to the Total Revolving Loan Commitment)) during such period,
(iii) the increase, if any, in Adjusted Consolidated Working Capital from the
first day to the last day of such period and (iv) for purposes of calculating
Excess Cash Flow for the fiscal year ending September 30, 1998 (and only for
such fiscal year), $5,000,000.
"Excess Cash Flow Payment Date" shall mean the date occurring 120 days
after the last day of a fiscal year of Parent (in either case beginning with the
fiscal year ending on September 30, 1998).
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"Excess Cash Flow Payment Period" shall mean, with respect to each
Excess Cash Payment Date, the immediately preceding fiscal year of Parent.
"Excess Inventory" shall mean the Targeted Inventory, as defined in
the Maple Leaf Aerospace Bonus Plan.
"Existing Indebtedness" shall have the meaning provided in Section
5.16.
"Existing Indebtedness Agreements" shall have the meaning provided in
Section 5.14.
"Facing Fee" shall have the meaning provided in Section 3.01(c).
"Federal Funds Rate" shall mean, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal Funds brokers of
recognized standing selected by the Agent.
"Fees" shall mean all amounts payable pursuant to, or referred to in,
Section 3.01.
"Final Maturity Date" shall mean September 30, 2003.
"Foreign Pension Plan" shall mean any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by Parent or any one or more of
its Subsidiaries primarily for the benefit of employees of Parent or such
Subsidiaries residing outside the United States of America, which plan, fund or
other similar program provides, or results in, retirement income, a deferral of
income in contemplation of retirement or payments to be made upon termination of
employment, and which plan is not subject to ERISA or the Code.
"Foreign Subsidiary" shall mean each Subsidiary of Parent other than a
Domestic Subsidiary.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time; it being understood and
agreed that deter-
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minations in accordance with GAAP for purposes of Section 9, including
defined terms as used therein, are subject (to the extent provided therein)
to Section 13.07(a).
"Guaranteed Creditors" shall mean and include each of the Agent, the
Collateral Agent, the Banks and each party (other than any Credit Party) party
to an Interest Rate Protection Agreement or Other Hedging Agreement to the
extent that such party constitutes a Secured Creditor under the Security
Documents.
"Guaranteed Obligations" shall mean (i) the principal and interest on
each Note issued by the 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 the 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 the 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 the
Borrower or any of its Subsidiaries owing under any Interest Rate Protection
Agreement or Other Hedging Agreement entered into by the 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.
"Guarantor" shall mean each Parent Guarantor and each Subsidiary
Guarantor.
"Guaranty" shall mean and include each of the Parent Guaranty and the
Subsidiary Guaranty.
"Hazardous Materials" shall mean (a) any petrochemical or petroleum
products, radioactive materials friable asbestos, urea formaldehyde foam
insulation, transformers or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls, and radon gas; and (b) any
chemicals, materials or substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "restricted
hazardous materials," "extremely hazardous wastes," "restrictive hazardous
wastes," "toxic substances," "toxic pollutants," "contaminants" or
"pollutants," or words of similar meaning and regulatory effect where the
relevant
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Governmental authority has jurisdiction over the operations of Parent or any of
its Subsidiaries.
"Holdings" shall have the meaning provided in the first paragraph of
this Agreement.
"Indebtedness" of any Person shall mean, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services payable to the sellers thereof or any of such seller's
assignees which in accordance with GAAP would be shown on the liability side of
the balance sheet of such Person but excluding deferred rent as determined in
accordance with GAAP, (iii) the face amount of all letters of credit issued for
the account of such Person and, without duplication, all drafts drawn
thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any
property owned by such first Person, whether or not such Indebtedness has been
assumed, (v) all Capitalized Lease Obligations of such Person, (vi) all
obligations of such Person to pay a specified purchase price for goods or
services whether or not delivered or accepted, I.E., take-or-pay and similar
obligations, (vii) all obligations under Interest Rate Protection Agreements and
Other Hedging Agreements and (viii) all Contingent Obligations of such Person,
PROVIDED, that Indebtedness shall not include trade payables and accrued
expenses, in each case arising in the ordinary course of business.
"Initial Borrowing Date" shall mean the date upon which the initial
Borrowing of Loans occurs.
"Intercompany Acquisition Loans" shall have the meaning provided in
Section 9.05(l).
"Intercompany Loan" shall have the meaning provided in Section
9.05(f).
"Intercompany Notes" shall mean promissory notes, in the form of
Exhibit L, evidencing Intercompany Loans.
"Interest Determination Date" shall mean, with respect to any
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.
"Interest Period," with respect to any Eurodollar Loan, shall mean the
interest period applicable thereto, as determined pursuant to Section 1.09.
"Interest Rate Protection Agreement" shall mean any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, interest
rate hedging agreement or other similar agreement or arrangement.
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"L/C Supportable Indebtedness" shall mean (i) obligations of the
Borrower or its Wholly-Owned Subsidiaries incurred in the ordinary course of
business with respect to insurance obligations and workers' compensation, surety
bonds and other similar statutory obligations and (ii) such other obligations of
the Borrower or any of its Wholly-Owned Subsidiaries as are reasonably
acceptable to the Agent and the Letter of Credit Issuer and otherwise permitted
to exist pursuant to the terms of this Agreement,
"Leasehold" of any Person shall mean all of the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section 2.01(a).
"Letter of Credit Fees" shall have the meaning provided in Section
3.01(b).
"Letter of Credit Issuer" shall mean BTCo and any other Bank which, at
the request of the Borrower and with the consent of the Agent, agrees in such
Bank's sole discretion to become a Letter of Credit Issuer for purposes of
issuing Letters of Credit pursuant to Section 2. The sole Letter of Credit
Issuer on the Initial Borrowing Date is BTCo.
"Letter of Credit Outstandings" shall mean, at any time, the sum of,
without duplication, (i) the aggregate Stated Amount of all outstanding Letters
of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all
Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in Section
2.02(a).
"Leverage Ratio" shall mean on any date the ratio of (i) Consolidated
Debt on such date to (ii) Consolidated EBITDAR for the Test Period most recently
ended on or prior to such date, in each case taken as one accounting period.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the UCC or any similar
recording or notice statute, and any lease having substantially the same effect
as the foregoing).
"Loan" shall mean each Term Loan, each Revolving Loan and each
Swingline Loan.
"Management Agreements" shall have the meaning provided in Section
5.14.
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"Management Participants" shall mean certain members of the management
of Tri-Star Aerospace and the Aviall Business or corporations owned by such
individuals, acceptable to the Agent.
"Management Stockholders' and Optionholders' Agreement" shall mean the
Management Stockholders' and Optionholders' Agreement dated as of September 19,
1996, by and among Parent, Odyssey, any Affiliate (as defined therein) of
Odyssey which is or becomes a stockholder, BT Investment Partners, Inc. and the
parties identified as the Management Stockholders on the signature pages
thereto.
"Mandatory Borrowing" shall have the meaning provided in Section
1.01(d).
"Maple Leaf Aerospace Bonus Plan" shall mean the Maple Leaf Aerospace,
Inc. Annual Bonus Plan to the extent such plan is in effect pursuant to terms
substantially similar to those contained in the Maple Leaf Aerospace, Inc.
Annual Bonus Plan summary of terms and conditions provided to the Agent prior to
the Initial Borrowing Date.
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on the
business, properties, assets, liabilities, condition (financial or otherwise) or
prospects of Parent, Holdings, Tri-Star Holdings, the Borrower, the Borrower and
its Subsidiaries taken as a whole, Tri-Star Holdings 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.
"Material Contracts" shall have the meaning provided in Section 5.14.
"Maturity Date", with respect to any Tranche of Loans, shall mean the
Final Maturity Date or the Revolving Loan Maturity Date, as the case may be.
"Maximum Swingline Amount" shall mean $3,000,000.
"Merger Agreement" shall mean the Agreement and Plan of Merger dated
as of August 28, 1996, by and among Parent, Holdings, Tri-Star Holdings,
Tri-Star Aerospace and the Shareholders of Tri-Star Aerospace party thereto,
as the same may be
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amended, modified or supplemented from time to time in accordance with the
terms hereof and thereof.
"Minimum Borrowing Amount" shall mean (i) for Revolving Loans,
$1,000,000, (ii) for Term Loans, $5,000,000, and (iii) for Swingline Loans,
$100,000.
"Moody's" shall mean Moody's Investors Service, Inc.
"Mortgage" shall have the meaning provided in Section 5.13(a).
"Mortgage Policies" shall have the meaning provided in Section
5.13(b).
"Mortgaged Properties" shall mean and include the Real Properties
owned or leased by the Borrower and its Domestic Subsidiaries to the extent
designated as such on Annex III.
"Net Cash Proceeds" shall mean for any event requiring a reduction of
the Total Revolving Loan Commitment and/or repayment of Term Loans pursuant to
Section 3.03 or 4.02, as the case may be, the gross cash proceeds (including any
cash received by way of deferred payment pursuant to a promissory note,
receivable or otherwise, but only as and when received) received from such
event, net of reasonable transaction costs (including, as applicable, any
underwriting, brokerage or other customary commissions and reasonable legal,
advisory and other fees and expenses associated therewith) received from any
such event.
"Net Sale Proceeds" shall mean for any sale of assets, the gross cash
proceeds (including any cash received by way of deferred payment pursuant to a
promissory note, receivable or otherwise, but only as and when received)
received from any sale of assets, net of reasonable transaction costs
(including, without limitation, any underwriting, brokerage or other customary
selling commissions and reasonable legal, advisory and other fees and expenses,
including title and recording expenses, associated therewith) and payments of
unassumed liabilities relating to the assets sold at the time of, or within 30
days after, the date of such sale, the amount of such gross cash proceeds
required to be used to repay any Indebtedness (other than Indebtedness of the
Banks pursuant to this Agreement) which is secured by the respective assets
which were sold, and the estimated marginal increase in income and sales taxes
which will be payable by Parent's consolidated group with respect to the fiscal
year in which the sale occurs as a result of such sale; but excluding any
portion of any such gross cash proceeds which the Borrower determines in good
faith should be reserved for post-closing adjustments (to the extent the
Borrower delivers to the Banks a certificate signed by its chief financial
officer or treasurer, controller or chief accounting officer as to such
determination), it being understood and agreed that on the day that all such
post-closing adjustments have been determined (which shall not be
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later than six months following the date of the respective asset sale), the
amount (if any) by which the reserved amount in respect of such sale or
disposition exceeds the actual post-closing adjustments payable by Parent or
any of its Subsidiaries shall constitute Net Sale Proceeds on such date
received by Parent and/or any of its Subsidiaries from such sale, lease,
transfer or other disposition.
"Non-Defaulting Bank" shall mean each Bank other than a Defaulting
Bank.
"Note" shall mean each Term Note, each Revolving Note and the
Swingline Note.
"Notice of Borrowing" shall have the meaning provided in Section
1.03(a).
"Notice of Conversion" shall have the meaning provided in Section
1.06.
"Notice Office" shall mean the office of the Agent located at One
Bankers Trust Plaza, New York, New York 10006 or such other office as the Agent
may designate to the Borrower and the Banks from time to time.
"Obligations" shall mean all amounts, direct or indirect, contingent
or absolute, of every type or description, and at any time existing, owing to
the Agent, the Collateral Agent or any Bank pursuant to the terms of this
Agreement or any other Credit Document.
"Odyssey" shall mean Odyssey Partners, L.P., a Delaware limited
partnership.
"Odyssey Convertible Note" shall mean an unsecured junior subordinated
note issued by Parent (and not guaranteed or supported in any way by Holdings or
any of its Subsidiaries), which note shall evidence a loan, in a maximum total
amount of $1,000,000, from Odyssey to Parent and shall mature not later than the
90th day following the Initial Borrowing Date; PROVIDED that such note shall not
bear interest and may only be repaid with either (i) cash proceeds provided to
Parent by the Management Participants in exchange for an amount of common stock
of Parent which is of equal value, or (ii) common stock of Parent equal in value
to any remaining balance on the note after taking account of all payments made
pursuant to clause (i) above.
"Other Hedging Agreements" shall mean any foreign exchange contracts,
currency swap agreements or other similar agreements or arrangements designed to
protect against fluctuations in currency values.
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"Parent" shall have the meaning provided in the first paragraph of
this Agreement.
"Parent Common Stock" shall have the meaning provided in Section
7.14(a).
"Parent Guarantors" shall have the meaning provided in Section 14.01.
"Parent Guaranty" shall mean the guaranty of Parent pursuant to
Section 14.
"Participant" shall have the meaning provided in Section 2.03(a).
"Payment Office" shall mean the office of the Agent located at One
Bankers Trust Plaza, New York, New York 10006 or such other office as the Agent
may designate to the Borrower and the Banks from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" shall mean, at any time for each Bank, the percentage
obtained by dividing such Bank's Revolving Loan Commitment at such time by the
Total Revolving Loan Commitment then in effect, PROVIDED, that if the Total
Revolving Loan Commitment has been terminated, the Percentage of each Bank shall
be determined by dividing such Bank's Revolving Loan Commitment as in effect
immediately prior to such termination by the Total Revolving Loan Commitment as
in effect immediately prior to such termination.
"Permitted Acquired Debt" shall have the meaning set forth in Section
9.04(f).
"Permitted Acquisition" shall mean the acquisition by the Borrower of
assets constituting a business, division or product line of any Person not
already a Subsidiary of the 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 Borrower, PROVIDED that (A) the consideration paid by the
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
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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.
"Permitted Encumbrances" shall mean (i) those liens, encumbrances and
other matters affecting title to any Mortgaged Property listed in the Mortgage
Policies in respect thereof and found reasonably acceptable by the Agent, (ii)
as to any particular Mortgaged Property at any time, such easements,
encroachments, covenants, rights of way, minor defects, irregularities or
encumbrances on title which do not, in the reasonable opinion of the Agent,
materially impair such Mortgaged Property for the purpose for which it is held
by the mortgagor thereof, or the lien held by the Collateral Agent, (iii) zoning
and other municipal ordinances which are not violated in any material respect by
the existing improvements and the present use made by the mortgagor thereof of
the Premises (as defined in the respective Mortgage), (iv) general real estate
taxes and assessments not yet delinquent, and (v) such other similar items as
the Agent may consent to (such consent not to be unreasonably withheld).
"Permitted Liens" shall have the meaning provided in Section 9.03.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other enterprise
or any government or political subdivision or any agency, department or
instrumentality thereof.
"Plan" shall mean any pension plan as defined in Section 3(2) of
ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of) Parent or a Subsidiary of Parent or an ERISA
Affiliate, and each such plan for the five year period immediately following the
latest date on which Parent, or a Subsidiary of Parent or an ERISA Affiliate
maintained, contributed to or had an obligation to contribute to such plan.
"Pledge Agreement" shall have the meaning provided in Section 5.11(a).
"Pledge Agreement Collateral" shall mean all "Collateral" as defined
in the Pledge Agreement.
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"Pledged Securities" shall mean all the Pledged Securities as defined
in the Pledge Agreement.
"Prime Lending Rate" shall mean the rate which BTCo announces from
time to time as its prime lending rate, the Prime Lending Rate to change when
and as such prime lending rate changes. The Prime Lending Rate is a reference
rate and does not necessarily represent the lowest or best rate actually charged
to any customer. BTCo may make commercial loans or other loans at rates of
interest at, above or below the Prime Lending Rate.
"PRO FORMA Basis" shall mean, in connection with any calculation of
compliance with any financial covenant or financial term, the calculation
thereof after giving effect on a PRO FORMA basis to (x) the incurrence of any
Indebtedness (other than revolving Indebtedness, except to the extent same is
incurred to finance the Transaction, to refinance other outstanding Indebtedness
or to finance Permitted Acquisitions) after the first day of the relevant
Calculation Period as if such Indebtedness had been incurred (and the proceeds
thereof applied) on the first day of the relevant Calculation Period, (y) the
permanent repayment of any Indebtedness (other than revolving Indebtedness)
after the first day of the relevant Calculation Period as if such Indebtedness
had been retired or redeemed on the first day of the relevant Calculation Period
and (z) the Permitted Acquisition, if any, then being consummated as well as any
other Permitted Acquisition consummated after the first day of the relevant
Calculation Period and on or prior to the date of the respective Permitted
Acquisition then being effected, with the following rules to apply in connection
therewith:
(i) all Indebtedness (x) (other than revolving Indebtedness, except
to the extent same is incurred to finance the Transaction, to refinance
other outstanding Indebtedness, or to finance Permitted Acquisitions)
incurred or issued after the first day of the relevant Calculation Period
(whether incurred to finance a Permitted Acquisition, to refinance
Indebtedness or otherwise) shall be deemed to have been incurred or issued
(and the proceeds thereof applied) on the first day of the respective
Calculation Period and remain outstanding through the date of determination
(and thereafter in the case of projections pursuant to Section 8.14(a)(iv))
and (y) (other than revolving Indebtedness) permanently retired or redeemed
after the first day of the relevant Calculation Period shall be deemed to
have been retired or redeemed on the first day of the respective
Calculation Period and remain retired through the date of determination
(and thereafter in the case of projections pursuant to Section
8.14(a)(iv));
(ii) all Indebtedness assumed to be outstanding pursuant to preceding
clause (i) shall be deemed to have borne interest at (x) the rate
applicable thereto, in the case of fixed rate indebtedness or (y) the rates
which would have been appli-
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cable thereto during the respective period when same was deemed
outstanding, in the case of floating rate Indebtedness (although interest
expense with respect to any Indebtedness for periods while same was
actually outstanding during the respective period shall be calculated using
the actual rates applicable thereto while same was actually outstanding);
provided that for purposes of calculations pursuant to Section 8.14(a)(iv),
all Indebtedness (whether actually outstanding or deemed outstanding)
bearing interest at a floating rate of interest shall be tested on the
basis of the rates applicable at the time the determination is made
pursuant to said provisions; and
(iii) in making any determination of Consolidated EBITDAR, PRO FORMA
effect shall be given to the Transaction and any Permitted Acquisition for
the periods described above, taking into account, in the case of any
Permitted Acquisition, cost savings and expenses which would otherwise be
accounted for as an adjustment pursuant to Article 11 of Regulation S-X
under the Securities Act, as if such cost savings or expenses were realized
on the first day of the respective period.
"Projections" shall have the meaning provided in Section 5.17.
"Quarterly Payment Date" shall mean the last Business Day of each
March, June, September and December.
"Real Property" of any Person shall mean all of the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recovery Event" shall mean the receipt by Parent or any of its
Subsidiaries of any insurance or condemnation proceeds payable (i) by reason of
theft, physical destruction or damage or any other similar event with respect to
any properties or assets of Parent or any of its Subsidiaries, (ii) by reason of
any condemnation, taking, seizing or similar event with respect to any
properties or assets of Parent or any of its Subsidiaries and (iii) under any
policy of insurance required to be maintained under Section 8.03.
"Refinancing" shall mean the refinancing of the Designated
Indebtedness in connection with the Acquisition in accordance with the
requirements of Section 5.09.
"Refinancing Documents" shall mean each of the agreements, documents
and instruments entered into in connection with the Refinancing.
"Register" shall have the meaning provided in Section 13.17.
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"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing reserve requirements.
"Regulation G" shall mean Regulation G of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or any portion thereof.
"Regulation T" shall mean Regulation T of the Board of Governors of
the Federal Reserve System as from to time in effect and any successor to all or
any portion thereof.
"Regulation U" shall mean Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Regulation X" shall mean Regulation X of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or any portion thereof.
"Release" means disposing, discharging, injecting, spilling, pumping,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing,
pouring and the like, into or upon any land or water or air, or otherwise
entering into the environment.
"Replaced Bank" shall have the meaning provided in Section 1.13.
"Replacement Bank" shall have the meaning provided in Section 1.13.
"Reportable Event" shall mean an event described in Section 4043(c) of
ERISA with respect to a Plan that is subject to Title IV of ERISA other than
those events as to which the 30-day notice period is waived under subsection
.13, .14, .16, .18, .19 or .20 of PBGC Regulation Section 2615.
"Required Banks" shall mean collectively (and not individually)
Non-Defaulting Banks the sum of whose outstanding Term Loans and Revolving
Loan Commitments (or, if after the Total Revolving Loan Commitment has been
terminated, outstanding Revolving Loans and Percentages of outstanding
Swingline Loans and Letter of Credit Outstandings) constitute greater than
50% of the sum of (i) the total outstanding Term Loans of Non-Defaulting
Banks and (ii) the Total Revolving Loan Commitment less the aggregate
Revolving Loan Commitments of Defaulting Banks (or, if after the Total
Revolving Loan Commitment has been terminated, the total outstanding
Revolving Loans
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of Non-Defaulting Banks and the aggregate Percentages of all Non-Defaulting
Banks of the total outstanding Swingline Loans and Letter of Credit
Outstandings at such time).
"Returns" shall have the meaning provided in Section 7.21.
"Revolving Loan" shall have the meaning provided in Section 1.01(b).
"Revolving Loan Commitment" shall mean, with respect to each RL Bank,
the amount set forth opposite such Bank's name in Annex I directly below the
column entitled "Revolving Loan Commitment," as the same may be reduced from
time to time pursuant to Sections 3.02, 3.03, 4.02 and/or Section 10
"Revolving Loan Maturity Date" shall mean the fifth anniversary of the
Initial Borrowing Date.
"Revolving Note" shall have the meaning provided in Section 1.05(a).
"RL Bank" shall mean at any time each Bank with a Revolving Loan
Commitment or with outstanding Revolving Loans.
"S&P" shall mean Standard & Poor's Ratings Services, a division of
McGraw Hill, Inc.
"Scheduled Commitment Reduction" shall have the meaning provided in
Section 3.03(c).
"Scheduled Commitment Reduction Date" shall have the meaning provided
in Section 3.03(c).
"Scheduled Repayment" shall have the meaning provided in Section
4.02(b).
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Section 4.04(b)(ii) Certificate" shall have the meaning provided in
Section 4. 04(b)(ii).
"Secured Creditors" shall have the meaning provided in the Security
Documents.
"Security Agreement" shall have the meaning provided in Section
5.11(b).
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"Security Agreement Collateral" shall mean all "Collateral" as defined
in the Security Agreement.
"Security Documents" shall mean and include the Security Agreement,
the Pledge Agreement, each Mortgage and each Additional Security Document, if
any.
"Shareholder Subordinated Note" shall mean an unsecured junior
subordinated note issued by Parent (and not guaranteed or supported in any way
by Holdings or any of its Subsidiaries), which note shall be in the form of
Exhibit M, provided that additional provisions may be included so long as such
provisions do not adversely affect the interests of the Banks and are not in
conflict with the provisions of this Agreement or any other Credit Document.
"Shareholders' Agreements" shall have the meaning provided in Section
5.14.
"Stated Amount" of each Letter of Credit shall mean the maximum amount
available to be drawn thereunder (regardless of whether any conditions for
drawing could then be met).
"Stock Option Plan" shall mean the Maple Leaf Aerospace, Inc. Stock
Option Plan, to the extent such plan is in effect pursuant to terms
substantially similar to those contained in the Maple Leaf Aerospace, Inc. Stock
Option Plan summary of terms and conditions provided to the Agent prior to the
Initial Borrowing Date.
"Subsidiaries Guaranty" shall have the meaning provided in Section
5.12.
"Subsidiary" of any Person shall mean and include (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity (other than a corporation) in which such Person directly
or indirectly through Subsidiaries, has more than a 50% equity interest at the
time.
"Subsidiary Guarantor" shall mean each Subsidiary of Tri-Star Holdings
and/or of the Borrower that is or becomes a party to the Subsidiaries Guaranty.
"Swingline Expiry Date" shall mean the date which is five Business
Days prior to the Revolving Loan Maturity Date.
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"Swingline Loan" shall have the meaning provided in Section 1.01(c).
"Swingline Note" shall have the meaning provided in Section 1.05(a).
"Syndication Date" shall mean that date upon which the Agent
determines (and notifies the Borrower and the Banks) that the primary
syndication (and resultant addition of Persons as Banks pursuant to Section
13.04(b)) has been completed.
"Tax Allocation Agreements" shall have the meaning provided in Section
5.14.
"Taxes" shall have the meaning provided in Section 4.04(a).
"Term Loan" shall have the-meaning provided in Section I.01(a).
"Term Loan Commitment" shall mean, with respect to each Bank, the
amount set forth opposite such Bank's name in Annex I directly below the column
entitled "Term Loan Commitment," as the same may be terminated pursuant to
Sections 3.03, 4.02 and/or Section 9.
"Term Note" shall have the meaning provided in Section 1.05(a).
"Test Period" shall mean each period of four consecutive fiscal
quarters (or, if shorter, the period beginning on October 1, 1996 and ending on
the last day of such fiscal quarter) then last ended, in each case taken as one
accounting period, with the first Test Period to end on the last day of the
fiscal quarter ending March 31, 1997; PROVIDED that for purposes of calculating
compliance with Sections 9.09 and 9.11, for (i) the Test Period ending March 31,
1997, EBITDAR shall be EBITDAR as calculated for such Test Period multiplied by
two, and (ii) the Test Period ending June 30, 1997, EBITDAR shall be EBITDAR as
calculated for such Test period multiplied by 1.333.
"Total Commitment" shall mean the sum of the Total Term Loan
Commitment and the Total Revolving Loan Commitment.
"Total Revolving Loan Commitment" shall mean the sum of the Revolving
Loan Commitments of each of the Banks.
"Total Term Loan Commitment" shall mean the sum of the Term Loan
Commitments of each of the Banks.
"Total Unutilized Revolving Loan Commitment" shall mean, at any time,
(i) the Total Revolving Loan Commitment at such time less (ii) the sum of the
aggregate
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principal amount of all Revolving Loans and Swingline Loans outstanding at
such time plus the Letter of Credit Outstandings at such time.
"Tranche" shall mean the respective facility and commitments utilized
in making Loans hereunder, with there being two separate Tranches, I.E., Term
Leans and Revolving Loans.
"Transaction" shall mean, collectively, (i) the consummation of the
Acquisition, (ii) the consummation of the Equity Financing, (iii) the
consummation of the Refinancing, (iv) the entering into of the Credit Documents
and the incurrence of all Loans and issuance of all Letters of Credit on the
Initial Borrowing Date and (v) the payment of fees and expenses in connection
with the foregoing.
"Transaction Documents" shall mean the Acquisition Documents, the
Equity Financing Documents, the Refinancing Documents and all other documents,
agreements and instruments (other than the Credit Documents) executed in
connection with the Transaction.
"Tri-Star Aerospace" shall mean Tri-Star Aerospace, Inc., a Florida
corporation as such entity exists prior to the effectiveness of the Merger
Agreement.
"Tri-Star Business" shall mean the business, assets, liabilities and
personnel of Tri-Star Aerospace acquired pursuant to the Merger Agreement.
"Tri-Star Holdings" shall mean (x) prior to the consummation of the
Merger, Aerospace Merger Sub I, Inc., a Florida corporation and (y) from and
after the consummation of the Merger, Tri-Star Aerospace, Inc., a Florida
corporation, as successor by merger to Aerospace Merger Sub I, Inc.
"Tri-Star Holdings Asset Contribution" shall have the meaning provided
in Section 9.02(1).
"Type" shall mean any type of Loan determined with respect to the
interest option applicable thereto I E., a Base Rate Loan or a Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan shall mean the amount, if
any, by which the actuarial present value of the accumulated plan benefits under
the Plan as of the close of its most recent plan year exceeds the fair market
value of the assets allocable thereto, each determined in accordance with
Statement of Financial Accounting Standards
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No. 87, based upon the actuarial assumptions used by the Plan's actuary in
the most recent annual valuation of tire Plan.
"Unpaid Drawing" shall have the meaning provided in Section 2.04(a).
"Unutilized Revolving Loan Commitment" with respect to any RL Bank at
any time shall mean such RL Bank's Revolving Loan Commitment at such time less
the sum of (i) the aggregate outstanding principal amount of all Revolving Loans
made by such RL Bank and (ii) such RL Bank's Percentage of the Letter of Credit
Outstandings at such time.
"U.S. Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States of America.
"Wholly-Owned Domestic Subsidiary" shall mean, as to any Person, any
Wholly-Owned Subsidiary of such Person which is a Domestic Subsidiary.
"Wholly-Owned Foreign Subsidiary" shall mean, as to any Person, any
Wholly-Owned Subsidiary of such Person which is a Foreign Subsidiary.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock (other than director's qualifying shares
and/or other nominal amounts of shares required to be held other than by such
Person under applicable law) is at the time owned by such Person and/or one or
more Wholly-Owned Subsidiaries of such Person and (ii) any partnership,
association, joint venture or other entity in which such Person and/or one or
more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such
time.
"Written" (whether lower or upper case) or in writing" shall mean any
form of written communication or a communication by means of telex, facsimile
device, telegraph or cable.
SECTION 12. THE AGENT.
12.01 APPOINTMENT. Each Bank hereby irrevocably designates and
appoints BTCo as Agent of such Bank (such term to include for purposes of this
Section 12, BTCo acting as Collateral Agent) to act as specified herein and in
the other Credit Documents, and each such Bank hereby irrevocably authorizes
BTCo as the Agent to take such action on its behalf under the provisions of this
Agreement and the other Credit Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and the other Credit Documents, together with such other
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powers as are reasonably incidental thereto. The Agent agrees to act as such
upon the express conditions contained in this Section 12. Notwithstanding any
provision to the contrary elsewhere in this Agreement or in any other Credit
Document, the Agent shall not have any duties or responsibilities, except
those expressly set forth herein or in the other Credit Documents, or any
fiduciary relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Agent. The provisions of this
Section 12 are solely for the benefit of the Agent and the Banks, and neither
Parent nor any of its Subsidiaries shall have any rights as a third party
beneficiary of any of the provisions hereof. In performing its functions and
duties under this Agreement, the Agent shall act solely as agent of the Banks
and the Agent does not assume and shall not be deemed to have assumed any
obligation or relationship of agency or trust with or for Parent or any of
its Subsidiaries.
12.02 DELEGATION OF DUTIES. The Agent may execute any of its duties
under this Agreement or any other Credit Document by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
12.03 EXCULPATORY PROVISIONS. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person in its capacity as Agent under or in connection with this Agreement or
the other Credit Documents (except for its or such Person's own gross negligence
or willful misconduct) or (ii) responsible in any manner to any of the Banks for
any recitals, statements, representations or warranties made by Parent, any of
its Subsidiaries or any of their respective officers contained in this Agreement
or the other Credit Documents, any other Document or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Document or for
any failure of Parent or any of its Subsidiaries or any of their respective
officers to perform its obligations hereunder or thereunder. The Agent shall not
be under any obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or the other Documents, or to inspect the properties, books
or records of Parent or any of its Subsidiaries. The Agent shall not be
responsible to any Bank for the effectiveness, genuineness, validity,
enforceability, collectability or sufficiency of this Agreement or any other
Document or for any representations, warranties, recitals or statements made
herein or therein or made in any written or oral statement or in any financial
or other statements, instruments, reports, certificates or any other documents
in connection herewith or therewith furnished or made by the Agent to the Banks
or by or on behalf of Parent or any of its Subsidiaries to the Agent or any Bank
or be required to ascertain or inquire as to the performance or observance of
any of the terms, conditions, provisions, covenants or agreements contained
herein or therein or as to the use of the
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proceeds of the Loans or of the existence or possible existence of any
Default or Event of Default.
12.04 RELIANCE BY AGENT. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, facsimile, telex
or teletype message, statement, order or other document or conversation
reasonably believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to Parent or any of its
Subsidiaries), independent accountants and other experts selected by the Agent.
The Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Credit Document unless it shall first receive
such advice or concurrence of the Required Banks as it deems appropriate or it
shall first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
other Credit Documents in accordance with a request of the Required Banks, and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all the Banks.
12.05 NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default unless
the Agent has actually received notice from a Bank, Parent or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default." In the event that the Agent
receives such a notice, the Agent shall give prompt notice thereof to the Banks.
The Agent shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Banks; PROVIDED, that,
unless and until the Agent shall have received such directions, the Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action,. with respect to such Default or Event of Default as it shall deem
advisable in the best interests of the Banks.
12.06 NONRELIANCE ON AGENT AND OTHER BANKS. Each Bank expressly
acknowledges that neither the Agent nor any of its respective officers,
directors, employees, agents, attorneys-in-fact or affiliates have made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Borrower or any of its
Subsidiaries, shall be deemed to constitute any representation or warranty by
the Agent to any Bank. Each Bank represents to the Agent that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, assets, operations, property,
financial and other condition, prospects and creditworthiness of the Acquired
Business, Parent, the Borrower or their respective Subsidiaries and made its own
decision to make its Loans hereunder and enter into this Agreement. Each Bank
also represents that it will, independently and without reli-
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ance upon the Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement, and to make such investigation as it deems necessary to
inform itself as to the business, assets, operations, property, financial and
other condition, prospects and creditworthiness of the Acquired Business,
Parent, the Borrower or their respective Subsidiaries. The Agent shall not
have any duty or responsibility to provide any Bank with any credit or other
information concerning the business, operations, assets, property, financial
and other condition, prospects or credit-worthiness of the Acquired Business,
Parent, the Borrower or their respective Subsidiaries which may come into the
possession of the Agent or any of its officers, directors, employees, agents
PARA attorneys-in-fact or affiliates.
12.07 INDEMNIFICATION. The Banks agree to indemnify the Agent in its
capacity as such ratably according to their respective "percentages" as used in
determining the Required Banks at such time or, if the Commitments have
terminated and all Loans have been repaid in full, as determined immediately
prior to such termination and repayment (with such "percentages" to be
determined as if there are no Defaulting Banks), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, reasonable expenses or disbursements of any kind whatsoever which may at
any time (including, without limitation, at any time following the payment of
the Obligations) be imposed on, incurred by or asserted against the Agent in its
capacity as such in any way relating to or arising out of this Agreement or any
other Credit Document, or any documents contemplated by or referred to herein or
the transactions contemplated hereby or any action taken or omitted to be taken
by the Agent under or in connection with any of the foregoing, but only to the
extent that any of the foregoing is not paid by Parent or any of its
Subsidiaries; PROVIDED, that no Bank shall be liable to the Agent for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
solely from the gross negligence or willful misconduct of the Agent. If any
indemnity furnished to the Agent for any purpose shall, in the opinion of the
Agent be insufficient or become impaired, the Agent may call for additional
indemnity and cease, or not commence, to do the acts indemnified against until
such additional indemnity is furnished. The agreements in this Section 12.07
shall survive the payment of all Obligations.
12.08 AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with Parent and its Subsidiaries as though the Agent were not the Agent
hereunder. With respect to the Loans made by it and all Obligations owing to
it, the Agent shall have the same rights and powers under this Agreement as any
Bank and may exercise the same as though it were not the Agent and the terms
"Bank" and "Banks" shall include the Agent in its individual capacity.
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12.09 HOLDERS. The Agent may deem and treat the payee of any Note as
the owner thereof for all purposes hereof unless and until a written notice of
the assignment, transfer or endorsement thereof, as the case may be, shall have
been filed with the Agent. Any request, authority or consent of any Person or
entity who, at the time of making such request or giving such authority or
consent, is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee, assignee or indorsee, as the case may be, of such
Note or of any Note or Notes issued in exchange therefor.
12.10 RESIGNATION OF THE AGENT. (a) The Agent may resign from the
performance of all its functions and duties hereunder and/or under the other
Credit Documents at any time by giving 30 Business Days' prior written notice to
the Borrower and the Banks. Such resignation shall take effect upon the
appointment of a successor Agent pursuant to clauses (b) and (c) below or as
otherwise provided below.
(b) Upon any such notice of resignation, the Required Banks shall
appoint a successor Agent hereunder or thereunder who shall be a commercial bank
or trust company reasonably acceptable to the Borrower.
(c) If a successor Agent shall not have been so appointed within such
30 Business Day period, the Agent, with the consent of the Borrower (which
consent shall not be unreasonably withheld or delayed), shall then appoint a
successor Agent who shall serve as Agent hereunder or thereunder until such
time, if any, as the Required Banks appoint a successor Agent as provided above.
(d) If no successor Agent has been appointed pursuant to clause (b) or
(c) above by the 30th Business Day after the date such notice of resignation was
given by the Agent, the Agent's resignation shall become effective and the
Required Banks shall thereafter perform all the duties of the Agent hereunder
and/or under any other Credit Document until such time, if any, as the Banks
appoint a successor Agent as provided above.
SECTION 13. MISCELLANEOUS.
13.01 PAYMENT OF EXPENSES. ETC. The Borrower agrees to: (i) whether
or not the transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Agent (including, without limitation,
the reasonable fees and disbursements of White & Case and local counsel) in
connection with the negotiation, preparation, execution and delivery of the
Credit Documents and the documents and instruments referred to therein and any
amendment, waiver or consent relating thereto and in connection with the Agent's
syndication efforts with respect to this Agreement; (ii) pay all reasonable
out-of-pocket costs and expenses of the Agent, each Letter of Credit Issuer and
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each of the Banks in connection with the enforcement of the Credit Documents and
the documents and instruments referred to therein and, after an Event of Default
shall have occurred and be continuing, the protection of the rights of the
Agent, each Letter of Credit Issuer and each of the Banks thereunder (including,
without limitation, the reasonable fees and disbursements of counsel (including
in-house counsel) for the Agent, for each Letter of Credit Issuer and for each
of the Banks); (iii) pay and hold each of the Banks harmless from and against
any and all present and future stamp and other similar taxes with respect to the
foregoing matters and save each of the Banks harmless from and against any and
all liabilities with respect to or resulting from any delay or omission (other
than to the extent attributable to such Bank) to pay such taxes; and (iv)
indemnify the Agent, the Collateral Agent, each Letter of Credit Issuer and each
Bank, their respective officers, directors, employees, representatives and
agents from and hold each of them harmless against any and all losses,
liabilities, claims, damages or expenses incurred by any of them (but excluding
any such losses, liabilities, claims, damages or expenses to the extent incurred
by reason of the gross negligence or willful misconduct of the Person to be
indemnified), as a result of, or arising out of, or in any way related to, or by
reason of, (a) any investigation, litigation or other proceeding (whether or not
the Agent, the Collateral Agent, any Letter of Credit Issuer or any Bank is a
party thereto and whether or not any such investigation, litigation or other
proceeding is between or among the Agent, the Collateral Agent, any Letter of
Credit Issuer, any Bank, any Credit Party or any third Person or otherwise)
related to the entering into and/or performance of this Agreement or any other
Document or the use of the proceeds of any Loans hereunder or the Transaction or
the consummation of any other transactions contemplated in any Document or (b)
the actual or alleged presence of Hazardous Materials in the air, surface water
or groundwater or on the surface or subsurface of any Real Property or any
Environmental Claim, in each case, including, without limitation, the reasonable
fees and disbursements of counsel and independent consultants incurred in
connection with any such investigation, litigation or other proceeding.
Notwithstanding the foregoing, neither Parent nor any of its Subsidiaries shall
be liable to any Indemnified Party hereunder with respect to any Hazardous
Materials that are first manufactured, emitted, generated, treated, released,
stored or disposed of on the Real Property, and any violation of Environmental
Laws that first occurs on or with respect to the Real Property, after the Real
Property is transferred to Lender or its successor by foreclosure sale, deed in
lieu of foreclosure, or similar transfer, except to the extent such manufacture,
emission, release, generation, treatment, storage or disposal or violation is
actually caused by Parent or any Subsidiary.
13.02 RIGHT OF SETOFF. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of an Event of Default, the Agent, each Letter
of Credit Issuer and each Bank is hereby authorized at any time or from time to
time, without presentment, demand, protest or other notice of any kind to Parent
or any of its Subsidiaries or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and
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apply any and all deposits (general or special) and any other Indebtedness at
any time held or owing by the Agent, such Letter of Credit Issuer or such
Bank (including, without limitation, by branches and agencies of the Agent,
such Letter of Credit Issuer and such Bank wherever located) to or for the
credit or the account of Parent or any of its Subsidiaries against and on
account of the Obligations of the Borrower or any of its Subsidiaries to the
Agent, such Letter of Credit Issuer or such Bank under this Agreement or
under any of the other Credit Documents, including, without limitation, all
interests in Obligations of the Borrower or any of its Subsidiaries purchased
by such Bank pursuant to Section 13.06(b), and all other claims of any nature
or description arising out of or connected with this Agreement or any other
Credit Document, irrespective of whether or not the Agent, such Letter of
Credit Issuer or such Bank shall have made any demand hereunder and although
said Obligations shall be contingent or unmatured. Notwithstanding anything
to the contrary contained in this Section 13.02, no Bank shall exercise any
such right of set-off without the prior consent of the Agent or the Required
Banks if, and so long as, the Obligations shall be secured by any Real
Property located in the State of California, it being understood and agreed,
however, that this sentence is for the sole benefit of the Letter of Credit
Issuers and the Banks and may be amended, modified or waived in any respect
by the Required Banks without the requirement of prior notice to or consent
by any Credit Party and does not constitute a waiver of any rights against
any Credit Party or against any Collateral.
13.03 NOTICES. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, facsimile or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered, if to any Credit Party,
at the address specified opposite its signature below or in the other relevant
Credit Documents, as the case may be; if to any Bank, at its address specified
for such Bank on Annex II; or, at such other address as shall be designated by
any party in a written notice to the other parties hereto. All such notices and
communications shall be mailed, telegraphed, telexed, telecopied or cabled or
sent by overnight courier, and shall be effective when received.
13.04 BENEFIT OF AGREEMENT. (a) This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; PROVIDED, HOWEVER, the Borrower may not assign or
transfer any of its rights, obligations or interest hereunder or under any other
Credit Document without the prior written consent of the Banks and, PROVIDED
FURTHER, that, although any Bank may transfer, assign or grant participations in
its rights hereunder, such Bank shall remain a "Bank" for all purposes hereunder
(and may not transfer or assign all or any portion of its Commitments hereunder
except as provided in Section 13.04(b)) and the transferee, assignee or
participant, as the case may be, shall not constitute a "Bank" hereunder and,
PROVIDED FURTHER, that no Bank shall transfer or grant any participation under
which the participant shall have rights to approve any amendment to or waiver of
this Agreement or
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any other Credit Document except to the extent such amendment or waiver would
(i) extend the final scheduled maturity of any Loan, Note or Letter of Credit
(unless such Letter of Credit is not extended beyond the relevant Maturity
Date) in which such participant is participating, or reduce the rate or
extend the time of payment of interest or Fees thereon (except in connection
with a waiver of applicability of any post-default increase in interest
rates) or reduce the principal amount thereof, or increase the amount of the
participant's participation over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default or of a mandatory
reduction in the Total Commitment shall not constitute a change in the terms
of such participation, and that an increase in any Commitment or Loan shall
be permitted without the consent of any participant if the participant's
participation is not increased as a result thereof), (ii) consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement or (iii) release all or substantially all of the
Collateral under all of the Security Documents (except as expressly provided
in the Credit Documents) supporting the Loans hereunder in which such
participant is participating. In the case of any such participation, the
participant shall not have any rights under this Agreement or any of the
other Credit Documents (the participant's rights against such Bank in respect
of such participation to be those set forth in the agreement executed by such
Bank in favor of the participant relating thereto) and all amounts payable by
the Borrower hereunder shall be determined as if such Bank had not sold such
participation.
(b) Notwithstanding the foregoing, any Bank (or any Bank together
with one or more other Banks) may (x) assign all or a portion of its Revolving
Loan Commitment (and related outstanding Obligations hereunder) and/or its
outstanding Term Loans (or, if prior to the Initial Borrowing Date, Term Loan
Commitments) to its parent company and/or any affiliate of such Bank which is at
least 50% owned by such Bank or its parent company or to one or more Banks or
(y) assign all, or if less than all, a portion equal to at least $5,000,000 in
the aggregate for the assigning Bank or assigning Banks, of such Revolving Loan
Commitments (and related outstanding Obligations hereunder) and/or outstanding
principal amount of Term Loans (or, if prior to the Initial Borrowing Date, Term
Loan Commitments) to one or more Eligible Transferees, each of which assignees
shall become a party to this Agreement as a Bank by execution of an Assignment
and Assumption Agreement, PROVIDED that (i) at such time Annex I shall be deemed
modified to reflect the Commitments (and/or outstanding Term Loans, as the case
may be) of such new Bank and of the existing Banks, (ii) upon surrender of the
old Notes (or the furnishing of a standard indemnity letter from the respective
assigning Bank in respect of any lost Notes), new Notes will be issued, at the
Borrower's expense, to such new Bank and to the assigning Bank, such new Notes
to be in conformity with the requirements of Section 1.05 (with appropriate
modifications) to the extent needed to reflect the revised Commitments (and/or
outstanding Term Loans, as the case may be), (iii) the consent of the Agent
shall be required in connection with any such assignment pursuant to clause (y)
of this Section 13.04(b) (which consent shall not be unreasonably withheld),
(iv) the consent of the
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Borrower, BTCo and the each Letter of Credit Issuer shall be required in
connection with any assignment of Revolving Loan Commitments pursuant to this
Section 13.04(b) (which consent shall not be unreasonably withheld or
delayed) and (v) the Agent shall receive at the time of each assignment, from
the assigning or assignee Bank, the payment of a non-refundable assignment
fee of $3,500 and, PROVIDED FURTHER, that such transfer or assignment will
not be effective until recorded by the Agent on the Register pursuant to
Section 13.17. To the extent of any assignment pursuant to this Section
13.04(b), the assigning Bank shall be relieved of its obligations hereunder
with respect to its assigned Commitments. At the time of each assignment
pursuant to this Section 13.04(b) to a Person which is not already a Bank
hereunder and which is not a United States person (as such term is defined in
Section 7701(a)(30) of the Code) for Federal income tax~purposes, the
respective assignee Bank shall provide to the Borrower and the Agent the
appropriate Internal Revenue Service Forms (and, if applicable a Section
4.04(b)(ii) Certificate) described in Section 4.04(b). To the extent that an
assignment of all or any portion of a Bank's Commitment and related
outstanding Obligations pursuant to Section 1.13 or this Section 13.04(b)
would, at the time of such assignment, result in increased costs under
Section 1.10, 1.11, 2.05 or 4.04 from those being charged by the respective
assigning Bank prior to such assignment, then the Borrower shall not be
obligated to pay such increased costs (although the Borrower shall be
obligated to pay any other increased costs of the type described above
resulting from changes after the date of the respective assignment).
Notwithstanding anything to the contrary contained above, at any time after
the termination of the Total Revolving Loan Commitment, if any Revolving
Loans or Letters of Credit remain outstanding, assignments may be made as
provided above, except that the respective assignment shall be of a portion
of the outstanding Revolving Loans of the respective RL Bank and its
participation in Letters of Credit and its obligation to make Mandatory
Borrowings, although any such assignment effected after the termination of
the Total Revolving Loan Commitment shall not release the assigning RL Bank
from its obligations as a Participant with respect to outstanding Letters of
Credit or to fund its share of any Mandatory Borrowing (although the
respective assignee may agree, as between itself and the respective assigning
RL Bank, that it shall be responsible for such amounts).
(c) Nothing in this Agreement shall prevent or prohibit any Bank
from pledging its Loans and Notes hereunder to a Federal Reserve Bank in support
of borrowings made by such Bank from such Federal Reserve Bank.
13.05 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part
of the Agent or any Bank in exercising any right, power or privilege hereunder
or under any other Credit Document and no course of dealing between any Credit
Party and the Agent or any Bank shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or under
any other Credit Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder or thereunder. The
rights and remedies herein expressly provided are cumulative
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and not exclusive of any rights or remedies which the Agent or any Bank would
otherwise have. No notice to or demand on any Credit Party in any case shall
entitle any Credit Party to any other or further notice or demand in similar
or other circumstances or constitute a waiver of the rights of the Agent or
the Banks to any other or further action in any circumstances without notice
or demand.
13.06 PAYMENTS PRO RATA. (a) The Agent agrees that promptly after its
receipt of each payment from or on behalf of any Credit Party in respect of any
Obligations of such Credit Party, it shall, except as otherwise provided in this
Agreement, distribute such payment to the Banks (other than any Bank that has
consented in writing to waive its PRO RATA share of such payment) PRO RATA based
upon their respective shares, if any, of the Obligations with respect to which
such payment was received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings or Fees, of a sum which with respect to the
related sum or sums received by other Banks is in a greater proportion than the
total of such Obligation then owed and due to such Bank bears to the total of
such Obligation then owed and due to all of the Banks immediately prior to such
receipt, then such Bank receiving such excess payment shall purchase for cash
without recourse or warranty from the other Banks an interest in the Obligations
of the respective Credit Party to such Banks in such amount as shall result in a
proportional participation by all of the Banks in such amount; PROVIDED, that if
all or any portion of such excess amount is thereafter recovered from such Bank,
such purchase shall be rescinded and the purchase price restored to the extent
of such recovery, but without interest.
13.07 CALCULATIONS: COMPUTATIONS. (a) The financial statements to be
furnished to the Banks pursuant hereto shall be made and prepared in accordance
with GAAP consistently applied throughout the periods involved (except as set
forth in the notes thereto or as otherwise disclosed in writing by Parent or the
Borrower to the Banks); PROVIDED, that except for the election of the LIFO
inventory price index computation method of computing inventory (and cost of
goods sold) as referenced below, and as otherwise specifically provided herein,
all computations determining compliance with Sections 4.02, 8.14 and 9,
including definitions used therein shall, in each case, utilize accounting
principles and policies in effect at the time of the preparation of, and in
conformity with those used to prepare, the December 31, 1995 financial
statements of Tri-Star Aerospace delivered to the Banks pursuant to Section
7.10(b); PROVIDED FURTHER, that (i) to the extent expressly required pursuant to
the provisions of this Agreement, certain calculations shall be made on a PRO
FORMA Basis and (ii) Borrower shall utilize the LIFO
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inventory price index computation method of calculating inventory (and cost
of goods sold) for purposes of determining compliance with Sections 4.02(g),
9.09, 9.10 and 9.11.
(b) All computations of interest and Fees hereunder shall be made on
the actual number of days elapsed over a year of 360 days.
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE. (a) THIS
AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding
with respect to this Agreement or any other Credit Document may be brought in
the courts of the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this Agreement, each
Credit Party hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Each Credit Party hereby further irrevocably waives any claim that any
such courts lack jurisdiction over such Credit Party, and agrees not to plead or
claim, in any legal action or proceeding with respect to this Agreement or any
other Credit Document brought in any of the aforesaid courts, that any such
court lacks jurisdiction over such Credit Party. Each Credit Party further
irrevocably consents to the service of process in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to such Credit Party, at its address for notices pursuant to Section
13.03, such service to become effective 30 days after such mailing. Each Credit
Party hereby irrevocably waives any objection to such service of process and
further irrevocably waives and agrees not to plead or claim in any action or
proceeding commenced hereunder or under any other Credit Document that service
of process was in any way invalid or ineffective. Nothing herein shall affect
the right of the Agent, any Bank or the holder of any Note to serve process in
any other manner permitted by law or to commence legal proceedings or otherwise
proceed against any Credit Party in any other jurisdiction.
(b) Each Credit Party hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement or
any other Credit Document brought in the courts referred to in clause (a) above
and hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
13.09 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts executed by all the parties hereto shall be lodged with Parent, the
Borrower and the Agent.
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13.10 EFFECTIVENESS. This Agreement shall become effective on the date
(the "Effective Date") on which Parent, the Borrower, the Agent and each of the
Banks shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered the same to the Agent at the Notice
Office or, in the case of the Banks, shall have given to the Agent telephonic
(confirmed in writing), written, telex or facsimile notice (actually received)
at such office that the same has been signed and mailed to it. The Agent will
give Parent, the Borrower and each Bank prompt written notice of the occurrence
of the Effective Date.
13.11 HEADINGS DESCRIPTIVE. The headings of the several sections and
sub-sections of this Agreement are inserted for convenience only and shall not
in any way affect the meaning or construction of any provision of this Agreement
13.12 AMENDMENT OR WAIVER; ETC. (a) Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the respective Credit Parties party thereto and the
Required Banks, PROVIDED that no such change, waiver, discharge or termination
shall, without the consent of each Bank (other than a Defaulting Bank) (with
Obligations being directly affected thereby in the case of the following clause
(i)), (i) extend the final scheduled maturity of any Loan or Note or extend the
stated maturity of any Letter of Credit beyond the Revolving Loan Maturity Date,
or reduce the rate or extend the time of payment of interest or Fees thereon, or
reduce the principal amount thereof (it being understood that any amendment or
modification to the financial definitions in this Agreement shall not constitute
a reduction in any rate of interest or fees for purposes of this clause (i)),
(ii) release all or substantially all of the Collateral (except as expressly
provided in the Security Documents) under all the Security Documents, (iii)
amend, modify or waive any provision of this Section 13.12, (iv)
reduce the percentage specified in the definition of Required Banks (it being
understood that, with the consent of the Required Banks, additional extensions
of credit pursuant to this Agreement may be included in the determination of the
Required Banks on substantially the same basis as the extensions of Term Loans
and Revolving Loan Commitments are included on the Effective Date) or (v)
consent to the assignment or transfer by The Borrower of any of its rights and
obligations under this Agreement; PROVIDED FURTHER, that no such change, waiver,
discharge or termination shall (w) increase the Commitments of any Bank over the
amount thereof then in effect without the consent of such Bank (it being
understood that waivers or modifications of conditions precedent, covenants,
Defaults or Events of Default or of a mandatory reduction in the Total
Commitment shall not constitute an increase of the Commitment of any Bank, and
that an increase in the available portion of any Commitment of any Bank shall
not constitute an increase in the Commitment of such Bank), (x) without the
consent of each Letter of Credit Issuer or BTCo as the case may be, amend,
modify or waive any provision of Section 2 or alter its rights or obligations
with respect to Letters of Credit or Swingline Loans, (y) without the consent of
the Agent, amend, modify or waive
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any provision of Section 12 as same applies to the Agent or any other
provision as same relates to the rights or obligations of the Agent and (z)
without the consent of the Collateral Agent, amend, modify or waive any
provision relating to the rights or obligations of the Collateral Agent.
(b) If, in connection with any proposed change, waiver, discharge or
termination to any of the provisions of this Agreement as contemplated by
clauses (i) through (v), inclusive, of the first proviso to Section 13.12(a),
the consent of the Required Banks is obtained but the consent of one or more of
such other Banks whose consent is required is not obtained, then the Borrower
shall have the right, so long as all nonconsenting Banks whose individual
consent is required are treated as described in either clause (A) or (B) below,
to either (A) replace each such nonconsenting Bank or Banks (or, at the option
of the Borrower if the respective Bank's consent is required with respect to
less than all Tranches of Loans (or related Commitments), to replace only the
respective Tranche of Commitments and/or Loans of the respective non.consenting
Bank which gave rise to the need to obtain such Bank's individual consent) with
one or more Replacement Banks pursuant to Section 1.13 so long as at the time of
such replacement, each such Replacement Bank consents to the proposed change,
waiver, discharge or termination or (B) terminate such non-consenting Bank's
Revolving Loan Commitment (if such Bank's consent is required as a result of its
Revolving Loan Commitment) and/or repay each Tranche of outstanding Loans of
such Bank which gave rise to the need to obtain such Bank's consent and/or cash
collateralize its applicable Percentage of the Letter of Credit of Outstandings,
in accordance with Sections 3.02(b) and/or 4.01(b), PROVIDED that, unless the
Commitments which are terminated and Loans which are repaid pursuant to
preceding clause (B) are immediately replaced in full at such time through the
addition of new Banks or the increase of the Commitments and/or outstanding
Loans of existing Banks (who in each case must specifically consent thereto),
then in the case of any action pursuant to preceding clause (B) the Required
Banks (determined after giving effect to the proposed action) shall specifically
consent thereto, PROVIDED FURTHER, that the Borrower shall not have the right to
replace a Bank, terminate its Commitments or repay its Loans solely as a result
of the exercise of such Bank's rights (and the withholding of any required
consent by such Bank) pursuant to the second proviso to Section 13.12(a).
13.13 SURVIVAL. All indemnities set forth herein including, without
limitation, in Section 1.10, 1.11, 2.05, 4.04, 12.07 or 13.01, shall survive the
execution and delivery of this Agreement and the making and repayment of the
Loans.
13.14 DOMICILE OF LOANS AND COMMITMENTS. Each Bank may transfer and
carry its Loans and/or Commitments at, to or for the account of any branch
office, subsidiary or affiliate of such Bank; PROVIDED, that the Borrower shall
not be responsible for costs arising under Section 1.10, 1.11, 2.05 or 4.04
resulting from any such transfer
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(other than a transfer pursuant to Section 1.12) to the extent such costs
would not otherwise be applicable to such Bank in the absence of such
transfer.
13.15 CONFIDENTIALITY. (a) Each of the Banks agrees that it will use
its reasonable efforts not to disclose without the prior consent of the Borrower
(other than to its directors, employees, auditors, counsel or other professional
advisors, to affiliates or to another Bank if the Bank or such Bank's holding or
parent company in its sole discretion determines that any such party should have
access to such information) any information with respect to Parent or any of its
Subsidiaries which is furnished pursuant to this Agreement; PROVIDED, that any
Bank may disclose any such information (a) as has become generally available to
the public, (b) as may be required or appropriate (x) in any report, statement
or testimony submitted to any municipal, state or Federal regulatory body having
or claiming to have jurisdiction over such Bank or to the Federal Reserve Board
or the Federal Deposit Insurance Corporation or similar organizations (whether
in the United States or elsewhere) or their successors or (y) in connection with
any request or requirement of any such regulatory body, (c) as may be required
or appropriate in response to any summons or subpoena or in connection with any
litigation, (d) to comply with any law, order, regulation or ruling applicable
to such Bank, and (e) to any prospective transferee in connection with any
contemplated transfer of any of the Notes or any interest therein by such Bank;
PROVIDED, that such prospective transferee agrees to be bound by this Section
13.15 to the same extent as such Bank.
(b) Each of Parent and the Borrower hereby acknowledges and agrees
that each Bank may share with any of its affiliates any information related to
Parent or any of its Subsidiaries (including, without limitation, any nonpublic
customer information regarding the creditworthiness of Parent and its
Subsidiaries), PROVIDED that such Persons shall be subject to the provisions of
this Section 13.15 to the same extent as such Bank.
13.16 WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
13.17 REGISTER. The Borrower hereby designates the Agent to serve as
the Borrower's agent, solely for purposes of this Section 13.17, to maintain a
register (the "Register") on which it will record the Commitments from time to
time of each of the Banks, the Loans made by each of the Banks and each
repayment in respect of the principal amount of the Loans of each Bank. Failure
to make any such recordation, or any error in such recordation shall not affect
the Borrower's obligations in respect of such Loans. With respect to any Bank,
the transfer of the Commitments of such Bank and the rights to the principal of,
and interest on, any Loan made pursuant to such Commitments shall not be
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effective until such transfer is recorded on the Register maintained by the
Agent with respect to ownership of such Commitment and Loans and prior to such
recordation all amounts owing to the transferor with respect to such Commitment
and Loans shall remain owing to the transferor. The registration of assignment
or transfer of all or part of any Commitment and Loans shall be recorded by the
Agent on the Register only upon the acceptance by the Agent of a properly
executed and delivered Assignment and Assumption Agreement pursuant to Section
13.04(b). Coincident with the delivery of such an Assignment and Assumption
Agreement to the Agent for acceptance and registration of assignment or transfer
of all or part of a Loan, or as soon thereafter as practicable, the assigning or
transferor Bank shall surrender the Note evidencing such Loan, and thereupon one
or more new Notes in the same aggregate principal amount shall be issued to the
assigning or transferor Bank and/or the new Bank. The Borrower agrees to
indemnify the Agent from and against any and all losses, claims, damages and
liabilities of whatsoever nature which may be imposed on. asserted against or
incurred by the Agent in performing its duties under this Section 13.17.
SECTION 14. PARENT GUARANTY.
14.01 THE GUARANTY. In order to induce the Banks to enter into this
Agreement and to extend credit hereunder and in recognition of the direct
benefits to be received by Parent, Holdings and Tri-Star Holdings (each a
"Parent Guarantor" and collectively, the "Parent Guarantors") from the proceeds
of the Loans and the issuance of the Letters of Credit, each Parent Guarantor
hereby agrees with the Banks as follows: each Parent Guarantor hereby jointly
and severally unconditionally and irrevocably guarantees, as primary obligor and
not merely as surety the full and prompt payment when due, whether upon
maturity, acceleration or otherwise, of any and all of the Guaranteed
Obligations of the Borrower to the Guaranteed Creditors. If any or all of the
Guaranteed Obligations of the Borrower to the Guaranteed Creditors becomes due
and payable hereunder, each Parent Guarantor unconditionally promises to pay
such indebtedness to the Guaranteed Creditors, or order, on demand, together
with any and all expenses which may be incurred by the Guaranteed Creditors in
collecting any of the Guaranteed Obligations. If claim is ever made upon any
Guaranteed Creditor for repayment or recovery of any amount or amounts received
in payment or on account of any of the Guaranteed Obligations and any of the
aforesaid payees repays all or part of said amount by reason of (i) any
judgment, decree or order of any court or administrative body having
jurisdiction over such payee or any of its property or (ii) any settlement or
compromise of any such claim effected by such payee with any such claimant
(including the Borrower), then and in such event each Parent Guarantor agrees
that any such judgment, decree, order, settlement or compromise shall be binding
upon each Parent Guarantor, notwithstanding any revocation of this Guaranty or
any other instrument evidencing any liability of the Borrower, and each Parent
Guarantor shall be and remain liable to the aforesaid payees hereunder for the
amount so repaid or
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recovered to the same extent as if such amount had never originally been
received by any such payee.
14.02 BANKRUPTCY. Additionally, each Parent Guarantor unconditionally
and irrevocably guarantees the payment of any and all of the Guaranteed
Obligations of the Borrower to the Guaranteed Creditors whether or not due or
payable by the Borrower upon the occurrence of any of the events specified in
Section 10.05, and unconditionally promises to pay such indebtedness to the
Guaranteed Creditors, or order, on demand, in lawful money of the United States.
14.03 NATURE OF LIABILITY. The liability of each Parent Guarantor
hereunder is exclusive and independent of any security for or other guaranty of
the Guaranteed Obligations of the Borrower whether executed by such Parent
Guarantor, any other guarantor or by any other party, and the liability of each
Parent Guarantor hereunder is not affected or impaired by (a) any direction as
to application of payment by the Borrower or by any other party, or (b) any
other continuing or other guaranty, undertaking or maximum liability of a
guarantor or of any other party as to the Guaranteed Obligations of the
Borrower, or (c) any payment on or in reduction of any such other guaranty or
undertaking, or (d) any dissolution, termination or increase, decrease or change
in personnel by the Borrower, or (e) any payment made to the Guaranteed
Creditors on the Guaranteed Obligations which any such Guaranteed Creditor
repays to the Borrower pursuant to court order in any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding, and
each Parent Guarantor waives any right to the deferral or modification of its
obligations hereunder by reason of any such proceeding.
14.04 INDEPENDENT OBLIGATION. The obligations of each Parent Guarantor
hereunder are independent of the obligations of any other guarantor, any other
party or the Borrower, and a separate action or actions may be brought and
prosecuted against each Parent Guarantor whether or not action is brought
against any other guarantor, any other party or the Borrower and whether or not
any other guarantor, any other party or the Borrower be joined in any such
action or actions. Each Parent Guarantor waives, to the full extent permitted by
law, the benefit of any statute of limitations affecting its liability hereunder
or the enforcement thereof. Any payment by the Borrower or other circumstance
which operates to toll any statute of limitations as to the Borrower shall
operate to toll the statute of limitations as to each Parent Guarantor.
14.05 AUTHORIZATION. Each Parent Guarantor authorizes the Guaranteed
Creditors without notice or demand (except as shall be required by applicable
statute and cannot be waived), and without affecting or impairing its liability
hereunder, from time to time to:
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(a) change the manner, place or terms of payment of, and/or change or
extend the time of payment of, renew, increase, accelerate or alter, any of the
Guaranteed Obligations (including any increase or decrease in the rate of
interest thereon), any security therefor, or any liability incurred directly or
indirectly in respect thereof, and the Guaranty herein made shall apply to the
Guaranteed Obligations as so changed, extended, renewed or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or otherwise
deal with in any manner and in any order any property by whomsoever at any time
pledged or mortgaged to secure, or howsoever securing, the Guaranteed
Obligations or any liabilities (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and/or any offset
thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers, guarantors. the
Borrower or other obligors;
(e) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and may subordinate the
payment of all or any part thereof to the payment of any liability (whether due
or not) of the Borrower to its creditors other than the Guaranteed Creditors;
(f) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of the Borrower to the Guaranteed Creditors regardless
of what liability or liabilities of the Borrower remain unpaid:
(g) consent to or waive any breach of, or any act, omission or
default under, this Agreement, any other Credit Document or any of the
instruments or agreements referred to herein or therein, or otherwise amend,
modify or supplement this Agreement, any other Credit Document or any of such
other instruments or agreements; and/or
(h) take any other action which would, under otherwise applicable
principles of common law, give rise to a legal or equitable discharge of any
Parent Guarantor from its liabilities under this Guaranty.
14.06 RELIANCE. It is not necessary for the Guaranteed Creditors to
inquire into the capacity or powers of the Borrower or the officers, directors,
partners or agents
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acting or purporting to act on their behalf, and any Guaranteed Obligations
made or created in reliance upon the professed exercise of such powers shall
be guaranteed hereunder.
14.07 SUBORDINATION. Any of the indebtedness of the Borrower now or
hereafter owing to any Parent Guarantor is hereby subordinated to the Guaranteed
Obligations of the Borrower owing to the Guaranteed Creditors; and if the Agent
so requests at a time when an Event of Default exists, all such indebtedness of
the Borrower to any Parent Guarantor shall be collected, enforced and received
by such Parent Guarantor for the benefit of the Guaranteed Creditors and be paid
over to the Agent on behalf of the Guaranteed Creditors on account of the
Guaranteed Obligations of the Borrower to the Guaranteed Creditors, but without
affecting or impairing in any manner the liability of such Parent Guarantor
under the other provisions of this Guaranty. Prior to the transfer by any
Parent Guarantor of any note or negotiable instrument evidencing any of the
indebtedness of the Borrower to such Parent Guarantor, such Parent Guarantor
shall mark such note or negotiable instrument with a legend that the same is
subject to this subordination. Without limiting the generality of the
foregoing, each Parent Guarantor hereby agrees with the Guaranteed Creditors
that it will not exercise any right of subrogation which it may at any time
otherwise have as a result of this Guaranty (whether contractual, under
Section 509 of the Bankruptcy Code or otherwise) until all Guaranteed
Obligations have been irrevocably paid in full in cash.
14.08 WAIVER. (a) Each Parent Guarantor waives any right (except as
shall be required by applicable statute and cannot be waived) to require any
Guaranteed Creditor to (i) proceed against the Borrower, any other guarantor
or any other party, (ii) proceed against or exhaust any security held from
the Borrower, any other guarantor or any other party or (iii) pursue any
other remedy in any Guaranteed Creditor's power whatsoever. Each Parent
Guarantor waives any defense based on or arising out of any defense of the
Borrower, any other guarantor or any other party, other than payment in full
of the Guaranteed Obligations, based on or arising out of the disability of
the Borrower, any other guarantor or any other party, or the unenforceability
of the Guaranteed Obligations or any part thereof from any cause, or the
cessation from any cause of the liability of the Borrower other than payment
in full of the Guaranteed Obligations. The Guaranteed Creditors may, at their
election, foreclose on any security held by the Agent, the Collateral Agent
or any other Guaranteed Creditor by one or more judicial or nonjudicial
sales, whether or not every aspect of any such sale is commercially
reasonable (to the extent such sale is permitted by applicable law), or
exercise any other right or remedy the Guaranteed Creditors may have against
the Borrower or any other party, or any security, without affecting or
impairing in any way the liability of any Parent Guarantor hereunder except
to the extent the Guaranteed Obligations have been paid. Each Parent
Guarantor waives any defense arising out of any such election by the
Guaranteed Creditors, even though such election operates to impair or
extinguish any right of reimbursement or subrogation or other
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<PAGE>
right or remedy of such Parent Guarantor against the Borrower or any other
party or any security.
(b) Each Parent Guarantor waives all presentments, demands for
performance, protests and notices, including, without limitation, notices of
nonperformance, notices of protest, notices of dishonor, notices of acceptance
of this Guaranty, and notices of the existence, creation or incurring of new or
additional Guaranteed Obligations. Each Parent Guarantor assumes all
responsibility for being and keeping itself informed of the Borrower's financial
condition and assets, and of all other circumstances bearing upon the risk of
nonpayment of the Guaranteed Obligations and the nature, scope and extent of the
risks which such Parent Guarantor assumes and incurs hereunder, and agrees that
the Guaranteed Creditors shall have no duty to advise any Parent Guarantor of
information known to them regarding such circumstances or risks.
(c) Each Parent Guarantor understands, is aware and hereby
acknowledges that if at any time the Guaranteed Obligations are secured by real
property located in the State of California, such Parent Guarantor shall be
liable for the full amount of its liability hereunder notwithstanding
foreclosure on such real property by trustee sale or any other reason impairing
such Parent Guarantor's or any Guaranteed Creditor's right to proceed against
any Credit Party. Each Parent Guarantor hereby waives, to the fullest extent
permitted by law, all rights and benefits under Section 2809 of the California
Civil Code purporting to reduce a guarantor's obligation in proportion to the
principal obligation. Each Parent Guarantor hereby waives all rights and
benefits under Section 580a of the California Code of Civil Procedure purporting
to limit the amount of any deficiency judgment which might be recoverable
following the occurrence of a trustee's sale under a deed of trust and all
rights and benefits under Section 580b of the California Code of Civil Procedure
stating that no deficiency may be recovered on a real property purchase money
obligation. Each Parent Guarantor further understands, is aware and hereby
acknowledges that if the Guaranteed Creditors elect to nonjudicially foreclose
on any real property security located in the State of California any right of
subrogation of such Parent Guarantor against the Guaranteed Creditors may be
impaired or extinguished and that as a result of such impairment or
extinguishment of subrogation rights, such Parent Guarantor may have a defense
to a deficiency judgment arising out of the operation of (i) Section 580d of the
California Code of Civil Procedure which states that no deficiency may be
recovered on a note secured by a deed of trust on real property in case such
real property is sold under the power of sale contained in such deed of trust,
and (ii) related principles of estoppel. To the fullest extent permitted by law,
each Parent Guarantor waives all rights and benefits and any defense arising out
of the operation of Section 580d of the California Code of Civil Procedure and
related principles of estoppel, even though such election operates to impair or
extinguish any right of reimbursement or subrogation or other right or remedy of
such Parent Guarantor against any Credit Party or any other party or any
security. In addition, each Parent Guarantor hereby waives, to the fullest
extent permitted by applicable law,
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<PAGE>
without limiting the generality of the foregoing or any other provision
hereof, all rights and benefits which might otherwise be available to such
Parent Guarantor under Section 726 of the California Code of Civil Procedure
and all rights and benefits which might otherwise be available to such Parent
Guarantor under California Civil Code Sections 2809, 2810, 2815, 2819, 2821,
2839, 2845, 2848, 2849, 2850, 2899 and 3433.
(d) Each Parent Guarantor hereby further waives (to the fullest
extent permitted by applicable law): (1) all rights and defenses arising out of
an election of remedies by the Guaranteed Creditors, even though that election
of remedies, such as a nonjudicial foreclosure with respect to security for a
Guaranteed Obligation, has destroyed such Parent Guarantor's rights of
subrogation and reimbursement against the principal by the operation of Section
580d of the California Code of Civil Procedure or otherwise; (2) such Parent
Guarantor's rights of subrogation and reimbursement and any other rights and
defenses available to such Parent Guarantor by reason of the California Civil
Code Sections 2787 to 2855, inclusive. including, without limitation, (i) any
defenses such Parent Guarantor may have to the Guaranteed Obligations by reason
of an election of remedies by the Guaranteed Creditors and (ii) any rights or
defenses such Parent Guarantor may have by reason of protection afforded to the
principal borrower with respect to the obligation so guaranteed pursuant to the
antideficiency or other laws of the State of California limiting or discharging
the borrower's indebtedness, including, without limitation, California Code of
Civil Procedure Sections 580a, 580b, 580d or 726.
14.09 NATURE OF LIABILITY. It is the desire and intent of each Parent
Guarantor and the Guaranteed Creditors that this Guaranty shall be enforced
against each Parent Guarantor to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which enforcement is sought.
If, however, and to the extent that, the obligations of any Parent Guarantor
under this Guaranty shall be adjudicated to be invalid or unenforceable for any
reason (including, without limitation, because of any applicable state or
federal law relating to fraudulent conveyances or transfers), then the amount of
the Guaranteed Obligations of such Parent Guarantor shall be deemed to be
reduced and such Parent Guarantor shall pay the maximum amount of the Guaranteed
Obligations which would be permissible under applicable law.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
ADDRESS:
MAPLE LEAF AEROSPACE, INC.
11535 East Pine Street
Tulsa, Oklahoma 74116
Telephone No.: (918) 234-7771
Facsimile No.: (918) 234-7744 By /s/ Muzzafar Mirza
Attention: Richard P. Small ------------------------------------
Title: Vice President
AEROSPACE ACQUISITION CORP.
By /s/ Muzzafar Mirza
------------------------------------
Title: Vice President
AEROSPACE MERGER SUB I, INC.
(and TRI-STAR AEROSPACE, INC.
as its successor by merger)
By /s/ Muzzafar Mirza
------------------------------------
Title: Vice President
TRI-STAR AEROSPACE CO.
By /s/ Muzzafar Mirza
------------------------------------
Title: Vice President
<PAGE>
BANKERS TRUST COMPANY,
Individually and as Agent
By /s/ Mary Kay Coyle
------------------------------------
Title: Managing Director
<PAGE>
ANNEX I
LIST OF BANKS AND COMMITMENTS
-----------------------------
Term Loan Revolving Loan
Bank Commitment Commitment
- ---- ---------- --------------
Bankers Trust Company $50,000,000 $30,000,000
----------- -----------
----------- -----------
----------- -----------
Total $50,000,000 $30,000,000
<PAGE>
EXHIBIT 10.2
FIRST AMENDMENT
FIRST AMENDMENT (the "Amendment"), dated as of April 1997, among MAPLE
LEAF AEROSPACE, INC. ("Holdings"), AEROSPACE ACQUISITION CORP. ("Parent"),
TRI-STAR AEROSPACE, INC. (f/k/a AEROSPACE MERGER SUB I, INC.) (the
"Borrower"), TRI-STAR AEROSPACE CO., the financial institutions party to the
Credit Agreement referred to 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.
W I T N E S S E T H :
WHEREAS Holdings, Parent, the Borrower, the Banks and the Agent are
parties to a Credit Agreement, dated as of September 19, 1996, (as amended from
time to time, the "Credit Agreement"); and
WHEREAS, the parties hereto wish to amend that certain provision of the
Credit Agreement as herein provided;
NOW, THEREFORE, it is agreed:
1. Section 9.05(g) of the Credit Agreement is hereby amended by deleting
the reference to "300,000" appearing therein and by inserting in lieu thereof a
reference to "500,000".
2. In order to induce the Banks to enter into this Amendment, each of
Holdings, Parent and the Borrower hereby represents and warrants that (i) the
representations, warranties and agreements contained in Section 7 of the Credit
Agreement are true and correct in all material respects on and as of the First
Amendment Effective Date (except with respect to any representations and
warranties limited by their terms to a specific date, which shall be true and
correct in all material respects as of such date) and (ii) there exists no
Default or Event of Default on the First Amendment Effective Date (as defined
herein) in each case both before and after giving effect to this Amendment.
<PAGE>
3. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
4. 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 each of Holdings, Parent, the Borrower and
the Agent.
5. 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.
6. This Amendment shall become effective on the date (the "First
Amendment Effective Date") when each of Holdings, Parent, the Borrower, and the
Required Banks shall have signed a copy hereof (whether the same or different
copies) and shall have delivered (including by way of facsimile) the same to
the Agent at the Notice Office.
7. From and after the First Amendment Effective Date, all references in
the Credit Agreement and the other Credit Documents to the Credit Agreement
shall be deemed to be references to such Credit Agreement as modified hereby.
-2-
<PAGE>
IN WITNESSES WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Amendment as of the date first above
written.
MAPLE LEAF AEROSPACE, INC.
By: /s/ Stephen Berger
---------------------------------
Title: Chairman
AEROSPACE ACQUISITION CORP.
By: /s/ Stephen Berger
---------------------------------
Title: Chairman
TRI-STAR AEROSPACE CO.
By: /s/ Stephen Berger
---------------------------------
Title: Chairman
BANKERS TRUST COMPANY
By:
---------------------------------
Title:
PRIME INCOME TRUST
By:
---------------------------------
Title:
-3-
<PAGE>
BANKERS TRUST COMPANY
By: /s/ Mary Kay Coyle
---------------------------------
Title: MANAGING DIRECTOR
-4-
<PAGE>
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By: /s/ ILLEGIBLE
---------------------------------
Title: Vice President
-5-
<PAGE>
KEY BANK N.A.
By: /s/ ILLEGIBLE
---------------------------------
Title: Vice President
-6-
<PAGE>
LASALLE NATIONAL BANK
By: /s/ ILLEGIBLE
---------------------------------
Title: FIRST VICE PRESIDENT
-7-
<PAGE>
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By: /s/ Gilles Marchand
---------------------------------
Title: GILLES MARCHAND, CFA
AUTHORIZED SIGNATORY
MERRILL LYNCH PRIME RATE PORTFOLIO
By: /s/ Gilles Marchand
---------------------------------
Title: GILLES MARCHAND, CFA
AUTHORIZED SIGNATORY
-8-
<PAGE>
PILGRIM AMERICA PRIME RATE TRUST
By: /s/ Thomas C. Hunt
---------------------------------
Title: THOMAS C. HUNT
PORTFOLIO ANALYST
-9-
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: /s/ Jeffrey W. Maillet
----------------------------------------
Title: JEFFREY W. MAILLET
Senior Vice President & Director
-10-
<PAGE>
SECOND AMENDMENT
SECOND AMENDMENT (the "Amendment"), dated as of August 4, 1997, among
MAPLE LEAF AEROSPACE, INC. ("Parent"), AEROSPACE ACQUISITION CORP.
("Holdings"), TRI-STAR AEROSPACE, INC. (f/k/a AEROSPACE MERGER SUB I, INC.)
("Tri-Star Holdings"), TRI-STAR AEROSPACE CO. (the "Borrower"), the financial
institutions party to the Credit Agreement referred to 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.
W I T N E S S E T H :
WHEREAS, Parent, Holdings, Tri-Star Holdings, the Borrower, the Banks and
the Agent are parties to a Credit Agreement, dated as of September 19, 1996,
(as amended from time to time, the "Credit Agreement"); and
WHEREAS, the parties hereto wish to amend that certain provision of the
Credit Agreement as herein provided;
NOW, THEREFORE, it is agreed:
1. Section 9.02(d) of the Credit Agreement is hereby amended by inserting
immediately following the reference to "(x)" contained therein, the following
new language: "except in the case of a sale of Obsolete Inventory to Specaero,
Inc. in exchange for an interest bearing promissory note equal to not less than
5% of the original book value of such Obsolete inventory and a cash commission
on the sale of such Obsolete Inventory equal to not less than 50% of Specaero,
Inc.'s sale proceeds from such Obsolete Inventory,".
2. Section 11 of the Credit Agreement is hereby amended by inserting the
following new definition in proper alphabetical order:
<PAGE>
"Obsolete Inventory" shall mean inventory of Tri-Star Holdings and its
Subsidiaries which (i) has been reserved against on the consolidated
balance sheet of Parent and its Subsidiaries and (ii) in the reasonable
judgment of management, is no longer saleable in the ordinary course of
business or is uneconomic for sale in the ordinary course of business,
PROVIDED that Obsolete inventory shall not include part numbers which have
been sold in the ordinary course of business during the two years prior to
its sale to Specaero, Inc. and at no time shall more than 5% of parts
designated as Obsolete inventory consist of parts purchased by Tri-Star
Holdings or any of its Subsidiaries after January 1, 1994.
3. In order to induce the Banks to enter into this Amendment, each of
Parent, Holdings, Tri-Star Holdings and the Borrower hereby represents and
warrants that (i) the representations, warranties and agreements contained in
Section 7 of the Credit Agreement are true and correct in all material respects
on and as of the Second Amendment Effective Date (except with respect to any
representations and warranties limited by their terms to a specific date, which
shall be true and correct in all material respects as of such date) and (ii)
there exists no Default or Event of Default on the Second Amendment Effective
Date (as defined herein) in each case both before and after giving effect to
this Amendment.
4. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
5. 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 each of Holdings, Parent, the Borrower and
the Agent.
6. 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.
7. This Amendment shall become effective on the date (the "Second
Amendment Effective Date") when each of Parent, Holdings, Tri-Star Holdings,
the Borrower, and the Required Banks shall have signed a copy hereof (whether
the same or different copies) and shall have delivered (including by way of
facsimile) the same to the Agent at the Notice Office.
-2-
<PAGE>
8. From and after the Second Amendment Effective Date, all references in
the Credit Agreement and the other Credit Documents to the Credit Agreement
shall be deemed to be references to such Credit Agreement as modified hereby.
* * * *
-3-
<PAGE>
IN WITNESSES WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Amendment as of the date first above
written.
MAPLE LEAF AEROSPACE, INC.
By: /s/ Bruce McInnis
-----------------------------------
Title: EVP & CFO
AEROSPACE ACQUISITION CORP.
By: /s/ Bruce McInnis
-----------------------------------
Title: EVP & CFO
TRI-STAR AEROSPACE INC.
By: /s/ Bruce McInnis
-----------------------------------
Title: EVP & CFO
TRI-STAR AEROSPACE CO.
By: /s/ Bruce McInnis
-----------------------------------
Title: EVP & CFO
<PAGE>
BANKERS TRUST COMPANY
By: /s/ (Illegible)
-----------------------------------
Title: VP
<PAGE>
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By: /s/ GILLES MARCHAND
-----------------------------------
Title: GILLES MARCHAND, CFA
AUTHORIZED SIGNATORY
MERRILL LYNCH PRIME RATE PORTFOLIO
By: /s/ GILLES MARCHAND
-----------------------------------
Title: GILLES MARCHAND, CFA
AUTHORIZED SIGNATORY
<PAGE>
KEYBANK N.A.
By: /s/ SHARON F. WEINSTEIN
-----------------------------------
Title: SHARON F. WEINSTEIN
VICE PRESIDENT
<PAGE>
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By: /s/ SCOTT H. PAGE
-----------------------------------
Title: Scott H. Page
Vice President
<PAGE>
LASALLE NATIONAL BANK
By: /s/ (Illegible)
-----------------------------------
Title: First Vice President
<PAGE>
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By: /s/ JEFFREY W. MAILLET
---------------------------------------
Title: JEFFREY W. MAILLET
Senior Vice President & Director
<PAGE>
PILGRIM AMERICA PRIME RATE TRUST
By: /s/ THOMAS C. HUNT
-----------------------------------
Title: THOMAS C. HUNT
ASSISTANT PORTFOLIO MANAGER
<PAGE>
THIRD AMENDMENT
THIRD AMENDMENT (the "Amendment"), dated as of November 7, 1997, among
MAPLE LEAF AEROSPACE, INC. ("Parent"), AEROSPACE ACQUISITION CORP.
("Holdings"), TRI-STAR AEROSPACE, INC. (f/k/a AEROSPACE MERGER SUB 1, INC.)
("Tri-Star Holdings"), TRI-STAR AEROSPACE CO. (the "Borrower"), the financial
institutions party to the Credit Agreement referred to 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.
W I T N E S S E T H
WHEREAS, Parent, Holdings, Tri-Star Holdings, the Borrower, the Banks
and the Agent are parties to a Credit Agreement, dated as of September 19,
1996, (as amended from time to time, the "Credit Agreement"); and
WHEREAS, the parties hereto wish to amend certain provisions of the
Credit Agreement as herein provided;
NOW THEREFORE, it is agreed:
1. Section 1.08 of the Credit Agreement is hereby amended by (i)
inserting the words "Base Rate" immediately following the reference to
"Applicable" appearing in clause (a) thereof and (ii) inserting the word
"Eurodollar" immediately following the reference to "Applicable" appearing in
clause (b) thereof.
2. Section 2.04(a) of the Credit Agreement is hereby amended by
inserting the words "Base Rate" immediately following both reference to
"Applicable" appearing therein and (ii) by deleting both references to
"maintained as Base Rate Loans" appearing therein.
3. Section 3.01(b) of the Credit Agreement is hereby amended by
inserting the word "Eurodollar" immediately following the reference to
"Applicable"
<PAGE>
appearing therein and by deleting the reference to "maintained as Eurodollar
Loans" appearing therein.
4. Section 11 of the Credit Agreement is hereby amended by (i) deleting
the definition of "Applicable Margin" contained therein and (ii) inserting
the following new definitions in proper alphabetical order:
"Applicable Base Rate Margin" (i) for any calculation of interest
accrued in respect of the period prior to the Third Amendment Effective Date,
shall have the meaning provided in the Credit Agreement for "Applicable
Margin" prior to giving effect to the Third Amendment, (ii) for any such
calculation in respect of the period from and including the Third Amendment
Effective Date to but excluding the first Start Date (as defined below),
shall mean 1.00% per annum, and (iii) from and after the first day of any
Applicable Pricing Period (the "Start Date") (commencing with the first Start
Date to occur after the Third Amendment Effective Date) to and including the
last day of such Applicable Pricing Period (the "End Date"), shall mean the
applicable percentage per annum set forth in clause (A), (B) or (C) below if,
but only if, as of the last day of the most recent fiscal quarter of the
Borrower ended immediately prior to such Start Date (the "Test Date") the
condition in clause (A), (B) or (C) below is met:
(A) (x) in the case of Term Loans 2.00% and (y) in the case of
Revolving Loans, 1.50%, if, but only if, as of the Test Date for such
Start Date, the Leverage Ratio for the Test Period ended on such Test
Date shall be greater than or equal to 3.75:1.00; or
(B) (x) in the case of Term Loans, 1.50% and (y) in the case of
Revolving Loans, 1.25%, if, but only if, as of the Test Date for such
Start Date, the Leverage Ratio for the Test Period ended on such Test
Date shall be less than 3.75:1.0 but equal to or greater than 3.00:1.00;
or
(C) 1.00%, if, but only if, as of the Test Date for such Start
Date, the Leverage Ratio for the Test Period ended on such Test Date
shall be less than 3.00:1.00.
Notwithstanding anything to the contrary contained above in this definition,
the Applicable Base Rate Margin shall be (x) in the case of Revolving Loans,
1.50% per annum and (y) in the case of Term Loans, 2.00% per annum at all
times when (i) a payment Default under Section 10.01 shall exist or any Event
of Default shall exist and/or (ii) financial statements have not been
delivered when required pursuant to Section 8.01(b) or (c), as the case may
be.
-2-
<PAGE>
"Applicable Eurodollar Margin" (i) for any calculation of interest
accrued in respect of the period prior to the Third Amendment Effective Date,
shall have the meaning provided in the Credit Agreement for "Applicable
Margin" prior to giving effect to the Third Amendment, (ii) for any such
calculation in respect of the period from and including the Third Amendment
Effective Date to but excluding the first Start Date to occur after the Third
Amendment Effective Date, shall mean 2.00% per annum and (iii) from and after
the first Start Date to occur after the Third Amendment Effective Date to and
including the End Date, shall mean the respective percentage per annum set
forth in clause (A), (B) or (C) below if, but only if, as of the most recent
Test Date, the condition in clause (A), (B) or (C) below is met:
(A) (x) in the case of Term Loans 3.00% and (y) in the case of
Revolving Loans, 2.50%, if, but only if, as of the Test Date for such
Start Date, the Leverage Ratio for the Test Period ended on such Test
Date shall be greater than or equal to 3.75:1.00; or
(B) (x) in the case of Term Loans 2.50% and (y) in the case of
Revolving Loans, 2.25%, if, but only if, as of the Test Date for such
Start Date, the Leverage Ratio for the Test Period ended on such Test
Date shall be less than 3.75:1.0 but equal to or greater than 3.00:1.00;
or
(C) 2.00%, if, but only if, as of the Test Date for such Start
Date, the Leverage Ratio for the Test Period ended on such Test Date shall
be less than 3.00:1.00.
Notwithstanding anything to the contrary contained above in this definition,
the Applicable Eurodollar Margin shall be (x) in the case of Revolving Loans,
2.50% per annum and (y) in the case of Term Loans, 3.00% per annum at all
times when (i) a payment Default under Section 10.01 shall exist or any Event
of Default shall exist and/or (ii) financial statements have not been
delivered when required pursuant to Section 8.01(a), (b) or (c), as the case
may be.
"Applicable Pricing Period" shall mean each period which shall commence
on a date on which the financial statements are delivered pursuant to Section
8.01(b) or (c) and which shall end on the earlier of (i) the date of actual
delivery of the next financial statements pursuant to Section 8.01(b) or (c)
and (ii) the latest date on which the next financial statements are required
to be delivered pursuant to Section 8.01(b) or (c).
"End Date" shall have the meaning provided in the definition of
Applicable Base Rate Margin.
-3-
<PAGE>
"Start Date" shall have the meaning provided in the definition of
Applicable Base Rate Margin.
"Test Date" shall have the meaning provided in the definition of
Applicable Base Rate Margin.
"Third Amendment" shall mean the Third Amendment to this Agreement,
dated as of November 7, 1997.
"Third Amendment Effective Date" shall mean November [19], 1997.
5. Section 9.08 of the Credit Agreement is hereby amended by (i)
deleting the reference to "2,000,000" appearing therein and (ii) inserting a
reference to "3,000,000" in lieu thereof.
6. Section 13.07(a) of the Credit Agreement is hereby amended by (i)
deleting the reference to "except for the election of the LIFO inventory
price index computation method of computing inventory (and cost of goods
sold) as referenced below, and as otherwise specifically provided herein,"
appearing in the first proviso thereto, (ii) deleting the reference to "(i)"
appearing in the second proviso thereto and (iii) deleting clause (a) of the
second proviso thereto in its entirety.
7. The Borrower hereby acknowledges that it has failed to comply with
(A) the requirements of Section 4.02(e) as it relates to (i) the $1,000,000
in Equity Financing proceeds received from the Management Participants on or
about June 30, 1997 and (ii) $200,000 in equity proceeds received from
employees of Equitable Securities Corp. on or about June 30, 1997
(collectively, the "Equity Proceeds") and (B) the requirements of Section
13.07(a)(ii) relating to the Borrower's use of the LIFO inventory accounting
method. The Banks hereby waive compliance by the Borrower with Section
4.02(e) of the Credit Agreement solely with respect to the Equity Proceeds
and Section 13.07(a)(ii), and any Default or Event of Default that may exist
solely as a result of the failure to comply with such Section 4.02(e) as it
relates to the Equity Proceeds and Section 13.07(a)(ii). The parties hereto
further agree that no Default or Event of Default arising as a result of a
failure to comply with Section 4.02(e) of the Credit Agreement solely in
respect of the Equity Proceeds, and Section 13.07(a)(ii) shall be deemed to
exist under Section 6.01 of the Credit Agreement or with respect to any
misrepresentation arising in connection with a Notice of Borrowing in respect
of Section 4.02(c) of the Credit Agreement as it relates to the Equity
Proceeds, or Section 13.07(a)(ii).
-4-
<PAGE>
8. In order to induce the Banks to enter into this Amendment, each of
Parent, Holdings, Tri-Star Holdings and the Borrower hereby represents and
warrants that (i) the representations, warranties and agreements contained in
Section 7 of the Credit Agreement are true and correct in all material
respects on and as of the Third Amendment Effective Date (except with respect
to any representations and warranties limited by their terms to a specific
date, which shall be true and correct in all material respects as of such
date) and (ii) there exists no Default or Event of Default on the Third
Amendment Effective Date (as defined herein); in each case after giving
effect to this Amendment.
9. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
10. 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 each of Holdings, Parent, the Borrower
and the Agent.
11. 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.
12. This Amendment shall become effective on the date (the "Third
Amendment Effective Date") when each of Parent, Holdings, Tri-Star Holdings,
the Borrower, and each Bank shall have signed a copy hereof (whether the same
or different copies) and shall have delivered (including by way of facsimile)
the same to the Agent at the Notice Office.
13. From and after the Third Amendment Effective Date, all references in
the Credit Agreement and the other Credit Documents to the Credit Agreement
shall be deemed to be references to such Credit Agreement as modified hereby.
* * * *
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<PAGE>
IN WITNESSES WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Amendment as of the date first above
written.
MAPLE LEAF AEROSPACE, INC.
By: /s/ Doug Childress
-------------------------------
Title: V.P. Finance
AEROSPACE ACQUISITION CORP.
By: /s/ Doug Childress
-------------------------------
Title: V.P. Finance
TRI-STAR AEROSPACE INC.
By: /s/ Doug Childress
-------------------------------
Title: V.P. Finance
TRI-STAR AEROSPACE CO.
By: /s/ Doug Childress
-------------------------------
Title: V.P. Finance
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<PAGE>
BANKERS TRUST COMPANY
By: /s/ Gregory P. Shefrin
-------------------------------
Title: Vice President
<PAGE>
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By: /s/ Payson F. Swaffield
-------------------------------
Title: Vice President
<PAGE>
KEYBANK N.A.
By: /s/ Sharon [illegible]
-------------------------------
Title: Vice President
<PAGE>
PILGRIM AMERICA PRIME RATE TRUST
By: /s/ Thomas C. Hunt
-------------------------------
Title: Assistant Portfolio Manager
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: /s/ Jeffrey W. Maillet
-------------------------------
Title: Sr. Vice Pres. & Director
<PAGE>
LASALLE NATIONAL BANK
By: /s/ [illegible]
-------------------------------
Title: First Vice President
<PAGE>
PRIME INCOME TRUST
By: /s/ [illegible]
-------------------------------
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By:
-------------------------------
Title:
KEYBANK N.A.
By:
-------------------------------
Title:
LASALLE NATIONAL BANK
By:
-------------------------------
Title:
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By:
-------------------------------
Title:
-7-
<PAGE>
EXHIBIT 10.5
- ---------------------------------------------------------------
- ---------------------------------------------------------------
SECURITY AGREEMENT
among
MAPLE LEAF AEROSPACE, INC.,
AEROSPACE ACQUISITION CORP.,
TRI-STAR AEROSPACE, INC.
(as successor by merger to AEROSPACE MERGER SUB I, INC.),
TRI-STAR AEROSPACE CO.,
VARIOUS OTHER SUBSIDIARIES OF MAPLE LEAF
AEROSPACE, INC.,
and
BANKERS TRUST COMPANY,
as Collateral Agent
Dated as of September 19, 1996
- ---------------------------------------------------------------
- ---------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I SECURITY INTERESTS 3
1.1. Grant of Security Interests 3
1.2. Power of Attorney 4
ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND
COVENANTS 4
2.1. Necessary Filings 4
2.2. No Liens 4
2.3. Other Financing Statements 5
2.4. Chief Executive Office; Records 5
2.5. Location of Inventory and Equipment 6
2.6. Recourse 6
2.7. Trade Names; Change of Name 6
ARTICLE III SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS 7
3.1. Additional Representations and Warranties 7
3.2. Maintenance of Records 7
3.3. Direction to Account Debtors; Contracting Parties; etc. 8
3.4. Modification of Terms; etc. 8
3.5. Collection 8
3.6. Instruments 9
3.7. Further Actions 9
ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS 9
4.1. Additional Representations and Warranties 9
4.2. Licenses and Assignments 10
4.3. Infringements 10
4.4. Preservation of Marks 10
4.5. Maintenance of Registration 10
4.6. Future Registered Marks 11
4.7. Remedies 11
ARTICLE V SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS 12
5.1. Additional Representations and Warranties 12
5.2. Licenses and Assignments 12
5.3. Infringements 13
(ii)
<PAGE>
5.4. Maintenance of Patents and Copyrights 13
5.5. Prosecution of Patent or Copyright Application 13
5.6. Other Patents and Copyrights 13
5.7. Remedies 13
ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL 14
6.1. Protection of Collateral Agent's Security 14
6.2. Warehouse Receipts Non-negotiable 14
6.3. Further Actions 15
6.4. Financing Statements 15
ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF
DEFAULT 15
7.1. Remedies; Obtaining the Collateral Upon Default 15
7.2. Remedies; Disposition of the Collateral 16
7.3. Waiver of Claims 17
7.4. Application of Proceeds 18
7.5. Remedies Cumulative 20
7.6. Discontinuance of Proceedings 21
ARTICLE VIII INDEMNITY 21
8.1. Indemnity 21
8.2. Indemnity Obligations Secured by Collateral; Survival 23
ARTICLE IX DEFINITIONS 23
ARTICLE X MISCELLANEOUS 28
10.1. Notices 28
10.2. Waiver; Amendment 29
10.3. Obligations Absolute 30
10.4. Successors and Assigns 30
10.5. Headings Descriptive 30
10.6. Governing Law 30
10.7. Assignor's Duties 30
10.8. Termination; Release 31
10.9. Counterparts 32
10.10. The Collateral Agent 32
10.11. Severability 32
10.12. Limited Obligations 32
10.13. Additional Assignors 32
ANNEX A Schedule of Chief Executive Offices/Record Locations
(ii)
<PAGE>
Page
----
ANNEX B Schedule of Inventory and Equipment Locations
ANNEX C Schedule of Trade, Fictitious and Other Names
ANNEX D Schedule of Marks
ANNEX E Schedule of Patents and Applications
ANNEX F Schedule of Copyrights and Applications
ANNEX G Assignment of Security Interest in Patents and Trademarks
ANNEX H Assignment of Security Interest in Copyrights
(iii)
<PAGE>
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of September 19, 1996 (as amended, modified
or supplemented from time to time, this "Agreement"), among each of the under-
signed assignors (each, an "Assignor" and, together with each other entity that
is required to execute a counterpart hereof pursuant to Section 10.13 hereof,
the "Assignors") and BANKERS TRUST COMPANY, as Collateral Agent (the
"Collateral Agent"), for the benefit of the Secured Creditors (as defined
below). Except as otherwise defined herein, terms used herein and defined in
the Credit Agreement (as defined below) shall be used herein as therein
defined.
WITNESSETH:
WHEREAS, Maple Leaf Aerospace. Inc. ("Parent"). Aerospace Acquisition
Corp. ("Holdings"), Tri-Star Aerospace, Inc. (as successor by merger to
Aerospace Merger Sub I, Inc.) ("Tri-Star Holdings"), Tri-Star Aerospace Co.
(the "Borrower"); various financial institutions from time to time party
thereto (the "Banks") and Bankers Trust Company, as Agent (the "Agent", and
together with the Banks and the Collateral Agent, the "Bank Creditors"), have
entered into a Credit Agreement, dated as of September 19, 1996, providing for
the making of Loans to the Borrower and the issuance of, and participation in,
Letters of Credit for the account of the Borrower as contemplated therein (as
used herein, the term "Credit Agreement" means the Credit Agreement described
above in this paragraph as amended, modified, extended, renewed, replaced,
restated, supplemented, restructured or refinanced from time to time, and
including any agreement extending the maturity of, refinancing or restructuring
(including, but not limited to, the inclusion of additional borrowers
thereunder or any increase in the amount borrowed) all, or any portion of, the
Indebtedness under such agreement or any successor agreements);
WHEREAS, any Assignor may from time to time enter into, or guaranty the
obligations of any other Assignor under, one or more (i) interest rate
protection agreements (including, without limitation, interest rate swaps,
caps, floors, collars and similar agreements), (ii) foreign exchange contracts,
currency swap agreements or other similar agreements or arrangements designed
to protect against the fluctuations in currency values and/or (iii) other types
of hedging agreements from time to time (each such agreement or arrangement
with an Other Creditor (as hereinafter defined), an "Interest Rate Protection
Agreement or Other Hedging Agreement"), with any Bank, any affiliate thereof or
a syndicate of financial institutions organized by any such Bank or affiliate
(any such Bank
<PAGE>
or affiliate (even if any such Bank ceases to be a Bank under the Credit
Agreement for any reason) and any such other institution that participates in
such Interest Rate Protection Agreements or Other Hedging Agreements and
their subsequent successors and assigns collectively, the "Other Creditors",
and together with the Bank Creditors, the "Secured Creditors");
WHEREAS, pursuant to Section 14 of the Credit Agreement, Parent, Holdings
and Tri-Star Holdings have provided a joint and several guaranty of the payment
when due of all obligations and liabilities of the Borrower under and in
connection with the Credit Documents and each Interest Rate Protection
Agreement or Other Hedging Agreement entered into with one or more Other
Creditors;
WHEREAS, pursuant to the Subsidiaries Guaranty, the Subsidiary Guarantors
have jointly and severally guaranteed the payment when due of all obligations
and liabilities of the Borrower under or with respect to the Credit Documents
and each Interest Rate Protection Agreement or Other Hedging Agreement entered
into with one or more Other Creditors;
WHEREAS, it is a condition precedent to the making of Loans to the
Borrower and the issuance of, and participation in, Letters of Credit for the
account of the Borrower under the Credit Agreement and to the Other Creditors
entering into Interest Rate Protection Agreements or Other Hedging Agreements
that each Assignor shall have executed and delivered to the Collateral Agent
this Agreement; and
WHEREAS, each Assignor desires to execute this Agreement to satisfy the
condition described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to each
Assignor, the receipt and sufficiency of which are hereby acknowledged, each
Assignor hereby makes the following representations and warranties to the
Collateral Agent and hereby covenants and agrees with the Collateral Agent as
follows:
ARTICLE I
SECURITY INTERESTS
1.1. GRANT OF SECURITY INTERESTS. (a) As security for the prompt and
complete payment and performance when due of all Obligations of such Assignor,
each Assignor does hereby assign and transfer unto the Collateral Agent, and
does hereby pledge and grant to the Collateral Agent for the benefit of the
Secured Creditors, a continuing
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<PAGE>
security interest of first priority in, all of the right, title and interest
of such Assignor in, to and under all of the following, whether now existing
or hereafter from time to time acquired:
(i) each and every Receivable;
(ii) all Contracts, together with all Contract Rights arising
thereunder;
(iii) all Inventory;
(iv) the Cash Collateral Account and any other cash collateral
account established for any Assignor and all moneys, securities and
instruments deposited or required to be deposited in such Cash Collateral
Account;
(v) all Equipment;
(vi) all Marks, together with the registrations and right to all
renewals thereof, and the goodwill of the business of such Assignor
symbolized by the Marks;
(vii) all Patents and Copyrights and all reissues, renewals and
extensions thereof;
(viii) all computer programs of such Assignor and all intellectual
property rights therein and all other proprietary information of such
Assignor, including, but not limited to, trade secrets and Trade Secret
Rights;
(ix) all insurance policies;
(x) all other Goods, General Intangibles. Chattel Paper, Documents
and Instruments and other assets of such Assignor (other than the Pledged
Securities); and
(xi) all Proceeds and products of any and all of the foregoing (all
of the above, collectively, the "Collateral").
(b) The security interest of the Collateral Agent under
this Agreement extends to all Collateral of the kind which is the subject of
this Agreement which any Assignor may acquire at any time during the
continuation of this Agreement.
1.2. POWER OF ATTORNEY. Each Assignor hereby constitutes
and appoints the Collateral Agent its true and lawful attorney, irrevocably,
with full power after the
-3-
<PAGE>
occurrence of and during the continuance of an Event of Default (in the name
of such Assignor or otherwise) to act, require, demand, receive, compound and
give acquittance for any and all monies and claims for monies due or to
become due to such Assignor under or arising out of the Collateral, to
endorse any checks or other instruments or orders in connection therewith and
to file any claims or take any action or institute any proceedings which the
Collateral Agent may deem to be necessary or advisable to accomplish the
purposes of this Agreement, which appointment as attorney is coupled with an
interest.
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Assignor represents, warrants and covenants, which representations,
warranties and covenants shall survive execution and delivery of this
Agreement, as follows:
2.1. NECESSARY FILINGS. All filings, registrations and recordings
necessary or appropriate to create, preserve, protect and perfect the security
interest granted by such Assignor to the Collateral Agent hereby in respect of
the Collateral have been accomplished and the security interest granted to the
Collateral Agent pursuant to this Agreement in and to the Collateral
constitutes a perfected security interest therein prior to the rights of all
other Persons therein and subject to no other Liens (other than Permitted
Liens) and is entitled to all the rights, priorities and benefits afforded by
the Uniform Commercial Code or other relevant law as enacted in any relevant
jurisdiction to perfected security interests.
2.2. NO LIENS. Such Assignor is, and as to Collateral acquired by it from
time to time after the date hereof such Assignor will be, the owner of all
Collateral free from any Lien, security interest, encumbrance or other right,
title or interest of any Person (other than Permitted Liens and Liens created
under this Agreement) and such Assignor shall defend the Collateral against all
claims and demands of all Persons at any time claiming the same or any interest
therein adverse to the Collateral Agent.
2.3. OTHER FINANCING STATEMENTS. As of the date hereof, there is no
financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) covering or purporting to cover any interest of
any kind in the Collateral (other than (x) those created under this Agreement
and (y) as may be filed in connection with Liens permitted pursuant to Section
9.01(iii) of the Credit Agreement), and so long as the Total Commitment has not
been terminated or any Note or Letter of Credit remains outstanding or any of
the Obligations remain unpaid or any Interest Rate Protection Agreement or
Other Hedging Agreement remains in effect or any Obligations are owed with
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<PAGE>
respect thereto, such Assignor will not execute or authorize to be filed in any
public office any financing statement (or similar statement or instrument of
registration under the law of any jurisdiction) or statements relating to the
Collateral, except financing statements filed or to be filed in respect of and
covering the security interests granted hereby by such Assignor or as permitted
by the Credit Agreement.
2.4. CHIEF EXECUTIVE OFFICE; RECORDS. The chief executive office of such
Assignor is located at the address or addresses indicated on Annex A hereto.
Such Assignor will not move its chief executive office except to such new
location as such Assignor may establish in accordance with the last sentence of
this Section 2.4. The originals of all documents evidencing all Receivables
and Contract Rights and Trade Secret Rights of such Assignor and the only
original books of account and records of such Assignor relating thereto are,
and will continue to be, kept at such chief executive office or at such new
locations as such Assignor may establish in accordance with the last sentence
of this Section 2.4. All Receivables and Contract Rights and Trade Secret
Rights of such Assignor are, and will continue to be, maintained at, and
controlled and directed (including, without limitation, for general accounting
purposes) from, the office locations described above or such new location
established in accordance with the last sentence of this Section 2.4. No
Assignor shall establish new locations for such offices until (i) it shall have
given to the Collateral Agent not less than 30 days' prior written notice of
its intention to do so, clearly describing such new location and providing such
other information in connection therewith as the Collateral Agent may
reasonably request, (ii) with respect to such new location, it shall have taken
all action, satisfactory to the Collateral Agent, to maintain the security
interest of the Collateral Agent in the Collateral intended to be granted
hereby at all times fully perfected and in full force and effect, (iii) at the
request of the Collateral Agent, it shall have furnished an opinion of counsel
acceptable to the Collateral Agent to the effect that all financing or
continuation statements and amendments or supplements thereto have been filed
in the appropriate filing office or offices, and (iv) the Collateral Agent
shall have received evidence that all other actions (including, without
limitation, the payment of all filing fees and taxes, if any, payable in
connection with such filings) have been taken, in order to perfect (and
maintain the perfection and priority of) the security interest granted hereby.
2.5. LOCATION OF INVENTORY AND EQUIPMENT. All Inventory and Equipment
held on the date hereof by each Assignor is located at one of the locations
shown on Annex B hereto. Each Assignor agrees that all Inventory and Equipment
now held or subsequently acquired by it shall be kept at (or shall be in
transport to) any one of the locations shown on Annex B hereto, or such new
location as such Assignor may establish in accordance with the last sentence of
this Section 2.5, except as permitted to be sold in accordance with the terms
hereof and in the Credit Agreement. Any Assignor may establish a new location
for Inventory and Equipment only if (i) it shall have given to the Collateral
Agent not less than 30 days prior written notice of its intention so to do,
clearly
-5-
<PAGE>
describing such new location and providing such other information in
connection therewith as the Collateral Agent may reasonably request, (ii)
with respect to such new location, it shall have taken all action
satisfactory to the Collateral Agent to maintain the security interest of the
Collateral Agent in the Collateral intended to be granted hereby at all times
fully perfected and in full force and effect, (iii) at the request of the
Collateral Agent, it shall have furnished an opinion of counsel acceptable to
the Collateral Agent to the effect that all financing or continuation
statements and amendments or supplements thereto have been filed in the
appropriate filing office or offices, and (iv) the Collateral Agent shall
have received evidence that all other actions (including, without limitation,
the payment of all filing fees and taxes, if any, payable in connection with
such filings) have been taken, in order to perfect (and maintain the
perfection and priority of) the security interest granted hereby.
2.6. RECOURSE. This Agreement is made with full recourse to each Assignor
and pursuant to and upon all the warranties, representations, covenants and
agreements on the part of such Assignor contained herein, in the other Credit
Documents, in the Interest Rate Protection Agreements or Other Hedging
Agreements and otherwise in writing in connection herewith or therewith.
2.7. TRADE NAMES; CHANGE OF NAME. No Assignor has or operates in any
jurisdiction under, or previously has had or has operated in any jurisdiction
within the five year period preceding the date of this Agreement under, any
trade names, fictitious names or other names except its legal name and such
other trade or fictitious names as are listed on Annex C hereto. No Assignor
shall change its legal name or assume or operate in any jurisdiction under any
trade, fictitious or other name except those names listed on Annex C hereto in
the jurisdictions listed with respect to such names and new names (including,
without limitation, any names of divisions or operations) and/or jurisdictions
established in accordance with the last sentence of this Section 2.7. No
Assignor shall assume or operate in any jurisdiction under any new trade,
fictitious or other name or operate under any existing name in any additional
jurisdiction until (i) it shall have given to the Collateral Agent not less
than 30 days' prior written notice of its intention so to do, clearly
describing such new name and/or jurisdiction and, in the case of a new name,
the jurisdictions in which such new name shall be used and providing such other
information in connection therewith as the Collateral Agent may reasonably
request, (ii) with respect to such new name and/or jurisdiction, it shall have
taken all action to maintain the security interest of the Collateral Agent in
the Collateral intended to be granted hereby at all times fully perfected and
in full force and effect, (iii) at the request of the Collateral Agent, it
shall have furnished an opinion of counsel acceptable to the Collateral Agent
to the effect that all financing or continuation statements and amendments or
supplements thereto have been filed in the appropriate filing office or
offices, and (iv) the Collateral Agent shall have received evidence that all
other actions (including, without limitation, the payment of all filing fees
and taxes, if any, payable in connection with such filings) have been taken, in
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<PAGE>
order to perfect (and maintain the perfection and priority of) the security
interest granted hereby.
ARTICLE III
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
3.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. As of the time when each
of its Receivables arises, each Assignor shall be deemed to have represented
and warranted that such Receivable, and all records, papers and documents
relating thereto (if any) are genuine and in all respects what they purport to
be, and that all papers and documents (if any) relating thereto (i) will
represent the genuine legal, valid and binding obligation of the account debtor
evidencing indebtedness unpaid and owed by the respective account debtor
arising out of the performance of labor or services or the sale or lease and
delivery of the inventory, materials, equipment or merchandise listed therein,
or both, (ii) will be the only original writings evidencing and embodying such
obligation of the account debtor named therein (other than copies created for
general accounting purposes), (iii) will evidence true and valid obligations,
enforceable in accordance with their respective terms and (iv) will be in
compliance and will conform in all material respects with all applicable
federal, state and local laws and applicable laws of any relevant foreign
jurisdiction.
3.2. MAINTENANCE OF RECORDS. Each Assignor will keep and maintain at its
own cost and expense satisfactory and complete records of its Receivables and
Contracts, including, but not limited to, originals or copies of all
documentation (including each Contract) with respect thereto, records of all
payments received, all credits granted thereon, all merchandise returned and
all other dealings therewith, and such Assignor will make the same available on
such Assignor's premises to the Collateral Agent for inspection, at such
Assignor's own cost and expense, at any and all reasonable times and intervals
as the Collateral Agent may request. Upon the occurrence and during the
continuance of an Event of Default and at the request of the Collateral Agent,
such Assignor shall, at its own cost and expense, deliver all tangible evidence
of its Receivables and Contract Rights (including, without limitation, all
documents evidencing the Receivables and all Contracts) and such books and
records to the Collateral Agent or to its representatives (copies of which
evidence and books and records may be retained by such Assignor). If the
Collateral Agent so directs, such Assignor shall legend, in form and manner
satisfactory to the Collateral Agent, the Receivables and the Contracts, as
well as books, records and documents of such Assignor evidencing or pertaining
to such Receivables and Contracts with an appropriate reference to the fact
that such Receivables and Contracts have been assigned to the Collateral Agent
and that the Collateral Agent has a security interest therein.
-7-
<PAGE>
3.3. DIRECTION TO ACCOUNT DEBTORS; CONTRACTING PARTIES; ETC. Upon the
occurrence and during the continuance of an Event of Default, and if the
Collateral Agent so directs any Assignor, such Assignor agrees (x) to cause
all payments on account of the Receivables and Contracts to be made directly
to the Cash Collateral Account, (y) that the Collateral Agent may, at its
option, directly notify the obligors with respect to any Receivables and/or
under any Contracts to make payments with respect thereto as provided in
preceding clause (x), and (z) that the Collateral Agent may enforce
collection of any such Receivables and Contracts and may adjust, settle or
compromise the amount of payment thereof, in the same manner and to the same
extent as such Assignor. Without notice to or assent by any Assignor, the
Collateral Agent may apply any or all amounts then in, or thereafter
deposited in, the Cash Collateral Account which application shall be effected
in the manner provided in Section 7.4 of this Agreement. The costs and
expenses (including attorneys' fees) of collection, whether incurred by the
Assignor or the Collateral Agent, shall be borne by the relevant Assignor.
3.4. MODIFICATION OF TERMS; ETC. No Assignor shall rescind or cancel any
indebtedness evidenced by any Receivable or under any Contract, or modify any
term thereof or make any adjustment with respect thereto, or extend or renew
the same, or compromise or settle any material dispute, claim, suit or legal
proceeding relating thereto, or sell any Receivable or Contract, or interest
therein, without the prior written consent of the Collateral Agent, except as
permitted by Section 3.5. Each Assignor will duly fulfill all obligations on
its part to be fulfilled under or in connection with the Receivables and
Contracts and will do nothing to impair the rights of the Collateral Agent in
the Receivables or Contracts.
3.5. COLLECTION. Each Assignor shall endeavor to cause to be collected
from the account debtor named in each of its Receivables or obligor under any
Contract, as and when due (including, without limitation, amounts, services or
products which are delinquent, such amounts, services or products to be
collected in accordance with generally accepted lawful collection procedures)
any and all amounts, services or products owing under or on account of such
Receivable or Contract, and apply forthwith upon receipt thereof all such
amounts, services or products as are so collected to the outstanding balance of
such Receivable or under such Contract, except that, prior to the occurrence of
an Event of Default, any Assignor may allow in the ordinary course of business
as adjustments to amounts, services or products owing under its Receivables and
Contracts (i) an extension or renewal of the time or times of payment or
exchange, or settlement for less than the total unpaid balance, which such
Assignor finds appropriate in accordance with reasonable business judgment and
(ii) a refund or credit due as a result of returned or damaged merchandise or
improperly performed services. The costs and expenses (including, without
limitation, attorneys' fees) of collection, whether incurred by an Assignor or
the Collateral Agent, shall be borne by the relevant Assignor.
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<PAGE>
3.6. INSTRUMENTS. If any Assignor owns or acquires any Instrument
constituting Collateral, such Assignor will within 10 days notify the
Collateral Agent thereof, and upon request by the Collateral Agent will
promptly deliver such Instrument to the Collateral Agent appropriately endorsed
to the order of the Collateral Agent as further security hereunder.
3.7. FURTHER ACTIONS. Each Assignor will, at its own expense, make,
execute, endorse. acknowledge, file and/or deliver to the Collateral Agent from
time to time such vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other assurances or instruments and take such further
steps relating to its Receivables, Contracts, Instruments and other property or
rights covered by the security interest hereby granted, as the Collateral Agent
may require.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING TRADEMARKS
4.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. Each Assignor represents
and warrants that it is the true, lawful, sole and exclusive owner of the Marks
listed in Annex D hereto and that said listed Marks constitute all the Marks
that such Assignor presently owns or uses in connection with its business and
include all the United States federal registrations or applications registered
in the United States Patent and Trademark Office. Each Assignor represents and
warrants that it owns all Marks that it uses. Each Assignor further warrants
that it has no knowledge as of the date hereof, of any third party claim that
any aspect of such Assignor's present or contemplated business operations
infringes or will infringe any rights in any trademark, service mark or trade
name. Each Assignor represents and warrants that it is the beneficial and
record owner of all trademark registrations and applications listed in Annex D
hereto and that said registrations are valid, subsisting and have not been
cancelled and that such Assignor is not aware of any third-party claim that
any of said registrations is invalid or unenforceable, or that there is any
reason that any of said applications will not pass to registration. Each
Assignor represents and warrants that upon the recordation of an Assignment of
Security Interest in United States Trademarks and Patents in the form of Annex
G hereto in the United States Patent and Trademark Office, together with
filings on Form UCC-1 pursuant to this Agreement, all filings, registrations
and recordings necessary or appropriate to perfect the security interest
granted to the Collateral Agent in the United States Marks covered by this
Agreement under federal law will have been accomplished. Each Assignor agrees
to execute such an Assignment of Security Interest in United States Trademark
and Patents covering all right, title and interest in each United States Mark,
and the associated goodwill, of such Assignor, and to record the same. Each
Assignor hereby grants to the Collateral
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Agent an absolute power of attorney to sign, upon the occurrence and during
the continuance of an Event of Default, any document which may be required by
the U.S. Patent and Trademark Office or secretary of state or equivalent
governmental agency of any State of the United States or any foreign
jurisdiction in order to effect an absolute assignment of all right, title
and interest in each Mark, and record the same.
4.2. LICENSES AND ASSIGNMENTS. Each Assignor hereby agrees not to divest
itself of any right under any Mark which, in the good faith judgment of
management, is useful or valuable to its business, absent prior written
approval of the Collateral Agent, except as otherwise permitted by this
Agreement or the Credit Agreement.
4.3. INFRINGEMENTS. Each Assignor agrees, promptly upon learning thereof,
to notify the Collateral Agent in writing of the name and address of, and to
furnish such pertinent information that may be available with respect to, (i)
any party who such Assignor believes is infringing or diluting or otherwise
violating in any respect any of such Assignor's rights in and to any Mark, or
(ii) with respect to any party claiming that such Assignor's use of any Mark
violates in any material respect any property right of that party. Each
Assignor further agrees, unless otherwise agreed by the Collateral Agent,
diligently to prosecute any Person infringing any Mark.
4.4. PRESERVATION OF MARKS. Each Assignor agrees to use all its Marks
which, in the good faith judgment of management, is useful or valuable to its
business, in interstate or foreign commerce, as the case may be, during the
time in which this Agreement is in effect, sufficiently to preserve such Marks
as valid and subsisting trademarks or service marks under the laws of the
United States or the relevant foreign jurisdiction.
4.5. MAINTENANCE OF REGISTRATION. Each Assignor shall, at its own expense,
diligently process all documents required by the Trademark Act of 1946, as
amended, 15 U.S.C. Sections 1051 ET SEQ. to maintain trademark registrations,
including but not limited to affidavits of continued use and applications for
renewals of registration in the United States Patent and Trademark Office for
all of its registered Marks pursuant to 15 U.S.C. Sections 1058, 1059 and 1065
and any foreign equivalent thereof, and shall pay all fees and disbursements in
connection therewith and shall not abandon any such filing of affidavit of use
or any such application of renewal prior to the exhaustion of all
administrative and judicial remedies without prior written consent of the
Collateral Agent. Each Assignor agrees to notify the Collateral Agent at least
two (2) months prior to the dates on which the affidavits of use or the
applications for renewal registration are due with respect to any registered
Mark that the affidavits of use or the renewal is being processed.
4.6. FUTURE REGISTERED MARKS. If any registration for any Mark issues
hereafter to any Assignor as a result of any application now or hereafter
pending before the
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United States Patent and Trademark Office, within 30 days of receipt of such
certificate, such Assignor shall deliver to the Collateral Agent a copy of
such certificate, and an assignment for security in such Mark, to the
Collateral Agent and at the expense of such Assignor, confirming the
assignment for security in such Mark to the Collateral Agent hereunder, the
form of such security to be substantially the same as the form hereof or in
such other form as may be satisfactory to the Collateral Agent.
4.7. REMEDIES. If an Event of Default shall occur and be continuing, the
Collateral Agent may, by written notice to the relevant Assignor, take any or
all of the following actions: (i) declare the entire right, title and interest
of such Assignor in and to each of the Marks, together with all trademark
rights and rights of protection to the same and the goodwill of such Assignor's
business symbolized by said Marks and the right to recover for post
infringements thereof, vested in the Collateral Agent for the benefit of the
Secured Creditors, in which event such rights, title and interest shall
immediately vest, in the Collateral Agent for the benefit of the Secured
Creditors, and the Collateral Agent shall be entitled to exercise the power of
attorney referred to in Section 4.1 hereof to execute, cause to be
acknowledged and notarized and to record said absolute assignment with the
applicable agency; (ii) take and use or sell the Marks and the goodwill of such
Assignor's business symbolized by the Marks and the right to carry on the
business and use the assets of such Assignor in connection with which the Marks
have been used; and (iii) direct such Assignor to refrain, in which event such
Assignor shall refrain, from using the Marks in any manner whatsoever, directly
or indirectly, and, if requested by the Collateral Agent, change such
Assignor's corporate name to eliminate therefrom any use of any Mark and
execute such other and further documents that the Collateral Agent may request
to further confirm this and to transfer ownership of the Marks and
registrations and any pending trademark applications therefor in the United
States Patent and Trademark Office or any equivalent government agency or
office in any foreign jurisdiction to the Collateral Agent.
ARTICLE V
SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS
5.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. Each Assignor represents
and warrants that it is the true and lawful exclusive owner of all rights in
(i) all trade secrets and proprietary information necessary to operate the
business of such Assignor (the "Trade Secret Rights"), (ii) the Patents listed
in Annex E hereto and (iii) the Copyrights listed in Annex F hereto, that said
Patents constitute all the patents and applications for patents that such
Assignor now owns and that are necessary in the conduct of the business of such
Assignor and that said Copyrights constitute all registrations of copyrights
and applications for copyright registrations that the Assignor now owns and
that are necessary
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in the conduct of the business of such Assignor. Each Assignor further
represents and warrants that it has the exclusive right to use and practice
under all Patents and Copyrights that it owns, uses or practices under and
has the exclusive right to exclude others from using or practicing under any
Patents its owns, uses or practices under. Each Assignor further warrants
that, as of the date hereof, it has no knowledge of any third party claim
that any aspect of such Assignor's present or contemplated business
operations infringes or will infringe any rights in any patent or copyright
or such Assignor has misappropriated any trade secret or proprietary
information. Each Assignor represents and warrants that upon the recordation
of an Assignment of Security interest in United States Trademarks and Patents
in the form of Annex G hereto in the United States Patent and Trademark
Office and the recordation of an Assignment of Security interest in United
States Copyrights in the form of Annex H hereto in the United States
Copyright Office, together with filings on Form UCC-1 pursuant to this
Agreement, all filings, registrations and recordings necessary or appropriate
to perfect the security interest granted to the Collateral Agent in the
United States Patents and United States Copyrights covered by this Agreement
under federal law will have been accomplished. Each Assignor agrees to
execute such an Assignment of Security interest in United States Trademarks
and Patents covering all right, title and interest in each United States
Patent of such Assignor and to record the same, and to execute such an
Assignment of Security interest in United States Copyrights covering all
right, title and interest in each United States Copyright of such Assignor
and to record the same. Each Assignor hereby grants to the Collateral Agent
an absolute power of attorney to sign, upon the occurrence and during the
continuance of any Event of Default, any document which may be required by
the U.S. Patent and Trademark Office or equivalent governmental agency in any
foreign jurisdiction or the U.S. Copyright Office or equivalent governmental
agency in any foreign jurisdiction in order to effect an absolute assignment
of all right, title and interest in each Patent and Copyright, and to record
the same.
5.2. LICENSES AND ASSIGNMENTS. Each Assignor hereby agrees not to divest
itself of any right under any Patent or Copyright which, in the good faith
judgment of management, is useful or valuable to its business absent prior
written approval of the Collateral Agent, except as otherwise permitted by this
Agreement or the Credit Agreement.
5.3. INFRINGEMENTS. Each Assignor agrees, promptly upon learning thereof,
to furnish the Collateral Agent in writing with all pertinent information
available to such Assignor with respect to infringement, contributing
infringement or active inducement to infringe in any Patent or Copyright or to
any claim that the practice of any Patent or the use of any Copyright violates
any property right of a third party, or with respect to any misappropriation of
any Trade Secret Right or any claim that practice of any Trade Secret Right
violates any property right of a third party. Each Assignor further agrees,
absent direction of the Collateral Agent to the contrary, diligently to
prosecute any Person infringing any Patent or Copyright or any Person
misappropriating any Trade Secret Right.
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5.4. MAINTENANCE OF PATENTS AND COPYRIGHTS. At its own expense, each
Assignor shall make timely payment of all post-issuance fees required pursuant
to 35 U.S.C. Section 41 and any foreign equivalent thereof to maintain in force
rights under each Patent, and to apply as permitted pursuant to applicable law
for any renewal of each Copyright absent prior written consent of the
Collateral Agent.
5.5. PROSECUTION OF PATENT OR COPYRIGHT APPLICATION. At its own expense,
each Assignor shall diligently prosecute all applications for Patents listed in
Annex E hereto and for Copyrights listed in Annex F hereto and shall not
abandon any such application prior to exhaustion of all administrative and
judicial remedies, absent written consent of the Collateral Agent.
5.6. OTHER PATENTS AND COPYRIGHTS. Within 30 days of the acquisition or
issuance of a Patent or of a Copyright registration, or of filing of an
application for a Patent or Copyright registration, the relevant Assignor shall
deliver to the Collateral Agent a copy of said Copyright registration or Patent
or certificate or registration of, or application therefor, as the case may be,
with an assignment for security as to such Patent or Copyright, as the case may
be, to the Collateral Agent and at the expense of such Assignor, confirming the
assignment for security, the form of such assignment for security to be
substantially the same as the form hereof or in such other form as may be
satisfactory to the Collateral Agent.
5.7. REMEDIES. If an Event of Default shall occur and be continuing, the
Collateral Agent may by written notice to the relevant Assignor, take any or
all of the following actions: (i) declare the entire right, title, and interest
of such Assignor in each of the Patents and Copyrights vested in the Collateral
Agent for the benefit of the Secured Creditors, in which event such right,
title, and interest shall immediately vest in the Collateral Agent for the
benefit of the Secured Creditors, in which case the Collateral Agent shall be
entitled to exercise the power of attorney referred to in Section 5.1 hereof
to execute, cause to be acknowledged and notarized and to record said absolute
assignment with the applicable agency; (ii) take and practice or sell the
Patents, Copyrights and Trade Secret Rights; and (iii) direct such Assignor to
refrain, in which event such Assignor shall refrain, from practicing the
Patents and using the Copyrights and/or Trade Secret Rights directly or
indirectly, and such Assignor shall execute such other and further documents as
the Collateral Agent may request further to confirm this and to transfer
ownership of the Patents, Copyrights and Trade Secret Rights to the Collateral
Agent for the benefit of the Secured Creditors.
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ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL
6.1. PROTECTION OF COLLATERAL AGENT'S SECURITY. Each Assignor will do
nothing to impair the rights of the Collateral Agent in the Collateral. Each
Assignor will at all times keep its Inventory and Equipment insured in favor of
the Collateral Agent, at such Assignor's own expense to the extent and in the
manner provided in the Credit Agreement; all policies or certificates with
respect to such insurance (and any other insurance maintained by such
Assignor); (i) shall be endorsed to the Collateral Agent's satisfaction for the
benefit of the Collateral Agent (including, without limitation, by naming the
Collateral Agent as loss payee and naming the Collateral Agent as an additional
insured); (ii) shall state that such insurance policies shall not be cancelled
or materially revised without 30 days' prior written notice thereof by the
insurer to the Collateral Agent; and (iii) certified copies of such policies or
certificates shall be deposited with the Collateral Agent. If any Assignor
shall fail to insure its Inventory and Equipment in accordance with the
preceding sentence, or if any Assignor shall fail to so endorse and deposit all
policies or certificates with respect thereto, the Collateral Agent shall have
the right (but shall be under no obligation) to procure such insurance and such
Assignor agrees to promptly reimburse the Collateral Agent for all costs and
expenses of procuring such insurance. The Collateral Agent shall, at the time
such proceeds of such insurance are distributed to the Secured Creditors, apply
such proceeds in accordance with Section 7.4 hereof. Each Assignor assumes all
liability and responsibility in connection with the Collateral acquired by it
and the liability of such Assignor to pay the Obligations shall in no way be
affected or diminished by reason of the fact that such Collateral may be lost,
destroyed, stolen, damaged or for any reason whatsoever unavailable to such
Assignor.
6.2. WAREHOUSE RECEIPTS NON-NEGOTIABLE. Each Assignor agrees that if any
warehouse receipt or receipt in the nature of a warehouse receipt is issued
with respect to any of its Inventory, such warehouse receipt or receipt in the
nature thereof shall not be "negotiable" (as such term is used in Section 7-104
of the Uniform Commercial Code as in effect in any relevant jurisdiction or
under other relevant law).
6.3. FURTHER ACTIONS. Each Assignor will, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such lists, descriptions and designations of its Collateral,
warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers
of attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Collateral Agent
deems reasonably appropriate or advisable to perfect, preserve or protect its
security interest in the Collateral,
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including, without limitation, any Collateral which previously constituted
Excluded Collateral.
6.4. FINANCING STATEMENTS. Each Assignor agrees to execute and deliver to
the Collateral Agent such financing statements, in form acceptable to the
Collateral Agent, as the Collateral Agent may from time to time request or as
are necessary or desirable in the opinion of the Collateral Agent to establish
and maintain a valid, enforceable, first priority perfected security interest
in the Collateral as provided herein and the other rights and security
contemplated hereby all in accordance with the Uniform Commercial Code as
enacted in any and all relevant jurisdictions or any other relevant law. Each
Assignor will pay any applicable filing fees, recordation taxes and related
expenses relating to its Collateral. Each Assignor hereby authorizes the
Collateral Agent to file any such financing statements without the signature of
such Assignor where permitted by law.
ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
7.1. REMEDIES; OBTAINING THE COLLATERAL UPON DEFAULT. Each Assignor
agrees that, if any Event of Default shall have occurred and be continuing,
then and in every such case, the Collateral Agent, in addition to any rights
now or hereafter existing under applicable law, shall have all rights as a
secured creditor under the Uniform Commercial Code in all relevant
jurisdictions and may also:
(i) personally, or by agents or attorneys, immediately take
possession of the Collateral or any part thereof, from such Assignor or
any other Person who then has possession of any part thereof with or
without notice or process of law, and for that purpose may enter upon such
Assignor's premises where any of the Collateral is located and remove the
same and use in connection with such removal any and all services,
supplies, aids and other facilities of such Assignor;
(ii) instruct the obligor or obligors on any agreement, instrument
or other obligation (including, without limitation, the Receivables and
the Contracts) constituting the Collateral to make any payment required by
the terms of such agreement, instrument or other obligation directly to
the Collateral Agent;
(iii) withdraw all monies, securities and instruments in the Cash
Collateral Account for application to the Obligations in accordance with
Section 7.4 hereof;
(iv) sell, assign or otherwise liquidate any or all of the
Collateral or any part thereof in accordance with Section 7.2 hereof, or
direct the relevant Assignor
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to sell, assign or otherwise liquidate any or all of the Collateral or
any part thereof, and, in each case, take possession of the proceeds of
any such sale or liquidation;
(v) take possession of the Collateral or any part thereof, by
directing the relevant Assignor in writing to deliver the same to the
Collateral Agent at any place or places designated by the Collateral
Agent, in which event such Assignor shall at its own expense:
(x) forthwith cause the same to be moved to the place
or places so designated by the Collateral Agent and there
delivered to the Collateral Agent;
(y) store and keep any Collateral so delivered to the
Collateral Agent at such place or places pending further
action by the Collateral Agent as provided in Section 7.2
hereof; and
(z) while the Collateral shall be so stored and kept,
provide such guards and maintenance services as shall be
necessary to protect the same and to preserve and maintain
them in good condition; and
(vi) license or sublicense, whether on an exclusive or nonexclusive
basis, any Marks, Patents or Copyrights included in the Collateral for
such term and on such conditions and in such manner as the Collateral
Agent shall in its sole judgment determine;
it being understood that each Assignor's obligation so to deliver the
Collateral is of the essence of this Agreement and that, accordingly, upon
application to a court of equity having jurisdiction, the Collateral Agent
shall be entitled to a decree requiring specific performance by such Assignor
of said obligation.
7.2. REMEDIES; DISPOSITION OF THE COLLATERAL. Any Collateral repossessed
by the Collateral Agent under or pursuant to Section 7.1 hereof and any other
Collateral whether or not so repossessed by the Collateral Agent, may be sold,
assigned, leased or otherwise disposed of under one or more contracts or as an
entirety, and without the necessity of gathering at the place of sale the
property to be sold, and in general in such manner, at such time or times, at
such place or places and on such terms as the Collateral Agent may, in
compliance with any mandatory requirements of applicable law, determine to be
commercially reasonable. Any of the Collateral may be sold, leased or otherwise
disposed of, in the condition in which the same existed when taken by the
Collateral Agent or after any overhaul or repair at the expense of the relevant
Assignor which the Collateral Agent shall determine to be commercially
reasonable. Any such disposition which shall be a private sale or other
private proceedings permitted by such requirements shall be made upon
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not less than 10 days' written notice to the relevant Assignor specifying the
time at which such disposition is to be made and the intended sale price or
other consideration therefor, and shall be subject, for the 10 days after the
giving of such notice, to the right of the relevant Assignor or any nominee of
such Assignor to acquire the Collateral involved at a price or for such other
consideration at least equal to the intended sale price or other consideration
so specified. Any such disposition which shall be a public sale permitted by
such requirements shall be made upon not less than 10 days' written notice to
the relevant Assignor specifying the time and place of such sale and, in the
absence of applicable requirements of law, shall be by public auction (which
may, at the Collateral Agent's option, be subject to reserve), after
publication of notice of such auction not less than 10 days prior thereto in
two newspapers in general circulation to be selected by the Collateral Agent.
To the extent permitted by any such requirement of law, the Collateral Agent
may bid for and become the purchaser of the Collateral or any item thereof,
offered for sale in accordance with this Section without accountability to the
relevant Assignor. If, under mandatory requirements of applicable law, the
Collateral Agent shall be required to make disposition of the Collateral
within a period of time which does not permit the giving of notice to the
relevant Assignor as hereinabove specified, the Collateral Agent need give
such Assignor only such notice of disposition as shall be reasonably
practicable in view of such mandatory requirements of applicable law. Each
Assignor agrees to do or cause to be done all such other acts and things as
may be reasonably necessary to make such sale or sales of all or any portion
of the Collateral of such Assignor valid and binding and in compliance with
any and all applicable laws, regulations, orders, writs, injunctions, decrees
or awards of any and all courts, arbitrations or governmental
instrumentalities, domestic or foreign, having jurisdiction over any such sale
or sales, all at such Assignor's expense.
7.3. WAIVER OF CLAIMS. Except as otherwise provided in this Agreement.
EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE
AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING
POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL,
INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY
PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH ASSIGNOR WOULD
OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF
ANY STATE, and such Assignor hereby further waives, to the extent permitted by
law:
(i) all damages occasioned by such taking of possession except any
damages which are the direct result of the Collateral Agent's gross
negligence or willful misconduct;
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(ii) all other requirements as to the time, place and terms of sale
or other requirements with respect to the enforcement of the Collateral
Agent's rights hereunder; and
(iii) all rights of redemption, appraisement, valuation, stay.
extension or moratorium now or hereafter in force under any applicable law
in order to prevent or delay the enforcement of this Agreement or the
absolute sale of the Collateral or any portion thereof, and each Assignor,
for itself and all who may claim under it, insofar as it or they now or
hereafter lawfully may, hereby waives the benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization
upon, any Collateral shall operate to divest all right, title, interest, claim
and demand, either at law or in equity, of the relevant Assignor therein and
thereto, and shall be a perpetual bar both at law and in equity against such
Assignor and against any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under such Assignor.
7.4. APPLICATION OF PROCEEDS. (a) All moneys collected by the Collateral
Agent upon any sale or other disposition of the Collateral (or, to the extent
the Pledge Agreement or Mortgages require proceeds of collateral thereunder to
be applied in accordance with the provisions of this Agreement, the Pledgee or
Mortgagee under such other Security Documents), together with all other moneys
received by the Collateral Agent hereunder, shall be applied as follows:
(i) first, to the payment of all Obligations owing the Collateral
Agent of the type described in clauses (iii) and (iv) of the definition of
"Obligations";
(ii) second, to the extent proceeds remain after the application
pursuant to the preceding clause (i), an amount equal to the outstanding
Primary Obligations shall be paid to the Secured Creditors as provided in
Section 7.4(e) hereof, with each Secured Creditor receiving an amount
equal to its outstanding Primary Obligations or, if the proceeds are
insufficient to pay in full all such Primary Obligations, its Pro Rata
Share of the amount remaining to be distributed;
(iii) third, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) and (ii), an amount equal to the
outstanding Secondary Obligations shall be paid to the Secured Creditors
as provided in Section 7.4(e) hereof, with each Secured Creditor receiving
an amount equal to its outstanding Secondary Obligations or, if the
proceeds are insufficient to pay in full all such Secondary Obligations.
its Pro Rata Share of the amount remaining to be distributed; and
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(iv) fourth, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) through (iii), inclusive, and
following the termination of this Agreement pursuant to Section 10.8(a)
hereof, to the relevant Assignor or to whomever may be lawfully entitled
to receive such surplus.
(b) For purposes of this Agreement (x) "Pro Rata Share" shall
mean, when calculating a Secured Creditor's portion of any distribution or
amount, that amount (expressed as a percentages equal to a fraction the
numerator of which is the then unpaid amount of such Secured Creditor's Primary
Obligations or Secondary Obligations, as the case may be, and the denominator
of which is the then outstanding amount of all Primary Obligations or Secondary
Obligations, as the case may be, (y) "Primary Obligations" shall mean (i) in
the case of the Credit Document Obligations, all principal of, and interest on,
all Loans under the Credit Agreement, all Unpaid Drawings theretofore made
(together with all interest accrued thereon), the aggregate Stated Amounts of
all Letters of Credit issued (or deemed issued) under the Credit Agreement, and
all Fees and (ii) in the case of the Other Obligations, all amounts due under
the Interest Rate Protection Agreements or Other Hedging Agreements (other than
indemnities, fees (including, without limitation, attorneys fees) and similar
obligations and liabilities) and (z) "Secondary Obligations" shall mean all
Obligations other than Primary Obligations.
(c) When payments to Secured Creditors are based upon their
respective Pro Rata Shares, the amounts received by such Secured Creditors
hereunder shall be applied (for purposes of making determinations under this
Section 7.4 only) (i) first, to their Primary Obligations and (ii) second, to
their Secondary Obligations. If any payment to any Secured Creditor of its Pro
Rata Share of any distribution would result in overpayment to such Secured
Creditor, such excess amount shall instead be distributed in respect of the
unpaid Primary Obligations or Secondary Obligations, as the case may be, of the
other Secured Creditors, with each Secured Creditor whose Primary Obligations
or Secondary Obligations, as the case may be, have not been paid in full to
receive an amount equal to such excess amount multiplied by a fraction the
numerator of which is the unpaid Primary Obligations or Secondary Obligations,
as the case may be, of such Secured Creditor and the denominator of which is
the unpaid Primary Obligations or Secondary Obligations, as the case may be, of
all Secured Creditors entitled to such distribution.
(d) Each of the Secured Creditors agrees and acknowledges that if
the Bank Creditors are to receive a distribution on account of undrawn amounts
with respect to Letters of Credit issued (or deemed issued) under the Credit
Agreement (which shall only occur after all outstanding Loans and Unpaid
Drawings with respect to such Letters of Credit have been paid in full), such
amounts shall be paid to the Agent under the Credit Agreement and held by it,
for the equal and ratable benefit of the Bank Creditors, as cash security for
the repayment of Obligations owing to the Bank Creditors as such. If any
amounts are held as cash security pursuant to the immediately preceding
sentence, then
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upon the termination of all outstanding Letters of Credit, and after the
application of all such cash security to the repayment of all Obligations
owing to the Bank Creditors after giving effect to the termination of all such
Letters of Credit, if there remains any excess cash, such excess cash shall be
returned by the Agent to the Collateral Agent for distribution in accordance
with Section 7.4(a) hereof.
(e) Except as set forth in Section 7.4(d) hereof, all payments
required to be made hereunder shall be made (x) if to the Bank Creditors, to
the Agent under the Credit Agreement for the account of the Bank Creditors, and
(y) if to the Other Creditors, to the trustee, paying agent or other similar
representative (each, a "Representative") for the Other Creditors or, in the
absence of such a Representative, directly to the Other Creditors.
(f) For purposes of applying payments received in accordance with
this Section 7.4, the Collateral Agent shall be entitled to rely upon (i) the
Agent under the Credit Agreement and (ii) the Representative for the Other
Creditors or, in the absence of such a Representative, upon the Other Creditors
for a determination (which the Agent, each Representative for any Other
Creditors and the Secured Creditors agree (or shall agree) to provide upon
request of the Collateral Agent) of the outstanding Primary Obligations and
Secondary Obligations owed to the Bank Creditors or the Other Creditors, as the
case may be. Unless it has actual knowledge (including by way of written notice
from a Bank Creditor or an Other Creditor) to the contrary, the Agent and each
Representative, in furnishing information pursuant to the preceding sentence,
and the Collateral Agent, in acting hereunder, shall be entitled to assume that
no Secondary Obligations are outstanding. Unless it has actual knowledge
(including by way of written notice from an Other Creditor) to the contrary,
the Collateral Agent, in acting hereunder, shall be entitled to assume that no
Interest Rate Protection Agreements or Other Hedging Agreements are in
existence.
(g) It is understood and agreed that each of the Assignors shall
remain jointly and severally liable to the extent of any deficiency between the
amount of the proceeds of the Collateral hereunder and the aggregate amount of
the sums referred to in clause (a) of this Section with respect to the relevant
Assignor.
7.5. REMEDIES CUMULATIVE. Each and every right, power and remedy hereby
specifically given to the Collateral Agent shall be in addition to every other
right, power and remedy specifically given under this Agreement, the Interest
Rate Protection Agreements or Other Hedging Agreements or the other Credit
Documents now or hereafter existing at law, in equity or by statute and each
and every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time or simultaneously and as
often and in such order as may be deemed expedient by the Collateral Agent. All
such rights, powers and remedies shall be cumulative and the exercise or the
beginning of the exercise of one shall not be deemed a waiver of the right to
exercise any
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other or others. No delay or omission of the Collateral Agent in the exercise
of any such right, power or remedy and no renewal or extension of any of the
Obligations shall impair any such right, power or remedy or shall be construed
to be a waiver of any Default or Event of Default or an acquiescence therein.
No notice to or demand on any Assignor in any case shall entitle it to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of any of the rights of the Collateral Agent to any other
or further action in any circumstances without notice or demand. In the event
that the Collateral Agent shall bring any suit to enforce any of its rights
hereunder and shall be entitled to judgment, then in such suit the Collateral
Agent may recover expenses, including attorneys' fees, and the amounts thereof
shall be included in such judgment.
7.6. DISCONTINUANCE OF PROCEEDINGS. In case the Collateral Agent shall
have instituted any proceeding to enforce any right, power or remedy under this
Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have been
determined adversely to the Collateral Agent, then and in every such case the
relevant Assignor, the Collateral Agent and each holder of any of the
Obligations shall be restored to their former positions and rights hereunder
with respect to the Collateral subject to the security interest created under
this Agreement, and all rights, remedies and powers of the Collateral Agent
shall continue as if no such proceeding had been instituted.
ARTICLE VIII
INDEMNITY
8.1. INDEMNITY. (a) Each Assignor jointly and severally agrees to
indemnify, reimburse and hold the Collateral Agent, each other Secured Creditor
and their respective successors, permitted assigns, employees, agents and
servants (hereinafter in this Section 8.1 referred to individually as an
"Indemnitee," and, collectively, as "Indemnities") harmless from any and all
liabilities, obligations, damages, injuries, penalties, claims, demands,
actions, suits, judgments and any and all costs, expenses or disbursements
(including attorneys' fees and expenses) (for the purposes of this Section 8.1
the foregoing are collectively called "expenses") of whatsoever kind and nature
imposed on, asserted against or incurred by any of the Indemnities in any way
relating to or arising out of this Agreement, any Interest Rate Protection
Agreement or Other Hedging Agreement, any other Credit Document or any other
document executed in connection herewith or therewith or in any other way
connected with the administration of the transactions contemplated hereby or
thereby or the enforcement of any of the terms of, or the preservation of any
rights under any thereof, or in any way relating to or arising out of the
manufacture, ownership, ordering, purchase, delivery, control, acceptance,
lease, financing, possession, operation, condition, sale, return or other
disposition, or use of the Collateral (including,
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without limitation, latent or other defects, whether or not discoverable), the
violation of the laws of any country, state or other governmental body or
unit, any tort (including, without limitation, claims arising or imposed under
the doctrine of strict liability, or for or on account of injury to or the
death of any Person (including any Indemnitee), or property damage), or
contract claim; provided that no Indemnitee shall be indemnified pursuant to
this Section 8.1(a) for losses, damages or liabilities to the extent caused by
the gross negligence or willful misconduct of such Indemnitee. Each Assignor
agrees that upon written notice by any Indemnitee of the assertion of such a
liability, obligation, damage, injury, penalty, claim, demand, action, suit or
judgment, the relevant Assignor shall assume full responsibility for the
defense thereof. Each Indemnitee agrees to use its best efforts to promptly
notify the relevant Assignor of any such assertion of which such Indemnitee
has knowledge.
(b) Without limiting the application of Section 8.1(a) hereof, each
Assignor agrees, jointly and severally, to pay, or reimburse the Collateral
Agent for any and all fees, costs and expenses of whatever kind or nature
incurred in connection with the creation, preservation or protection of the
Collateral Agent's Liens on, and security interest in, the Collateral.
including, without limitation, all fees and taxes in connection with the
recording or filing of instruments and documents in public offices, payment or
discharge of any taxes or Liens upon or in respect of the Collateral, premiums
for insurance with respect to the Collateral and all other fees, costs and
expenses in connection with protecting, maintaining or preserving the
Collateral and the Collateral Agent's interest therein, whether through
judicial proceedings or otherwise, or in defending or prosecuting any actions.
suits or proceedings arising out of or relating to the Collateral.
(c) Without limiting the application of Section 8.1(a) or (b) hereof,
each Assignor agrees, jointly and severally, to pay, indemnify and hold each
Indemnitee harmless from and against any loss, costs, damages and expenses
which such Indemnitee may suffer, expend or incur in consequence of or growing
out of any misrepresentation by any Assignor in this Agreement, any Interest
Rate Protection Agreement or Other Hedging Agreement, any other Credit Document
or in any writing contemplated by or made or delivered pursuant to or in
connection with this Agreement, any Interest Rate Protection Agreement or Other
Hedging Agreement or any other Credit Document.
(d) If and to the extent that the obligations of any Assignor under this
Section 8.1 are unenforceable for any reason, such Assignor hereby agrees to
make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
8.2. INDEMNITY OBLIGATIONS SECURED BY COLLATERAL; SURVIVAL. Any amounts
paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of each
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Assignor contained in this Article VIII shall continue in full force and
effect notwithstanding the full payment of all the Notes issued under the
Credit Agreement, the termination of all Interest Rate Protection Agreements
or Other Hedging Agreements and Letters of Credit, and the payment of all
other Obligations and notwithstanding the discharge thereof.
ARTICLE IX
DEFINITIONS
The following terms shall have the meanings herein specified. Such
definitions shall be equally applicable to the singular and plural forms of the
terms defined.
"Agent" shall have the meaning provided in the recitals to this Agreement.
"Agreement" shall have the meaning provided in the preamble to this
Agreement.
"Assignor" shall have the meaning provided in the preamble to this
Agreement.
"Bank Creditors" shall have the meaning provided in the recitals to this
Agreement.
"Banks" shall have the meaning provided in the recitals to this Agreement.
"Borrower" shall have the meaning provided in the recitals of this
Agreement.
"Cash Collateral Account" shall mean a non-interest bearing cash
collateral account maintained with, and in the sole dominion and control of,
the Collateral Agent for the benefit of the Secured Creditors.
"Chattel Paper" shall have the meaning provided in the Uniform Commercial
Code as in effect on the date hereof in the State of New York.
"Class" shall have the meaning provided in Section 10.2 of this Agreement.
"Collateral" shall have the meaning provided in Section 1.1(a) of this
Agreement.
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"Collateral Agents' shall have the meaning provided in the preamble to
this Agreement.
"Contract Rights" shall mean all rights of any Assignor (including without
limitation all rights to payment) under each Contract.
"Contracts" shall mean all contracts between any Assignor and one or more
additional parties (including, without limitation, any Interest Rate Protection
Agreements or Other Hedging Agreements), but excluding those Contracts to the
extent that the terms thereof expressly prohibit the assignment of, or granting
of a security interest in, such Assignor's rights and obligations thereunder
(it being understood and agreed, however, that notwithstanding the foregoing,
all rights to payment for money due or to become due pursuant to any excluded
contract shall be subject to the security interests created pursuant to this
Agreement).
"Copyrights" shall mean any U.S. or foreign copyright owned by any
Assignor, including any registrations of any Copyrights, in the U.S. Copyright
Office or the equivalent thereof in any foreign country, as well as any
application for a U.S. or foreign copyright registration now or hereafter made
with the U.S. Copyright Office or the equivalent thereof in any foreign
jurisdiction by any Assignor.
"Credit Agreement" shall have the meaning provided in the recitals to this
Agreement.
"Credit Document Obligations" shall have the meaning provided in the
definition of "Obligations" in this Article IX.
"Default" shall mean any event which, with notice or lapse of time, or
both, would constitute an Event of Default.
"Documents" shall have the meaning provided in the Uniform Commercial Code
as in effect on the date hereof in the State of New York.
"Equipment" shall mean any "equipment," as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor and, in any event, shall include,
but shall not be limited to, all machinery, equipment, furnishings, movable
trade fixtures and vehicles now or hereafter owned by any Assignor and any and
all additions, substitutions and replacements of any of the foregoing, wherever
located, together with all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto.
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"Event of Default" shall mean any Event of Default under, and as defined
in, the Credit Agreement or any payment default under any Interest Rate
Protection Agreement or Other Hedging Agreement and shall in any event, without
limitation, include any payment default on any of the Obligations after the
expiration of any applicable grace period.
"General Intangibles" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Goods" shall have the meaning provided in the Uniform Commercial Code as
in effect on the date hereof in the State of New York.
"Holdings" shall have the meaning provided in the recitals to this
Agreement.
"Indemnitee" shall have the meaning provided in Section 8.1 of this
Agreement.
"Instrument" shall have the meaning provided in the Uniform Commercial
Code as in effect on the date hereof in the State of New York.
"Interest Rate Protection Agreement or Other Hedging Agreement" shall have
the meaning provided in the recitals to this Agreement.
"Inventory" shall mean merchandise, inventory and goods, and all
additions, substitutions and replacements thereof, wherever located, together
with all goods, supplies, incidentals, packaging materials, labels, materials
and any other items used or usable in manufacturing, processing, packaging or
shipping same; in all stages of production -- from raw materials through work-
in-process to finished goods -- and all products and proceeds of whatever sort
and wherever located and any portion thereof which may be returned, rejected,
reclaimed or repossessed by the Collateral Agent from any Assignor's customers,
and shall specifically include all "inventory" as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor.
"Liens" shall mean any security interest, mortgage, pledge, lien, claim,
charge, encumbrance, title retention agreement, lessor's interest in a
financing lease or analogous instrument, in, of, or on any Assignor's property.
"Marks" shall mean all right, title and interest in and to any U.S. or
foreign trademarks, service marks and trade names now held or hereafter
acquired by any Assignor, including any registration or application for
registration of any trademarks and
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service marks in the United States Patent and Trademark Office, or the
equivalent, thereof in any State of the United States or in any foreign
country, and any trade dress including logos, designs, trade names, company
names, business names, fictitious business names and other business
identifiers in connection with which any of these registered or unregistered
marks are used.
"Obligations" shall mean (i) the full and prompt payment when due (whether
at the stated maturity, by acceleration or otherwise) of all obligations and
liabilities (including, without limitation, indemnities, fees and interest
thereon) of each Assignor owing to the Bank Creditors, now existing or
hereafter incurred under, arising out of or in connection with any Credit
Document to which such Assignor is a party (including all such obligations and
liability under any Guaranty to which such Assignor is a party) and the due
performance and compliance by each Assignor with the terms, conditions and
agreements of each such Credit Document (all such obligations and liabilities
under this clause (i), except to the extent consisting of obligations or
liabilities with respect to Interest Rate Protection Agreements or Other
Hedging Agreements, being herein collectively called the "Credit Document
Obligations"); (ii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
(including, without limitation, indemnities, fees and interest thereon) of each
Assignor owing to the Other Creditors, now existing or hereafter incurred
under, arising out of or in connection with any Interest Rate Protection
Agreement or Other Hedging Agreement, whether such Interest Rate Protection
Agreement or Other Hedging Agreement is now in existence or hereafter arising),
including, all such obligations under the Parent Guaranty and (y) each
Subsidiary Guarantor, all obligations and liabilities under any Guaranty to
which such Assignor is a party, in each case in respect of Interest Rate
Protection Agreements or Other Hedging Agreements), and the due performance and
compliance by such Assignor with all of the terms, conditions and agreements
contained in any such Interest Rate Protection Agreement or Other Hedging
Agreement (all such obligations and liabilities under this clause (ii) being
herein collectively called the "Other Obligations"); (iii) any and all sums
advanced by the Collateral Agent in order to preserve the Collateral or
preserve its security interest in the Collateral; (iv) in the event of any
proceeding for the collection or enforcement of any indebtedness, obligations,
or liabilities of each Assignor referred to in clauses (i), (ii) and (iii)
after an Event of Default shall have occurred and be continuing, the reasonable
expenses of re-taking, holding, preparing for sale or lease, selling or
otherwise disposing of or realizing on the Collateral, or of any exercise by
the Collateral Agent of its rights hereunder, together with reasonable
attorneys' fees and court costs; and (v) all amounts paid by any Indemnitee as
to which such Indemnitee has the right to reimbursement under Section 8.1 of
this Agreement. It is acknowledged and agreed that the "Obligations" shall
include extensions of credit of the types described above, whether outstanding
on the date of this Agreement or extended from time to time after the date of
this Agreement.
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"Other Creditors" shall have the meaning provided in the recitals to this
Agreement.
"Other Obligations" shall have the meaning provided in the definition of
"Obligations" in this Article IX.
"Parent" shall have the meaning provided in the recitals to this
Agreement.
"Patents" shall mean any U.S. or foreign patent to which any Assignor now
or hereafter has title and any divisions or continuations thereof, as well as
any application for a U.S. or foreign patent now or hereafter made by any
Assignor.
"Pledged Securities" shall have the meaning provided in the Pledge
Agreement.
"Primary Obligations" shall have the meaning provided in Section 7.4(b) of
this Agreement.
"Proceeds" shall have the meaning provided in the Uniform Commercial Code
as in effect in the State of New York on the date hereof or under other
relevant law and, in any event, shall include, but not be limited to, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Collateral Agent or any Assignor from time to time with respect to any of
the Collateral, (ii) any and all payments (in any form whatsoever) made or due
and payable to any Assignor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental authority (or any person acting
under color of governmental authority) and (iii) any and all other amounts from
time to time paid or payable under or in connection with any of the Collateral.
"Pro Rata Share" shall have the meaning provided in Section 7.4(b) of this
Agreement.
"Receivables" shall mean any "account" as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor and, in any event, shall include,
but shall not be limited to, all of such Assignor's rights to payment for, or
exchange of, goods sold or leased or services performed or product exchanged by
such Assignor, whether now in existence or arising from time to time hereafter,
including, without limitation, rights evidenced by an account, note, contract,
barter arrangement, security agreement, chattel paper, or other evidence of
indebtedness or security, together with (a) all security pledged, assigned,
hypothecated or granted to or held by such Assignor to secure the foregoing,
(b) all of any Assignor's right, title and interest in and to any goods or
services, the sale or exchange of
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which gave rise thereto, (c) all guarantees, endorsements and indemnifications
On, or of, any of the foregoing, (d) all powers of attorney for the execution
of any evidence of indebtedness or security or other writing in connection
therewith, (e) all books, records, ledger cards, and invoices relating
thereto, (f) all evidences of the filing of financing statements and other
statements and the registration of other instruments in connection therewith
and amendments thereto, notices to other creditors or secured parties, and
certificates from filing or other registration officers, (g) all credit
information, reports and memoranda relating thereto and (h) all "other
writings related in any way to the foregoing.
"Representative" shall have the meaning provided in Section 7.4(e) of
this Agreement.
"Requisite Creditors" shall have the meaning provided in Section 10.2 of
this Agreement.
"Secondary Obligations" shall have the meaning provided in Section 7.4(b)
of this Agreement.
"Secured Creditors" shall have the meaning provided in the recitals to
this Agreement.
"Termination Date" shall have the meaning provided in Section 10.8 of this
Agreement.
"Trade Secret Rights" shall have the meaning provided in Section 5.1 of
this Agreement.
"Tri-Star Holdings" shall have the meaning provided in the recitals to
this Agreement.
ARTICLE X
MISCELLANEOUS
10.1. NOTICES. Except as otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when delivered to the
party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed:
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(a) if to any Assignor, at it address set forth opposite its signature
below;
(b) if to the Collateral Agent:
Bankers Trust Company
One Bankers Trust Plaza
New York, New York 10006
Attention: Mary Kay Coyle
Telephone No.: (212) 250-9094
Facsimile No.: (212) 250-7218
(c) if to any Bank Creditor (other than the Collateral Agent), at such
address as such Bank Creditor shall have specified in the Credit Agreement; and
(d) if to any Other Creditor, at such address as such Other Creditor
shall have specified in writing to each Assignor and the Collateral Agent;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
10.2. WAIVER; AMENDMENT. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Assignor directly and adversely affected
thereby and the Collateral Agent (with the consent of (x) the Required Banks
(or all the Banks if required by Section 13.12 of the Credit Agreement) at all
times prior to the time at which all Credit Document Obligations have been paid
in full and all Commitments under the Credit Agreement have been terminated or
(y) the holders of at least a majority of the outstanding Other Obligations at
all times after the time on which all Credit Document Obligations have been
paid in hill and all Commitments under the Credit Agreement have been
terminated; PROVIDED, that any change, waiver, modification or variance
affecting the rights and benefits of a single Class of Secured Creditors (and
not all Secured Creditors in a like or similar manner) shall require the
written consent of the Requisite Creditors of such Class of Secured Creditors.
For the purpose of this Agreement the term "Class" shall mean each class of
Secured Creditors, EL,, whether (x) the Bank Creditors as holders of the Credit
Document Obligations or (y) the Other Creditors as the holders of the Other
Obligations. For the purpose of this Agreement, the term "Requisite Creditors"
of any Class shall mean each of (x) with respect to the Credit Document
Obligations, the Required Banks and (y) with respect to the Other Obligations,
the holders of at least a majority of all obligations outstanding from time to
time under the Interest Rate Protection Agreements or Other Hedging Agreements.
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10.3. OBLIGATIONS ABSOLUTE. The obligations of each Assignor hereunder
shall remain in full force and effect without regard to, and shall not be
impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of such Assignor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Agreement, any other Credit Document or
any Interest Rate Protection Agreement or Other Hedging Agreement; or (c) any
renewal, extension, amendment or modification of or addition or supplement to
or deletion from any Credit Document or any Interest Rate Protection Agreement
or Other Hedging Agreement or any security for any of the Obligations; (d) any
waiver, consent, extension, indulgence or other action or inaction under or in
respect of any such agreement or instrument including, without limitation, this
Agreement; (e) any furnishing of any additional security to the Collateral
Agent or its assignee or any acceptance thereof or any release of any security
by the Collateral Agent or its assignee; or (f) any limitation on any party's
liability or obligations under any such instrument or agreement or any
invalidity or unenforceability, in whole or in part, of any such instrument or
agreement or any term thereof; whether or not any Assignor shall have notice or
knowledge of any of the fore-going. The rights and remedies of the Collateral
Agent herein provided are cumulative and not exclusive of any rights or
remedies which the Collateral Agent would otherwise have.
10.4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
each Assignor and its successors and assigns and shall inure to the benefit of
the Collateral Agent and its successors and assigns; PROVIDED, that no Assignor
may transfer or assign any or all of its rights or obligations hereunder
without the prior written consent of the Collateral Agent. All agreements,
statements, representations and warranties made by each Assignor herein or in
any certificate or other instrument delivered by such Assignor or on its behalf
under this Agreement shall be considered to have been relied upon by the
Secured Creditors and shall survive the execution and delivery of this
Agreement, the other Credit Documents and the Interest Rate Protection
Agreements or Other Hedging Agreements regardless of any investigation made by
the Secured Creditors or on their behalf.
10.5. HEADINGS DESCRIPTIVE. The headings of the several sections of
this Agreement are inserted for convenience only and shall not in any way
affect the meaning or construction of any provision of this Agreement.
10.6. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE LAW OF THE STATE OF NEW YORK.
10.7. ASSIGNOR'S DUTIES. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that each Assignor shall remain
liable to perform all of the obligations, if any, assumed by it with respect to
the Collateral and the Collateral Agent
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shall not have any obligations or liabilities with respect to any Collateral
by reason of or arising out of this Agreement, nor shall the Collateral Agent
be required or obligated in any manner to perform or fulfill any of the
obligations of each Assignor under or with respect to any Collateral.
10.8. TERMINATION; RELEASE. (a) After the Termination Date this
Agreement shall terminate (provided that all indemnities set forth herein
including, without limitation, in Section 8.1 hereof shall survive such
termination) and the Collateral Agent, at the request and expense of the
respective Assignor, will promptly execute and deliver to such Assignor a
proper instrument or instruments (including Uniform Commercial Code termination
statements on form UCC-3) acknowledging the satisfaction and termination of
this Agreement, and will duly assign, transfer and deliver to such Assignor
(without recourse and without any representation or warranty) such of the
Collateral as may be in the possession of the Collateral Agent and as has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement. As used in this Agreement, "Termination Date" shall mean the date
upon which the Total Commitment and all Interest Rate Protection Agreements or
Other Hedging Agreements have been terminated, no Note is outstanding (and all
Loans have been paid in full), all Letters of Credit have been terminated and
all other Obligations then owing have been paid in full.
(b) In the event that any part of the Collateral is sold (x) at any
time prior to the time at which all Credit Document Obligations have been paid
in full and all Commitments under the Credit Agreement have been terminated, in
connection with a sale permitted by Section 9.02 of the Credit Agreement or is
otherwise released at the direction of the Required Banks (or all the Banks if
required by Section 13.12 of the Credit Agreement) or (y) at any time
thereafter, to the extent permitted by the Interest Rate Protection Agreements
or Other Hedging Agreements, and in the case of clause (x) and (y), the
proceeds of such sale or sales or from such release are applied in accordance
with the terms of the Credit Agreement or such Interest Rate Protection
Agreements or Other Hedging Agreements, as the case may be, to the extent
required to be so applied, the Collateral Agent, at the request and expense of
such Assignor, will duly assign, transfer and deliver to such Assignor (without
recourse and without any representation or warranty) such of the Collateral as
is then being (or has been) so sold or released and as may be in the possession
of the Collateral Agent and has not theretofore been released pursuant to this
Agreement.
(c) At any time that the respective Assignor desires that Collateral
be released as provided in the foregoing Section 10.8(a) or (b), it shall
deliver to the Collateral Agent a certificate signed by its chief financial
officer or another senior officer of such Assignor stating that the release of
the respective Collateral is permitted pursuant to such Section 10.8(a) or (b).
If requested by the Collateral Agent (although the Collateral Agent shall have
no obligation to make any such request), the relevant Assignor shall furnish
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appropriate legal opinions (from counsel, which may be in-house counsel,
reasonably acceptable to the Collateral Agent) to the effect set forth in the
immediately preceding sentence. The Collateral Agent shall have no liability
whatsoever to any Secured Creditor as the result of any release of Collateral
by it as permitted by this Section 10.8.
10.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the
Collateral Agent.
10.10. THE COLLATERAL AGENT. The Collateral Agent will hold in
accordance with this Agreement all items of the Collateral at any time received
under this Agreement, it is expressly understood and agreed that the
obligations of the Collateral Agent as holder of the Collateral and interests
therein and with respect to the disposition thereof, and otherwise under this
Agreement, are only those expressly set forth in this Agreement. The
Collateral Agent shall act hereunder on the terms and conditions set forth in
Section 12 of the Credit Agreement.
10.11. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.12. LIMITED OBLIGATIONS. It is the desire and intent of each
Assignor and the other Secured Creditors that this Agreement shall be enforced
against each Assignor to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.
10.13. ADDITIONAL ASSIGNORS. it is understood and agreed that any
Subsidiary of Parent that is required to execute a counterpart of this
Agreement after the date hereof pursuant to the Credit Agreement shall
automatically become an Assignor hereunder by executing a counterpart hereof
and delivering the same to the Collateral Agent.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
Address:
11535 East Pine Street MAPLE LEAF AEROSPACE, INC., as an
Tulsa, Oklahoma 74116 Assignor
Attention: Richard Small
Telephone: 918-234-7771
Facsimile: 918-234-7744 By /s/ Muzzafar Mirza
-----------------------------------
Title: Vice President
AEROSPACE ACQUISITION CORP.
as an Assignor
By /s/ Muzzafar Mirza
-----------------------------------
Title: Vice President
TRI-STAR AEROSPACE, INC.
(as successor by merger to AEROSPACE
MERGER SUB I, INC.), as an Assignor
By /s/ Muzzafar Mirza
-----------------------------------
Title: Vice President
TRI-STAR AEROSPACE CO., as an Assignor
By /s/ Muzzafar Mirza
-----------------------------------
Title: Vice President
<PAGE>
TRI-STAR INVENTORY MANAGEMENT
SERVICE, INC., as an Assignor
By /s/ Muzzafar Mirza
-----------------------------------
Title: Vice President
BANKERS TRUST COMPANY,
as Collateral Agent
By /s/ Mary Kay Coyle
-----------------------------------
Title: Managing Director
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PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of September 19, 1996 (as amended, modified
or supplemented from time to time, this "Agreement"), made by each of the
undersigned Pledgors (each, a "Pledgor" and, together with each other entity
that is required to sign a counterpart hereof pursuant to Section 23 hereof,
the "Pledgors"), in favor of BANKERS TRUST COMPANY, as Collateral Agent (the
"Pledgee"), for the benefit of the Secured Creditors (as defined below).
Except as otherwise defined herein, terms used herein and defined in the
Credit Agreement (as defined below) shall be used herein as therein defined.
W I T N E S S E T H:
WHEREAS, Maple Leaf Aerospace, Inc. ("Parent"), Aerospace Acquisition
Corp. ("Holdings"), Tri-Star Aerospace, Inc. (as successor by merger to
Aerospace Merger Sub I, Inc.) ("Tri-Star Holdings"), Tri-Star Aerospace Co.
(the "Borrower"), various financial institutions from time to time party
thereto (the "Banks"), and Bankers Trust Company, as Agent (the "Agent", and
together with the Banks and the Pledgee, the "Bank Creditors"), have entered
into a Credit Agreement, dated as of September 19, 1996, providing for the
making of Loans to the Borrower and the issuance of, and participation in,
Letters of Credit for the account of the Borrower as contemplated therein (as
used herein, the term "Credit Agreement" means the Credit Agreement described
above in this paragraph as amended, modified, extended, renewed, replaced,
restated, supplemented, restructured or refinanced from time to time, and
including any agreement extending the maturity of, refinancing or
restructuring (including, but not limited to, the inclusion of additional
borrowers thereunder or any increase in the amount borrowed) all, or any
portion of, the Indebtedness under such agreement or any successor agreements;
WHEREAS, any Pledgor may from time to time enter into, or guaranty the
obligations of any other Pledgor under, one or more (i) interest rate
protection agreements (including, without limitation, interest rate swaps,
caps, floors, collars and similar agreements), (ii) foreign exchange
contracts, currency swap agreements or other similar agreements or
arrangements designed to protect against the fluctuations in currency values
and/or (iii) other types of hedging agreements from time to time (each such
agreement or arrangement with an Other
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Creditor (as hereinafter defined), an "Interest Rate Protection Agreement or
Other Hedging Agreement"), with any Bank, any affiliate thereof or a
syndicate of financial institutions organized by any such Bank or affiliate
(any such Bank or affiliate (even if any such Bank subsequently ceases to be
a Bank under the Credit Agreement for any reason) and any such other
institution that participates in such Interest Rate Protection Agreements or
Other Hedging Agreements, and their subsequent successors and assigns,
collectively, the "Other Creditors", and together with the Bank Creditors,
the "Secured Creditors");
WHEREAS, pursuant to Section 14 of the Credit Agreement, Parent,
Holdings and Tri-Star Holdings have provided a joint and several guaranty of
the payment when due of all obligations and liabilities of the Borrower under
and in connection with the Credit Documents and each Interest Rate Protection
Agreement or Other Hedging Agreement entered into with one or more Other
Creditors;
WHEREAS, pursuant to the Subsidiaries Guaranty, the Subsidiary
Guarantors have jointly and severally guaranteed the payment when due of all
obligations and liabilities of the Borrower under or with respect to the
Credit Documents and each Interest Rate Protection Agreement or Other Hedging
Agreement entered into with one or more Other Creditors;
WHEREAS, it is a condition precedent to the making of Loans to the
Borrower and the issuance of, and participation in, Letters of Credit for the
account of the Borrower under the Credit Agreement and to the Other Creditors
entering into Interest Rate Protection Agreements or Other Hedging Agreements
that each Pledgor shall have executed and delivered to the Pledgee this
Agreement; and
WHEREAS, each Pledgor desires to execute this Agreement to satisfy the
conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to each
Pledgor, the receipt and sufficiency of which are hereby acknowledged, each
Pledgor hereby makes the following representations and warranties to the
Pledgee and hereby covenants and agrees with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by each Pledgor
for the benefit of the Secured Creditors to secure:
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(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
(including, without limitation, indemnities, fees and interest thereon) of
such Pledgor owing to the Bank Creditors, now existing or hereafter
incurred under, arising out of or in connection with any Credit Document
to which such Pledgor is a party (including all such obligations and
liabilities under any Guaranty to which such Pledgor is a party) and the
due performance and compliance by such Pledgor with the terms, conditions
and agreements contained in each such Credit Document (all such
obligations and liabilities under this clause (i), except to the extent
consisting of obligations or indebtedness with respect to Interest Rate
Protection Agreements or Other Hedging Agreements, being herein
collectively called the "Credit Document Obligations");
(ii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
(including, without limitation, indemnities, fees and interest thereon) of
such Pledgor owing to the Other Creditors, now existing or hereafter
incurred under, arising out of or in connection with any Interest Rate
Protection Agreement or Other Hedging Agreement, whether such Interest
Rate Protection Agreement or Other Hedging Agreement is now in existence
or hereafter arising, including all such obligations and liabilities under
any Guaranty to which such Pledgor is a party, in each case in respect of
Interest Rate Protection Agreements or Other Hedging Agreements, and the
due performance and compliance by such Pledgor with all of the terms,
conditions and agreements contained in each such Interest Rate Protection
Agreement or Other Hedging Agreement (all such obligations and liabilities
under this clause (ii) being herein collectively called the "Other
Obligations");
(iii) any and all sums advanced by the Pledgee in order to preserve
the Collateral (as hereinafter defined) or preserve its security interest
in the Collateral;
(iv) in the event of any proceeding for the collection or enforcement
of any indebtedness, obligations or liabilities referred to in clauses
(i), (ii) and (iii) above, after an Event of Default (such term, as used
in this Agreement, shall mean any Event of Default under, and as defined
in, the Credit Agreement or any payment default under any Interest Rate
Protection Agreement or Other Hedging Agreement and shall in any event
include,
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without limitation, any payment default (after the expiration of any
applicable grace period) on any of the Obligations (as hereinafter
defined)) shall have occurred and be continuing, the reasonable expenses
of retaking, holding, preparing for sale or lease, selling or otherwise
disposing or realizing on the Collateral, or of any exercise by the
Pledgee of its rights hereunder, together with reasonable attorneys' fees
and court costs; and
(v) all amounts paid by any Indemnitee to which such Indemnitee has
the right to reimbursement under Section II of this Agreement;
all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (v) of this Section I being herein collectively called the
"Obligations"; it being acknowledged and agreed that the "Obligations" shall
include extensions of credit of the types described above, whether
outstanding on the date of this Agreement or extended from time to time after
the date of this Agreement.
2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used herein: (i)
the term "Stock" shall mean (x) with respect to corporations incorporated
under the laws of the United States or any State or territory thereof (each,
a "Domestic Corporation), all of the issued and outstanding shares of capital
stock of any Domestic Corporation at any time owned by each Pledgor and all
certificates and instruments evidencing the same and (y) with respect to
corporations not Domestic Corporations (each, a "Foreign Corporation"), all
of the issued and outstanding shares of capital stock of any Foreign
Corporation at any time owned by each Pledgor and all certificates and
instruments evidencing the same, PROVIDED that, except as provided in the
last sentence of this Section 2, such Pledgor shall not be required to pledge
hereunder more than 65% of the total combined voting power of all classes of
capital stock of any Foreign Corporation entitled to vote; (ii) the term
"Notes" shall mean (x) all Intercompany Notes at any time issued to each
Pledgor and (y) all other promissory notes from time to time issued to, or
held by, each Pledgor; and (iii) the term "Securities" shall mean all of the
Stock and Notes. Each Pledgor represents and warrants that on the date hereof
(i) each Subsidiary of such Pledgor, and the direct ownership thereof, is
listed on Annex A hereto; (ii) the Stock held by such Pledgor consists of the
number and type of shares of the stock of the corporations as described in
Annex B hereto; (iii) such Stock constitutes that percentage of the issued
and outstanding capital stock of the issuing corporation as is set forth in
Annex B hereto; (iv) the Notes held by such Pledgor consist of the promissory
notes described in Annex C hereto where such Pledgor is listed as the lender;
(v) such Pledgor is the holder of record and sole beneficial owner of the
Stock and Notes held by such Pledgor and there exist no options or preemptive
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rights in respect of any such Stock; and (vi) on the date hereof, such
Pledgor owns no other Securities. To the extent provided in the Credit
Agreement, the 65% limitation set forth in clause (i)(y) of this Section 2
and in Section 3.2 hereof shall no longer be applicable and such Pledgor
shall duly pledge and deliver to the Pledgee such of the Securities not
theretofore required to be pledged hereunder.
3. PLEDGE OF SECURITIES, ETC.
3.1. PLEDGE. To secure the Obligations and for the purposes set forth
in Section 1 hereof, each Pledgor hereby: (i) grants to the Pledgee a
security interest in all of the Collateral owned by the Pledgor; (ii) pledges
and deposits as security with the Pledgee the Securities owned by such
Pledgor on the date hereof, and delivers to the Pledgee certificates or
instruments therefor, duly endorsed in blank in the case of Notes and
accompanied by undated stock powers duly executed in blank by such Pledgor in
the case of Stock, or such other instruments of transfer as are acceptable to
the Pledgee; and (iii) assigns, transfers, hypothecates, mortgages, charges
and sets over to the Pledgee all of such Pledgor's right, title and interest
in and to such Securities (and in and to all certificates or instruments
evidencing such Securities), to be held by the Pledgee, and, at the Pledgee's
request, to be registered in the name of the Pledgee or in the name of its
nominee or nominees upon the terms and conditions set forth in this Agreement.
3.2. SUBSEQUENTLY ACQUIRED SECURITIES. If any Pledgor shall acquire (by
purchase, stock dividend or otherwise) any additional Securities at any time
or from time to time after the date hereof, such Pledgor will forthwith
pledge and deposit such Securities (or certificates or instruments
representing such Securities) as security with the Pledgee and deliver to the
Pledgee certificates therefor or instruments thereof, duly endorsed in blank
in the case of Notes and accompanied by undated stock powers duly executed in
blank in the case of Stock, or such other instruments of transfer as are
acceptable to the Pledgee, and will promptly thereafter deliver to the
Pledgee a certificate executed by any of the Chairman of the Board, the Chief
Financial Officer, the President, a Vice Chairman, any Vice President or the
Treasurer of such Pledgor describing such Securities and certifying that the
same have been duly pledged with the Pledgee hereunder. Subject to the last
sentence of Section 2 hereof, no Pledgor shall be required at any time to
pledge hereunder any Stock which is more than 65% of the total combined
voting power of all classes of capital stock of any Foreign Corporation
entitled to vote.
3.3. UNCERTIFICATED SECURITIES. Notwithstanding anything to the
contrary contained in Sections 3.1 and 3.2 hereof, if any Securities (whether
or not
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now owned or hereafter acquired) are uncertificated securities, the
respective Pledgor shall promptly notify the Pledgee thereof, and shall
promptly take all actions required to perfect the security interest of the
Pledgee under applicable law (including, in any event, under Sections 8-313
and 8-321 of the New York UCC, if applicable). Each Pledgor further agrees to
take such actions as the Pledgee deems necessary or desirable to effect the
foregoing and to permit the Pledgee to exercise any of its rights and
remedies hereunder, and agrees to provide an opinion of counsel reasonably
satisfactory to the Pledgee with respect to any such pledge of uncertificated
Securities promptly upon request of the Pledgee.
3.4. DEFINITION OF PLEDGED STOCK, PLEDGED NOTES, PLEDGED SECURITIES AND
COLLATERAL. All Stock at any time pledged or required to be pledged hereunder
is hereinafter called the "Pledged Stock", all Notes at any time pledged or
required to be pledged hereunder are hereinafter called the "Pledged Notes",
all of the Pledged Stock and Pledged Notes together are hereinafter called
the "Pledged Securities", which together with all proceeds thereof, including
any securities and moneys received and at the time held by the Pledgee
hereunder, is hereinafter called the "Collateral".
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall have
the right to appoint one or more sub-agents for the purpose of retaining
physical possession of the Pledged Securities, which may be held (in the
discretion of the Pledgee) in the name of the Pledgor, endorsed or assigned
in blank or in favor of the Pledgee or any nominee or nominees of the Pledgee
or a sub-agent appointed by the Pledgee.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until an Event of
Default shall have occurred and be continuing, each Pledgor shall be entitled
to exercise any and all voting and other consensual rights pertaining to the
Pledged Securities and to give consents, waivers or ratifications in respect
thereof; PROVIDED, that no vote shall be cast or any consent, waiver or
ratification given or any action taken which would violate or be inconsistent
with any of the terms of this Agreement, any other Credit Document or any
Interest Rate Protection Agreement or Other Hedging Agreement (collectively,
the "Secured Debt Agreements"), or which would have the effect of impairing
the position or interests of the Pledgee or any other Secured Creditor. All
such rights of such Pledgor to vote and to give consents, waivers and
ratifications shall cease in case an Event of Default shall occur and be
continuing, and Section 7 hereof shall become applicable.
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6. DIVIDENDS AND OTHER DISTRIBUTIONS Unless an Event of Default shall
have occurred and be continuing, all cash dividends payable in respect of the
Pledged Stock and all payments in respect of the Pledged Notes shall be paid
to the respective Pledgor; PROVIDED, that all cash dividends payable in
respect of the Pledged Stock which are determined by the Pledgee to represent
in whole or in part an extraordinary, liquidating or other distribution in
return of capital shall be paid, to the extent so determined to represent an
extraordinary, liquidating or other distribution in return of capital, to the
Pledgee and retained by it as part of the Collateral. The Pledgee shall also
be entitled to receive directly, and to retain as part of the Collateral:
(i) all other or additional stock or other securities or property
(other than cash) paid or distributed by way of dividend or otherwise in
respect of the Pledged Stock;
(ii) all other or additional stock or other securities or property
(including cash) paid or distributed in respect of the Pledged Stock by
way of stock-split, spin-off, split-up, reclassification, combination of
shares or similar rearrangement; and
(iii) all other or additional stock or other securities or property
(including cash) which may be paid in respect of the Collateral by reason
of any consolidation, merger, exchange of stock, conveyance of assets,
liquidation or similar corporate reorganization.
Nothing contained in this Section 6 shall limit or restrict in any way the
Pledgee's right to receive proceeds of the Collateral in any form in
accordance with Section 3 of this Agreement. All dividends, distributions or
other payments which are received by any Pledgor contrary to the provisions
of this Section 6 and Section 7 hereof shall be received in trust for the
benefit of the Pledgee, shall be segregated from other property or funds of
such Pledgor and shall be forthwith paid over to the Pledgee as Collateral in
the same form as so received (with any necessary endorsement).
7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of Default
shall have occurred and be continuing, the Pledgee shall be entitled to
exercise all of the rights, powers and remedies (whether vested in it by this
Agreement or by any other Secured Debt Agreement or by law) for the
protection and enforcement of its rights in respect of the Collateral, and
the Pledgee shall be
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entitled, without limitation, to exercise the following rights, which each
Pledgor hereby agrees to be commercially reasonable:
(i) to receive all amounts payable in respect of the Collateral
payable to such Pledgor under Section 6 hereof;
(ii) to transfer all or any part of the Pledged Securities into the
Pledgee's name or the name of its nominee or nominees if not previously so
transferred;
(iii) to accelerate any Pledged Note which may be accelerated in
accordance with its terms, and take any other action to collect upon any
Pledged Note (including, without limitation, to make any demand for
payment thereon);
(iv) to vote all or any part of the Pledged Stock (whether or not
transferred into the name of the Pledgee) and give all consents, waivers
and ratifications in respect of the Collateral and otherwise act with
respect thereto as though it were the outright owner thereof (each Pledgor
hereby irrevocably constituting and appointing the Pledgee the proxy and
attorney-in-fact of such Pledgor, with full power of substitution to do
so); and
(v) at any time or from time to time to sell, assign and deliver, or
grant options to purchase, all or any part of the Collateral, or any
interest therein, at any public or private sale, without demand of
performance, advertisement or notice of intention to sell (except as set
forth in the proviso below) or of the time or place of sale or adjournment
thereof or to redeem or otherwise (all of which are hereby waived by each
Pledgor), for cash. on credit or for other property, for immediate or
future delivery without any assumption of credit risk, and for such price
or prices and on such terms as the Pledgee in its absolute discretion may
determine; PROVIDED, that at least 10 days' notice of the time and place of
any such sale shall be given to such Pledgor.
Each purchaser at any such sale shall hold the property so sold absolutely
free from any claim or right on the part of each Pledgor, acid each Pledgor
hereby waives and releases to the fullest extent permitted by law any right
or equity of redemption with respect to the Collateral, whether before or
after sale hereunder, and all rights, if any, of marshalling the Collateral
and any other security for the Obligations or otherwise. At any such sale,
unless prohibited by applicable law, the Pledgee on
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behalf of the Secured Creditors may bid for and purchase all or any part of
the Collateral so sold free from any such right or equity of redemption.
Neither the Pledgee nor any other Secured Creditor shall be liable for
failure to collect or realize upon any or all of the Collateral or for any
delay in so doing nor shall any of them be under any obligation to take any
action whatsoever with regard thereto. Notwithstanding anything to the
contrary contained herein, the Pledgee shall give to the respective Pledgor
three Business Days' prior notice or such greater period as is required by
applicable law of any foreclosure effected on any Pledged Securities of such
Pledgor pursuant to the terms of this Agreement.
8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of the
Pledgee provided for in this Agreement or any other Secured Debt Agreement or
now or hereafter existing at law or in equity or by statute shall be
cumulative and concurrent and shall be in addition to every other such right,
power or remedy. The exercise or beginning of the exercise by the Pledgee or
any other Secured Creditor of any one or more of the rights, powers or
remedies provided for in this Agreement or any other Secured Debt Agreement
or now or hereafter existing at law or in equity or by statute or otherwise
shall not preclude the simultaneous or later exercise by the Pledgee or any
other Secured Creditor of all such other rights, powers or remedies, and no
failure or delay on the part of the Pledgee or any other Secured Creditor to
exercise any such right, power or remedy shall operate as a waiver thereof.
No notice to or demand on any Pledgor in any case shall entitle such Pledgor
to any other or further notice or demand in similar other circumstances or
constitute a waiver of any of the rights of the Pledgee or any other Secured
Creditor to any other or further action in any circumstances without demand
or notice.
9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Pledgee upon
any sale or other disposition of the Collateral pursuant to the terms of this
Agreement, together with all other moneys received by the Pledgee hereunder,
shall be applied to the payment of the Obligations in the manner provided in
Section 7.4 of the Security Agreement
(b) It is understood and agreed that the Pledgors shall remain
jointly and severally liable to the extent of any deficiency between the
amount of the proceeds of the Collateral hereunder and the aggregate amount
of the Obligations.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
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officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall
not be obligated to see to the application of any part of the purchase money
paid over to the Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.
11. INDEMNITY. Each Pledgor jointly and severally agrees (i) to
indemnify and hold harmless the Pledgee, each other Secured Creditor and
their respective successors, assigns, employees and agents (hereunder
referred to individually as, an "Indemnitee" and, collectively, as
"Indemnities") from and against any and all claims, demands, losses,
judgments and liabilities of whatsoever kind or nature, and (ii) to reimburse
each Indemnitee for all costs and expenses, including attorneys' fees,
growing out of or resulting from this Agreement or the exercise by any
Indemnitee of any right or remedy granted to it hereunder or under any other
Secured Debt Agreement except, with respect to clauses (i) and (ii) above,
for those arising from such Indemnitee's gross negligence or willful
misconduct. In no event shall any Indemnitee hereunder be liable, in the
absence of gross negligence or willful misconduct on its part, for any matter
or thing in connection with this Agreement other than to account for moneys
actually received by it in accordance with the terms hereof. If and to the
extent that the obligations of any Pledgor under this Section II are
unenforceable for any reason, such Pledgor hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law. The indemnity obligations of each Pledgor
contained in this Section II shall continue in full force and effect
notwithstanding the full payment of all the Notes issued under the Credit
Agreement, the termination of all Interest Rate Protection Agreements or
Other Hedging Agreements and Letters of Credit and the payment of all other
Obligations and notwithstanding the discharge thereof.
12. FURTHER ASSURANCES; POWER OF ATTORNEY. (a) Each Pledgor agrees that
it will join with the Pledgee in executing and, at such Pledgor's own
expense, file and refile under the UCC such financing statements,
continuation statements and other documents in such offices as the Pledgee
may deem necessary or appropriate and wherever required or permitted by law
in order to perfect and preserve the Pledgee's security interest in the
Collateral and hereby authorizes the Pledgee to file financing statements and
amendments thereto relative to all or any part of the Collateral without the
signature of such Pledgor where permitted by law, and agrees to do such
further acts and things and to execute and deliver to the Pledgee such
additional conveyances, assignments, agreements and instruments as the
Pledgee may reasonably require or deem advisable to carry into
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effect the purposes of this Agreement or to further assure and confirm unto
the Pledgee its rights, powers and remedies hereunder.
(b) Each Pledgor hereby appoints the Pledgee, such Pledgor's attorney-
in-fact, with full authority in the place and stead of such Pledgor and in the
name of such Pledgor or otherwise, from time to time after the occurrence and
during the continuance of an Event of Default, in the Pledgee's discretion to
take such actions and to execute any instrument which the Pledgee may deem
necessary or advisable to accomplish the purposes of this Agreement.
13. THE PLEDGEE AS COLLATERAL AGENT. The Pledgee will hold in accordance
with this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed that the obligations of the
Pledgee as holder of the Collateral and interests therein and with respect to
the disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement. The Pledgee shall act hereunder on the
terms and conditions set forth herein and in Section 12 of the Credit
Agreement.
14. TRANSFER BY PLEDGORS. Except for sales of Collateral permitted (i)
prior to the date all Credit Document Obligations have been paid in full and
all Commitments under the Credit Agreement have been terminated, pursuant to
the Credit Agreement, and (ii) thereafter, pursuant to the other Secured Debt
Agreements, no Pledgor will sell or otherwise dispose of, grant any option with
respect to, or mortgage, pledge or otherwise encumber any of the Collateral or
any interest therein (except in accordance with the terms of this Agreement).
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGORS. (a) Each
Pledgor represents, warrants and covenants that:
(i) it is the legal, record and beneficial owner of, and has good and
marketable title to, all Securities pledged by it hereunder, subject to no
pledge, lien, mortgage, hypothecation security interest, charge, option or
other encumbrance whatsoever, except the liens and security interests
created by this Agreement;
(ii) it has full power, authority and legal right to pledge all the
Securities pledged by it pursuant to this Agreement;
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(iii) this Agreement has been duly authorized, executed and delivered
by such Pledgor and constitutes a legal, valid and binding obligation of
such Pledgor enforceable in accordance with its terms;
(iv) no consent of any other party (including, without limitation,
any stockholder, member, limited or general partner or creditor of such
Pledgor or any of its Subsidiaries) other than the approval of the board
of directors or shareholders of the Pledgor for the transfer of the
securities to the Pledgee hereunder, which approval has already been
obtained, and no consent, license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or declaration
with, any governmental authority is required to be obtained by such
Pledgor in connection with (a) the execution, delivery or performance of
this Agreement, (b) the validity or enforceability of this Agreement, (c)
the perfection or enforceability of the Pledgee's security interest in the
Collateral or (d) except for compliance with or as may be required by
applicable securities laws, the exercise by the Pledgee of any of its
rights or remedies provided herein;
(v) the execution, delivery and performance of this Agreement does
not violate any provision of any applicable law or regulation or of any
order, judgment, writ, award or decree of any court, arbitrator or
domestic or foreign governmental authority, or of the certificate of
incorporation, certificate of formation or by-laws, as the case may be, of
such Pledgor or of any securities issued by such Pledgor or any of its
Subsidiaries, or of any indenture, mortgage, lease, deed of trust, credit
agreement, loan agreement, agreement or other instrument to which such
Pledgor or any of its Subsidiaries is a party or which purports to be
binding upon such Pledgor or any of its Subsidiaries or upon any of their
respective assets and will not result in the creation or imposition of any
lien or encumbrance on any of the assets of such Pledgor or any of its
Subsidiaries except as contemplated by this Agreement;
(vi) all the shares of Stock have been duly and validly issued, are
fully paid and nonassessable and are subject to no options to purchase or
similar rights;
(vii) each of the Pledged Notes constitute, or, when executed by the
obligor thereof, will constitute, the legal, valid and binding obligation
of such obligor, enforceable in accordance with its terms; and
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(viii) the pledge, assignment and delivery to the Pledgee of the
Securities pursuant to this Agreement, creates a valid and perfected first
security interest in such Securities and the proceeds thereof, subject to
no prior lien or encumbrance or to any agreement purporting to grant to
any third party a lien or encumbrance on the property or assets of such
Pledgor which would include the Securities.
(b) Each Pledgor covenants and agrees that it will defend the
Pledgee's right, title and security interest in and to the Securities and the
proceeds thereof against the claims and demands of all persons whomsoever; and
such Pledgor covenants and agrees that it will have like title to and right to
pledge any other property at any time hereafter pledged to the Pledgee as
Collateral hereunder and will likewise defend the right thereto and security
interest therein of the Pledgee and the Secured Creditors.
(c) Each Pledgor covenants and agrees that it will take no
action which would violate any of the terms of any Secured Debt Agreement.
16. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each Pledgor
under this Agreement shall be absolute and unconditional and shall remain in
full force and effect (subject to the provisions of Section 18 hereof) without
regard to, and shall not be released, suspended, discharged, terminated or
otherwise affected by, any circumstance or occurrence whatsoever, including,
without limitation: (i) any renewal, extension, amendment or modification of or
addition or supplement to or deletion from any Secured Debt Agreement or any
other instrument or agreement referred to therein, or any assignment or
transfer of any thereof; (ii) any waiver, consent, extension, indulgence or
other action or inaction under or in respect of any such agreement or
instrument or this Agreement; (iii) any furnishing of any additional security
to the Pledgee or its assignee or any acceptance thereof or any release of any
security by the Pledgee or its assignee; (iv) any limitation on any party's
liability or obligations under any such instrument or agreement or any
invalidity or unenforceability, in whole or in part, of any such instrument or
agreement or any term thereof; or (v) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other like
proceeding relating to such Pledgor or any Subsidiary of such Pledgor, or any
action taken with respect to this Agreement by any trustee or receiver, or by
any court, in any such proceeding, whether or not such Pledgor shall have
notice or knowledge of any of the foregoing.
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<PAGE>
17. REGISTRATION, ETC. (a) If an Event of Default shall have occurred and
be continuing and any Pledgor shall have received from the Pledgee a written
request or requests that such Pledgor cause any registration, qualification or
compliance under any Federal or state securities law or laws to be effected
with respect to all or any part of the Pledged Stock, such Pledgor as soon as
practicable and at its expense will use its best efforts to cause such
registration to be effected (and be kept effective) and will use its best
efforts to cause such qualification and compliance to be effected (and be kept
effective) as may be so requested and as would permit or facilitate the sale
and distribution of such Pledged Stock, including, without limitation,
registration under the Securities Act of 1933 as then in effect (or any
similar statute then in effect), appropriate qualifications under applicable
blue sky or other state securities laws and appropriate compliance with any
other government requirements; PROVIDED, that the Pledgee shall furnish to such
Pledgor such information regarding the Pledgee as such Pledgor may request in
writing and as shall be required in connection with any such registration,
qualification or compliance. Such Pledgor will cause the Pledgee to be kept
reasonably advised in writing as to the progress of each such registration,
qualification or compliance and as to the completion thereof, will furnish to
the Pledgee such number of prospectuses, offering circulars or other documents
incident thereto as the Pledgee from time to time may reasonably request, and
will indemnify the Pledgee and all others participating in the distribution of
the Pledged Stock against all claims, losses, damages and liabilities caused by
any untrue statement (or alleged untrue statement) of a material fact contained
therein (or in any related registration statement, notification or the like) or
by any omission (or alleged omission) to state therein (or in any related
registration statement, notification or the like) a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as the same may have been caused by an untrue statement or
omission based upon information furnished in writing to such Pledgor by the
Pledgee expressly for use therein.
(b) If at any time when the Pledgee shall determine to exercise its
right to sell all or any part of the Pledged Securities pursuant to Section 7,
and such Pledged Securities or the part thereof to be sold shall not, for any
reason whatsoever, be effectively registered under the Securities Act of 1933,
as then in effect, the Pledgee may, in its sole and absolute discretion, sell
such Pledged Securities or part thereof by private sale in such manner and
under such circumstances as the Pledgee may deem necessary or advisable in
order that such sale may legally be effected without such registration. Without
limiting the generality of the foregoing, in any such event the Pledgee, in its
sole and absolute discretion: (i) may proceed to make such private sale
notwithstanding that a registration statement for the
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<PAGE>
purpose of registering such Pledged Securities or part thereof shall have
been filed under such Securities Act; (ii) may approach and negotiate with a
single possible purchaser to effect such sale; and (iii) may restrict such
sale to a purchaser who will represent and agree that such purchaser is
purchasing for its own account, for investment, and not with a view to the
distribution or sale of such Pledged Securities or part thereof. In the event
of any such sale, the Pledgee shall incur no responsibility or liability for
selling all or any part of the Pledged Securities at a price which the
Pledgee, in its sole and absolute discretion, may in good faith deem
reasonable under the circumstances, notwithstanding the possibility that a
substantially higher price might be realized if the sale were deferred until
after registration as aforesaid.
18. TERMINATION, RELEASE. (a) After the Termination Date (as defined
below), this Agreement shall terminate (provided that all indemnities set forth
herein including, without limitation, in Section 11 hereof shall survive any
such termination) and the Pledgee, at the request and expense of the respective
Pledgor, will promptly execute and deliver to such Pledgor a proper instrument
or instruments acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to such Pledgor (without
recourse and without any representation or warranty) such of the Collateral as
may be in the possession of the Pledgee and as has not theretofore been sold or
otherwise applied or released pursuant to this Agreement. As used in this
Agreement "Termination Date" shall mean the date upon which the Total
Commitment and all Interest Rate Protection Agreements or Other Hedging
Agreements have been terminated, no Note under the Credit Agreement is
outstanding (and all Loans have been paid in full), all Letters of Credit have
been terminated, and all other Obligations then owing have been paid in full.
(b) In the event that any part of the Collateral is sold (x) at any time
prior to the time at which all Credit Document Obligations have been paid in
full and all Commitments under the Credit Agreement have been terminated, in
connection with a sale permitted by Section 9.02 of the Credit Agreement or is
otherwise released at the direction of the Required Banks (or all the Banks if
required by Section 13.12 of the Credit Agreement) or (y) at any time
thereafter, to the extent permitted by the other Secured Debt Agreements, and
in the case of clause (x) and (y), and the proceeds of such sale or sales or
from such release are applied in accordance with the terms of the Credit
Agreement or such other Secured Debt Agreement, as the case may be, to the
extent required to be so applied, the Pledgee, at the request and expense of
such Pledgor will duly assign, transfer and deliver to such Pledgor (without
recourse and without any representation or
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<PAGE>
warranty) such of the Collateral as is then being (or has been) so sold or
released and as may be in possession of the Pledgee and has not theretofore
been released pursuant to this Agreement.
(c) At any time that a Pledgor desires that Collateral be released
as provided in the foregoing Section 18(a) or (b), it shall deliver to the
Pledgee a certificate signed by its chief financial officer or another senior
officer of such Pledgor stating that the release of the respective Collateral
is permitted pursuant to such Section 18(a) or (b). If requested by the
Pledgee (although the Pledgee shall have no obligation to make any such
request), the relevant Pledgor shall furnish appropriate legal opinions (from
counsel, which may be in-house counsel, reasonably acceptable to the Pledgee)
to the effect set forth in the immediately preceding sentence. The Pledgee
shall have no liability whatsoever to any Secured Creditor as the result of any
release of Collateral by it as permitted by this Section 18.
19. NOTICES, ETC. All notices and other communications hereunder shall be
in writing and shall be delivered or mailed by first class mail, postage
prepaid, addressed:
(a) if to any Pledgor, at its address set forth opposite its
signature below;
(b) if to the Pledgee, at:
Bankers Trust Company
One Bankers Trust Plaza
New York, New York 10006
Attention: Mary Kay Coyle
Telephone No.: (212) 250-9094
Facsimile No.: (212) 230-7218
(c) if to any Bank (other than the Pledgee), at such address as such
Bank shall have specified in the Credit Agreement; and
(d) if to any Other Creditor, at such address as such Other Creditor
shall have specified in writing to each Pledgor and the Pledgee;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
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<PAGE>
20. WAIVER; AMENDMENT. None of the terms and conditions of this Agreement
may be changed, waived, modified or varied in any manner whatsoever unless in
writing duly signed by each Pledgor directly and adversely affected thereby and
the Pledgee (with the written consent of (x) the Required Banks (or all the
Banks if required by Section 13.12 of the Credit Agreement) at all times prior
to the time at which all Credit Document Obligations have been paid in full and
all Commitments under the Credit Agreement have been terminated, and (y) the
holders of at least a majority of the outstanding Other Obligations at all
times after the time on which all Credit Document Obligations have been paid in
full and all Commitments under the Credit Agreement have been terminated;
PROVIDED, that any change, waiver, modification or variance affecting the
rights and benefits of a single Class (as defined below) of Secured Creditors
(and not all Secured Creditors in a like or similar manner) shall require the
written consent of the Requisite Creditors (as defined below) of such Class.
For the purpose of this Agreement, the term "Class" shall mean each class of
Secured Creditors I.E., whether (i) the Bank Creditors as holders of the Credit
Document Obligations or (ii) the Other Creditors as holders of the Other
Obligations. For the purpose of this Agreement, the term "Requisite Creditors"
of any Class shall mean each of (i) with respect to the Credit Document
Obligations, the Required Banks and (ii) with respect to the Other Obligations,
the holders of at least a majority of all obligations outstanding from time to
time under the Interest Rate Protection Agreements or Other Hedging Agreements.
21. MISCELLANEOUS. This Agreement shall create a continuing security
interest in the Collateral and shall (i) remain in full force and effect,
subject to release and/or termination as set forth in Section 18 hereof, (ii)
be binding upon each Pledgor, its successors and assigns; PROVIDED, HOWEVER,
that no Pledgor shall assign any of its rights or obligations hereunder without
the prior written consent of the Pledgee (and the prior written consent of the
Required Banks or, to the extent required by Section 13.12 of the Credit
Agreement, each of the Banks), and (iii) inure, together with the rights and
remedies of the Pledgee hereunder, to the benefit of the Pledgee, the other
Secured Creditors and their respective successors, transferees and assigns.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF
THE STATE OF NEW YORK. The headings of the several sections and subsections in
this Agreement are for purposes of reference only and shall not limit or define
the meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument. In the event that any provision of this
Agreement shall prove to be invalid or unenforceable, such provision shall be
deemed to be severable from the other provisions of this Agreement which shall
remain binding on all parties hereto.
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<PAGE>
22. RECOURSE. This Agreement is made with full recourse to the Pledgors
and pursuant to and upon all the representations, warranties, covenants and
agreements on the part of the Pledgors contained herein and in the other
Secured Debt Agreements and otherwise in writing in connection herewith or
therewith.
23. ADDITIONAL PLEDGORS. It is understood and agreed that any Subsidiary
of Parent that is required to execute a counterpart of this Agreement after the
date hereof pursuant to the Credit Agreement shall automatically become a
Pledgor hereunder by executing a counterpart hereof and delivering the same to
the Pledgee.
24. LIMITED OBLIGATIONS. It is the desire and intent of each Pledgor and
the other Secured Creditors that this Agreement shall be enforced against each
Pledgor to the fullest extent permissible under the laws and public policies
applied in each jurisdiction in which enforcement is sought.
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<PAGE>
IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this
Agreement to be executed by their duly elected officers duly authorized as of
the date first above written.
Address:
11535 East Pine Street MAPLE LEAF AEROSPACE, INC., as Pledgor
Tulsa, Oklahoma 79116
Attn: Richard Small
Tel: 918 234 7771
Fax: 918 234 7744 By /s/ Muzzafar Mirza
-------------------------------------
Title: Vice President
AEROSPACE ACQUISITION CORP., as a
Pledgor
By /s/ Muzzafar Mirza
-------------------------------------
Title: Vice President
TRI-STAR AEROSPACE, INC.
(as successor by merger to
AEROSPACE MERGER SUB I, INC.),
as a Pledgor
By /s/ Muzzafar Mirza
-------------------------------------
Title: Vice President
<PAGE>
TRI-STAR AEROSPACE CO., as a Pledgor
By /s/ Muzzafar Mirza
-------------------------------------
Title: Vice President
TRI-STAR INVENTORY
MANAGEMENT SERVICE, INC., as a Pledgor
By /s/ Muzzafar Mirza
-------------------------------------
Title: Vice President
BANKERS TRUST COMPANY,
as Collateral Agent, Pledgee
By /s/ Mary Kay Coyle
-------------------------------------
Title: Managing Director
<PAGE>
V.C., Inc. - Lease N0. 101
Revised: January 8, 1990
LEASE AGREEMENT
THIS LEASE AGREEMENT made and entered into this 12 day of July, 1990, by and
between ROBERT L. ZELIGSON TRUST by it's agent Vansu Company hereinafter
called "Landlord", and Tri-Star Aerospace, Inc., hereinafter called "Tenant".
WITNESSETH: That Landlord for and in consideration of the agreed rents to be
paid and in consideration of the other covenants and agreements hereinafter
recited to be kept and performed, does hereby lease, let and demise unto
Tenant the following real property and premises, hereinafter called "Leased
Premises", on the terms and conditions recited:
1. DESCRIPTION OF LEASED PREMISES: 11535 - 39 East Pine Street TULSA,
OKLAHOMA 74116 consisting of 22,500 sq. ft. (more or less) office/warehouse.
2. TERM OF LEASE AND USE. TO HAVE AND TO HOLD the said described
property and Leased Premises unto the said Tenant, its successors and
assigns, for the term of two (2) years commencing on the September 1, 1990.
Tenant warrants that the use of the Leased Premises shall only be for the
conduct of its principal business which is described as follows:
Aerospace Hardware and Fittings.
3. RENTAL AND SECURITY DEPOSIT: Tenant agrees to pay Landlord as rent
for said Leased Premises the total sum of One Hundred Twenty-One Thousand
Five Hundred Dollars ($121,500.00). Additionally Tenant shall pay Landlord
as a security deposit for said Leased Premises the sum of a $5,155.00 all
payments of rent and the security deposit to be made in accordance with the
provisions of Exhibit "A" attached hereto and made part hereof.
4. ASSIGNMENT AND SUBLEASE: This Lease Agreement shall not be assigned
or the property Subleased in whole or part without written consent of
Landlord first obtained. Provided, however, Landlord agrees that consent to
any such assignment or sublease shall not be unreasonably withheld, provided
the use of the property is the same type of use being made of the property by
Tenant hereunder; such rental rate payable on this Lease Agreement and
provided further that Tenant shall remain liable for the full performance of
the Tenant's obligations under this lease.
5. LIABILITY: Tenant agrees to defend, save and hold Landlord harmless
from any and all claims, judgments, liabilities or demands of any person or
persons whomsoever arising out of or connected with the use of said Leased
Premises by the Tenant and the operation of its business there. Tenant agrees
to carry and maintain employer's liability and public liability insurance in
the amount of $1,000,000.00 to protect both Tenant and Landlord from any
liabilities or legal exposure contemplated in this paragraph. Tenant agrees
to furnish Landlord a copy of said insurance policy or a certificate
evidencing issuance of a policy of such insurance upon request. Tenant's
policy of insurance shall further provide for waiver of subrogation rights
(by Tenant's Insurer) as against Landlord.
6. TAXES AND INSURANCE: Tenant shall pay to Landlord, as additional
rent for each calendar year, (except for the base year) its pro rata portion
of the amount paid by Landlord in that calendar year for insurance premiums
and general real property taxes which are in excess of the amount paid for
insurance premiums and general real property taxes in the base year. The base
year shall be the year in which this Lease is executed.
Tenant shall pay that portion of such excess insurance premiums and
general real property taxes which shall be calculated by multiplying said
excess by a fraction, the numerator of which shall be the gross square foot
area of the premises demised to the Tenant, and the denominator of which
shall be the gross square foot area of all of the buildings in BRANIFF "M"
WAREHOUSE CONSISTING OF *. Tenant shall also pay a portion, computed in the
manner above, of any special taxes or special assessments levied or assessed
at any time during the term against the land and improvements on the
property. The charges provided for in this Section shall be paid within ten
(10) days after demand therefor is made by Landlord.
7. CONDITION OF PREMISES: Tenant represents and acknowledges that it
has inspected the Leased Premises prior to execution of this Lease Agreement
and found same clean and in good repair unless otherwise specified in writing
under the Clause "Special Conditions". *150,000 square feet
8. MAINTENANCE AND REPAIR:
A. Landlord will keep the exterior of the Leased Premises, except doors,
windows and glass, in repair. Landlord shall not repair any damage
caused by the negligence of the Tenant or its agents, servants,
employees, customers, licensees or invitees. Landlord shall be under no
other liability for repair, maintenance, alteration, or other action
with reference to the Leased Premises or any other part thereof, or any
plumbing, heating, electrical, air conditioning, or other mechanical
installation therein, except (1) that Landlord agrees to repair any
latent defects appearing on the premises within ninety (90) days after
occupancy of the same by Tenant; and provided further that Landlord
shall during the period of written warranty given by manufacturer or
supplier of any air conditioning or heating equipment request the same
to be repaired by the manufacturer or supplier upon the request of
Tenant.
B. Tenant hereby agrees to keep the interior of the Leased Premises, and all
doors, windows and glass, together with all electrical, plumbing and
other mechanical installation therein, in good order and repair, and
will make all replacements thereto at its own expense, and will replace
all light bulbs needing replacement in the Leased Premises. Landlord
shall not be liable to Tenant for any damage in the leased premises due
to the backing up of any drains or any water leaks. Tenant will
surrender the Leased Premises at the expiration of the term or at such
other time as it may vacate the Leased Premises in as good a condition
as when received, excepting depreciation caused by ordinary wear and
tear.
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<PAGE>
C. The Landlord shall initially furnish heating and air conditioning equipment
to the Leased Premises. The Tenant shall cause this equipment to be
serviced no less than semiannually or at such greater frequency as the
nature of its business may require. In the event such service is not
provided by the Tenant, the Landlord shall have the right to schedule
the servicing to be done by a serviceman or contractor selected by the
Landlord and to charge the cost of the service to the Tenant or, at the
option of the Landlord, bill and collect the service charge from the
Tenant. All heating and air conditioning equipment is the property of
the Landlord and at the termination of this Lease Agreement, the Tenant
shall not have the right to remove said equipment. Landlord shall have
exclusive control over and exclusive use of the roof of the Leased
Premises.
D. Tenant specifically agrees that in addition to the other repairs under the
terms of this Lease Agreement, it will, at its sole cost and expense,
promptly repair all exterior doors and exterior metal panels of the
Leased Premises immediately after any of said doors have sustained any
type of damage. Should Tenant fail to repair any damaged door within ten
(10) days after receiving written notice from Landlord requesting such
repairs to be made, then Landlord shall have the right to hire such
parties as Landlord deems appropriate to repair said exterior doors and
exterior metal panels, at Tenant's sole cost and expense. The Tenant
will reimburse Landlord for any such costs of such repairs within ten
(10) days after receiving written notice front Landlord of cost of such
repairs.
9. LIENS: Tenant shall at all times keep the Leased Premises free and
clear of any liens, charges and claims because of any act or omission to act
on the part of Tenant in connection with the maintenance and repair of the
premises and likewise shall keep the Leased Premises free and clear of any
liens, charges and claims by reason of the acquisition of Tenant, and the
installation therein, of any fixtures and equipment; and if any such liens,
charges or claims are made or filed against said Leased Premises, Tenant
agrees to promptly discharge the same and furnish Landlord evidence thereof.
10. CLEAN UP:
10.A Tenant agrees, at Tenant's cost and expense, to keep or cause to be
kept its Leased Premises, the exterior area adjacent to the Leased Premises,
and the adjacent parking areas, (assigned to Tenant) clean and free of litter
and other debris, provided, however, should Tenant fail to keep its Leased
Premises and other areas and adjacent parking areas free of litter and other
debris then Landlord, after notice, shall have the right to clean up Tenant's
Leased Premises and other areas or cause the same to be cleaned and charge
the cost of same to Tenants by appropriate billing therefor. Final clean-up
at the termination of this Lease Agreement shall be completed to Landlord's
satisfaction as evidenced in writing prior to termination date of this Lease
Agreement. Tenant shall be obligated to pay rent as a hold-over tenant until
the Leased Premises and exterior area adjacent to the Leased Premises have
been cleaned, whether the cleaning is performed by the Tenant or by the
Landlord. If the cleaning is performed by the Landlord the Tenant shall pay
all cleaning costs with in ten (10) days after receiving notice from Landlord
of the cost of such repairs
10.B Tenant hereby agrees not to engage in any activity, or produce or
store upon the Leased Premises any such goods or equipment which would cause
or allow for any hazardous waste or materials, or in any manner place the
Building or any of its tenants in any danger whatsoever. If, at any time,
Landlord discovers that the Tenant's use or occupancy of the Leased Premises
has caused or allowed any hazardous waste or materials on the Property or
endangered the Building or any of its tenants then this Lease Agreement will
immediately terminate as specified in paragraph 16, and Tenant shall, at its
sole cost and expense, immediately commence and complete cleanup and removal
as required by all of the applicable governmental regulations and agencies,
and to the satisfaction of the Landlord. Further, Tenant shall indemnify and
hold Landlord harmless for any claim, action, expense (including all attorney
fees for an attorney hired by Landlord, and all costs incurred in any
dispute), fire, or damage in connection with any of the above being found.
11. INSURANCE AND OBLIGATION TO REPAIR AND RESTORE: If the Leased
Premises shall be damaged by fire, the elements, unavoidable accident or
other casualty, and is not thereby rendered untenantable, in whole or in
part, Landlord shall promptly, at Landlord's own expense, cause such damage
to be repaired and the rent shall not be abated: if by reason of such
occurrence, the Leased Premises shall be rendered untenantable only in part,
the Landlord shall promptly, at Landlord's own expense, cause the damage to
be repaired and minimum rent meanwhile shall be abated proportionally as to
the portion of the Leased Premises rendered untentable; if by reason of such
occurrence the Leased Premises should be rendered wholly untenantable; the
Landlord shall promptly, at Landlord's own expense, cause such damage to be
repaired, and the minimum annual rent meanwhile shall be abated in whole,
unless within thirty (30) days after such occurrence Landlord shall give the
Tenant written notice that the Landlord has elected not to reconstruct the
destroyed Leased Premises, in which event this Lease Agreement and tenancy
hereby created shall cease as of the date of said occurrence, all rentals to
be adjusted as of such date. If the Leased Premises shall be damaged by fire,
the elements, unavoidable accident or other casualty, and are thereby
rendered wholly untenantable, following which the Landlord does not commence
diligent restoration of said damages within sixty (60) days after such
occurrence of damages, then, in such event, the Tenant shall have the right,
at Tenant's option, to declare this Lease Agreement cancelled by giving
appropriate written notice to the Landlord within ten (10) days first
following said sixty (60) day period, following which this Lease Agreement
and tenancy hereby created shall cease as of the date of occurrence of said
damages, all rentals to be adjusted as of such date. Tenant shall acquire,
install, and service such fire extinguishers as are necessary to comply with
Tulsa City Codes.
12. UTILITIES: Tenant agrees to promptly pay and discharge all water,
light, heating, gas, refuse collection and disposal, and other utility bills
incurred from date of occupancy by Tenant to date of lease termination and
vacation of the premises by Tenant, together with all other operating expense
connected with its use and occupancy of the Leased Premises, including the
payment of all taxes levied and assessed against Tenant's personal property,
fixtures, equipment and inventory.
13. SURRENDER OF LEASED PREMISES: ADDITIONS, ALTERATIONS AND
MODIFICATIONS; At the expiration of the lease term or any extensions or
renewals of this Lease Agreement, Tenant agrees to surrender possession of
the Leased Premises to Landlord in as good a state of repair and condition as
at the date of initial possession hereunder by Tenant, reasonable wear and
tear alone excepted. Reasonable wear and tear is limited to that which is
normal for a quality office/warehouse facility and is further defined on
Exhibit "B" annexed herein. Tenant shall make no additions, alterations or
modifications to the Leased Premises (including painting of the interior
walls and floors of the building) without the prior written consent of the
Landlord, and Landlord may require Tenant to submit written plans and
specifications for its approval. All additions, alterations or modifications
made to the Leased Premises by the Tenant (after obtaining Landlord's written
consent) shall be made at the sole cost and expense of Tenant. All additions,
alterations and modifications shall, at the time of installation, become the
sole
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<PAGE>
property of the Landlord and shall be left as a part of the Leased Premises
at the end of the term of this Lease Agreement. Provided, however, Landlord
shall have the right at the end of the lease term to require the Tenant to
remove any or all improvements made to the Leased Premises and restore the
Leased Premises to the condition it was in at the beginning of the lease
term, reasonable wear and tear alone excepted. Such removal and restoration,
if required, shall be made at the sole cost and expense of the Tenant. Tenant
shall, at the end of this Lease Agreement, have the right to remove any trade
fixtures from the Lease Premises which have not been affixed to the Leased
Premises so as to become a part of the realty. However, any damage caused to
the building in removing said trade fixtures 'shall be repaired at the sole
cost and expense of the Tenant.
14. CONDEMNATION: In the event that the entire Leased Premises shall be
taken in condemnation proceedings or by exercise of any right of eminent
domain for public or quasi-public use, this Lease Agreement shall terminate
as of the date of said taking and all unearned rent and other charges paid in
advance shall be refunded to the Tenant after deducting any charges owed by
Tenant to Landlord and the Tenant shall surrender possession of the Leased
Premises to the Landlord. In the event a portion of the Lease Premises shall
be taken by such proceedings, the Landlord shall have the option to terminate
this Lease Agreement or make a proportionate reduction of rent during the
remainder of the lease term. The award for such taking shall belong to the
Landlord; except that the Tenant shall be entitled to make a claim in its own
name to the condemning authority for the value of any furniture, trade
fixtures, trade equipment, merchandise or personal property of any kind
belonging to the Tenant, and not forming a part of the real estate, or for
the cost of moving all of the same or for moving such business as is
necessary.
15. BANKRUPTCY OR RECEIVERSHIP: Should Tenant make an assignment for
the benefit of creditors or a receiver be appointed or bankruptcy proceedings
be instituted by it or against it, then any of such events shall, at the
option of Landlord, operate forthwith to cancel and hold this Lease Agreement
for naught, and Lessor shall, after notice, be entitled to immediate
possession of the Leased Premises.
16. DEFAULT: It is expressly covenanted and agreed that in the event
the Tenant vacates or abandons the Leased Premises during the term of the
Lease, or defaults at any time in any term of this Lease or in the payment of
any rent or other payment herein provided for, then, in any of such events
and without further notice the Landlord at its option may declare this lease
terminated and all accrued and unaccrued rentals immediately due and payable,
and with or without legal process enter into and upon the Leased Premises,
repossess the same and expel the Tenant, or any other occupant therefrom, it
being expressly agreed by the Tenant that time is of the essence hereof and
the Tenant expressly waives all notice of non-payment of rent or termination
of the Lease Agreement or demand for possession or demand for rent, and
further provided that such lease termination, re-entry and expulsion of the
Tenant or other occupancy whether by legal process or otherwise, shall be
without prejudice to the right of the Landlord to sue and collect the accrued
and unaccrued rental of for the breach of any other covenant herein
contained. In the event of any such default the Landlord may, at its option,
without forfeiting any accrued or unaccrued rentals due the Landlord, enter
into possession and relet the Leased Premises or any part thereof and the
Tenant agrees to further pay all of Landlord's attorney's fees and to pay for
all costs of redecorating, remodeling, leasing fees or any costs of such
re-letting. Any re-letting or re-entry and expulsion of the Tenant shall in
no manner relieve the Tenant of the obligation to immediately pay all accrued
and unaccrued rental due under this Lease Agreement, provided, however, that
in the event the Landlord receives from the Tenant all of such accrued and
unaccrued rental, whether by judgment or otherwise, and further finds a
tenant suitable to the Landlord during the remaining term of this Lease
Agreement, then at the conclusion thereof the Landlord shall remit back to
Tenant any excess rentals received hereunder, less any charges incurred by
reason of such default of the Tenant, including the aforesaid redecorating,
remodeling, leasing fees and attorney's fees. In any event, if Tenant
defaults in the performance of any of the terms, covenants, agreements or
conditions contained in this Lease Agreement, and the Landlord places the
enforcement of this Lease Agreement, or any part hereof, or the collection of
any rent, or charge due, or to become due, or the recovery of the possession
of the Premises, in the hands of an attorney, the Tenant agrees to pay the
reasonable attorney fees of Landlord; plus all the actual costs of
enforcement or collection, including but not limited to expert witness fees
and charges, all copying expenses and laboratory tests. All property of the
Tenant, including property otherwise legally exempt from levy and execution
in or upon the Leased Premises is now and shall be bound for and subject to
the payment of all rent and other sums herein agreed to be paid, whether due
or not, and such shall be and do hereby constitute a lien upon all of the
property of Tenant or upon the Leased Premises and such lien of the Landlord
upon the property of the Tenant, as hereinabove set forth, may be foreclosed
by selling the same at public or private sale, with or without notice at the
option of the Landlord.
Any re-entry or re-letting under the provisions hereof shall not work a
forfeiture of the rent or other agreements to be performed by the Tenant
hereunder during the full term of this lease agreement. The foregoing rights
and remedies hereinabove given to the Landlord are and shall be deemed to be
cumulative and the exercise of one shall not be deemed to be an election
excluding the exercise by the Landlord at any other or different time of a
different or inconsistent remedy and shall be deemed to be given to said
Landlord in addition to any other and further rights given to said Landlord
in addition to any other and further rights given or granted to said Landlord
by the terms of any paragraph hereof or by law and the failure upon the part
of Landlord at any time to exercise any right or remedy hereby given to it,
shall not be deemed to operate as a waiver by it of its right to exercise
such right or remedy at any other future time.
In the event of default by Tenant of any of the terms and conditions of
this Lease Agreement, or the addendums attached hereto, then, interest at
the highest rate allowed by law in the state of Oklahoma shall accrue on any
amounts due or which will become due, including all costs and attorney fees.
17. HOLDING OVER: If Tenant remains in possession of the Leased
Premises after the expiration of this Lease Agreement, such continued
possession shall, if rent is paid by Tenant and accepted by Landlord, create
a month-to-month tenancy on the terms herein specified, and said tenancy may
be terminated at any time by either party by thirty (30) days written notice
to the other party. Tenant agrees that in the event Tenant becomes a
hold-over Tenant in accordance with this Paragraph, all of the same terms and
conditions of this Lease Agreement shall apply except the monthly rent to be
paid shall be one hundred fifty percent (150%) of the monthly rent which was
in effect during the last month of this Lease Agreement and any renewals and
addendums hereto immediately preceding the month Tenant becomes a hold-over
Tenant.
18. RIGHT TO INSTALL SIGNS: Tenant shall not install any sign without
Landlord's approval.
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<PAGE>
19. PARKING: COMMON AREAS; INGRESS AND EGRESS; Landlord shall repair
and maintain the parking areas at Landlord's cost and expense, except damage
resulting from Tenant's forklifts, trucks, semi-trailers, dolly wheels,
tracked vehicles, and fuel, oil or acid spillage, all of said damages and
other damages caused by the Tenant or the Tenant's employees, guests,
customers, deliverymen or licensees, shall be repaired by Tenant at Tenant's
expense.
20. NOTICE: Any notice provided for herein shall be given by mail,
postage prepaid, to the Landlord at the address to which the rent is then
being mailed, and to the Tenant, at the Leased Premises. The place to which
notices are to be made may be changed by written notice from time to time
from one party to the other party.
21. COVENANT NOT TO WASTE: The Tenant covenants not to commit nor to
permit any waste whatever and will, free of expense to Landlord, when
required by the Landlord, when required by the proper authorities or
Landlord, abate all nuisances whether public or private.
22. RULES AND REGULATIONS: The Rules and Regulations attached hereto
and marked Exhibit "B" are made a part of this Lease Agreement as if fully
herein set forth and are material terms of this Lease Agreement. Tenant, its
employees, agents and visitors, shall observe and abide by them and by such
other and further reasonable Rules and Regulations as Landlord may prescribe
which, it its judgment, are needful for the reputation, safely, care or
cleanliness of the Building or Leased Premises, or the operations and
maintenance thereof and the equipment therein, or for the comfort of Tenant
and the other tenants of the Building. Landlord, however, shall have the right
to change said rules and waive in writing any or all of said rules in the
case of any one or more tenant. All such Rules and Regulations are of the
essence hereof without which this Lease Agreement would not have been entered
into by the Landlord, and any breach of any provision of the Rules and
Regulations by the Tenant shall constitute a default hereunder.
23. FORCE MAJEURE: Except with respect to the obligation of Tenant to
pay rental, after this Lease Agreement shall have commenced, the time for
performance of other matters set forth herein may be delayed for the period
or periods of interference therewith or delay thereof caused by strikes,
unusual climatic conditions, act of God or war, or by conditions and
situations not reasonably within control of either of the parties hereto.
24. RIGHT OF OCCUPANCY: Landlord agrees to furnish the Leased Premises
described in paragraph 1, subject to the terms and conditions described
herein; however, it shall be the responsibility of the Tenant to obtain the
necessary occupancy permits required by Local, State and Federal Agencies and
Tenant shall be solely responsible for any modifications or changes required
to obtain such permits.
In the event Tenant fails to perform any obligation under the terms of
this Lease Agreement (including but not limited to cleaning in and around the
Leased Premises and repairing damages to the Leased Premises) and Landlord
elects to perform Tenant's obligation, then Landlord shall have the right to
collect from the Tenant the actual costs incurred in performing such
obligations together with the Landlord's costs of any of Landlord's employees
time spent in connection therewith and 20% of all amounts described above to
compensate Landlord for overhead and profit.
25. BINDING EFFECT AND SPECIAL CONDITIONS:
25.1 This Lease Agreement and the terms, covenants and provisions
hereof, shall inure to the benefit of and be binding upon the successors and
assigns of both parties hereto.
EXECUTED the day and year first hereinabove written.
Robert L. Zeligson Trust by its Agent,
VANSU COMPANY
By: /s/ C. G. Van Schoyck
-----------------------------------
"Landlord"
Tri-Star Aerospace, Inc.
By: /s/ R. P. Small
-----------------------------------
President
"Tenant"
---------------------------------------
"Guarantor"
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<PAGE>
TENANT ESTOPPEL CERTIFICATE
LEASED PREMISES: 11535-39 East Pine Street
Tulsa, Oklahoma
DATE OF LEASE: July 12, 1990
DATE OF AMENDMENTS: May 25, 1995
NAME OF TENANT: Tri-Star Aerospace, Inc.
NAME OF OWNER: Robert L. Zeligson, Trustee of the
Braniff M Warehouse Trust
The undersigned ("Tenant") certifies as of the date of this Certificate the
following data as true and accurate:
1. The attached Lease, and any Amendments thereto, comprise a complete copy of
the entire Lease Agreement (please attach a copy of Lease and all Exhibits
and Addenda).
2. The Tenant's Lease, and any Amendments thereto (known collectively as the
"Lease"), are correctly identified by the date(s) stated above.
3. The commencement date of the Lease was September 1, 1995. The expiration
of the Lease is August 31, 2000.
4. The monthly base rent (not including any percentage rent or expense pass
through presently payable under the Lease is $5,155.00, and such rent has
been paid through January 31, 1998.
5. The real estate property taxes payable by Tenant under the Lease are as
follows: the amount owed by the Tenant, is equal to the amount that the
property taxes incurred during each calendar year exceed the Base Year 1990
property taxes which were $24,701.00.
6. The Tenant has deposited with Landlord $5,155.00 as a Security Deposit
under the terms of the Lease.
7. The Lease is presently in full force and effect and has not been modified,
supplemented, or amended except as indicated on this Tenant Estoppel
Certificate. To the knowledge of the undersigned, Landlord is not in
default of any terms or conditions of said Lease and Tenant is not in
default of any terms or conditions of said Lease.
8. Tenant is in possession of Leased Premises and that the Leased Premises is
in conformity with that stated in the Lease.
9. Tenant has no option to purchase the Property or first right of refusal
(FRR) to purchase the Property in which the Leased Premises is situated.
10. The Lease is personally guaranteed by N/A.
11. The square footage of the Leased Premises used for the calculation of all
rental sums due and payable per the terms and conditions of the Lease is
approximately 22,500 square feet, and that the total square footage of the
Property is approximately 155,000 square feet.
<PAGE>
Page 2
12. The statements contained herein are made for the purpose of verifying the
current status of the Tenant's Leasehold interest in Leased Premises and
may be relied upon by Landlord and any successor(s) and/or assignee(s) for
such purpose.
By: /s/ Brian J. Murphy
-------------------------------
Brian J. Murphy
Vice President
Date: 12/24/97
------------------------------
Acknowledgment:
I hereby acknowledge that I witnessed the execution of this document by Brian
Murphy on this ________ day of________ 19____.
By:
-------------------------------
TJO/jp7007
<PAGE>
V.C., Inc. - Lease N0. 101
Revised: January 8, 1990
LEASE AGREEMENT
THIS LEASE AGREEMENT made and entered into this 4th day of December, 1990, by
and between ROBERT L. ZELIGSON TRUST by it's Agent, Vansu Company hereinafter
called "Landlord", and Tri-Star Aerospace, Inc. hereinafter called "Tenant".
WITNESSETH: That Landlord for and in consideration of the agreed rents to be
paid and in consideration of the other covenants and agreements hereinafter
recited to be kept and performed, does hereby lease, let and demise unto
Tenant the following real property and premises, hereinafter called "Leased
Premises", on the terms and conditions recited:
1. DESCRIPTION OF LEASED PREMISES: 11533 East Pine Street, Tulsa,
Oklahoma 74116 Consisting of 7500 square feet (more or less) office/warehouse
space
2. TERM OF LEASE AND USE: TO HAVE AND TO HOLD the said described
property and Leased Premises unto the said Tenant, its successors and
assigns, for the term of two (2) years commencing on the 1st day of December,
1990. Tenant warrants that the use of the Leased Premises shall only be for
the conduct of its principal business which is described as follows:
Aerospace Hardware and Fittings
3. RENTAL AND SECURITY DEPOSIT: Tenant agrees to pay Landlord as rent
for said Leased Premises the total sum of Thirty Thousand Four Hundred
Dollars ($30,400.00). Additionally Tenant shall pay Landlord as a security
deposit for said Leased Premises the sum of a $1,600.00 all payments of rent
and the security deposit to be made in accordance with the provisions of
Exhibit "A" attached hereto and made part hereof.
4. ASSIGNMENT AND SUBLEASE: This Lease Agreement shall not be assigned
or the property subleased in whole or part without written consent of Landlord
first obtained. Provided, however, Landlord agrees that consent to any such
assignment or sublease shall not be unreasonably withheld, provided the use of
the property is the same type of use being made of the property by Tenant
hereunder and provided further that Tenant shall remain liable for the full
performance of the Tenant's obligations under this lease.
5. LIABILITY: Tenant agrees to defend, save and hold Landlord harmless
from any and all claims, judgments, liabilities or demands of any person or
persons whomsoever arising out of or connected with the use of said Leased
Premises by the Tenant and the operation of its business there. Tenant agrees
to carry and maintain employer's liability and public liability insurance in
the amount of $1,000,000.00 to protect both Tenant and Landlord from any
liabilities or legal exposure contemplated in this paragraph. Tenant agrees
to furnish Landlord a copy of said insurance policy or a certificate
evidencing issuance of a policy of such insurance upon request. Tenant's
policy of insurance shall further provide for waiver of subrogation rights
(by Tenant's Insurer) as against Landlord.
6. TAXES AND INSURANCE: Tenant shall pay to Landlord, as additional
rent for each calendar year, (except for the base year) its pro rata portion
of the amount paid by Landlord in that calendar year for insurance premiums
and general real property taxes which are in excess of the amount paid for
insurance premiums and general real property taxes in the base year. The base
year shall be the year in which this Lease is executed.
Tenant shall pay that portion of such excess insurance premiums and
general real property taxes which shall be calculated by multiplying said
excess by a fraction, the numerator of which shall be the gross square foot
area of the premises demised to the Tenant, and the denominator of which
shall be the gross square foot area of all of the buildings in Braniff "M"
Warehouse consisting of *. Tenant shall also pay a portion, computed in the
manner above, of any special taxes or special assessments levied or assessed
at any time during the term against the land and improvements on the
property. The charges provided for in this Section shall be paid within ten
(10) days after demand therefor is made by Landlord.
7. CONDITION OF PREMISES: Tenant represents and acknowledges that it
has inspected the Leased Premises prior to execution of this Lease Agreement
and found same clean and in good repair unless otherwise specified in writing
under the Clause "Special Conditions". * 150,000 square feet
8. MAINTENANCE AND REPAIR:
A. Landlord will keep the exterior of the Leased Premises, except doors,
windows and glass, in repair. Landlord shall not repair any damage
caused by the negligence of the Tenant or its agents, servants,
employees, customers, licensees or invitees. Landlord shall be under
no other liability for repair, maintenance, alteration, or other
action with reference to the Leased Premises or any other part
thereof, or any plumbing, heating, electrical, air conditioning, or
other mechanical installation therein, except (1) that Landlord agrees
to repair any latent defects appearing on the premises within ninety
(90) days after occupancy of the same by Tenant; and provided further
that Landlord shall during the period of written warranty given by
manufacturer or supplier of any air conditioning or heating equipment
request the same to be repaired by the manufacturer or supplier upon
the request of Tenant.
B. Tenant hereby agrees to keep the interior of the Leased Premises, and
all doors, windows and glass, together with all electrical, plumbing
and other mechanical installation therein, in good order and repair,
and will make all replacements thereto at its own expense, and will
replace all light bulbs needing replacement in the Leased Premises.
Landlord shall not be liable to Tenant for any damage in the leased
premises due to the backing up of any drains or any water leaks.
Tenant will surrender the Leased Premises at the expiration of the
term or at such other time as it may vacate the Leased Premises in as
good a condition as when received, excepting depreciation caused by
ordinary wear and tear.
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<PAGE>
C. The Landlord shall initially furnish heating and air conditioning
equipment to the Leased Premises. The Tenant shall cause this
equipment to be serviced no less than semiannually or at such greater
frequency as the nature of its business may require. In the event such
service is not provided by the Tenant, the Landlord shall have the
right to schedule the servicing to be done by a serviceman or
contractor selected by Landlord and to charge the cost of the
service to the Tenant or, at the option of the Landlord, bill and
collect the service charge from the Tenant. All heating and air
conditioning equipment is the property of the Landlord and at the
termination of this Lease Agreement, the Tenant shall not have the
right to remove said equipment. Landlord shall have exclusive control
over and exclusive use of the roof of the Leased Premises.
D. Tenant specifically agrees that in addition to the other repairs under
the terms of this Lease Agreement, it will, at its sole cost and
expense, promptly repair all exterior doors and exterior metal panels
of the Leased Premises immediately after any of said doors have
sustained any type of damage. Should Tenant fail to repair any damaged
door within ten (10) days after receiving written notice from Landlord
requesting such repairs to be made, then Landlord shall have the right
to hire such parties as Landlord deems appropriate to repair said
exterior doors and exterior metal panels, at Tenant's sole cost and
expense. The Tenant will reimburse Landlord for any such costs of such
repairs within ten (10) days after receiving written notice from
Landlord of cost of such repairs.
9. LIENS: Tenant shall at all times keep the Leased Premises free and
clear of any liens, charges and claims because of any act or omission to act
on the part of Tenant in connection with the maintenance and repair of the
premises and likewise shall keep the Leased Premises free and clear of any
liens, charges and claims by reason of the acquisition of Tenant, and the
installation therein, of any fixtures and equipment; and if any such liens,
charges or claims are made or filed against said Leased Premises, Tenant
agrees to promptly discharge the same and furnish Landlord evidence thereof.
10. CLEAN UP:
10.A Tenant agrees, at Tenant's cost and expense, to keep or cause to be
kept its Leased Premises, the exterior area adjacent to the Leased Premises,
and the adjacent parking areas, (assigned to Tenant) clean and free of litter
and other debris, provided, however, should Tenant fail to keep its Leased
Premises and other areas and adjacent parking areas free of litter and other
debris then Landlord, after notice, shall have the right to clean up Tenant's
Leased Premises and other areas or cause the same to be cleaned and charge
the cost of same to Tenants by appropriate billing therefor. Final clean-up
at the termination of this Lease Agreement shall be completed to Landlord's
satisfaction as evidenced in writing prior to termination date of this Lease
Agreement. Tenant shall be obligated to pay rent as a hold-over tenant until
the Leased Premises and exterior area adjacent to the Leased Premises have
been cleaned, whether the cleaning is performed by the Tenant or by the
Landlord. If the cleaning is performed by the Landlord the Tenant shall pay
all cleaning costs within ten (10) days after receiving notice from Landlord
of the cost of such repairs.
10.B Tenant hereby agrees not to engage in any activity, or produce or
store upon the Leased Premises any such goods or equipment which would cause
or allow for any hazardous waste or materials, or in any manner place the
Building or any of its tenants in any danger whatsoever. If, at any time,
Landlord discovers that the Tenant's use or occupancy of the Leased Premises
has caused or allowed any hazardous waste or materials on the Property or
endangered the Building or any of its tenants then this Lease Agreement will
immediately terminate as specified in Paragraph 16, and Tenant shall, at its
sole cost and expense, immediately commence and complete cleanup and removal
as required by all of the applicable governmental regulations and agencies,
and to the satisfaction of the Landlord. Further, Tenant shall indemnify and
hold Landlord harmless for any claim, action, expense (including all attorney
fees for an attorney hired by Landlord, and all costs incurred in any dispute,
fine, or damage in connection with any of the above being found.
11. INSURANCE AND OBLIGATION TO REPAIR AND RESTORE: If the Leased
Premises shall be damaged by fire, the elements, unavoidable accident or
other casualty, and is not thereby rendered untenantable, in whole or in
part, Landlord shall promptly, at Landlord's own expense, cause such damage
to be repaired and the rent shall not be abated: if by reason of such
occurrence, the Leased Premises shall be rendered untenantable only in part,
the Landlord shall promptly, at Landlord's own expense, cause the damage to
be repaired and minimum rent meanwhile shall be abated proportionally as to
the portion of the Leased Premises rendered untenantable, if by reason of such
occurrence the Leased Premises should be rendered wholly untenantable, the
Landlord shall promptly, at Landlord's own expense, cause such damage to be
repaired, and the minimum annual rent meanwhile shall be abated in whole,
unless within thirty (30) days after such occurrence Landlord shall give the
Tenant written notice that the Landlord has elected not to reconstruct the
destroyed Leased Premises, in which event this Lease Agreement and tenancy
hereby created shall cease as of the date of said occurrence, all rentals to
be adjusted as of such date. If the Leased Premises shall be damaged by fire,
the elements, unavoidable accident or other casualty, and are thereby
rendered wholly untenantable, following which the Landlord does not commence
diligent restoration of said damages within sixty (60) days after such
occurrence of damages, then, in such event, the Tenant shall have the right,
at Tenant's option, to declare this Lease Agreement canceled by giving
appropriate written notice to the Landlord within ten (10) days first
following said sixty (60) day period, following which this Lease Agreement
and tenancy hereby created shall cease as of the date of occurrence of said
damages, all rentals to be adjusted as of such date. Tenant shall acquire,
install, and service such fire extinguishers as are necessary to comply with
the Tulsa City Codes.
12. UTILITIES: Tenant agrees to promptly pay and discharge all water,
light, heating, gas, refuse collection and disposal, and other utility bills
incurred from date of occupancy by Tenant to date of lease termination and
vacation of the premises by Tenant, together with all other operating expense
connected with its use and occupance of the Leased Premises, including the
payment of all taxes levied and assessed against Tenant's personal property,
fixtures, equipment and inventory.
13. SURRENDER OF LEASED PREMISES: ADDITIONS, ALTERATIONS AND
MODIFICATIONS: At the expiration of the lease term or any extensions or
renewals of this Lease Agreement, Tenant agrees to surrender possession of
the Leased Premises to Landlord in as good a state of repair and condition as
at the date of initial possession hereunder by Tenant, reasonable wear and
tear alone excepted. Reasonable wear and tear is limited to that which is
normal for a quality office/warehouse facility and is further defined in
Exhibit "B" annexed herein. Tenant shall make no additions, alterations or
modifications to the Leased Premises (including painting of the interior
walls and floors of the building) without the prior written consent of the
Landlord, and Landlord may require Tenant to submit written plans and
specifications for its approval. All additions, alterations or modifications
made to the Leased Premises by the Tenant (after obtaining Landlord's written
consent) shall be made at the sole cost and expense of Tenant. All additions,
alterations and modifications shall, at the time of installation, become the
sole
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<PAGE>
property of the Landlord and shall be left as a part of the Leased Premises
at the end of the term of this Lease Agreement. Provided, however, Landlord
shall have the right at the end of the lease term to require the Tenant to
remove any or all improvements made to the Leased Premises and restore the
Leased Premises to the condition it was in at the beginning of the lease
term, reasonable wear and tear alone excepted. Such removal and restoration,
if required, shall be made at the sole cost and expense of the Tenant. Tenant
shall, at the end of this Lease Agreement, have the right to remove any trade
fixtures from the Lease Premises which have not been affixed to the Leased
Premises so as to become a part of the realty. However, any damage caused to
the building in removing said trade fixtures shall be repaired at the sole
cost and expense of the Tenant.
14. CONDEMNATION: In the event that the entire Leased Premises shall be
taken in condemnation proceedings or by exercise of any right of eminent
domain for public or quasi-public use, this Lease Agreement shall terminate
as of the date of said taking and all unearned rent and other charges paid in
advance shall be refunded to the Tenant after deducting any charges owed by
Tenant to Landlord and the Tenant shall surrender possession of the Leased
Premises to the Landlord. In the event a portion of the Leased Premises shall
be taken by such proceedings, the Landlord shall have the option to terminate
this Lease Agreement or make a proportionate reduction of rent during the
remainder of the lease term. The award for such taking shall belong to the
Landlord; except that the Tenant shall be entitled to make a claim in its own
name to the condemning authority for the value of any furniture, trade
fixtures, trade equipment, merchandise or personal property of any kind
belonging to the Tenant, and not forming a part of the real estate, or for
the cost of moving all of the same or for moving such business as is
necessary.
15. BANKRUPTCY OR RECEIVERSHIP: Should Tenant make an assignment for
the benefit of creditors or a receiver be appointed or bankruptcy proceedings
be instituted by it or against it, then any of such events shall, at the
option of Landlord, operate forthwith to cancel and hold this Lease Agreement
for naught, and Lessor shall, after notice, be entitled to immediate
possession of the Leased Premises.
16. DEFAULT: It is expressly covenanted and agreed that in the event
the Tenant vacates or abandons the Leased Premises during the term of the
Lease, or defaults at any time in any term of this Lease or in the payment of
any rent or other payment herein provided for, then, in any of such events
and without further notice the Landlord at its option may declare this lease
terminated and all accrued and unaccrued rentals immediately due and payable,
and with or without legal process enter into and upon the Leased Premises,
repossess the same and expel the Tenant, or any other occupant therefrom, it
being expressly agreed by the Tenant that time is of the essence hereof and
the Tenant expressly waives all notice of non-payment of rent or termination
of the Lease Agreement or demand for possession or demand for rent, and
further provided that such lease termination, re-entry and expulsion of the
Tenant or other occupancy whether by legal process or otherwise, shall be
without prejudice to the right of the Landlord to sue and collect the accrued
and unaccrued rental of for the breach of any other covenant herein
contained. In the event of any such default the Landlord may, at its option,
without forfeiting any accrued or unaccrued rentals due the Landlord, enter
into possession and relet the Leased Premises or any part thereof and the
Tenant agrees to further pay all of Landlord's attorney's fees and to pay for
all costs of redecorating, remodeling, leasing fees or any costs of such
re-letting. Any re-letting or re-entry and expulsion of the Tenant shall in
no manner relieve the Tenant of the obligation to immediately pay all accrued
and unaccrued rental due under this Lease Agreement, provided, however, that
in the event the Landlord receives from the Tenant all of such accrued and
unaccrued rental, whether by judgment or otherwise, and further finds a
tenant suitable to the Landlord during the remaining term of this Lease
Agreement, then at the conclusion thereof the Landlord shall remit back to
Tenant any excess rentals received hereunder, less any charges incurred by
reason of such default of the Tenant, including the aforesaid redecorating,
remodeling, leasing fees and attorney's fees. In any event, if Tenant
defaults in the performance of any of the terms, covenants, agreements or
conditions contained in this Lease Agreement, and the Landlord places the
enforcement of this Lease Agreement, or any part hereof, or the collection of
any rent or charge due, or to become due, or the recovery of the possession
of the Premises, in the hands of an attorney, the Tenant agrees to pay the
reasonable attorney fees of Landlord; plus all the actual costs of
enforcement or collection, including but not limited to expert witness fees
and charges, all copying expenses and laboratory tests. All property of the
Tenant, including property otherwise legally exempt from levy and execution
in or upon the Leased Premises is now and shall be bound for and subject to
the payment of all rent and other sums herein agreed to be paid, whether due
or not, and such sums shall be and do hereby constitute a lien upon all of the
property of Tenant in or upon the Leased Premises and such lien of the Landlord
upon the property of the Tenant, as hereinabove set forth, may be foreclosed
by selling the same at public or private sale, with or without notice at the
option of the Landlord.
Any re-entry or re-letting under the provisions hereof shall not work a
forfeiture of the rent or other agreements to be performed by the Tenant
hereunder during the full term of this lease agreement. The foregoing rights
and remedies hereinabove given to the Landlord are and shall be deemed to be
cumulative and the exercise of one shall not be deemed to be an election
excluding the exercise by the Landlord at any other or different time of a
different or inconsistent remedy and shall be deemed to be given to said
Landlord in addition to any other and further rights given to said Landlord or
granted to said Landlord by the terms of any paragraph hereof or by law and
the failure upon the part of Landlord at any time to exercise any right or
remedy hereby given to it, shall not be deemed to operate as a waiver by it of
its right to exercise such right or remedy at any other future time.
In the event of default by Tenant of any of the terms and conditions of
this Lease Agreement, or the addendums attached hereto, then, interest at
the highest rate allowed by law in the state of Oklahoma shall accrue on any
amounts due or which will become due, including all costs and attorney fees.
17. HOLDING OVER: If Tenant remains in possession of the Leased
Premises after the expiration of this Lease Agreement, such continued
possession shall, if rent is paid by Tenant and accepted by Landlord, create
a month-to-month tenancy on the terms herein specified, and said tenancy may
be terminated at any time by either party by thirty (30) days written notice
to the other party. Tenant agrees that in the event Tenant becomes a
hold-over Tenant in accordance with this Paragraph, all of the same terms and
conditions of this Lease Agreement shall apply except the monthly rent to be
paid shall be one hundred fifty percent (150%) of the monthly rent which was
in effect during the last month of this Lease Agreement and any renewals and
addendums hereto immediately preceding the month Tenant becomes a hold-over
Tenant.
18. RIGHT TO INSTALL SIGNS: Tenant shall not install any sign without
Landlord's approval.
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19. PARKING: COMMON AREAS; INGRESS AND EGRESS: Landlord shall repair
and maintain the parking areas at Landlord's cost and expense, except damage
resulting from Tenant's forklifts, trucks, semi-trailers, dolly wheels,
tracked vehicles, and fuel, oil or acid spillage, all of said damages and
other damages caused by the Tenant or the Tenant's employees, guests,
customers, deliverymen or licensees, shall be repaired by Tenant at Tenant's
expense.
20. NOTICE: Any notice provided for herein shall be given by mail,
postage prepaid, to the Landlord at the address to which the rent is then
being mailed, and to the Tenant, at the Leased Premises. The place to which
notices are to be made may be changed by written notice from time to time
from one party to the other party.
21. COVENANT NOT TO WASTE: The Tenant covenants not to commit nor to
permit any waste whatever and will, free of expense to Landlord, when
required by the Landlord, when required by the proper authorities or
Landlord, abate all nuisances whether public or private.
22. RULES AND REGULATIONS: The Rules and Regulations attached hereto
and marked Exhibit "B" are made a part of this Lease Agreement as if fully
herein set forth and are material terms of this Lease Agreement. Tenant, its
employees, agents and visitors, shall observe and abide by them and by such
other and further reasonable Rules and Regulations as Landlord may prescribe
which, in its judgment, are needful for the reputation, safety, care or
cleanliness of the Building or Leased Premises, or the operations and
maintenance thereof and the equipment therein, or for the comfort of Tenant
and the other tenants of the Building. Landlord, however, shall have the right
to change said rules and waive in writing any or all of said rules in the
case of any one or more tenant. All such Rules and Regulations are of the
essence hereof without which this Lease Agreement would not have been entered
into by the Landlord, and any breach of any provision of the Rules and
Regulations by the Tenant shall constitute a default hereunder.
23. FORCE MAJEURE: Except with respect to the obligation of Tenant to
pay rental, after this Lease Agreement shall have commenced, the time for
performance of other matters set forth herein may be delayed for the period
or periods of interference therewith or delay thereof caused by strikes,
unusual climatic conditions, act of God or war, or by conditions and
situations not reasonably within control of either of the parties hereto.
24. RIGHT OF OCCUPANCY: Landlord agrees to furnish the Leased Premises
described in paragraph 1, subject to the terms and conditions described
herein; however, it shall be the responsibility of the Tenant to obtain the
necessary occupancy permits required by Local, State and Federal Agencies and
Tenant shall be solely responsible for any modifications or changes required
to obtain such permits.
In the event Tenant fails to perform any obligation under the terms of
this Lease Agreement (including but not limited to cleaning in and around the
Leased Premises and repairing damages to the Leased Premises) and Landlord
elects to perform Tenant's obligation, then Landlord shall have the right to
collect from the Tenant the actual costs incurred in performing such
obligations together with the Landlord's costs of any of Landlord's employees
time spent in connection therewith and 20% of all amounts described above to
compensate Landlord for overhead and profit.
25. BINDING EFFECT AND SPECIAL CONDITIONS:
25.1 This Lease Agreement and the terms, covenants and provisions
hereof, shall inure to the benefit of and be binding upon the
successors and assigns of both parties hereto.
EXECUTED the day and year first hereinabove written.
ROBERT L. ZELIGSON TRUST by its Agent, VANSU COMPANY
By: /s/ C. G. Van Schoyck
----------------------------------------
"Landlord"
TRI-STAR AEROSPACE, INC.
By: /s/ R. P. Small CEO
----------------------------------------
"Tenant"
----------------------------------------
"Guarantor"
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<PAGE>
TENANT ESTOPPEL CERTIFICATE
LEASED PREMISES; 11533 East Pine Street
Tulsa, Oklahoma
DATE OF LEASE: December 4, 1990
DATE OF AMENDMENTS: May 25, 1995
NAME OF TENANT: Tri-Star Aerospace, Inc.
NAME OF OWNER: Robert L. Zeligson, Trustee of the
Braniff M Warehouse Trust
The undersigned ("Tenant") certifies as of the date of this Certificate the
following data as true and accurate:
1. The attached Lease, and any Amendments thereto, comprise a complete copy of
the entire Lease Agreement (please attach a copy of Lease and all Exhibits
and Addenda).
2. The Tenant's Lease, and any Amendments thereto (known collectively as the
"Lease"), are correctly identified by the date(s) stated above.
3. The commencement date of the Lease was September 1, 1995. The expiration
of the Lease is August 31, 2000.
4. The monthly base rent (not including any percentage rent or expense pass
through) presently payable under the Lease is $1,600.00, and such rent has
been paid through January 31, 1998.
5. The real estate property taxes payable by Tenant under the Lease are as
follows: the amount owed by the Tenant, is equal to the amount that the
property taxes incurred during each calendar year exceed the Base Year 1990
property taxes which were $24,701.00.
6. The Tenant has deposited with Landlord $1,600.00 as a Security Deposit
under the terms of the Lease.
7. The Lease is presently in full force and effect and has not been modified,
supplemented, or amended except as indicated on this Tenant Estoppel
Certificate. To the knowledge of the undersigned, Landlord is not in
default of any terms or conditions of said Lease and Tenant is not in
default of any terms or conditions of said Lease.
8. Tenant is in possession of Leased Premises and that the Leased Premises
is in conformity with that stated in the Lease.
9. Tenant has no option to purchase the Property or first right of refusal
(FRR) to purchase the Property in which the Leased Premises is situated.
10. The Lease is personally guaranteed by N/A.
11. The square footage of the Leased Premises used for the calculation of all
rental sums due and payable per the terms and conditions of the Lease is
approximately 7,500 square feet, and that the total square footage of the
Property is approximately 155,000 square feet.
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Page 2
12. The statements contained herein are made for the purpose of verifying the
current status of the Tenant's Leasehold interest in Leased Premises and
may be relied upon by Landlord and any successor(s) and/or assignee(s) for
such purpose.
By: /s/ BRIAN J. MURPHY
---------------------------------
Brian J. Murphy
Vice President
Date: 12/24/97
---------------------------------
Acknowledgment:
I hereby acknowledge that I witnessed the execution of this document by Brian
Murphy on this ________ day of________ 19____.
By:
---------------------------------
TJO/jp 7006
<PAGE>
V.C., Inc. - Lease No. 101
Revised: January 8, 1990
LEASE AGREEMENT
THIS LEASE AGREEMENT made and entered into this 31ST day of MAY, 1991, by and
between ROBERT L. ZELIGSON TRUST BY IT'S AGENT VANSU COMPANY hereinafter
called "Landlord", and TRI-STAR AEROSPACE, INC., hereinafter called "Tenant".
WITNESSETH: That Landlord for and in consideration of the agreed rents to be
paid and in consideration of the other covenants and agreements hereinafter
recited to be kept and performed, does hereby lease, let and demise unto
Tenant the following real property and premises, hereinafter called "Leased
Premises", on the terms and conditions recited:
1. DESCRIPTION OF LEASED PREMISES: 11531 EAST PINE STREET, TULSA,
OKLAHOMA 74116 CONSISTING OF 7,500 SQUARE FEET (MORE OR LESS) OFFICE/WAREHOUSE
SPACE.
2. TERM OF LEASE AND USE. TO HAVE AND TO HOLD the said described
property and Leased Premises unto the said Tenant, its successors and
assigns, for the term of TWO (2) YEARS commencing on the 1ST DAY OF JUNE,
1991. Tenant warrants that the use of the Leased Premises shall only be for
the conduct of its principal business which is described as follows;
AEROSPACE HARDWARE AND FITTINGS
3. RENTAL AND SECURITY DEPOSIT: Tenant agrees to pay Landlord as rent
for said Leased Premises the total sum of THIRTY NINE THOUSAND SEVEN HUNDRED
SEVENTY-FOUR DOLLARS ($39,774.00). Additionally Tenant shall pay Landlord
as a security deposit for said Leased Premises the sum of a $1,657.25 all
payments of rent and the security deposit to be made in accordance with the
provisions of Exhibit "A" attached hereto and made part hereof.
4. ASSIGNMENT AND SUBLEASE: This Lease Agreement shall not be assigned
or the property subleased in whole or part without written consent of
Landlord first obtained. Provided, however, Landlord agrees that consent to
any such assignment or sublease shall not be unreasonably withheld, provided
the use of the property is the same type of use being made of the property by
Tenant hereunder; and provided further that Tenant shall remain liable for the
full performance of the Tenant's obligations under this lease.
5. LIABILITY: Tenant agrees to defend, save and hold Landlord harmless
from any and all claims, judgments, liabilities or demands of any person or
persons whomsoever arising out of or connected with the use of said Leased
Premises by the Tenant and the operation of its business there. Tenant agrees
to carry and maintain employer's liability and public liability insurance in
the amount of $1,000,000.00 to protect both Tenant and Landlord from any
liabilities or legal exposure contemplated in this paragraph. Tenant agrees
to furnish Landlord a copy of said insurance policy or a certificate
evidencing issuance of a policy of such insurance upon request. Tenant's
policy of insurance shall further provide for waiver of subrogation rights
(by Tenant's Insurer) as against Landlord.
6. TAXES AND INSURANCE: Tenant shall pay to Landlord, as additional
rent for each calendar year, (except for the base year) its pro rata portion
of the amount paid by Landlord in that calendar year for insurance premiums
and general real property taxes which are in excess of the amount paid for
insurance premiums and general real property taxes in the base year. The base
year shall be the year in which this Lease is executed.
Tenant shall pay that portion of such excess insurance premiums and
general real property taxes which shall be calculated by multiplying said
excess by a fraction, the numerator of which shall be the gross square foot
area of the premises demised to the Tenant, and the denominator of which
shall be the gross square foot area of all of the buildings in BRANIFF "M"
WAREHOUSE CONSISTING OF *. Tenant shall also pay a portion, computed in the
manner above, of any special taxes or special assessments levied or assessed
at any time during the term against the land and improvements on the
property. The charges provided for in this Section shall be paid within ten
(10) days after demand therefor is made by Landlord.
7. CONDITION OF PREMISES: Tenant represents and acknowledges that it
has inspected the Leased Premises prior to execution of this Lease Agreement
and found same clean and in good repair unless otherwise specified in writing
under the Clause "Special Conditions". *150,000 square feet
8. MAINTENANCE AND REPAIR:
A. Landlord will keep the exterior of the Leased Premises, except doors,
windows and glass, in repair. Landlord shall not repair any damage caused
by the negligence of the Tenant or its agents, servants, employees,
customers, licensees or invitees. Landlord shall be under no other
liability for repair, maintenance, alteration, or other action with
reference to the Leased Premises or any other part thereof, or any
plumbing, heating, electrical, air conditioning, or other mechanical
installation therein, except (1) that Landlord agrees to repair any latent
defects appearing on the premises within ninety (90) days after occupancy
of the same by Tenant; and provided further that Landlord shall during the
period of written warranty given by manufacturer or supplier of any air
conditioning or heating equipment request the same to be repaired by the
manufacturer or supplier upon the request of Tenant.
B. Tenant hereby agrees to keep the interior of the Leased Premises, and all
doors, windows and glass, together with all electrical, plumbing and other
mechanical installation therein, in good order and repair, and will make
all replacements thereto at its own expense, and will replace all light
bulbs needing replacement in the Leased Premises, Landlord shall not be
liable to Tenant for any damage in the leased premises due to the backing
up of any drains or any water leaks. Tenant will surrender the Leased
Premises at the expiration of the term or at such other time as it may
vacate the Leased Premises in as good a condition as when received,
excepting depreciation caused by ordinary wear and tear.
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<PAGE>
C. The Landlord shall initially furnish heating and air conditioning equipment
to the Leased Premises. The Tenant shall cause this equipment to be
serviced no less than semiannually or at such greater frequency as the
nature of its business may require. ln the event such service is not
provided by the Tenant, the Landlord shall have the right to schedule the
servicing to be done by a serviceman or contractor selected by Landlord
and to charge the cost of the service to the Tenant or, at the option of
the Landlord, bill and collect the service charge from the Tenant. All
heating and air conditioning equipment is the property of the Landlord and
at the termination of this Lease Agreement, the Tenant shall not have the
right to remove said equipment. Landlord shall have exclusive control over
and exclusive use of the roof of the Leased Premises.
D. Tenant specifically agrees that in addition to the other repairs under the
terms of this Lease Agreement, it will, at its sole cost and expense,
promptly repair all exterior doors and exterior metal panels of the Leased
Premises immediately after any of said doors have sustained any type of
damage. Should Tenant fail to repair any damaged door within ten (10) days
after receiving written notice from Landlord requesting such repairs to be
made, then Landlord shall have the right to hire such parties as Landlord
deems appropriate to repair said exterior doors and exterior metal panels,
at Tenant's sole cost and expense. The Tenant will reimburse Landlord for
any such costs of such repairs within ten (10) days after receiving written
notice from Landlord of cost of such repairs.
9. LIENS: Tenant shall at all times keep the Leased Premises free and
clear of any liens, charges and claims because of any act or omission to act on
the part of Tenant in connection with the maintenance and repair of the premises
and likewise shall keep the Leased Premises free and clear of any liens, charges
and claims by reason of the acquisition of Tenant, and the installation therein,
of any fixtures and equipment; and if any such liens, charges or claims are made
or filed against said Leased Premises, Tenant agrees to promptly discharge the
same and furnish Landlord evidence thereof.
10. CLEAN UP:
10.A Tenant agrees, at Tenant's cost and expense, to keep or cause to be
kept its Leased Premises, the exterior area adjacent to the Leased Premises, and
the adjacent parking areas, (assigned to Tenant) clean and free of litter and
other debris, provided, however, should Tenant fail to keep its Leased Premises
and other areas and adjacent parking areas free of litter and other debris then
Landlord, after notice, shall have the right to clean up Tenant's Leased
Premises and other areas or cause the same to be cleaned and charge the cost of
same to Tenants by appropriate billing therefor. Final clean-up at the
termination of this Lease Agreement shall be completed to Landlord's
satisfaction as evidenced in writing prior to termination date of this Lease
Agreement. Tenant shall be obligated to pay rent as a hold-over tenant until the
Leased Premises and exterior area adjacent to the Leased Premises have been
cleaned, whether the cleaning is performed by the Tenant or by the Landlord. If
the cleaning is performed by the Landlord the Tenant shall pay all cleaning
costs within ten (10) days after receiving notice from Landlord of the cost of
such repairs.
10.B Tenant hereby agrees not to engage in any activity, or produce or
store upon the Leased Premises any such goods or equipment which would cause or
allow for any hazardous waste or materials, or in any manner place the
Building, or any of its tenants in any danger whatsoever. If, at any time,
Landlord discovers that the Tenant's use or occupancy of the Leased Premises
has caused or allowed any hazardous waste or materials on the Property or
endangered the Building or any of its tenants then this Lease Agreement will
immediately terminate as specified in Paragraph 16, and Tenant shall, at its
sole cost and expense, immediately commence and complete cleanup and removal as
required by all of the applicable governmental regulations and agencies, and to
the satisfaction of the Landlord. Further, Tenant shall indemnify and hold
Landlord harmless for any claim, action, expense (including all attorney fees
for an attorney hired by Landlord, and all costs incurred in any dispute), fine,
or damage in connection with any of the above being found.
11. INSURANCE AND OBLIGATION TO REPAIR AND RESTORE: If the Leased Premises
shall be damaged by fire, the elements, unavoidable accident or other casualty,
and is not thereby rendered untenantable, in whole or in part, Landlord shall
promptly, at Landlord's own expense, cause such damage to be repaired and the
rent shall not be abated: if by reason of such occurrence, the Leased Premises
shall be rendered untenantable only in part, the Landlord shall promptly, at
Landlord's own expense, cause the damage to be repaired and minimum rent
meanwhile shall be abated proportionally as to the portion of the Leased
Premises rendered untenantable; if by reason of such occurrence the Leased
Premises should be rendered wholly untenantable; the Landlord shall promptly, at
Landlord's own expense, cause such damage to be repaired, and the minimum annual
rent meanwhile shall be abated in whole, unless within thirty (30) days after
such occurrence Landlord shall give the Tenant written notice that the Landlord
has elected not to reconstruct the destroyed Leased Premises, in which event
this Lease Agreement and tenancy hereby created shall cease as of the date of
said occurrence, all rentals to be adjusted as of such date. If the Leased
Premises shall be damaged by fire, the elements, unavoidable accident or other
casualty, and are thereby rendered wholly untenantable, following which the
Landlord does not commence diligent restoration of said damages within sixty
(60) days after such occurrence of damages, then, in such event, the Tenant
shall have the right, at Tenant's option, to declare this Lease Agreement
cancelled by giving appropriate written notice to the Landlord within ten (10)
days first following said sixty (60) day period, following which this Lease
Agreement and tenancy hereby created shall cease as of the date of occurrence of
said damages, all rentals to be adjusted as of such date. Tenant shall acquire,
install, and service such fire extinguishers as are necessary to comply with
Tulsa City Codes.
12. UTILITIES: Tenant agrees to promptly pay and discharge all water,
light, heating, gas, refuse collection and disposal, and other utility bills
incurred from date of occupancy by Tenant to date of lease termination and
vacation of the premises by Tenant, together with all other operating expense
connected with its use and occupancy of the Leased Premises, including the
payment of all taxes levied and assessed against Tenant's personal property,
fixtures, equipment and inventory.
13. SURRENDER OF LEASED PREMISES: ADDITIONS, ALTERATIONS AND
MODIFICATIONS: At the expiration of the lease term or any extensions or renewals
of this Lease Agreement, Tenant agrees to surrender possession of the Leased
Premises to Landlord in as good a state of repair and condition as at the date
of initial possession hereunder by Tenant, reasonable wear and tear alone
excepted. Reasonable wear and tear is limited to that which is normal for a
quality office/warehouse facility and is further defined on Exhibit "B" annexed
herein. Tenant shall make no additions, alterations or modifications to the
Leased Premises (including painting of the interior walls and floors of the
Building) without the prior written consent of the Landlord, and Landlord may
require Tenant to submit written plans and specifications for its approval. All
additions, alterations or modifications made to the Leased Premises by the
Tenant (after obtaining Landlord's written consent) shall be made at the sole
cost and expense of Tenant. All additions, alterations and modifications shall,
at the time of installation, become the sole
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<PAGE>
property of the Landlord and shall be left as a part of the Leased Premises
at the end of the term of this Lease Agreement. Provided, however, Landlord
shall have the right at the end of the lease term to require the Tenant to
remove any or all improvements made to the Leased Premises and restore the
Leased Premises to the condition it was in at the beginning of the lease
term, reasonable wear and tear alone excepted. Such removal and restoration,
if required, shall be made at the sole cost and expense of the Tenant. Tenant
shall, at the end of the term of this Lease Agreement, have the right to
remove any trade fixtures from the Lease Premises which have not been affixed
to the Leased Premises so as to become a part of the realty. However, any
damage caused to the Building in removing said trade fixtures shall be
repaired at the sole cost and expense of the Tenant.
14. CONDEMNATION: In the event that the entire Leased Premises shall be
taken in condemnation proceedings or by exercise of any right of eminent domain
for public or quasi-public use, this Lease Agreement shall terminate as of the
date of said taking and all unearned rent and other charges paid in advance
shall be refunded to the Tenant after deducting any charges owed by Tenant to
Landlord and the Tenant shall surrender possession of the Leased Premises to the
Landlord. In the event a portion of the Leased Premises shall be taken by such
proceedings, the Landlord shall have the option to terminate this Lease
Agreement or make a proportionate reduction of rent during the remainder of the
lease term. The award for such taking shall belong to the Landlord; except that
the Tenant shall be entitled to make a claim in its own name to the condemning
authority for the value of any furniture, trade fixtures, trade equipment,
merchandise or personal property of any kind belonging to the Tenant, and not
forming a part of the real estate, or for the cost of moving all of the same or
for moving such business as is necessary.
15. BANKRUPTCY OR RECEIVERSHIP: Should Tenant make an assignment for the
benefit of creditors or a receiver be appointed or bankruptcy proceedings be
instituted by it or against it, then any of such events shall, at the option of
Landlord, operate forthwith to cancel and hold this Lease Agreement for naught,
and Lessor shall, after notice, be entitled to immediate possession of the
Leased Premises.
16. DEFAULT: It is expressly covenanted and agreed that in the event the
Tenant vacates or abandons the Leased Premises during the term of the Lease, or
defaults at any time in any term of this Lease or in the payment of any rent or
other payment herein provided for, then, in any of such events and without
further notice the Landlord at its option may declare this lease terminated and
all accrued and unaccrued rentals immediately due and payable, and with or
without legal process enter into and upon the Leased Premises, repossess the
same and expel the Tenant, or any other occupant therefrom, it being expressly
agreed by the Tenant that time is of the essence hereof and the Tenant expressly
waives all notice of non-payment of rent or termination of the Lease Agreement
or demand for possession or demand for rent, and further provided that such
lease termination, re-entry and expulsion of the Tenant or other occupancy
whether by legal process or otherwise, shall be without prejudice to the right
of the Landlord to sue and collect the accrued and unaccrued rental of for the
breach of any other covenant herein contained. In the event of any such default
the Landlord may, at its option, without forfeiting any accrued or unaccrued
rentals due the Landlord, enter into possession and relet the Leased Premises or
any part thereof and the Tenant agrees to further pay all of Landlord's
attorney's fees and to pay for all costs of redecorating, remodeling, leasing
fees or any costs of such re-letting. Any re-letting or re-entry and expulsion
of the Tenant shall in no manner relieve the Tenant of the obligation to
immediately pay all accrued and unaccrued rental due under this Lease Agreement,
provided, however, that in the event the Landlord receives from the Tenant all
of such accrued and unaccrued rental, whether by judgment or otherwise, and
further finds a tenant suitable to the Landlord during the remaining term of
this Lease Agreement, then at the conclusion thereof the Landlord shall remit
back to Tenant any excess rentals received hereunder, less any charges incurred
by reason of such default of the Tenant, including the aforesaid redecorating,
remodeling, leasing fees and attorney's fees. In any event, if Tenant defaults
in the performance of any of the terms, covenants, agreements or conditions
contained in this Lease Agreement, and the Landlord places the enforcement of
this Lease Agreement, or any part hereof, or the collection of any rent, or
charge due, or to become due, or the recovery of the possession of the Premises,
in the hands of an attorney, the Tenant agrees to pay the reasonable attorney
fees of Landlord; plus all the actual costs of enforcement or collection,
including but not limited to expert witness fees and charges, all copying
expenses and laboratory tests. All property of the Tenant, including property
otherwise legally exempt from levy and execution in or upon the Leased Premises
is now and shall be bound for and subject to the payment of all rent and other
sums herein agreed to be paid, whether due or not, and such shall be and do
hereby constitute a lien upon all of the property of Tenant or upon the Leased
Premises and such lien of the Landlord upon the property of the Tenant, as
hereinabove set forth, may be foreclosed by selling the same at public or
private sale, with or without notice at the option of the Landlord.
Any re-entry or re-letting under the provisions hereof shall not work a
forfeiture of the rent or other agreements to be performed by the Tenant
hereunder during the full term of this lease agreement. The foregoing rights and
remedies hereinabove given to the Landlord are and shall be deemed to be
cumulative and the exercise of one shall not be deemed to be an election
excluding the exercise by the Landlord at any other or different time of a
different or inconsistent remedy and shall be deemed to be given to said
Landlord in addition to any other and further rights given or granted to said
Landlord by the terms of any paragraph hereof or by law and the failure upon
the part of Landlord at any time to exercise any right or remedy hereby given
to it, shall not be deemed to operate as a waiver by it of its right to
exercise such right or remedy at any other future time.
In the event of default by Tenant of any of the terms and conditions of
this Lease Agreement, or the addendums attached hereto, then, interest at the
highest rate allowed by law in the state of Oklahoma shall accrue on any amounts
due or which will become due, including all costs and attorney fees.
17. HOLDING OVER: If Tenant remains in possession of the Leased Premises
after the expiration of this Lease Agreement, such continued possession shall,
if rent is paid by Tenant and accepted by Landlord, create a month-to-month
tenancy on the terms herein specified, and said tenancy may be terminated at any
time by either party by thirty (30) days written notice to the other party.
Tenant agrees that in the event Tenant becomes a hold-over Tenant in accordance
with this Paragraph, all of the same terms and conditions of this Lease
Agreement shall apply except the monthly rent to be paid shall be one hundred
fifty percent (150%) of the monthly rent which was in effect during the last
month of this Lease Agreement and any renewals and addendums hereto immediately
preceding the month Tenant becomes a hold-over Tenant.
18. RIGHT TO INSTALL SIGNS: Tenant shall not install any sign without
Landlord's approval.
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19. PARKING: COMMON AREAS; INGRESS AND EGRESS; Landlord shall repair and
maintain the parking areas at Landlord's cost and expense, except damage
resulting from Tenant's forklifts, trucks, semi-trailers, dolly wheels, tracked
vehicles, and fuel, oil or acid spillage, all of said damages and other damages
caused by the Tenant or the Tenant's employees, guests, customers, deliverymen
or licensees, shall be repaired by Tenant at Tenant's expense.
20. NOTICE: Any notice provided for herein shall be given by mail, postage
prepaid, to the Landlord at the address to which the rent is then being mailed,
and to the Tenant, at the Leased Premises. The place to which notices are to be
made may be changed by written notice from time to time from one party to the
other party.
21. COVENANT NOT TO WASTE: The Tenant covenants not to commit nor to
permit any waste whatever and will, free of expense to Landlord, when required
by the Landlord, when required by the proper authorities or Landlord, abate all
nuisances whether public or private.
22. RULES AND REGULATIONS: The Rules and Regulations attached hereto and
marked Exhibit "B" are made a part of this Lease Agreement as if fully herein
set forth and are material terms of this Lease Agreement. Tenant, its employees,
agents and visitors, shall observe and abide by them and by such other and
further reasonable Rules and Regulations as Landlord may prescribe which, it its
judgment, are needful for the reputation, safely, care or cleanliness of the
Building or Leased Premises, or the operations and maintenance thereof and the
equipment therein, or for the comfort of Tenant and the other tenants of the
Building. Landlord, however, shall have the right to change said rules and waive
in writing any or all of said rules in the case of any one or more tenant. All
such Rules and Regulations are of the essence hereof without which this Lease
Agreement would not have been entered into by the Landlord, and any breach of
any provision of the Rules and Regulations by the Tenant shall constitute a
default hereunder.
23. FORCE MAJEURE: Except with respect to the obligation of Tenant to pay
rental, after this Lease Agreement shall have commenced, the time for
performance of other matters set forth herein may be delayed for the period or
periods of interference therewith or delay thereof caused by strikes, unusual
climatic conditions, act of God or war, or by conditions and situations not
reasonably within control of either of the parties hereto.
24. RIGHT OF OCCUPANCY: Landlord agrees to furnish the Leased Premises
described in paragraph 1, subject to the terms and conditions described herein;
however, it shall be the responsibility of the Tenant to obtain the necessary
occupancy permits required by Local, State and Federal Agencies and Tenant shall
be solely responsible for any modifications or changes required to obtain such
permits.
In the event Tenant fails to perform any obligation under the terms of this
Lease Agreement (including but not limited to cleaning in and around the Leased
Premises and repairing damages to the Leased Premises) and Landlord elects to
perform Tenant's obligation, then Landlord shall have the right to collect from
the Tenant the actual costs incurred in performing such obligations together
with the Landlord's costs of any of Landlord's employees time spent in
connection therewith and 20% of all amounts described above to compensate
Landlord for overhead and profit.
25. BINDING EFFECT AND SPECIAL CONDITIONS:
25.1 This Lease Agreement and the terms, covenants and provisions hereof,
shall inure to the benefit of and be binding upon the successors and assigns of
both parties hereto.
EXECUTED the day and year first hereinabove written.
ROBERT L. ZELIGSON TRUST by its Agent, VANSU COMPANY
By: /s/ C. G. Van Schoyck
--------------------------------------------
"Landlord"
TRI-STAR AEROSPACE, INC.
By: /s/ R. P. Small, President
--------------------------------------------
"Tenant"
--------------------------------------------
"Guarantor"
-4-
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TENANT ESTOPPEL CERTIFICATE
LEASED PREMISES: 11531 East Pine Street
Tulsa, Oklahoma
DATE OF LEASE: May 25, 1991
DATE OF AMENDMENTS: May 25, 1995
NAME OF TENANT: Tri-Star Aerospace, Inc.
NAME OF OWNER: Robert L. Zeligson, Trustee of the
Braniff M Warehouse Trust
The undersigned ("Tenant") certifies as of the date of this Certificate the
following data as true and accurate:
1. The attached Lease, and any Amendments thereto, comprise a complete copy of
the entire Lease Agreement (please attach a copy of Lease and all Exhibits
and Addenda).
2. The Tenant's Lease, and any Amendments thereto (known collectively as the
"Lease"), are correctly identified by the date(s) stated above.
3. The commencement date of the Lease was September 1, 1995. The expiration
of the Lease is August 31, 2000.
4. The monthly base rent (not including any percentage rent or expense pass
through) presently payable under the Lease is $1,627.25, and such rent has
been paid through JANUARY 31, 1998.
5. The real estate property taxes payable by Tenant under the Lease are as
follows: the amount owed by the Tenant, is equal to the amount that the
property taxes incurred during each calendar year exceed the Base Year 1990
property taxes which were $24,702.00.
6. The Tenant has deposited with Landlord $1,627.25 as a Security Deposit
under the terms of the Lease.
7. The Lease is presently in full force and effect and has not been modified,
supplemented, or amended except as indicated on this Tenant Estoppel
Certificate. To the knowledge of the undersigned, Landlord is not in
default of any terms or conditions of said Lease and Tenant is not in
default of any terms or conditions of said Lease.
8. Tenant is in possession of Leased Premises and that the Leased Premises is
in conformity with that stated in the Lease.
9. Tenant has no option to purchase the Property or first right of refusal
(FRR) to purchase the Property in which the Leased Premises is situated.
10. The Lease is personally guaranteed by N/A.
11. The square footage of the Leased Premises used for the calculation of all
rental sums due and payable per the terms and conditions of the Lease is
approximately 7,500 square feet, and that the total square footage of the
Property is approximately 155,000 square feet.
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Page 2
12. The statements contained herein are made for the purpose of verifying the
current status of the Tenant's Leasehold interest in Leased Premises and
may be relied upon by Landlord and any successor(s) and/or assignee(s) for
such purpose.
By: /s/ Brian J. Murphy
---------------------------
Brian J. Murphy
Vice President
Date: 12/24/97
-------------------------
Acknowledgment:
I hereby acknowledge that I witnessed the execution of this document by Brian
Murphy on this ________ day of________ 19____.
By:
---------------------------
<PAGE>
BUILD AND LEASE AGREEMENT
This Agreement is made this 30th day of APRIL, 1993, by and between ROBERT
L. ZELIGSON TRUST (hereinafter called "Landlord") and TRI-STAR AEROSPACE, INC.
(hereinafter called "Tenant").
RECITALS:
(1) Landlord is the owner of a warehouse building (the "Warehouse Building")
known as the BRANIFF "M" WAREHOUSE located at 11501 East Pine Street, Tulsa,
Oklahoma.
(2) Tenant presently leases space in the Warehouse Building under various
leases (the "Existing Leases").
(3) Tenant desires to have Landlord build an addition (the "Building
Addition") to the Warehouse Building for Tenant's use. Upon completion of
the Building Addition, Tenant will lease (the "Lease") the Building Addition
(the "Leased Premises") pursuant to the terms and provisions of this
instrument.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and intending to be legally bound, the parties agree as
follows:
1. CONSTRUCTION OF BUILDING ADDITION. Landlord, at Landlord's expense,
will construct the Building Addition pursuant to the plans and specifications
approved by both Landlord and Tenant and attached hereto as EXHIBIT A.
Landlord shall not be required to furnish any work, fixtures or equipment for
the Building Addition beyond what is shown by EXHIBIT A.
2. DELIVERY OF BUILDING ADDITION TO TENANT. When the Building Addition has
been substantially completed, Landlord will deliver possession of the
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Building Addition to Tenant for Tenant's use and occupancy. The date of
delivery of possession is hereinafter called the "Possession Date". The
parties will exchange a letter specifying the Possession Date as soon as that
date is established. Tenant will inspect the Building Addition on or
immediately prior to the Possession Date. If Tenant believes that the
Building Addition has not been constructed in accordance with the EXHIBIT A
plans and specifications, Tenant will furnish Landlord a list in writing of
the claimed deficiencies within ten (10) days after the Possession Date. The
existence of deficiencies will not delay the Possession Date. Possession of
the Building Addition by Tenant will constitute Tenant's acceptance of the
Building Addition, subject to Tenant's deficiency list. Landlord will proceed
promptly at Landlord's expense to correct the deficiencies on Tenant's
deficiency list. If Landlord disputes any item on Tenant's deficiency list,
Landlord and Tenant will negotiate in good faith to resolve the dispute. If
the dispute is not resolved by good faith negotiations, Tenant will submit
the dispute to arbitration under the Oklahoma Arbitration Act within one
hundred twenty (120) days after the Possession Date. Landlord anticipates
that Landlord will be able to deliver possession of the Building Addition to
Tenant within one hundred twenty (120) days after Landlord's receipt of the
building permit, subject to delays beyond Landlord's control. Tenant will
have no right to terminate this Agreement or claim for damages if Landlord is
unable to meet the anticipated delivery date, provided that Landlord acts
with due diligence in attempting to meet the anticipated delivery date.
3. LEASE TERM. The term of the Lease will be a period of fifteen (15)
years from the first day of the month following the month in which the
Possession Date occurs. Tenant will have the right to terminate this Lease by
giving Landlord written notice of Tenant's election to terminate the Lease at
least six (6) months prior to the tenth (10th) anniversary of the Lease.
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4. RENT. Subject to adjustment as herein provided, Tenant agrees to pay
Landlord as rent (the "Rent") for the use of the Leased Premises the sum of
ONE THOUSAND FOUR HUNDRED FIFTY-SIX DOLLARS ($1,456.00) per month, payable in
advance without notice or demand on the first day of each and every month
during the Lease term. The Rent will commence as of the Possession Date and
Tenant will pay Landlord with the first monthly Rent payment an additional
amount representing a pro rata share of a month's rent calculated on a daily
basis from and including the Possession Date to the first day of the
following month. In the event the first day of the month is a Saturday,
Sunday or holiday in Oklahoma on which national banks are closed, the Rent
will be due on the next business day. All Rent will be paid to Landlord at
its Notice address herein or at such other address as Landlord furnishes to
Tenant in writing. Landlord's deposit of Tenant's Rent payment is
conditioned upon credit to Landlord's account in the ordinary course of
banking transactions of Tenant's Rent payment. In the event Tenant's Rent
payment check is dishonored by Tenant's bank, Landlord shall have the right
to require Rent payments by cashier's check or wire transfer to Landlord's
account. The rental will be paid without deduction, counterclaim or offset.
This is a "net-net-net" lease; that is, the Rent is calculated on the basis
that the Landlord will not have any cost, expense or monetary obligation with
reference to the Leased Premises.
5. RENT ADJUSTMENT. The Rent will be adjusted as provided in this
paragraph, commencing on OCTOBER 1, 1993, and continuing quarterly thereafter
during the Lease term. The initial amount of $1,456.00 per month is based on
the eight percent (8%) interest rate on the loan obtained by Landlord to
finance the construction of the Building Addition. The interest rate on
Landlord's loan is subject to quarterly adjustment. In the event of an
upward or downward adjustment in the interest rate on Landlord's loan, the
Rent will be adjusted
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upward or downward to reflect Landlord's increased or decreased interest cost
as compared to Landlord's loan interest cost for the prior quarter. For
example only, if the interest rate on Landlord's loan is adjusted upward such
that Landlord will be paying $1,000 more in interest for the coming quarter
than Landlord paid during the previous quarter, the rental for the coming
quarter will be increased by $1,000, to be added in equal installments to the
monthly rental payments. A similar adjustment will be made each quarter in
the event of an increase or decrease in the interest rate on Landlord's loan,
except that the monthly rental will never be less than the initial monthly
rental amount of $1,456.00. It is recognized that the loan may be paid off
during the Lease term and not replaced with another loan. In that event, the
rental shall continue to be adjusted quarterly each year in the foregoing
manner based upon an assumed interest rate of the Chase Manhattan Bank of New
York City, New York, prime rate, plus two percent (2%). Landlord will notify
Tenant in writing within thirty (30) days of each quarter as to the
additional Rent amount (if any) required under the foregoing Rent adjustment
provision. Within ten (10) days after receipt of Landlord's notice, Tenant
will pay the installments of the additional Rent due to that date and will
thereafter increase the monthly Rent payments as required under the Rent
adjustment provision. Landlord's failure to notify Tenant of a Rent
adjustment within the thirty (30) day period will not release Tenant from
Tenant's obligation for a Rent adjustment if a Rent adjustment is due. The
term "Landlord's loan" in this paragraph is not limited to Landlord's loan
for the construction of the Building Addition but shall also include any
subsequent loan for permanent or replacement financing on the Leased Premises.
6. DEPOSIT. Landlord acknowledges receipt from Tenant of FIFTEEN THOUSAND
DOLLARS ($15,000) as a security deposit (the "Deposit") upon the signing of
this instrument. Landlord agrees to hold the Deposit without interest
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and to refund the Deposit to Tenant at the end of the Lease term if Tenant
has fully complied with all of Tenant's obligations under the Lease. In the
event of a default by Tenant, Landlord shall have the right to apply the
Deposit to correct the default or to reduce any amount owing by Tenant to
Landlord.
7. EXERCISE OF OPTIONS. Tenant has various renewal options under the
Existing Leases. As a material part of the consideration to Landlord for
this Agreement, Tenant hereby exercises the renewal options under the
Existing Leases for the premises (totaling 22,500 square feet) at 11535,
11537 and 11539 East Pine Street, Tulsa, Oklahoma.
8. MAINTENANCE AND REPAIRS. Landlord shall have no obligation to furnish
any maintenance, repairs or replacements of any nature for the Leased
Premises, including, without limiting the generality of the foregoing, the
mechanical, electrical, plumbing and HVAC facilities of the Leased Premises.
All maintenance, repairs and replacements shall be furnished by Tenant at
Tenant's sole expense, including all maintenance, repairs and replacement, if
necessary, to the mechanical, electrical, plumbing and HVAC facilities of the
Leased Premises. The foregoing includes structural repairs and replacements,
all of which shall be at Tenant's cost and expense. Landlord will assign to
Tenant, to the extent Landlord has the right to do so, all warranties
received by Landlord from the Building Addition contractor and any suppliers
of electrical, mechanical, plumbing and HVAC equipment. The assignment will
be on a "no recourse" basis to Landlord. At the end of the Lease term,
Tenant will deliver possession of the Leased Premises to Landlord in good
condition and repair except for wear and tear resulting from ordinary and
prudent use and loss or damage by fire or other insured casualty.
9. UTILITIES. From and after the Possession Date, Tenant agrees to pay all
costs and expenses for utility services to the Leased Premises. It will be
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Tenant's responsibility to provide the required deposits with utility
suppliers and to arrange for separate meters for the utility service to the
Leased Premises, except as to the extent that separate meters are provided by
EXHIBIT A. Landlord shall not be liable for, and Tenant shall not be entitled
to any reduction of Rent, by reason of any failure of utility services when
such failure is caused by accident, breakage, repairs, strikes, lockouts or
other labor disturbances or labor disputes of any character, or by any other
cause, similar or dissimilar. Notwithstanding any other provisions in this
Lease, Landlord shall not be liable under any circumstances for a loss or
injury to property or persons occurring through or in connection with
incidental failure to furnish any of the foregoing.
10. USE. Landlord leases the Leased Premises to Tenant for use as warehouse
space for Tenant's inventory, offices and for such allied purposes as may be
requisite to conduct Tenant's normal activities. Tenant shall not use, or
permit the Leased Premises or any part thereof to be used, for any purpose
other than the purpose for which the Leased Premises are hereby leased. No
use shall be made or permitted to be made of the Leased Premises, nor acts
done thereon, which will cause a cancellation of any insurance policy
covering the Leased Premises, or any part thereof, or cause a cancellation of
any insurance policy or increase the existing rate of insurance on Landlord's
building adjoining the Leased Premises, nor shall Tenant keep or permit to be
kept, or used in or about the Leased Premises, any article which may be
prohibited by the standard form of fire insurance policies. Tenant shall
comply with any and all requirements pertaining to the Leased Premises of any
insurance company necessary for the maintenance of reasonable fire and public
liability insurance covering said Leased Premises and appurtenances. Tenant
shall not commit or suffer to be committed any waste upon the Leased Premises.
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11. QUIET ENJOYMENT. Tenant, upon payment of the Rent and performing the
provisions of this Lease on its part, shall have peaceful and quiet
possession of the Leased Premises against all parties claiming adversely
thereto by or under Landlord.
12. COMPLIANCE WITH LAW. Tenant agrees that it will comply and conform to
all laws and ordinances, municipal, state and federal, and any and all lawful
requirements and orders of any properly constituted municipal, state or
federal board or authority, present or future, in any way relating to the
condition, use or occupancy of the Leased Premises throughout the entire term
of this Lease and to the complete exoneration from liability of Landlord.
The judgment of any court of competent jurisdiction or the admission by
Tenant in any action or proceeding against Tenant, whether Landlord be a
party thereto or not, that Tenant has violated any such law, ordinance,
requirement or order in the use of the Leased Premises, shall be conclusive
evidence of the fact as between Landlord and Tenant. Landlord represents that
the Building Addition will comply with the requirements of the Americans
With Disabilities Act and all applicable state, local and federal building,
use and fire codes on the Possession Date. Tenant agrees at Tenant's expense
to make all modifications to the Leased Premises required to bring the Leased
Premises into compliance with the requirements of the Americans With
Disabilities Act and all state, local and federal building, use and fire
codes which are enacted subsequent to the Possession Date.
13. LEASED PREMISES. No alterations, additions or improvements to the
Leased Premises costing in excess of ONE THOUSAND DOLLARS ($1,000) for any
single project shall be made without first having the written consent of
Landlord. All structural alterations are specifically prohibited. Any
improvements, additions, or alterations made to the Leased Premises shall
become a part of the realty and shall not thereafter be removed by the
Tenant, with the sole exception that Tenant
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shall have the right to install trade fixtures which may be removed by Tenant
upon payment to Landlord of the cost of repairing any damage caused by the
removal of said trade fixtures. In no event shall Tenant ever allow or cause
to be filed upon the Leased Premises any mechanic's or materialman's liens or
liens of any kind. In the event of such filing, Tenant shall cause the same
to be removed within thirty (30) days of the date thereof, unless Tenant
elects in good faith to contest the lien, in which event Tenant will remove
the lien from the Leased Premises under the deposit and bond procedure of
tit. 42, OKLA. STAT. Section 147.1.
14. RIGHT OF INSPECTION. Landlord reserves and shall at any and all times
have the right to enter the Leased Premises, inspect the same, to show the
Leased Premises to prospective purchasers or mortgagees and to post notices
of non-responsibility. Tenant hereby waives any claim for damages or for
injury or inconvenience to or interference with Tenant's business, any loss
of occupancy or quiet enjoyment of the Leased Premises, and any other loss
occasioned thereby. For each of the aforesaid purposes, Landlord shall at all
times have and retain a key with which to unlock all the doors in, upon, and
about the Leased Premises, excluding Tenant's vaults, safes and files, and
Landlord shall have the right to use any and all means which Landlord may
deem proper to open said doors in an emergency, in order to obtain entry to
the Leased Premises without liability to Tenant. Any entry to the Leased
Premises obtained by Landlord by any of said means or otherwise shall not
under any circumstances be construed or deemed to be forceful or unlawful
entry into, detainer, acceptance of surrender of or an eviction of Tenant
from the Leased Premises or any portion thereof.
15. CASUALTY LOSS. If, during the term of this Lease, the Leased Premises
are destroyed by fire or any other cause, or partially destroyed so as to
render the Leased Premises wholly unfit for occupancy, and the Landlord shall
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conclude that the Leased Premises cannot be repaired for occupancy within one
hundred twenty (120) days from the happening of the loss or damage, then this
Lease shall, at Landlord's option, immediately terminate. In case of total
or partial damage or destruction to the Leased Premises and if Landlord does
not elect to terminate this Lease, Tenant shall proceed to repair and restore
the same. The Rent during the period of such repairs shall not abate.
16. EMINENT DOMAIN. If during the term of this Lease, the Leased Premises
are taken as a result of an exercise of the power of eminent domain, this
Lease and all of Tenant's obligations, rights, titles and interests hereunder
will terminate on the date of vesting of title pursuant to such taking, and
Landlord will be entitled to receive the total award for such taking*. If
less than all of the Leased Premises is taken, this Lease will, upon vesting
of title pursuant to the taking or the actual physical taking, whichever
occurs first, terminate as to the portion of the Leased Premises so taken and
Landlord will be entitled to receive the total award therefor *except for (i)
any portion of the award separately allocated by the court to Tenant's
interest in the Leased Premises and (ii) moving or relocation expenses
awarded to Tenant, but this Lease will continue in force as to the remainder
of the Leased Premises if the remainder can be reasonably used for Tenant's
purposes, in which event there shall be an equitable reduction of the Rent
for the balance of the Lease term. Landlord will be under no obligation to
restore, repair and replace that portion of the Leased Premises not so taken
to a complete architectural unit for use and occupancy by Tenant. If, under
such circumstances, the Tenant chooses not to continue this Lease in force,
the Lease shall terminate as of the date that Tenant advises Landlord, in
writing, of its intention to terminate. Tenant's notice of termination must
be given to Landlord within thirty (30) days of notice to Tenant of the
vesting of title pursuant to the taking or the actual physical taking,
whichever occurs first.
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17. LIABILITY INSURANCE. Throughout the term of this Lease, Tenant shall,
at Tenant's expense, obtain and keep in force a policy of comprehensive
public and property damage liability insurance insuring Landlord and Tenant
against any liability arising out of the ownership, use, occupancy or
maintenance of the Leased Premises and all areas appurtenant thereto. The
limit of said insurance shall not, however, limit the liability of Tenant
hereunder. The limits of such insurance shall be in an amount of not less
than $3 Million combined single limit with respect to any one occurrence.
Tenant shall furnish evidence satisfactory to Landlord of such insurance.
Insurance required hereunder shall be in companies satisfactory to Landlord.
Tenant may carry this insurance wider a blanket policy providing, however,
that the insurance by Tenant shall have a Landlord's protective liability
endorsement attached thereto. Tenant shall deliver to Landlord copies of
policies of liability insurance required herein or certificates evidencing
the existence and amounts of such insurance with loss payable clauses
satisfactory to Landlord. If Tenant shall fail to procure and maintain said
insurance, Landlord may, fifteen (15) days after written notice of its intent
to Tenant, but shall not be required to, procure and maintain the same, but
at the expense of Tenant. Any amount so paid by Landlord shall be repayable
by Tenant to Landlord with the next installment of Rent, and failure to repay
the same shall carry with it the same consequences as failure to pay any
installment of Rent.
18. CASUALTY INSURANCE. Tenant agrees:
(a) to keep the Leased Premises insured for the benefit of Landlord
against loss or damage by fire, lightning, windstorm, hail, explosion,
riot, vandalism, malicious mischief, riot attending a strike, civil
commotion, aircraft, vehicles, smoke and other risks from time to
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time included under "extended coverage policies," all in amounts equal
to 100% of the full replacement value thereof; and
(b) to obtain insurance against explosion, rupture, bursting or leaking of
pipes, engines and all other forms of pressure vessels in amounts
satisfactory to Landlord and applicable to all apparatus of this nature in
use or connected ready for use at the Leased Premises; and
(i) to provide Landlord with insurance policies insuring against any other
risk insured against all persons owning like properties in the locality of
the Leased Premises.
All insurance herein provided for shall be in form and by companies approved
by Landlord. The policy or policies shall not include a co-insurance clause
with a higher percentage than 80% and shall include a stipulated value
endorsement showing compliance with any co-insurance clause included in the
policies. Tenant further agrees that Tenant will deliver to Landlord all
policies of insurance which insure against any loss or damage to the Leased
Premises, with loss payable to Landlord. If Landlord, by reason of such
insurance, receives any money for loss or damage, such amount will be held by
Landlord without interest and paid to the Tenant for the repair of
improvements on the Leased Premises as the repair progresses, unless Landlord
elects to terminate this Lease. Tenant further agrees that not less than
thirty (30) days prior to the expiration dates of each policy required of
Tenant pursuant to this paragraph, Tenant will deliver to the Landlord a
renewal policy or policies marked "premium paid" or accompanied by other
evidence of payment satisfactory to Landlord.
19. GENERAL INSURANCE REQUIREMENTS APPLICABLE TO ALL POLICIES. All insurance
policies shall name Landlord, Tenant, and parties designated by Landlord, as
loss payees, as their respective interests may appear, or as additional
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insureds as required by Landlord and shall otherwise be satisfactory in all
respects to Landlord. All insurance policies required to be maintained by
Tenant under the terms hereof, whether or not such policies are for amounts
in excess of the minimum required hereunder, shall:
(a) include an effective waiver by the insurer of all rights of
subrogation against any named insured or such insured's interest in the
Leased Premises or any income derived therefrom;
(b) provide that all insurance claims for losses shall be adjusted with
the insurer or its authorized representative Jointly by Landlord and Tenant
PROVIDED that in the event of a dispute between Landlord and Tenant as to
the manner, amount or other terms of such adjustment, the dispute shall be
submitted to binding arbitration under the Oklahoma Arbitration Act;
(c) provide that any losses shall be payable notwithstanding any act or
failure to act or negligence of Landlord or Tenant herein;
(d) provide that no cancellation, reduction in amount or material change
in coverage thereof shall be effective until at least thirty (30) days
after receipt by Landlord and Tenant of written notice thereof;
(e) contain only such deductibles, if any, as Landlord may approve in
writing; and
(f) be reasonably satisfactory to Landlord in all other respects.
20. ESTOPPEL CERTIFICATE. Tenant shall at any time upon ten (10) days prior
written notice from Landlord execute, acknowledge and deliver to Landlord a
statement in writing:
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(a) certifying that this Lease is unmodified and in full force and effect
(or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect or, if not in
full force and effect, stating the reasons why this Lease is not in full
force and effect) and the date to which the Rent and other charges are
paid in advance, if any;
(b) stating if Landlord has any unperformed obligations to Tenant under
the Lease; and
(c) acknowledging that there are not, to Tenant's knowledge, any uncured
defaults on the part of Landlord or any state of facts which, with the
passage of time or action by a third party, or both, could result in an
event of default on the part of the Landlord, or specifying such defaults
if any are claimed.
Any such statement may be conclusively relied upon by any prospective
purchaser or mortgagee of the Leased Premises. Tenant's failure to deliver
such statement within such time shall be conclusive upon Tenant:
(d) that this Lease is in full force and effect, without modification
except as may be represented by Landlord;
(e) that there are no uncured defaults in Landlord's performance; and
(f) that not more than one month's rent had been paid in advance.
21. HYPOTHECATION BY LANDLORD AND ATTORNMENT BY TENANT. Nothing herein
contained will preclude Landlord from assigning or hypothecating this Lease
or any of its rights arising hereunder as security for indebtedness incurred
by Landlord, provided, however, that any such assignment or
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hypothecation will not affect the Tenant's rights hereunder. Tenant shall,
in the event of a sale or assignment of Landlord's interest in the Leased
Premises or this Lease, attorn to the purchaser or such mortgagee or other
person and recognize the same as Landlord hereunder. Tenant shall execute, at
Landlord's request, an attornment agreement, provided that:
(a) the agreement does not lessen or prejudice any of Tenant's rights
hereunder; and
(b) the agreement contains an appropriate recognition and non-disturbance
provision.
22. ASSIGNMENT OR SUBLETTING. Tenant may not assign this Lease or sublease
the Leased Premises or any part thereof without the written consent of
Landlord, which consent will not be unreasonably withheld or delayed. In the
event of any approved assignment or sublease, Tenant shall not be released
from any past, present or future liability arising out of the Lease. A
merger or reorganization of Tenant or a change in Tenant's form of business
organization shall be deemed to be an assignment of the Lease.
23. EXEMPTION OF LANDLORD FROM LIABILITY. Landlord shall not be liable for
injury to Tenant's business or any loss of income therefrom or for damage to
the property of Tenant, Tenant's employees, invitees, customers, or any other
persons in or about the Leased Premises, nor shall Landlord be liable for
injury to the Tenant, Tenant's employees, agents or contractors, whether such
damage or injury is caused by or results from fire, smoke steam, electricity,
gas, water or rain, or from the breakage, leakage, obstruction or other
defects of the pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures, or from any other cause, whether the
damage or injury results from conditions arising upon the Leased Premises or
from other sources or places, and
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regardless of whether the cause of such damage or injury or the means of
repair is inaccessible to Tenant. Landlord shall have no responsibility for
any loss, theft, vandalism to, or disappearance of Tenant's property or the
property of Tenant's customers and employees in or about the Leased Premises.
24. INDEMNITY. Tenant shall indemnify and hold harmless Landlord from and
against any and all claims arising from Tenant's use of the Leased Premises,
or from the conduct of Tenant's business or from any activity, work or things
done, permitted or suffered by Tenant in or about the Leased Premises or
elsewhere and shall further indemnify and hold harmless Landlord from and
against any and all claims arising from any breach or default in the
performance of any obligation on Tenant's part to be performed under the
terms of this Lease, or arising from any negligence of the Tenant, or any of
Tenant's agents, contractors, invitees or employees, and from and against all
costs, attorneys fees, expenses and liabilities incurred in the defense of
any such claim or any action or proceeding brought thereon. In case any
action or proceeding be brought against Landlord by reason of any such claim,
Tenant, upon notice from Landlord, shall defend the claim or action at
Tenant's expense. Tenant, as a material part of the consideration to
Landlord, assumes all risk of damage to property or injury to persons, in,
upon or about the Leased Premises arising from any cause and Tenant waives
all claims in respect thereof against Landlord.
25. WAIVER OF SUBROGATION. Each party hereto waives any and every claim
which arises or may arise in its favor and against any other party hereto, or
anyone claiming through or under them, by way of subrogation or otherwise
during the term of this Lease or any extension or renewal thereof for any and
all loss of, or damage to, any of its property (whether or not such loss or
damage is caused by the fault or negligence of the other party or anyone for
whom said other party may be responsible), which loss or damage is covered by
valid and
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collectible fire or extended coverage insurance policies, to the extent that
such loss or damage is recovered under said insurance policies. Said waivers
shall be in additional to, and not in limitation or derogation of, any other
waiver or release contained in this Lease with respect to any loss or damage
to property of the parties hereto. Inasmuch as the above mutual waivers will
preclude the assignment of any aforesaid claim by way of subrogation (or
otherwise) to an insurance company (or any other person), each party hereto
hereby agrees immediately to give to each insurance company which has issued
to it policies of fire and extended coverage written notice of said mutual
waivers, and to have said insurance policies properly endorsed, if necessary,
to prevent the invalidation of said insurance coverages by reason of said
waiver. In the event such mutual release shall invalidate, increase the cost
of or make it impossible to obtain insurance coverage for either Landlord or
Tenant, the party suffering such burden shall give notice to the other party.
If the notified party, within 30 days of such notice, pays the increased cost
or is able to locate coverage for the notifying party, this mutual waiver
shall remain in full force and effect; otherwise, it shall terminate.
26. EVENTS OF DEFAULT. The following events shall be deemed to be events of
default by Tenant under this Lease:
(a) if Tenant fails to pay any installment of Rent or any other sum due
under this Lease when first payable and such failure continues for a period
of five (5) days after telephone or written notice to Tenant's President;
or
(b) if Tenant fails to comply with any term, provision or covenant of this
Lease other than the payment of Rent, and fails to cure such failure within
fifteen (15) days after written notice thereof to Tenant; or
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(c) if Tenant deserts or vacates any substantial portion of the Leased
Premises for a period of thirty (30) days.
27. REMEDIES. Upon the occurrence of any such events of default, Landlord
shall have the option to pursue any one or more of the following remedies:
(a) Terminate this Lease by giving notice to Tenant, in which event Tenant
shall immediately surrender the Leased Premises to Landlord in good repair
and order and in broom clean condition. If Tenant fails to do so, Landlord
may, without prejudice to any other remedy for possession, enter upon and
take possession of the Leased Premises and expel or remove Tenant and any
other person who may be occupying said Leased Premises or any part thereof,
without being liable for prosecution or any claim of damages.
Notwithstanding the exercise of this option, Tenant shall be liable to
Landlord for the "Termination Damages" specified below;
(b) Landlord may allow the Leased Premises to remain available to Tenant,
without terminating this Lease and without any duty to seek a new tenant or
otherwise mitigate its damages and from time to time during the remainder
of the term of this Lease, recover arrearages of rent, accrued interest
and all other amounts due it under this Lease;
(c) Landlord may, at its election, re-enter the Leased Premises and,
without terminating this Lease, at any time and from time to time relet
the Leased Premises and improvements, or any part or parts of them for the
account of Tenant. Any reletting may be for the remainder of the term of
this Lease or for any longer or shorter
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period. Landlord shall have sole discretion with regard to the terms of
any such reletting, including the right to give free rent or other
inducements. Landlord may execute any leases made under this provision
either in Landlord's name or in Tenant's name and shall be entitled to all
rents from the use, operation or occupancy of the premises or improvements
or both. Tenant shall nevertheless pay to Landlord on the due dates
specified in this Lease the equivalent of all sums required of Tenant
under this Lease, plus interest and Landlord's expenses less the avails of
any reletting. No act by or on behalf of Landlord under this provision
shall constitute a termination of this Lease unless Landlord gives Tenant
written notice of termination;
(d) in the event of Landlord's termination of this Lease, Landlord shall
be entitled, at Landlord's election, to damages in the following sums (the
"Termination Damages"):
(i) all unpaid Rent and other amounts due under this Lease, plus
interest, to the date of any judgment or award, or the date of
payment, whichever is first, less the net proceeds from reletting the
Leased Premises or any portion thereof; and
(ii) the present worth at the time of the award, judgment or payment
of the amount by which the unpaid rent for the balance of the term of
the Lease, had it not been terminated, exceeds the amount of revenue
that the Tenant proves reasonably could be recovered for such period;
and
(iii) any other amounts necessary to compensate the Landlord for all
the detriment proximately caused by the
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Tenant's failure to perform its obligations under the Lease or which
in the ordinary course of events would be likely to result therefrom;
and
(e) the present worth calculation shall be based on the discount rate of
the Federal Reserve Bank of Chicago at the time of the award, judgment or
payment, plus 1%. The monthly Rental for the balance of the term of the
Lease shall be equal to the highest monthly Rental for any month since the
commencement date of this Lease;
(f) whenever under the terms of this Lease or applicable law, Landlord is
obliged or elects to relet the Leased Premises or any portion of them for
the account or benefit of Tenant, Tenant shall only be credited with the
net proceeds of such reletting after deducting Landlord's expenses of
reletting. Such expenses shall include, but not be limited to, Landlord's
costs and expenses (including attorneys fees) incurred in connection with:
(i) regaining possession of the Leased Premises;
(ii) removal and storage of Tenant's or other occupants' property;
(iii) care, maintenance and repair of the Leased Premises while
vacant;
(iv) leasing commissions relative to the reletting; and
(v) remodeling and tenant improvements for the purpose of showing
or reletting the Leased Premises; and
(g) if Landlord elects to re-enter or take possession of the Leased
Premises after Tenant's default, Tenant waives notice of such re-
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<PAGE>
entry or repossession and of Landlord's intent to re-enter or retake
possession;
(h) pursuit of any of the foregoing remedies shall not preclude pursuit of
any other remedies provided in this Lease or by law. The election of one
remedy for any one time shall not foreclose an election of any other remedy
for another default or for the same default at a later time;
(i) no act or conduct of the Landlord, whether consisting of the
acceptance of the keys to the Leased Premises, or otherwise, shall be
deemed to be or constitute an acceptance of the surrender of the Leased
Premises by the Tenant prior to the expiration of the term of this Lease,
and such acceptance by the Landlord of surrender by the Tenant shall only
flow from and must be evidenced by a written acknowledgment of acceptance
of surrender signed by Landlord;
(j) the surrender of this lease by the Tenant, voluntary or otherwise,
shall not work a merger but shall operate as an assignment to the Landlord
of any and all existing subleases or the Landlord may, at Landlord's
option, terminate any and all of such subleases by notifying the
sublessees of Landlord's election so to do within five (5) days after such
surrender; and
(k) if on account of any breach or default by Tenant in its obligations
Landlord shall employ an attorney to enforce or defend any of Landlord's
rights or remedies, Tenant agrees to pay all reasonable attorney's fees
incurred by Landlord in such connection. All amounts payable by Tenant to
Landlord under this Lease, if not paid when due, shall bear interest from
the due date or dates until paid at the rate of 18% per annum.
20
<PAGE>
28. SUBORDINATION. This Lease, at Landlord's option, shall be subordinate
to any mortgage, deed of trust, or any other hypothecation for security now
or hereafter placed upon the real property of which the Leased Premises are a
part and to any and all advances made on the security thereof and to all
renewals, modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Tenant's right to quiet possession of the
Leased Premises shall not be disturbed if Tenant is not in default and so
long as Tenant shall pay the Tent and observe and perform all of the
provisions of this Lease, unless this Lease is otherwise terminated pursuant
to its terms. Tenant agrees to execute any documents required to effectuate
such subordination and to make this Lease junior and inferior to the lien of
any mortgage or deed of trust as the case may be.
29. NO BROKERS. Tenant warrants that it has dealt with no broker, agent or
other person in connection with the negotiation or execution of this Lease
and that no broker, agent or other person performed any services for Tenant
in connection with this Lease. Tenant shall indemnify and hold Landlord
harmless from and against any claims (including claims for attorneys fees
associated with presenting such claims) by any broker, agent or other person
for compensation by virtue of having been engaged by Tenant with regard to
this leasing transaction. In case any action or proceeding be brought against
Landlord by reason of any such claim, Tenant, upon notice from Landlord,
shall defend the claim or action at Tenant's expense.
30. TAXES. Tenant agrees to pay when due all taxes (both general and
special), assessments or governmental charges of any kind and nature whatever
levied or assessed against the Leased Premises during the Lease term. If
Tenant fails to pay any such taxes and assessments, Landlord may, at
Landlord's option,
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<PAGE>
advance the payments for the account of Tenant. All such amounts advanced by
Landlord shall be deemed additional Rent due Landlord on demand and shall
bear interest until paid at the rate of 18% per annum. Landlord will use its
best efforts to have the Leased Premises separately assessed and taxed and to
have the tax statements sent direct to Tenant. In such event, Tenant shall
furnish receipts to Landlord evidencing the payment of the taxes and
assessments prior to the due dates, subject to Tenant's right to protest or
appeal any tax or assessment by making the appropriate payment or deposit so
that no tax lien or proceeding will be filed against the Leased Premises.
The taxes for the tax year in which the commencement date of the Lease term
takes place and the taxes for the tax year in which the Lease term terminates
will be prorated according to the commencement date and termination date. If
Landlord is unable to have the Leased Premises separately assessed and taxed,
Tenant will pay an equitable share of Landlord's taxes on the property of
which the Leased Premises are a part, based on the taxing authority valuation
of the Leased Premises (both improvements and land) and the tax rate.
Landlord in such event will bill Tenant for Tenant's share of the taxes, with
supporting calculation of the amount, and Tenant will pay Landlord's invoice
within ten (10) days after Tenant's receipt. Landlord will furnish Tenant
with evidence of Landlord's payment of the taxes, subject to Landlord's right
to appeal or protest any assessment. If Landlord's protest or appeal results
in a refund, Tenant shall be entitled to an equitable share of the refund
subject to Tenant's payment of an equitable share of Landlord's appeal or
protest expense. Any disputes between Landlord and Tenant under this
paragraph shall be resolved by arbitration under the Oklahoma Arbitration Act.
22
<PAGE>
31. NOTICES. All notices authorized or required between the parties by
applicable law or required by any of the provisions of this Lease shall be in
writing, delivered or mailed by certified mail, return receipt requested,
with postage prepaid, to the following addresses:
IF TO LANDLORD:
ROBERT L. ZELIGSON TRUST
5810 E. Skelly Dr., Ste. 710
Tulsa OK 74135
IF TO TENANT:
TRI-STAR AEROSPACE, INC.
Attn: President
3411 S.W. 11th St.
Deerfield Beach, FL 33442
Notices which are mailed shall be considered to have been delivered on the
date shown on the return receipt or, if the addressee does not sign the
receipt, three (3) days after mailing. Either party may change its notice
address by written notice to the other party.
32. HEADINGS. The descriptive headings of the sections and paragraphs in
this Lease are solely for convenience and shall not be relied upon in
construing its provisions.
33. CAPITALIZED TERMS. Except where otherwise required by the context, all
capitalized terms used in this Lease shall have the definition ascribed to
them in the Lease.
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34. FORM. The singular form of a word shall include the plural, and the
plural shall include the singular, except as otherwise dictated by the
context.
35. ENTIRE AGREEMENT. This Lease contains the entire agreement between the
parties and no agreement will be effective to change, waive, modify,
discharge or terminate this Lease, in whole or in part, unless such agreement
is in writing and executed by the party against whom enforcement of the
change, waiver, modification, discharge or termination is sought. Time is
the essence of the performance of Tenant's obligations.
36. NON-WAIVER. The failure of either party to seek redress against the
other for violation of, or to insist upon strict performance of the terms and
provisions of this Lease, will not constitute a waiver of the right to seek
redress for such violation or any subsequent violation of its terms and
provisions, or of any right to insist on strict performance.
37. BINDING EFFECT. This Lease and its terms and provisions will be binding
upon and will inure to the benefit of the parties and their respective
successors and assigns. This section shall not be interpreted to constitute
Landlord's consent to any assignment or sub-lease unless Landlord's prior
written consent is obtained.
38. GOVERNING LAW. This Lease is entered into in Oklahoma and the law of
Oklahoma shall govern the construction of this instrument.
39. FORCE MAJEURE. Whenever a period of time is prescribed for action to be
taken by either party, such party shall not be liable or responsible for, and
there shall be excluded from the computation of any such period of time, any
delays due to strikes, riots, acts of God, shortages of labor or materials,
war, governmental laws, regulations or restrictions or any other causes of
any kind whatever which are beyond the reasonable control of such party,
excluding financial inability. At any time when there is outstanding a
mortgage, deed of
24
<PAGE>
trust or similar security interest covering Landlord's interest in the Leased
Premises, Tenant may not exercise any remedies for default by Landlord
hereunder unless and until the holder of the indebtedness secured by such
mortgage, deed of trust or similar security interest shall have received
written notice of such default and a reasonable time for curing such default
shall thereafter have elapsed.
40. SEVERABILITY. If any one or more of the covenants, agreements or
provisions of this Lease shall be determined to be invalid, the invalidity of
such covenants, agreements or provisions shall in no way affect the validity
or effectiveness of the remainder of this Lease and this Lease shall continue
in force to the fullest extent permitted by law.
41. RECORDING. The parties agree not to place this Lease of record but each
party shall, at the request of the other, execute and acknowledge, so that
the same may be recorded, a Short-Form Lease or Memorandum of Lease
indicating the Lease term but omitting Rent and other terms; provided
however, that the failure to record said Short-Form Lease or Memorandum of
Lease or Agreement shall not affect or impair the validity of effectiveness
of this Lease. The party requesting the instrument shall pay all costs,
taxes, fees and other expenses in connection with or prerequisite to
preparation and recording of such document.
42. SALE OF LEASED PREMISES. In the event the Landlord named herein sells
the Leased Premises, the named Landlord, and his successors in trust and
trust beneficiaries, shall be released from any duty or obligation of the
Landlord under this instrument from and after the effective date of the sale,
and thereafter the Tenant agrees to look solely to the successor owner or
owners for the performance of the duties and obligations of the Landlord
hereunder.
25
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have signed this Lease as of the
date specified in the first sentence of the Lease.
ROBERT L. ZELIGSON TRUST, by its Agent, Vansu
Company
By /s/ C. G. Van Schoyck
-----------------------------------------------
Title: ILLEGIBLE
-----------------------------------------
("LANDLORD")
ATTEST: TRI-STAR AEROSPACE, INC.
/s/ Norma Small
- ------------------------ By /s/ R. P. Small
----------------------------------------------
Secretary President
- ------------ ---------
(SEAL)
("TENANT")
26
<PAGE>
EXHIBIT 10.11
SUBLEASE
(Willowbrook)
THIS SUBLEASE (the "SUBLEASE") is made and entered into as of September
19, 1996 (the "EFFECTIVE DATE") by and between AVIALL SERVICES, INC., a Delaware
corporation ("SUBLESSOR"), and TRI-STAR AEROSPACE CO., a Delaware corporation
("SUBLESSEE").
RECITALS:
A. Pursuant to that certain, Industrial Lease Agreement (the "ORIGINAL
LEASE"), dated December 17, 1987, between Thorsen Tool Company ("THORSEN"), as
lessor, and Aviparts, Inc. ("AVIPARTS"), as lessee, Aviparts leased from Thorsen
the PREMISES (herein so called) described in the Original Lease.
B. Pursuant to that certain Assignment and Assumption of Lease Agreement,
dated August 23, 1990, Aviation Sales Company, Inc., ("AVIATION SALES"), as
Successor by merger to Aviparts, assigned the Original Lease to Aviall of Texas,
Inc. ("AVIALL OF TEXAS").
C. The Original Lease was amended pursuant to that certain First
Amendment to Industrial Lease Agreement, dated as of August 23, 1990, by and
between Household International, Inc. ("HII"), as Successor-in-interest under
the Original Lease to Thorsen, and Aviall of Texas.
D. The Original Lease was further amended pursuant to that certain Second
Amendment to Industrial Lease Agreement, dated as of October 27, 1995, by and
between COM Realty, Inc. ("LANDLORD"), as successor-in-interest under the
Original Lease to HII and Aviall, Inc., successor-in-interest to Aviparts, Inc.,
successor-in-interest to Aviall of Texas. The Original Lease, as amended and
assigned as described above, is referred to herein as the "LEASE." The lessor
under the Lease is referred to as the "LESSOR."
E. Sublessor is successor by merger to Aviall of Texas.
F. Sublessor desires to sublease that portion of the Premises depicted in
EXHIBIT "A" attached hereto (the "SUBLEASED PREMISES") upon the terms and
conditions set forth below.
<PAGE>
AGREEMENT:
In consideration of the mutual covenants and agreements contained herein,
and for other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, Sublessor and Sublessee hereby
agree is follows:
1. SUBLEASE. Sublessor hereby demises and subleases to Sublessee and
Sublessee hereby hires and subleases from Sublessor the Subleased Premises
for a term (the "SUBLEASE TERM") commencing on the Effective Date and ending
on December 31, 1997. In connection with Sublessee's lease of the Subleased
Premises, Sublessor also hereby grants to Sublessee, its employees, agents,
contractors and invitees, a nonexclusive right to use, in common with
Sublessor, its employees, agents, contractors and invitees, the following
areas (collectively, the "COMMON AREAS") for the purposes indicated and
consistent with the terms of the Lease: (i) all areas within the Premises
depicted in EXHIBIT "A" as "Common Areas" and (ii) all of the parking areas
that Sublessor is entitled to utilize pursuant to the Lease (provided that
the number of parking spaces used by Sublessee or its employees, contractors
or invitees shall not at any time exceed 80 spaces as depicted in EXHIBIT "B"
attached hereto). Sublessor may, at Sublessor's option, designate specific
parking areas for use by Sublessee, in which event Sublessee shall cause its
employees, contractors and invitees to use only such parking areas.
Notwithstanding the foregoing, Sublessor may at any time during the Lease
Term, upon giving not less than ninety (90) days notice to Sublessee, terminate
this Sublease and all of Sublessee's rights hereunder, upon payment to Sublessee
of $100,000 upon the termination date specified in Sublessor's notice to
Sublessee. Upon the termination date specified in Sublessor's notice to
Sublessee, the Lease Term shall be terminated.
2. SAME TERMS. Except as otherwise expressly set forth herein, this
Sublease shall be upon the same terms, conditions, covenants and agreements as
contained in the Lease, which is hereby incorporated by reference; provided,
however, that wherever the terms "Landlord," "Tenant," "this Lease," and
"Premises" occur in the Lease, they shall be deemed for the purposes of this
Sublease to refer respectively to "Sublessor," "Sublease," "this Sublease," and
the "Subleased Premises," as set forth in this Sublease.
3. BASIC RENTAL. Sublessee agrees to pay to Sublessor 30.162%
("SUBLESSEE'S SHARE") (56,177 total square feet for the Subleased Premises
DIVIDED BY 186,249
Sublease (Willowbrook) Page -2-
<PAGE>
total square feet for the Building) of all BASIC RENTAL (herein so called) as
described in and required by the Lease, as and when installments of Basic
Rental are due and owing under the Lease. If the Sublease Term commences or
ends on other than the first and last day, respectively, of a calendar month,
the rental for the fractional calendar month shall be prorated on a per diem
basis.
4. ADDITIONAL RENT. Notwithstanding PARAGRAPH 2 hereof and PARAGRAPH 4 of
the Lease, Sublessee shall pay to Sublessor as ADDITIONAL RENT (herein, so
called) under this Sublease, Sublessee's Share of all other amounts due and
owing to Lessor or any other person or entity pursuant to or as required by the
Lease including, without limitation, the following (collectively, the "OPERATING
COSTS"): (i) real estate taxes and assessments pursuant to assessments pursuant
to SECTIONS 4(a) and 4(e) of the Lease, (ii) utilities pursuant to SECTION 6 of
the Lease, (iii) insurance pursuant to SECTION 15 of the Lease, (iv) taxes
levied or assessed against the lessor under the Lease or such lessor's assets or
properties, as provided by SECTION 17 of the Lease, (v) casualty and public
liability insurance maintained by Sublessor with respect to the Premises or the
operations therein, (vi) utilities (including, without limitation, water, gas,
sewer, electricity, telephone service, fire sprinkler, lawn sprinkler charges
and other utilities and services used on or from the Premises, together with any
and all taxes, penalties, surcharges or the like pertaining thereto and any
maintenance charges for utilities and all electric light bulbs and tubes for the
Premises), but excluding amounts for utilities separately metered or calculated
without reference to the Subleased Premises or the Common Areas, and (vii)
maintenance and repair costs and expenses and all other amounts due and owing by
Sublessor udder the Lease, but excluding amounts payable only with respect to
those portions of the Premises other than the Subleased Premises. It is
understood and agreed, however, that (a) Additional Rent shall not in any event
include damages to Lessor caused solely by a breach by Sublessor under the Lease
so long as Sublessee is not then in default under this Sublease, and (b)
Operating Costs shall not in any event duplicate amounts otherwise due and
owing, and paid, by Sublessee under this Sublease. The provisions of this
PARAGRAPH 4 shall Survive termination of this Sublease. Additional Rent shall be
due and payable within 20 days following written demand for payment of any such
amounts by Sublessor to Sublessee.
5. PERFORMANCE OF LEASE OBLIGATIONS. Sublessee shall, throughout the
Sublease Term, timely and fully observe and perform all of the provisions of the
Lease on the part of Sublessor to be performed as tenant under the Lease with
respect to the Subleased Premises. Sublessee will not do or permit to be done
with respect to the Premises any act that will be in violation or breach of the
Lease.
Sublease (Willowbrook) Page -3-
<PAGE>
Notwithstanding anything herein to the contrary, (i) Sublessor shall have no
obligation to perform or have performed any construction or finish-out work
to the Subleased Premises for the benefit of Sublessee, other than to use
reasonable efforts upon Sublessee's written request to enforce Lessor's
obligations under the Lease, and (ii) with respect to other services and
obligations performed or to be performed by Lessor under the Lease, Sublessor
shall have no independent obligation as Sublessor to Sublessee hereunder, it
being understood and agreed that Lessor shall have sole responsibility for
such obligations, and that Sublessor shall have no obligations or liability
to Sublessee for any failure of Lessor to perform such services or obligations.
6. SUBLESSEE INDEMNIFICATION.
(a) SPECIFIC OCCURRENCES. Sublessee shall indemnify and defend
Sublessor and its affiliates, shareholders, directors, officers and
employees (the "SUBLESSOR PARTIES") and hold the Sublessor Parties harmless
from and against any and all claims, actions, damages, liability and
expense (including, without limitation, court costs, reasonable attorneys'
fees and other costs of litigation) incurred by or asserted against any of
the Sublessor Parties in connection with:
(i) the loss of life, personal injury and/or damage to property
arising from (A) any occurrence in, on or at the Subleased Premises,
(B) the occupancy, use or misuse by Sublessee or Sublessee's agents,
employees, contractors, invitees, sublessees, successors or assigns
(collectively, the "SUBLESSEE RELATED PARTIES", each a "SUBLESSEE
RELATED PARTY") of the Subleased Premises, the Common Areas or the
remainder of the Premises, (C) any occurrence occasioned wholly or in
part by any act or omission of any Sublessee Related Party, or (D) an
occurrence occasioned by the violation of any law, regulation or
ordinance by any Sublessee Related Party, but in any case, excluding
loss of life, personal injury and/or damage caused solely by the gross
negligence or willful misconduct of Sublessor; and
(ii) the failure of Sublessee to perform any act, obligation or
covenant of Sublessor under the Lease which Sublessee is obligated to
perform under this Sublease.
(b) SUBLESSEE'S LIABILITY FOR DAMAGE. Sublessee shall be liable to
Sublessor for any damage to the Subleased Premises or to any equipment,
Sublease (Willowbrook) Page -4-
<PAGE>
fixture or other personal property of Lessor or Sublessor within the
Subleased Premises, unless such damage is caused solely by the gross
negligence or willful misconduct of Sublessor.
(c) INSURANCE. Without limiting the generality of the terms of
PARAGRAPH 5 of this Sublease, Sublessee shall maintain public liability
insurance with respect to the Subleased Premises in accordance with the
requirements set forth in PARAGRAPH 11 of the Lease.
(d) HAZARDOUS MATERIALS. Sublessee shall neither use, Store,
discharge or dispose, nor permit the use, storage, discharge or disposal of
any Hazardous Substances within or around the Subleased premises or Common
Areas. For purposes hereof, the term "HAZARDOUS MATERIALS" shall mean
petroleum or any petroleum product, or any hazardous material, hazardous
waste, or hazardous substance, as such terms are defined in (i) the
Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901
ET SEQ., (ii) Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S,C, Section 9601 ET. SEQ., (iii)
the Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section
1802 ET. SEQ., (iv) the Toxic Substances Control Act, as amended, 15 U.S.C.
Section 2601 ET. SEQ., and (v) in any other applicable federal, state and
local statutes, laws and ordinances, now existing or hereafter enacted and
all regulations now or hereafter promulgated pursuant thereto (together,
"HAZARDOUS MATERIALS LAWS"); provided, however, that Sublessee may use,
store and dispose of Hazardous Materials on the Subleased Premises as
necessary to the ordinary and customary operation of Sublessee's business,
in commercially reasonable quantities, so long as such use, storage and
disposal are conducted by Sublessee with Sublessor's prior written consent
and in strict compliance with all applicable Hazardous Materials Laws.
Sublessee shall promptly report any spill, release or discharge of any
Hazardous Materials on, to or from the Subleased Premises or the Common
Areas to Sublessor, and to appropriate governmental authorities, in
accordance with applicable Hazardous Materials Laws, and shall promptly
clean up and remediate any spill, release or discharge of any Hazardous
Materials on, to or from the Subleased Premises in strict compliance with
all governmental requirements and Hazardous Materials Laws. Sublessee
agrees to indemnify, defend, and hold harmless Sublessor against all claims
(including, without limitation, all governmental claims, whether under
statute, regulation or common law), liabilities, penalties and costs
(including, but not limited to, attorneys' fees) incurred by or made
Sublease (Willowbrook) Page -5-
<PAGE>
against Sublessor or imposed against the Subleased Premises or the Common
Areas as a result of any act or omission of Sublessee or any Sublessee
Related Party which constitutes a breach or alleged breach of the
warranties, representations and covenants contained in this paragraph.
(e) SURVIVAL. The terms, conditions, covenants, agreements and indemnities
set forth in this PARAGRAPH 6 shall survive termination of the Lease and
this Sublease.
7. ASSIGNMENT AND SUBLEASE. Sublessee may not assign this Sublease or
sublease all or any portion of the Subleased Premises without the prior written
consent of Sublessor.
8. NOTICES. The notice address for each of Sublessor and Sublessee for
purposes of PARAGRAPH 26 of the Lease are as follows:
Sublessor: Aviall Services, Inc.
2055 Diplomat Drive
Dallas, Texas 75234-8989
Attn: Senior Manager Corporate Purchasing
Sublessee: Tri-Star Aerospace Co.
11535 East Pine Street
Tulsa, Oklahoma 74116
Attn: Qentin P. Bourjeaurd
9. SUBLESSOR INDEMNIFICATION. Commencing upon the Effective Date,
Sublessor shall neither use, store, discharge or dispose, nor permit the use,
storage, discharge or disposal of any Hazardous Substances within or around
the portion of the Premises other than the Subleased Premises (for purposes of
this PARAGRAPH 9. the "OTHER PREMISES"); provided, however, that Sublessor may
use, store and dispose of Hazardous Materials on the Other Premises as
necessary to the ordinary and customary operation of Sublessor's business, so
long as such use, storage and disposal are conducted by Sublessor in strict
compliance with all applicable Hazardous Materials laws. Sublessor agrees to
indemnify, defend, and hold harmless Sublessee against all claims (including,
without limitation, all governmental claims, whether under statute, regulation
or common law), liabilities, penalties and costs (including, but not limited
to, attorneys' fees) incurred by or made against Sublessee as a result
Sublease (Willowbrook) Page -6-
<PAGE>
EXECUTED as of the date first written above.
SUBLESSOR:
AVIALL SERVICES, INC.,
a Delaware corporation
By: /s/ Jeffrey J. Murphy
--------------------------------------------
Jeffrey J. Murphy
Senior, Vice-President, Secretary and General
Counsel
SUBLESSEE:
TRI-STAR AEROSPACE CO.,
a Delaware corporation
By: /s/ Quentin Bourjeaurd
--------------------------------------------
Name: Quentin Bourjeaurd
Title: President
Sublease (Willowbrook) Page -8-
<PAGE>
FIRST AMENDMENT TO THE SUBLEASE
First Amendment (the "Amendment") to the Sublease dated as of September 19,
1996 by and between Aviall Services, Inc. as Sublessor ("Sublessor") and Tri
Star Aerospace Co. as Sublessee ("Sublessee") for a portion of 2527 Willowbrook
Drive, Dallas, Texas (the "Sublease")
WHEREAS, the parties desire to amend the Sublease;
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
legal sufficiency or which is hereby acknowledged, Sublessor and Sublessee agree
that the Sublease is amended as follows:
1. The ending date of the term set forth on the fourth line of the first
paragraph of Section 1, of the Sublease is hereby deleted and the date "December
31, 1998" is inserted in its place.
2. Effective January 1, 1998, Attachment A of the Sublease shall be
deleted in its entirety and the attached new Attachment A inserted in its place.
It is recognized that the new Attachment A reduces the Subleased Premises by an
area of approximately 10,282 square feet which 10,282 square feet area of
reduction shall be hereinafter referred to as the "Excluded Premises".
3. The second paragraph of Section 1, of the Sublease is deleted, and the
following paragraph is inserted in its place.
"Provided Sublessee has performed all of the terms, covenants,
agreements and conditions of this sublease, including the payment
of all Basic Rent and additional rent, to be performed by
Sublessee, Sublessee shall peaceably and quietly hold and enjoy
the Subleased Premises for the term hereof, without hindrance
from Sublessor or any other person, subject to the terms and
conditions of the Lease and this Sublease, and Sublessor
covenants and agrees that it shall not take or omit to take any
action, in connection with its lease of the premises of which the
Subleased Premises are a part which could reasonable be expected
to interfere with the Sublessee's rights to occupy of the
Subleased Premises for the full term hereof, including the
optional extension term."
4. Section 3 of the Sublease is hereby deleted in its entirety and the
following Section 3 is inserted in its place:
"3. BASIC RENTAL. Effective January 1, 1998, Sublessee agrees to pay
to Sublessor 24.64% ("Sublessee's Share") (45,895 total square
feet for the
<PAGE>
FIRST AMENDMENT TO THE SUBLEASE
a portion of 2527 Willowbrook Drive, Dallas, Texas
Page 2
Subleased Premises DIVIDED BY 186,240. Total square feet for the
Building) of all BASIC RENTAL (herein so called) as described
in and required by the Lease, as and when installments of Basic
Rental are due and owing under the Lease. If the Sublease Term
commences or ends on other than the first and last day,
respectively, of a calendar month, the rental for the
fractional calendar month shall be prorated on a per diem
basis."
5. A new subsection 7 (a) is added to the Sublease as follows:
"7. (a) OPTION TO EXTEND
Provided that Sublessee is not in default of any of its
obligations under the Sublease, Sublessee is hereby given the
option to extend the term of the Sublease until September 30,
2000, provided that Sublessee provides Sublessor with written
notice of its exercise such option to extend the Sublease on or
before May 31, 1998. Sublessor shall have the right to show the
Subleased Premises to potential tenants for the period following
the term of this Sublease, during normal business hours unless
and until Sublessee has exercised its option to extend the
Sublease as set forth above.
In the event that Sublessee exercises its option to extend
the Sublease as set forth above in addition to the Sublessor's
Shares of Basic Rental as set forth in Section 3, above,
Sublessee shall pay an additional 10 CENTS per square feet, or
$4,589.50 per year, during the extended term of the Sublease in
consideration for the extension of the term.
6. Sublessor agrees that during the term of the Sublease, that so long as
Sublessor continues to occupy a significant part of the premises of which the
Subleased premises is a part, Sublessor shall make available to the Sublessee
use of Sublessor's PBX, and shall cooperate with Sublessee at Sublessee's
expense in making modifications as may be reasonably required to provide for
separate long-distance service for Sublessee through such PBX.
7. Provided that Sublessee is not in default of any of its obligations
under the Sublease, Sublessor agrees that, through November 15, 1997, Sublessee
shall have the option to expand this Sublease as amended to also include the
Excluded Premises in the Subleased Premises subject to all the other terms
hereof. In the event that (i) Sublessee exercises this option and (ii) Sublessee
exercises its option to extend the Sublessee pursuant to Section 10, such
extension and all terms thereof shall also be applicable to the Excluded
Premises, including but not limited to the 10-cent per square feet increase in
basic rental which shall be applied to the non-Excluded Premises effective
January l, 1999 notwithstanding the above, in the event that
<PAGE>
FIRST AMENDMENT TO THE SUBLEASE
a portion of 2527 Willowbrook Drive, Dallas, Texas
Page 3
Sublessor notifies Sublessee that Sublessor has found an alternative sublessee
for the Excluded Premises, such option shall expire unless exercised by the
Sublessee within two weeks of receipt of such notice.
8. Except as set forth in the first four items of this Amendment, the
Sublease remains in full force and effect as initially executed.
Executed as of the 22nd day of September 1997.
SUBLESSOR
Aviall Services, Inc.
by: /s/ Jeffrey J. Murphy
------------------------
Title: SVP Operations
SUBLESSEE
Tri Star Aerospace Co.
by: /s/ Quentin Bourjeaurd
------------------------
Title: EVP & CFO
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT made and entered into this 28th day of January 1997 by
and between Robert L. Zeligson Trust/Braniff "M" Warehouse by its agent
Vansu Company hereinafter called "Landlord", and Tri-Star Aerospace, Inc.
hereinafter called "Tenant". WITNESSETH: That Landlord for and in
consideration of the agreed rents to be paid and in consideration of the
other covenants and agreements hereinafter recited to be kept and performed,
does hereby lease, let and demise unto Tenant the following real property and
premises, hereinafter called "Leased Premises", on the terms and conditions
recited:
1. DESCRIPTION OF LEASED PREMISES: 11529 East Pine Street Tulsa, OK
Consisting of 7500 sq. ft. (more or less) Office/Warehouse.
2. TERM OF LEASE AND USE. TO HAVE AND TO HOLD the said described
property and Leased Premises unto the said Tenant, its successors and
assigns, for the term of ONE YEAR (1) commencing on the 1st day of March,
1997. Tenant warrants that the use of the Leased Premises shall only be for
the conduct of its principal business which is described as follows;
Aerospace Hardware and Fittings.
3. RENTAL AND SECURITY DEPOSIT: Tenant agrees to pay Landlord as rent
for said Leased Premises the total sum of Twenty-four Thousand and 00/100
Dollars ($24,000.00) in monthly installments of Two Thousand Dollars
($2,000.00) Additionally Tenant shall pay Landlord as a security deposit for
said Leased Premises the sum of a Two Thousand Dollars ($2,000.00) All
payments of rent and the security deposit to be made in accordance with the
provisions of Exhibit "A" attached hereto and made part hereof.
4. ASSIGNMENT AND SUBLEASE: This Lease Agreement shall not be assigned
or the property Subleased in whole or part without written consent of
Landlord first obtained. Provided, however, Landlord agrees that consent to
any such assignment or sublease shall not be unreasonably withheld, provided
the use of the property is the same type of use being made of the property by
Tenant hereunder; such rental rate payable on this Lease Agreement shall be
at such rate as Landlord shall request; and provided further that Tenant
shall remain liable for the full performance of the Tenant's obligations
under this lease.
5. LIABILITY: Tenant agrees to defend, save and hold Landlord harmless
from any and all claims, judgments, liabilities or demands of any person or
persons whomsoever arising out of or connected with the use of said Leased
Premises by the Tenant and the operation of its business there. Tenant agrees
to carry and maintain employer's liability and public liability insurance to
protect both Tenant and Landlord from any liabilities or legal exposure
contemplated in this paragraph. Tenant agrees to furnish Landlord a copy of
said insurance policy or a certificate evidencing issuance of a policy of
such insurance upon request. Tenant's policy of insurance shall further
provide for waiver of subrogation rights (by Tenant's Insurer) as against
Landlord.
6. TAXES AND INSURANCE: Tenant shall pay to Landlord, as additional
rent for each calendar year, (except for the base year) its prorata portion
of the amount paid by Landlord in that calendar year for insurance premiums
and general real property taxes which are in excess of the amount paid for
insurance premiums and general real property taxes in the base year. The base
year shall be the year in which this Lease is executed.
Tenant shall pay that portion of such excess insurance premiums and
general real property taxes which shall be calculated by multiplying said
excess by a fraction, the numerator of which shall be the gross square foot
area of the premises demised to the Tenant, and the denominator of which
shall be the gross square foot area of 150,000 square feet in Robert L.
Zeligson Trust/Braniff "M" Warehouse. Tenant shall also pay a portion,
computed in the manner above, of any special taxes or special assessments
levied or assessed at any time during the term against the land and
improvements on the property. The charges provided for in this Section shall
be paid within ten (10) days after demand therefor is made by Landlord.
7. CONDITION OF PREMISES: Tenant represents and acknowledges that it
has inspected the Leased Premises prior to execution of this Lease Agreement
and found same clean and in good repair unless otherwise specified in writing
under the Clause "Special Conditions".
8. MAINTENANCE AND REPAIR:
A. Landlord will keep the exterior of the Leased Premises, except doors,
windows and glass, in repair. Landlord shall not repair any damage caused by
the negligence of the Tenant or its agents, servants, employees, customers,
licensees or invitees. Landlord shall be under no other liability for repair,
maintenance, alteration, or other action with reference to the Leased
Premises or any other part thereof, or any plumbing, heating, electrical, air
conditioning, or other mechanical installation therein, except (1) that
Landlord agrees to repair any latent defects appearing on the premises within
ninety (90) days after occupancy of the same by Tenant; and provided further
that Landlord shall during the period of written warranty given by
manufacturer or supplier of any air conditioning or heating equipment request
the same to be repaired by the manufacturer or supplier upon the request of
Tenant.
B. Tenant hereby agrees to keep the interior of the Leased Premises, and all
doors, windows and glass, together with all electrical, plumbing and other
mechanical installation therein, in good order and repair, and will make all
replacements thereto at its own expense, and will replace all light bulbs
needing replacement in the Leased Premises. Landlord shall not be liable to
Tenant for any damage in the leased premises due to the backing up of any
drains or any water leaks. Tenant will surrender the Leased Premises at the
expiration of the term or at such other time as it may vacate the Leased
Premises in as good a condition as when received, excepting depreciation
caused by ordinary wear and tear.
C. The Landlord shall initially furnish heating and air conditioning
equipment to the Leased Premises. The Tenant shall cause this equipment to be
serviced no less than semiannually or at such greater frequency as the nature
of its business may require. In the event such service is not provided by the
Tenant, the Landlord shall have the right to schedule the servicing to be
done by a serviceman or
1
<PAGE>
contractor selected by the Landlord and to charge the cost of the service to
the Tenant or, at the option of the Landlord, bill and collect the service
charge from the Tenant. All heating and air conditioning equipment is the
property of the Landlord and at the termination of this Lease Agreement, the
Tenant shall not have the right to remove said equipment. Landlord shall have
exclusive control over and exclusive use of the roof of the Leased Premises.
D. Tenant specifically agrees that in addition to the other repairs under
the terms of this Lease Agreement, it will, at its sole cost and expense,
promptly repair all exterior doors and exterior metal panels of the Leased
Premises immediately after any of said doors have sustained any type of
damage. Should Tenant fail to repair any damaged door within ten (10) days
after receiving written notice from Landlord requesting such repairs to be
made, then Landlord shall have the right to hire such parties as Landlord
deems appropriate to repair said exterior doors and exterior metal panels, at
Tenant's sole cost and expense. The Tenant will reimburse Landlord for any
such costs of such repairs within ten (10) days after receiving written
notice from Landlord of cost of such repairs.
9. LIENS: Tenant shall at all times keep the Leased Premises free and
clear of any liens, charges and claims because of any act or omission to act
on the part of Tenant in connection with the maintenance and repair of the
premises and likewise shall keep the Leased Premises free and clear of any
liens, charges and claims by reason of the acquisition of Tenant, and the
installation therein, of any fixtures and equipment; and if any such liens,
charges or claims are made or filed against said Leased Premises, Tenant
agrees to promptly discharge the same and furnish Landlord evidence thereof.
10. CLEAN UP:
10.A Tenant agrees, at Tenant's cost and expense, to keep or cause to be
kept its Leased Premises, the exterior area adjacent to the Leased Premises,
and the adjacent parking areas, (assigned to Tenant) clean and free of litter
and other debris, provided, however, should Tenant fail to keep its Leased
Premises and other areas and adjacent parking areas free of litter and other
debris then Landlord, after notice, shall have the right to clean up Tenant's
Leased Premises and other areas or cause the same to be cleaned and charge
the cost of same to Tenants by appropriate billing therefor. Final clean-up
at the termination of this Lease Agreement shall be completed to Landlord's
satisfaction as evidenced in writing prior to termination date of this Lease
Agreement. Tenant shall be obligated to pay rent as a hold-over tenant until
the Leased Premises and exterior area adjacent to the Leased Premises have
been cleaned, whether the cleaning is performed by the Tenant or by the
Landlord. If the cleaning is performed by the Landlord the Tenant shall pay
all cleaning costs within ten (10) days after receiving notice from Landlord
of the cost of such repairs.
10.B Tenant hereby agrees not to engage in any activity, or produce or
store upon the Leased Premises any such goods or equipment which would cause
or allow for the accumulation, spill or creation of any toxic or hazardous
waste or materials, or in any manner place the Project, the Leased Premises,
or any of Landlord's tenants in any danger whatsoever. If, at any time,
Landlord discovers that the Tenant's use or occupancy of the Leased Premises
has caused or allowed any toxic or hazardous waste or materials on the
Property or endangered the Project or any of its tenants then this Lease
Agreement will immediately terminate as specified in Paragraph 16, and Tenant
shall, at its sole cost and expense, immediately commence and complete
cleanup and removal as required by all of the applicable governmental
regulations and agencies, and to the satisfaction of the Landlord. Further,
Tenant shall indemnify and hold Landlord harmless for any claim, action,
expense (including all attorney fees for an attorney hired by Landlord, and
all costs incurred in any dispute), fine, or damage in connection with any of
the above being found.
11. INSURANCE AND OBLIGATION TO REPAIR AND RESTORE: If the Leased
Premises shall be damaged by fire, the elements, unavoidable accident or
other casualty, and is not thereby rendered untenantable, in whole or in
part, Landlord shall promptly, at Landlord's own expense, cause such damage
to be repaired and the rent shall not be abated: if by reason of such
occurrence, the Leased Premises shall be rendered untenantable only in part,
the Landlord shall promptly, at Landlord's own expense, cause the damage to
be repaired and minimum rent meanwhile shall be abated proportionally as to
the portion of the Leased Premises rendered untenantable; if by reason of such
occurrence the Leased Premises should be rendered wholly untenantable; the
Landlord shall promptly, at Landlord's own expense, cause such damage to be
repaired, and the minimum annual rent meanwhile shall be abated in whole,
unless within thirty (30) days after such occurrence Landlord shall give the
Tenant written notice that the Landlord has elected not to reconstruct the
destroyed Leased Premises, in which event this Lease Agreement and tenancy
hereby created shall cease as of the date of said occurrence, all rentals to
be adjusted as of such date. If the Leased Premises shall be damaged by fire,
the elements, unavoidable accident or other casualty, and are thereby
rendered wholly untenantable, following which the Landlord does not commence
diligent restoration of said damages within sixty (60) days after such
occurrence of damages, then, in such event, the Tenant shall have the right,
at Tenant's option, to declare this Lease Agreement canceled by giving
appropriate written notice to the Landlord within ten (10) days first
following said sixty (60) day period, following which this Lease Agreement
and tenancy hereby created shall cease as of the date of occurrence of said
damages, all rentals to be adjusted as of such date. Tenant shall acquire,
install, and service such fire extinguishers as are necessary to comply with
Tulsa City Codes.
12. UTILITIES: Tenant agrees to promptly pay and discharge all water,
light, heating, gas, refuse collection and disposal, and other utility bills
incurred from date of occupancy by Tenant to date of lease termination and
vacation of the premises by Tenant, together with all other operating expense
connected with its use and occupancy of the Leased Premises, including the
payment of all taxes levied and assessed against Tenant's personal property,
fixtures, equipment and inventory.
13. SURRENDER OF LEASED PREMISES: ADDITIONS, ALTERATIONS AND
MODIFICATIONS: At the expiration of the lease term or any extensions or
renewals of this Lease Agreement, Tenant agrees to surrender possession of
the Leased Premises to Landlord in as good a state of repair and condition as
at the date of initial possession hereunder by Tenant, reasonable wear
and tear alone excepted. Reasonable wear and tear is limited to that which is
normal for a quality office/warehouse facility and is further defined on
Exhibit "B" annexed herein. Tenant shall make no additions, alterations or
modifications to the Leased Premises (including painting of the interior
walls and floors of the Project) without the prior
2
<PAGE>
written consent of the Landlord, and Landlord may require Tenant to submit
written plans and specifications for its approval. All additions, alterations
or modifications made to the Leased Premises by the Tenant (after obtaining
Landlord's written consent) shall be made at the sole cost and expense of
Tenant. All additions, alterations and modifications shall, at the time of
installation, become the sole property of the Landlord and shall be left as a
part of the Leased Premises at the end of the term of this Lease Agreement
Provided, however, Landlord shall have the right at the end of the lease term
to require the Tenant to remove any or all improvements made to the Leased
Premises and restore the Leased Premises to the condition it was in at the
beginning of the lease term, reasonable wear and tear alone excepted. Such
removal and restoration, if required, shall be made at the sole cost and
expense of the Tenant. Tenant shall, at the end of this Lease Agreement, have
the right to remove any trade fixtures from the Lease Premises which have not
been affixed to the Leased Premises so as to become a part of the realty.
However, any damage caused to the Project in removing said trade fixtures
shall be repaired at the sole cost and expense of the Tenant.
14. CONDEMNATION: In the event that the entire Leased Premises shall be
taken in condemnation proceedings or by exercise of any right of eminent
domain for public or quasi-public use, this Lease Agreement shall terminate
as of the date of said taking and all unearned rent and other charges paid in
advance shall be refunded to the Tenant after deducting any charges owed by
Tenant to Landlord and the Tenant shall surrender possession of the Leased
Premises to the Landlord. In the event a portion of the Lease Premises shall
be taken by such proceedings, the Landlord shall have the option to terminate
this Lease Agreement or make a proportionate reduction of rent during the
remainder of the lease term. The award for such taking shall belong to the
Landlord; except that the Tenant shall be entitled to make a claim in its own
name to the condemning authority for the value of any furniture, trade
fixtures, trade equipment, merchandise or personal property of any kind
belonging to the Tenant, and not forming a part of the real estate, or for
the cost of moving all of the same or for moving such business as is
necessary.
15. BANKRUPTCY OR RECEIVERSHIP: Should Tenant make an assignment for
the benefit of creditors or a receiver be appointed or bankruptcy proceedings
be instituted by it or against it, then any of such events shall, at the
option of Landlord, operate forthwith to cancel and hold this Lease Agreement
for naught, and Lessor shall, after notice, be entitled to immediate
possession of the Leased Premises.
16. DEFAULT: It is expressly covenanted and agreed that in the event
the Tenant vacates or abandons the Leased Premises during the term of the
Lease, or defaults at any time in any term of this Lease or in the payment of
any rent or other payment herein provided for, then, in any of such events
and without further notice the Landlord at its option may declare this lease
terminated and all accrued and unaccrued rentals immediately due and payable,
and with or without legal process enter into and upon the Leased Premises,
repossess the same and expel the Tenant, or any other occupant therefrom, it
being expressly agreed by the Tenant that time is of the essence hereof and
the Tenant expressly waives all notice of non-payment of rent or termination
of the Lease Agreement or demand for possession or demand for rent, and
further provided that such lease termination, re-entry and expulsion of the
Tenant or other occupancy whether by legal process or otherwise, shall be
without prejudice to the right of the Landlord to sue and collect the accrued
and unaccrued rental of for the breach of any other covenant herein
contained. In the event of any such default the Landlord may, at its option,
without forfeiting any accrued or unaccrued rentals due the Landlord, enter
into possession and relet the Leased Premises or any part thereof and the
Tenant agrees to further pay all of Landlord's attorney's fees and to pay for
all costs of redecorating, remodeling, leasing fees or any costs of such
re-letting. Any re-letting or re-entry and expulsion of the Tenant shall in
no manner relieve the Tenant of the obligation to immediately pay all accrued
and unaccrued rental due under this Lease Agreement, provided, however, that
in the event the Landlord receives from the Tenant all of such accrued and
unaccrued rental, whether by judgment or otherwise, and further finds a
tenant suitable to the Landlord during the remaining term of this Lease
Agreement, then at the conclusion thereof the Landlord shall remit back to
Tenant any excess rentals received hereunder, less any charges incurred by
reason of such default of the Tenant, including the aforesaid redecorating,
remodeling, leasing fees and attorney's fees. In any event, if Tenant
defaults in the performance of any of the terms, covenants, agreements or
conditions contained in this Lease Agreement, and the Landlord places the
enforcement of this Lease Agreement, or any part hereof, or the collection of
any rent, or charge due, or to become due, or the recovery of the possession
of the Premises, in the hands of an attorney, the Tenant agrees to pay the
reasonable attorney fees of Landlord; plus all the actual costs of
enforcement or collection, including but not limited to expert witness fees
and charges, all copying expenses and laboratory tests. All property of the
Tenant, including property otherwise legally exempt from levy and execution
in or upon the Leased Premises is now and shall be bound for and subject to
the payment of all rent and other sums herein agreed to be paid, whether due
or not, and such shall be and do hereby constitute a lien upon all of the
property of Tenant or upon the Leased Premises and such lien of the Landlord
upon the property of the Tenant, as hereinabove set forth, may be foreclosed
by selling the same at public or private sale, with or without notice at the
option of the Landlord.
Any re-entry or re-letting under the provisions hereof shall not work a
forfeiture of the rent or other agreements to be performed by the Tenant
hereunder during the full term of this lease agreement. The foregoing rights
and remedies hereinabove given to the Landlord are and shall be deemed to be
cumulative and the exercise of one shall not be deemed to be an election
excluding the exercise by the Landlord at any other or different time of a
different or inconsistent remedy and shall be deemed to be given to said
Landlord in addition to any other and further rights given to said Landlord
in addition to any other and further rights given or granted to said Landlord
by the terms of any paragraph hereof or by law and the failure upon the part
of Landlord at any time to exercise any right or remedy hereby given to it,
shall not be deemed to operate as a waiver by it of its right to exercise
such right or remedy at any other future time.
In the event of default by Tenant of any of the terms and conditions of
this Lease Agreement, or the addendum's attached hereto, then, interest at
the highest rate allowed by law in the state of Oklahoma shall accrue on any
amounts due or which will become due, including all costs and attorney fees.
If any
3
<PAGE>
payment required by this Lease Agreement is not paid prior to the 5th day
after the day it is due, the Tenant shall pay a late fee of 5% of the
delinquent payment.
17. HOLDING OVER: If Tenant remains in possession of the Leased
Premises after the expiration of this Lease Agreement, such continued
possession shall, if rent is paid by Tenant and accepted by Landlord, create
a month-to-month tenancy on the terms herein specified, and said tenancy may
be terminated at any time by either party by thirty (30) days written notice
to the other party. Tenant agrees that in the event Tenant becomes a
hold-over Tenant in accordance with this Paragraph, all of the same terms and
conditions of this Lease Agreement shall apply except the monthly rent to be
paid shall be one hundred fifty percent (150%) of the monthly rent which was
in effect during the last month of this Lease Agreement and any renewals and
addendum's hereto immediately preceding the month Tenant becomes a hold-over
Tenant.
18. RIGHT TO INSTALL SIGNS: Tenant shall not install any sign without
Landlord's approval.
19. PARKING: COMMON AREAS; INGRESS AND EGRESS; Landlord shall repair
and maintain the parking areas at Landlord's cost and expense, except damage
resulting from Tenant's forklifts, trucks, semi-trailers, dolly wheels,
tracked vehicles, and fuel, oil or acid spillage, all of said damages and
other damages caused by the Tenant or the Tenant's employees, guests,
customers, deliverymen or licensees, shall be repaired by Tenant at Tenant's
expense.
20. NOTICE: Any notice provided for herein shall be given by mail,
postage prepaid, to the Landlord at the address to which the rent is then
being mailed, and to the Tenant, at the Leased Premises. The place to which
notices are to be made may be changed by written notice from time to time
from one party to the other party.
21. COVENANT NOT TO WASTE: The Tenant covenants not to commit nor to
permit any waste whatever and will, free of expense to Landlord, when
required by the Landlord, when required by the proper authorities or
Landlord, abate all nuisances whether public or private.
22. RULES AND REGULATIONS: The Rules and Regulations attached hereto
and marked Exhibit "B" are made a part of this Lease Agreement as if fully
herein set forth and are material terms of this Lease Agreement, Tenant, its
employees, agents and visitors, shall observe and abide by them and by such
other and further reasonable Rules and Regulations as Landlord may prescribe
which, it its judgment, are needful for the reputation, safely, care or
cleanliness of the Project or Leased Premises, or the operations and
maintenance thereof and the equipment therein, or for the comfort of Tenant
and the other tenants of the Project. Landlord, however, shall have the right
to change said rules and waive in writing any or all of said rules in the
case of any one or more tenant. All such Rules and Regulations are of the
essence hereof without which this Lease Agreement would not have been entered
into by the Landlord, and any breach of any provision of the Rules and
Regulations by the Tenant shall constitute a default hereunder.
23. FORCE MAJEURE: Except with respect to the obligation of Tenant to
pay rental, after this Lease Agreement shall have commenced, the time for
performance of other matters set forth herein may be delayed for the period
or periods of interference therewith or delay thereof caused by strikes,
unusual climatic conditions, act of God or war, or by conditions and
situations not reasonably within control of either of the parties hereto.
24. RIGHT OF OCCUPANCY: Landlord agrees to furnish the Leased Premises
described in paragraph 1, subject to the terms and conditions described
herein; however, it shall be the responsibility of the Tenant to obtain the
necessary occupancy permits required by Local, State and Federal Agencies and
Tenant shall be solely responsible for any modifications or changes required
to obtain such permits.
In the event Tenant fails to perform any obligation under the terms of
this Lease Agreement (including but not limited to cleaning in and around the
Leased Premises and repairing damages to the Leased Premises) and Landlord
elects to perform Tenant's obligation, then Landlord shall have the right to
collect from the Tenant the actual costs incurred in performing such
obligations together with the Landlord's costs of any of Landlord's employees
time spent in connection therewith and 20% of all amounts described above to
compensate Landlord for overhead and profit.
25. BINDING EFFECT AND SPECIAL CONDITIONS:
25.1 This Lease Agreement and the terms, covenants and provisions
hereof, shall inure to the benefit of and be binding upon the successors and
assigns of both parties hereto.
EXECUTED the day and year first hereinabove written.
R. L. Zeligson Trust/Braniff "M" Warehouse
By: /s/ C. G. VanSchoyck
---------------------------------------
C. G. VanSchoyck, Manager
Tri-Star Aerospace, Inc.
By: /s/ Richard P. Small
---------------------------------------
Richard P. Small
Vice Chairman
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<PAGE>
TENANT ESTOPPEL CERTIFICATE
LEASED PREMISES: 11529 EAST PINE STREET
TULSA, OKLAHOMA
DATE OF LEASE: JANUARY 28. 1997
DATE OF AMENDMENTS: N/A
NAME OF TENANT: TRI-STAR AEROSPACE, INC.
NAME OF OWNER: ROBERT L. ZELIGSON, TRUSTEE OF THE
BRANIFF M WAREHOUSE TRUST
The undersigned ("Tenant") certifies as of the date of this Certificate the
following data as true and accurate:
1. The attached Lease, and any Amendments thereto, comprise a complete copy of
the entire Lease Agreement (please attach a copy of Lease and all Exhibits
and Addenda).
2. The Tenant's Lease, and any Amendments thereto (known collectively as the
"Lease"), are correctly identified by the date(s) stated above.
3. The commencement date of the Lease was MARCH 1, 1997. The expiration of
the Lease is FEBRUARY 28, 1998.
4. The monthly base rent (not including any percentage rent or expense pass
through) presently payable under the Lease is $2,000.00, and such rent has
been paid through JANUARY 31, 1998.
5. The real estate property taxes payable by Tenant under the Lease are as
follows: THE AMOUNT OWED BY THE TENANT, IS EQUAL TO THE AMOUNT THAT THE
PROPERTY TAXES INCURRED DURING EACH CALENDAR YEAR EXCEED THE BASE YEAR 1997
PROPERTY TAXES WHICH WERE $28,779.00.
6. The Tenant has deposited with Landlord $2,000.00 as a Security Deposit
under the terms of the Lease.
7. The Lease is presently in full force and effect and has not been modified,
supplemented, or amended except as indicated on this Tenant Estoppel
Certificate. To the knowledge of the undersigned, Landlord is not in
default of any terms or conditions of said Lease and Tenant is not in
default of any terms or conditions of said Lease.
8. Tenant is in possession of Leased Premises and that the Leased Premises is
in conformity with that stated in the Lease.
9. Tenant has no option to purchase the Property or first right of refusal
(FRR) to purchase the Property in which the Leased Premises is situated.
10. The Lease is personally guaranteed by N/A.
11. The square footage of the Leased Premises used for the calculation of all
rental sums due and payable per the terms and conditions of the Lease is
approximately 7,500 square feet, and that the total square footage of the
Property is approximately 155,000 square feet.
<PAGE>
Page 2
12. The statements contained herein are made for the purpose of verifying the
current status of the Tenant's Leasehold interest in Leased Premises and
may be relied upon by Landlord and any successor(s) and/or assignee(s) for
such purpose.
By: /s/ Brian Murphy
----------------------------
Brian Murphy
Vice President
Date: 12/24/97
--------------------------
Acknowledgment:
I hereby acknowledge that I witnessed the execution of this document by Brian
Murphy on this ________ day of _____________, 19____.
By:
----------------------------
<PAGE>
LEASE
THIS LEASE is made this 16 day of SEPTEMBER, 1997, by and between William
Weinberg (hereinafter called "Lessor") and TRISTAR AEROSPACE, INC.
(hereinafter called "Lessee").
WITNESSETH
1. LEASED PREMISES
A. In consideration of the rents hereinafter reserved and of the
covenants, agreements and conditions hereinafter contained on the part of the
Lessee to be paid, observed and performed, the Lessor does hereby demise and
lease the following described premises (hereinafter called the "Leased
Premises") located in the State of Oklahoma and more particularly described
as that portion of that certain building located at 11333 E. PINE ST., TULSA,
OKLAHOMA 74116-2030 (hereinafter called the "Building"), containing
approximately 3,588 square feet of office space as shown on the plan attached
hereto and made a part hereof as Exhibit "A" and located on the real estate
legally described in Exhibit "B" attached hereto and made a part hereof (such
real estate is hereinafter called the "Property" and the Building, and the
other improvements situated on the Property are herein called the "Center"),
subject to liens, covenants, easements, agreements and restrictions of record.
B. Lessee shall have the right to use, in common with the other
tenants of the Center, certain Common Areas as that term is defined in
Section 2 hereof, on the terms and conditions set forth herein.
2. COMMON AREAS
A. Subject to the terms and conditions of the Lease and such rules and
regulations as Lessor may from time to time impose in writing, Lessee and
Lessee's employees, agents, invites, customers and contractors shall, in
common with Lessor and the occupants of the Center and their respective
employees, agents, invites, customers and contractors and others entitled to
the use thereof have the right to use the access roads and parking areas
located on the Land (unless such parking areas are specifically designated by
Lessor for use by a particular tenant) and those facilities provided and
designated by Lessor for the general use and convenience of the tenants of
the Center, which roads, areas and facilities as they may from time to time
exist are referred to herein as "Common Areas". Lessor reserves the right
from time to time to increase or decrease the number of roads, areas and
facilities comprising the Common Areas and to make changes in the shape,
size, location and extent thereof provided that such changes will not affect
Lessee's use of the Leased Premises in a materially adverse manner.
B. Lessor shall, throughout the term of this Lease, including any
extensions and renewals thereof, operate, manage and maintain all Common Areas
within the Center. The manner in which such areas shall be maintained and the
amount and nature of the expenditures to be made for such maintenance shall
be determined at the sole discretion of Lessor.
C. Lessor shall have the right to close all or any portion of the
Common Areas to the extent as may be legally sufficient to prevent a
dedication thereof or the accrual of rights of any person or the public
therein, provided, however, that Lessor shall restrict the period of any such
closing to the minimum time necessary under applicable law to prevent such
dedication and accrual of rights.
D. Lessee shall not at any time park or permit the parking of Lessee's
trucks or other vehicles, or the trucks or other vehicles of Lessee's
suppliers or any others, adjacent to loading areas so as to interfere in any
way with the use of such areas by other tenants, nor shall Lessee at any time
permit the parking of Lessee's trucks, or the trucks of Lessee's suppliers,
or others in any portion of the parking lot not designated by Lessor for such
use by Lessee.
E. Lessee shall not at any time operate, nor shall it permit its
employees, agents, invites, customers or contractors to operate any truck or
other vehicle in such manner as to directly or indirectly damage any portion
of the
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Center, including damage to the Center caused by excessive wear and tear of
the improved portions of the Common Areas.
F. Lessor reserves the right to promulgate such reasonable rules and
regulations relating to the use of the Common Areas, and part or parts
thereof, as Lessor may deem appropriate. The rules and regulations shall be
binding upon Lessee seven (7) days after delivery of a copy thereof to
Lessee, and Lessee agrees to abide by such rules and regulations and to
cooperate in their observance. The rules and regulations may be amended by
Lessor from time to time, with or without advance notice to Lessee, and all
amendments shall be effective seven (7) days after delivery of a copy thereof
to Lessee. Any such changes shall not have a material adverse effect on
lessee's operations.
3. TERM
A. This Lease shall be for a term of 2 years, 0 month(s) and shall
commence on DECEMBER 1, 1997 (hereinafter called the "Leased Commencement
Date") and shall be terminated on NOVEMBER 30, 1999 (both dates inclusive,
unless sooner terminated as hereinafter provided (hereinafter sometimes
called the "Term").
4. USE OF LEASED PREMISES
A. Subject to the conditions contained herein, the Leased Premises may
be used and occupied by the Lessee during the Term hereof and any option or
renewal periods contained herein which are validly exercised, for the
following purposes (and for no other purpose whatsoever without Lessor's prior
written consent): GENERAL OFFICE OPERATIONS AND SERVICES.
B. Lessee shall not do or permit to be done in or about the Leased
Premises anything which is (a) contrary to law, zoning regulations, recorded
restrictions, applicable local rules and regulations, or (b) is, in the
opinion of Lessor, of a hazardous or dangerous nature, or (c) will increase
the rates or cause a cancellation of any insurance policies maintained on the
Center by Lessor or Lessee. Lessee shall not obstruct or interfere with the
rights of other tenants or occupants of the Building or their customers and
invites, nor shall it engage in any activities that in the opinion of Lessor
might constitute a source of annoyance thereto.
5. POSSESSION AND OCCUPANCY
A. By occupying the Leased Premises or taking possession thereof
Lessee (1) accepts said Premises as suitable for the purposes and uses
intended therefore by Lessee, (ii) accepts the Building and each and every
appurtenance thereof and (iii) conclusively waives any and all defects in or
to the Leased Premises, Building and Center.
B. If Lessee occupies the Leased Premises prior to the Lease
Commencement Date with Lessor's written consent, ail of the provisions of this
Lease shall be in full force and effect as of the date the Lessee occupies
the Leased Premises. Rent for any period prior to the Lease Commencement Date
shall be fixed by written agreement of the Lessor and Lessee or, in the
absence of such agreement, at the monthly Rent set forth in Section 6 below.
6. RENT
A. Lessee shall, without deduction, abatement or set off of any kind
or nature whatsoever, pay to Lessor at:
William Weinberg
11333 E. Pine St., Suite #147
Tulsa, OK. 74116-2030
or at such other place as Lessor may designate from time to time in writing,
monthly Base Rent the amount of $2,541.50 payable in advance on the first day
of each and every calendar month during the term of the lease. Such rent
shall be subject to adjustments for year two as follows and cost of living
adjustments in the beginning of years three, four and five as follows:
(1) RENTAL ADJUSTMENT. For the first two- (2) year(s), base rent shall be
as set forth in 6A above. For the option years following the second (2)
year, the base rent shall be increased by the percentage of increase, if
any, in the Consumer Price Index -- U.S. Average -- All Urban Consumers
(1982-84 = 100), as published by the U.S. Department of Labor's Bureau of
Labor Statistics for the first month of each of such successive periods
over the
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base period. If said index shall cease to be published, the parties
shall use the most comparable index published by the U.S. Government.
If the parties shall be unable to agree on a successor index, the
parties shall refer the choice of successor index to arbitration in
accordance with the rules of the American Arbitration Association. The
base period, for purposes of such adjustment, shall be the month of
the year in which this Lease is executed. (By way of illustration
only, if the base period Index figure for the month in which this
Lease is executed is 200, and the Index for the first month of the
first successive period is 210, then the Minimum Rent for such ensuing
period shall be increased by 5 percent).
The above Base Rent shall include charges for utilities, gas, water, electric
services and janitorial services in the demised office space. If the term
commences or ends other than on the first day of a month, then the Base Rent
for such month shall be prorated based upon a thirty (30) day month for such
fractional period and paid promptly to the Lessor. The obligation of Lessee
to pay Base Rent hereunder shall be deemed an independent covenant of Lessee.
B. All payments to Lessor due under this Lease shall, if not received
by the tenth (10th) day of the month in which said payment is due, bear
interest from the due date until received by Lessor at maximum lawful rate
allowed by the State of Oklahoma. Lessor's right to receive interest shall
not in any way limit any other remedies available to Lessor under this Lease
or at law or equity in the event of a default by Lessee hereunder.
C. In addition to the aforementioned Base Rent, Lessee shall reimburse
Lessor for Lessee's prorated share of maintenance related to the removal of
ice and/or snow from the common area walkways and automobile parking areas.
Prorated share of maintenance will be based on Lessee's percentage of the
entire net rentable space.
D. Lessee shall have two (2) option(s) to extend the terms of this
Lease for a period of two (2) year(s) each from and after the termination
hereof under the some terms and conditions herein, except as to Base Rent,
and as to the options provided that the following conditions are fulfilled:
(1) That one hundred eighty (180) days prior to the termination of the
original term of the Lease or the expiration of the first option period, the
Lessee gives Lessor written notice of Lessee's intention to exercise the
option; and
(2) That at the time of such written notices Lessee is not in default;
and
(3) Base Rent for each year of the option period(s) shall be increased,
by the percentage increase, if any in the United States Consumer Price Index
for All Urban Consumers (CPI) as stipulated in paragraph 6A(1).
7. SECURITY DEPOSIT
A. Lessee has deposited with Lessor the sum of TWO THOUSAND FIVE
HUNDRED FORTY-ONE AND 50/100 ----DOLLARS ($2,541.50) upon the execution of
this Lease (the "Security Deposit"). Said sum shall be held by Lessor as
security for the faithful performance by Lessee of all of the obligations
under this Lease. The Security Deposit shall not be assigned, transferred or
encumbered by Lessee and any attempt to do so by Lessee shall be void and
unenforceable and shall not be binding upon Lessor.
B. If Lessee defaults with respect to any provision of this Lease or
Lessor makes any payment on behalf of Lessee which Lessee is required to make
under the terms of this Lease, Lessor may (but shall not be required to) use,
apply, or retain all or any part of the Security Deposit for the payment of
any Rent or any other sum in default, or for the payment of any other amount
which Lessor may spend or become obligated to spend by reason of Lessee's
default, or to compensate Lessor for any other loss or damage which Lessor
has suffered or may suffer by reason Lessee's acts or default. If any portion
of the Security Deposit is so used, applied or retained, Lessee shall
forthwith, upon Lessor's demand, deposit cash with Lessor in an amount
sufficient to restore the Security Deposit to its original amount, Lessee's
failure to so restore the Security Deposit within ten (10) days after receipt
of such demand shall constitute an Event of Default (as such term is
hereinafter defined).
C. Lessor shall not be required to keep the Security Deposit separate
from its general fund unless so required by
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<PAGE>
law. In no event shall Lessor be deemed a trustee of the Security Deposit.
Lessee shall not be entitled to any interest on the Security Deposit.
D. If Lessee shall have fully and faithful performed all of its
obligations under the Lease, the Security Deposit or the then remaining
balance thereof shall be refunded to Lessee within twenty (20) business days
after the termination of this Lease. In the event Lessor's interest in this
Lease is sold, transferred or otherwise terminated, Lessor shall transfer
said deposit (or the remaining balance thereof) to its successor in interest
and thereupon Lessor shall be discharged from any further liability with
respect thereto. The provisions of the preceding sentence shall likewise
apply to any subsequent transferor.
8. ASSIGNMENT AND SUBLETTING
Lessee shall not assign this Lease or sublet any portion of the Premises
without prior written consent of the Lessor, which shall not be unreasonably
withheld, and which in no case shall be withheld by Lessor in the case of
assignment to an entity which continues Lessee's business operations pursuant
to a sale of Lessee or Lessee's assets to another entity. Any such assignment
or subletting without consent shall be void and, at the option of the Lessor,
may terminate this Lease. Notwithstanding the foregoing, Lessee may assign
this lease to any purchaser of substantially all of its operations, whether
by sale of assets, sale of stock, or merger, and upon the assumption of
liability under this lease by such purchaser, Lessee shall not be released
from all liability under this Lease.
9. ORDINANCE AND STATUTES
Lessee shall comply with all statutes, ordinances and requirements of
all municipal, state and federal authorities now in force, or which may
hereafter be in force, pertaining to the Leased Premises, occasioned by or
affecting the use thereof by Lessee. The commencement or pendency of any
state or federal court abatement proceeding affecting the use of the Leased
Premises shall, at the option of the Lessor, be deemed a breach hereof.
10. MAINTENANCE, REPAIRS, ALTERATIONS
Lessee acknowledges that the Leased Premises are in good order and
repair, unless otherwise indicated herein. If Lessee damages any of the
heating and air conditioning systems, electrical systems, pluming systems and
other building systems, fixtures, foundations, exterior and interior walls,
roofs, windows, doors, plate glass, floors and sprinkler systems, Lessee
shall, at his sole cost and expense, repair such damage. Lessee shall
surrender the Leased Premises at termination hereof in as good condition as
received, normal wear and tear excepted. Lessee acknowledges that he has
inspected the Premises and that Lessee is not relying on any representations
or warranties made by Lessor, or Lessor's agents, regarding the Leased
Premises except as expressly set forth herein. Any repairs or maintenance
shall be performed in a workmanlike manner by contractors approved by Lessor
pursuant to the specifications provided Lessee by Lessor. Lessor at its sole
cost and expense maintain all heating and air conditioning systems,
electrical systems, plumbing systems, and other building systems, fixtures,
foundations, exterior and interior walls, roofs, windows, doors, plate glass,
floors, and sprinkler systems, if any, in good repair and condition, normal
wear and tear excepted. Lessee's obligations under this Paragraph 10 shall
survive the expiration or other termination of this Lease. Lessor shall
provide general maintenance for all heating and air conditioning systems,
electrical systems, plumbing systems and office lighting, provided there is
no damage by Lessee or any of its agents, employees or invitees.
11. ENTRY AND INSPECTION
Lessee shall permit Lessor or Lessor's agent to enter upon the Leased
Premises at reasonable times and upon reasonable notice, for the purpose of
inspecting the same, and will permit Lessor at any time within sixty (60)
days prior to the expiration of the lease, to place upon the Leased Premises
any usual "To Let" or "For Lease" signs, and permit persons desiring to lease
the same to inspect the Leased Premises thereafter.
12. INDEMNIFICATION OF LESSOR
Lessor shall not be liable for any damage or injury to Lessee, or any
other person, or to any property, occurring on the Leased Premises or any
part thereof and Lessee agrees to hold Lessor harmless from any claims for
damages, no matter how caused, except if caused by gross negligence or
willful acts or omissions of the Lessor.
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13. SIGNS
Lessor reserves the exclusive right to the roof, side and rear walls of
the Leased Premises. Lessee shall not construct any projecting sign or awning
without the prior written consent of Lessor which consent shall not be
unreasonably withheld. Lessee shall reimburse Lessor a total sum of THREE
HUNDRED AND NO/100-- DOLLARS ($300.00) to provide common exterior and
interior directory signs.
14. ABANDONMENT OF PREMISES
Lessee shall not vacate or abandon the Leased Premises at any time during
the term hereof, and if Lessee shall abandon or vacate the premises, or be
dispossessed by process of law, or otherwise, any personal property belonging to
Lessee left upon the Leased Premises shall be deemed to be abandoned, at the
option of Lessor.
15. CONDEMNATION
If any part of the Leased Premises shall be taken or condemned for public
use, and a part thereof remains which is capable of being occupied hereunder,
this lease shall, as to the part taken, terminate as of the date the condemnor
acquires possession, and thereafter Lessee shall be required to pay such
proportion of the rent for the remaining term as the value of the Leased
Premises remaining bears to total value of the Leased Premises at the date of
condemnation; provided however, that Lessor may at his option, terminate this
lease as of the date the condemnor acquires possession. In the event that the
Leased Premises are condemned in whole or that such portion is condemned that
the remainder is not usable as intended hereunder, this lease shall terminate
upon the date upon which the condemnor acquires possession. All sums which may
be payable on account of any condemnation shall belong to the Lessor, and Lessee
shall be entitled to retain any amount awarded to him for his trade fixtures or
moving expenses. If the Building is condemned and the condemnation has a
material adverse affect on the Lessee's use of the Leased Premises then Lessee
has the right to terminate the Lease.
16. TRADE FIXTURES
Any and all improvements made to the Leased Premises during the term hereof
shall belong to the Lessor, except trade fixtures of the Lessee. Lessee may,
upon termination hereof, remove all his trade fixtures, but shall repair or pay
for all repairs necessary for damages to the Leased Premises occasioned by
removal.
17. DESTRUCTION OF LEASED PREMISES
A. In the event of a partial destruction of the Leased Premises during
the term hereof from any cause, Lessor shall forthwith repair the same, provided
that such repairs can be made within (60) days under existing governmental laws
and regulations, but such partial destruction shall not terminate this lease,
except that Lessee shall be entitled to a proportionate reduction of rent while
such repairs shall interfere with the business of Lessee on the Leased Premises.
If such repairs cannot be made within said sixty (60) days. Lessor, at his
option, may make the some within a reasonable time, this lease continuing in
effect with the rent proportionately abated as aforesaid, and in the event the
Lessor shall not elect to make such repairs which cannot be made within sixty
(60) days, this lease may be terminated at the option of either party.
B. In the event that the Building is destroyed to an extent of not less
than one-third of the replacement costs thereof, Lessor may elect to terminate
this lease whether the Leased Premises be insured or not. A total destruction of
the Building shall terminate this lease. If the building is destroyed to an
extent that Lessee's use of the Leased Premises is materially and adversely
affected, then Lessee shall have the right to terminate this Lease.
18. HAZARDOUS MATERIALS
Lessee shall not use, store, or dispose of any hazardous substances upon
the Leased Premises, except use and storage of such substances if they are
customarily used in lessee's business, and such use and storage complies with
all environmental laws. Hazardous substances means any hazardous waste,
substance or toxic materials regulated under any environmental laws or
regulations applicable to the Property. Lessee shall be solely responsible
for proper cleanup and containment of hazardous material spillage. Proper
testing of containment of hazardous material spillage by a certified
laboratory shall be documented with a copy of the documentation being
delivered to Lessor's representative. Lessee shall notify Lessor's
representative immediately of testing for the protection of occupants in the
facility.
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19. INSOLVENCY
In the event a receiver is appointed to take over the business of
Lessee, or in the event Lessee makes a general assignment for the benefit of
creditors, or Lessee takes or suffers any action under any insolvency or
bankruptcy act, the same shall constitute breach of this lease by Lessee.
20. DEFAULT AND REMEDIES OF LESSOR ON DEFAULT.
A. The occurrence of any of the following shall constitute an Event of
Default.
1. The vacation or abandonment of the Leased Premises by Lessee;
2. A failure by Lessee to pay rent, or make any other payment
required to be made by Lessee hereunder, where such failure
continues for ten (10) days after the date such payment was due;
3. A failure by Lessee to observe and perform any of the other
provisions of this lease to be observed or performed by Lessee,
where such failure continues for thirty (30) days after written
notice thereof by Lessor to Lessee; provided, same cannot
reasonably be cured within such thirty (30) day period. Lessee
shall not be deemed to be in default if Lessee shall within such
period commence such cure and thereafter diligently prosecute the
same to completion;
In the event of any such default by Lessee, Lessor may, at any time thereafter
at Lessor's option, and without limiting Lessor to the exercise of any other
right or remedy which Lessor may have at law, in equity or both, with or without
notice or demand.
B. In the event of any "Event of Default" ("Event of Default", and
collectively "Events of Default"), Lessor may, at this option, terminate the
lease and recover from lessee: (a) the worth at the time of award of unpaid
rent which was earned at the time of termination; (b) the worth at the time
of award of the amount by which the unpaid rent which would have been earned
after termination until the time of the award exceeds the amount of such
rental loss that the Lessee proves could have been reasonably avoided; (c)
the worth at the time of award of the amount by which the unpaid rent for the
balance of the term after the time of award exceeds the amount of such rental
loss that the Lessee proves could not be reasonably avoided; (d) the amount
of unamortized tenant improvement costs as more fully described in the
Addendum To Lease which is attached hereto; and (e) any other amount
necessary to compensate Lessor for all detriment proximately caused by
Lessee's failure to perform his obligations under the lease or which in the
ordinary course of things would be likely to result therefrom.
C. Lessor may, in the alternative, continue this lease in effect, as
long as lessor does not terminate Lessee's right to possession, and Lessor
may enforce all his rights and remedies under the lease, including the right
to recover the rent as it becomes due under the lease. If said breach of
lease continues, Lessor may, at any time thereafter, elect to terminate the
lease.
D. Nothing contained herein shall be deemed to limit any other rights
or remedies which Lessor may have.
21. SECURITY
The security deposit set forth above, if any shall secure the
performance of the Lessee's obligations hereunder. Lessor may, but shall not
be obligated to apply all or portions of said deposit on account of Lessee's
obligations hereunder. Lessee shall not have the right to apply the Security
Deposit in payment of the last month's rent
22. DEPOSIT REFUNDS
The balance of all deposits shall be refunded within two leeks from date
possession is delivered to Lessor or his authorized Agent, together with a
statement showing any charges made against such deposits by Lessor.
23. ATTORNEY'S FEES
In the event that Lessor is required to employ an attorney to enforce
the terms and conditions of this agreement or to recover possession of the
premises from Lessee, Lessee shall pay to Lessor a reasonable attorney's fee
whether or not a legal action is filed or a judgment is obtained. In the
event of a legal action, the other party shall pay the attorney's fees and
costs of the prevailing party.
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24. WAIVER
Failure of Lessor to enforce any term hereof shall not be deemed to be a
waiver of any subsequent breach of that or any other obligation hereunder.
25. NOTICES
Any notice which either party may or is required to give, shall be given
by mailing the same, postage prepaid, to Lessee at the premises, or Lessor at
the address shown below, or at such other place any may be designated by the
parties from time to time.
LESSOR:
William Weinberg
5275 Kalanianaole Highway
Honolulu, Hawaii 96821-1840
with a copy to:
Green Valley Center
Jim Allen, Building Manager
11333 E. Pine St., Suite #147
Tulsa, OK 74116-2030
LESSEE:
TriStar Aerospace, Inc.
Address: 11333 E. PINE ST., SUITE #73
-------------------------------------
City, state & zip code: TULSA, OK. 74116
----------------------
With a copy to:
TriStar Aerospace, Inc.
Mr. Brian Murphy, Vice President
Address: 11535 E. PINE ST.
-------------------------------------
City, state & zip code: TULSA, OK 74116
----------------------
26. HOLDING OVER
Any holding over after the expiration of this lease, with the consent of
Lessor, shall be construed as a month-to-month tenancy.
27. TIME
Time is of the essence of this lease.
28. HEIRS, ASSIGNS, SUCCESSORS
This lease is binding upon and insures to the benefit of the heirs,
assigns and successors in interest to the parties.
29. OMITT
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30. ESTOPPEL CERTIFICATE
A. Lessee shall at any time upon not less than fifteen (15) days prior
written notice from Lessor execute, acknowledge and deliver to Lessor a
statement in writing (1) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification
and certifying that this Lease, as so modified, is in full force and effect),
the amount of any security deposit, and the date to which the rent and other
charges are paid in advance, if any, and (2) acknowledging that there are
not, to Lessee's knowledge, any uncured defaults on the part of Lessor
hereunder, or specifying such defaults if any are claimed. Any such statement
may be conclusively relied upon by any prospective purchaser or encumbrancer
to the Premises.
B. At Lessor's option, Lessee's failure to deliver such statement
within such time shall be a material breach of this Lease or shall be
conclusive upon Lessee (1) that this Lease is in full force and effect,
without modification except as may be represented by Lessor, (2) that there
are no uncured defaults in lessor's performance, and (3) that not more than
one month's rent has been paid in advance or such failure may be considered
by Lessor as a default by Lessee under this lease.
C. If Lessor desires to finance, refinance, or sell the Premises, or
any part thereof, Lessee hereby agrees to deliver to any lender or purchaser
designated by Lessor such financial statements of Lessee as may be reasonably
required by such lender or purchaser. Such statements shall include the past
three-year's financial statements of Lessee. All such financial statements
shall be received by Lessor and such lender or purchaser in confidence and
shall be used only for the purposes herein set fourth.
31. INSURANCE
A. Liability Insurance; Business Interruption Insurance. Lessee will
procure at its own expense and keep in force during the entire term of this
Lease: (1) a policy of comprehensive general liability insurance (Owners',
Lessors' and Lessees' Public Liability Insurance) with minimum limits of not
less than FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($500,000.00) for injury
to one person and not less than ONE MILLION AND NO/100 DOLLARS
($1,000,000.00) for injury to more than one person arising out of one
occurrence; (ii) a policy in the sum of not less than ONE HUNDRED THOUSAND
AND NO/100 DOLLARS ($100,000.00) insuring claims of third persons for
property damage; and (iii) a policy of business interruption (use and
occupancy) insurance insuring that the rent received hereunder shall be paid
to Lessor for a period of up to one (1) year if the Premises are destroyed or
rendered inaccessible by a risk insured against by a policy of standard fire
and extended coverage insurance with vandalism and malicious mischief
endorsements. Said policy or policies shall be with an insurance company or
companies authorized to do business in the State of Oklahoma, shall name
Lessor as an additional insured, and shall cover the entire demised premises
and the areas appurtenant thereto, including the sidewalks upon which the
demised Premises abut; and a current certificate of said policy or policies
shall be deposited with Lessor. The limits of said policies shall be
increased from time to time with due regard to prevailing prudent business
practices and as reasonably adequate for Lessor's protection. Said insurance
shall contain a provision that it will not be canceled without giving Lessor
thirty (30) days' written notice prior to the effective date of the proposed
cancellation.
B. FIRE INSURANCE. Lessee shall, during the entire term hereof keep
in full force and effect a policy of fire insurance, sprinkler leakage
coverage, including standard extended coverage, in sufficient insurance
amounts to cover Lessee's portion of the total gross leasable area and
including all goods, wares, merchandise, furniture, fixtures, supplies and
other personal property located, stored or placed in or on the premises.
C. LESSEE'S LIABILITY FOR INCREASED FIRE INSURANCE. Lessee agrees that
it will not keep, use, sell or offer for sale in or upon the said premises
any article, or perform any services, which may be prohibited by the standard
form of fire insurance policy. Lessee agrees to pay as additional rental any
increase in premiums for fire and extended coverage
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insurance that may be charged during the term of this Lease on the amount of
such insurance to be carried by Lessor on said premises or the building of
which they are a part, resulting from the type of merchandise or services
sold or performed in the premises by Lessee, whether or not Lessor has
consented to the same.
32. ENTIRE AGREEMENT
The foregoing constitutes the entire agreement between the parties and may
be modified only by a writing signed by both parties. The following lettered
Exhibits are attached hereto and made a part hereof.
EXHIBIT A -- LEASED PREMISES
EXHIBIT B -- LEGAL DESCRIPTION
ADDENDUM
TRISTAR AEROSPACE, INC. - LESSEE:
Dated:
-------------------------------------------------------
Leassee:
-------------------------------------------------------
Signature: /s/ BRIAN MURPHY
---------------------------------------------------
Its Brian Murphy, Vice-president - Administration
William Weinberg - LESSOR:
Dated:
-------------------------------------------------------
Lessor: /s/ William Weinberg
-------------------------------------------------------
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ADDENDUM TO LEASE
1. Lessor shall provide the following:
1. Install East and West demising walls adjacent to corridors to
meet City of Tulsa Building Codes.
2. Repaint demised office walls, (Color- Winterbird satin white).
3. Refurbish existing ceiling tiles and air conditioning defusers.
4. Install two approximate 3' x 9' wood doors with 2' x 9'
sidelights. One in the East and one in the West demising wall.
5. Install two approximate 4' x 9' sidelights in West demising wall.
6. Install one approximate 3' x 7' wood door and metal frame between
suite 68 and 73.
7. Install one approximate 5' x 7' sliding pocket door between suite
68 and 70.
8. Install approximately six electrical power poles to accommodate
workstations and relocate light switches to West entrance.
9. Carpet shall be cleaned before occupancy and cleaned in the
evening after move-in date.
2. Lessor will ensure a minimum of thirty-five parking spaces is available to
the Lessee at the Green Valley Center location throughout the term of this
lease. This parking will be allocated for the TriStar employees, customers, and
invitees that are conducting business in the Green Valley Center.
3. Every attempt by Lessor will be made to complete this build-out by Lessee's
requested date of November 1, 1997. Or prior to December 1, 1997 as note in the
lease agreement. However, because of material ordering and city of Tulsa permit
requirement Lessor requires a possible sixty-day construction period from the
date this lease is consummated.
4. Lessee shall provide the following at Lessee's expense:
1. Underground installation of data and phone cabling from Lessee
offices located at Braniff M East of Green Valley Center. This
installation shall meet all local governmental codes. Cable shall
enter the Northeast corner of the Green Valley Center at the rail
spur entrance and continue to the South to the main phone cabling
office located near the main lobby of the Green Valley Center.
Cabling shall than be loop over to the demised space of Lessee.
5. Lessee shall peaceably and quietly hold and enjoy the Leased Premises for
the term hereof without hindrance from Lessor or any other person, subject
to the terms and conditions of this lease, provided that Lessee has
performed all of the terms, covenants, agreements, and conditions of this
lease.
6. Upon exercising this lease for one-year, Lessee must give Lessor a written
ninety- (90) day notice to terminate this lease agreement. Should Lessee
default or terminate the lease agreement before exercising Lessee's option
as stated in Section 6.D., Lessee agrees to reimburse Lessor based on the
following:
1. After one-year should Lessee give a written notice, and no option is
exercised, a penalty shall be assessed and the Lessee shall reimburse
Lessor $ 1,167.00 per month for each month not exercised for the full
term of the base lease period. (i.e. Should the one-year anniversary
of this lease fall on January 1, 1999 and Lessee gives Lessor a
written notice of ninety (90) days. Than Lessee shall vacate the
Leased Premises by March 30, 1999 and a penalty of nine months
amortized tenant improvement cost shall be assessed.
9 months x $ 1,167.00 tenant improvement cost = $ 10,503.00. Assessed
penalty to Lessor $ 10,503.00.)
2. If this agreement is exercised through the end of year-two, the
Lessee's tenant improvement cost shall be satisfied and no additional
penalties shall be assessed.
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EXHIBIT 10.14
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
November 7,1996, is made and entered into by and between MAPLE LEAF AEROSPACE,
INC., a Delaware corporation ("MLA"), ODYSSEY PARTNERS, L.P., a Delaware
limited partnership ("OP"), and any Affiliate of OP which is or becomes a
stockholder of MLA and executes a counterpart hereof (collectively with OP,
"Odyssey").
W I T N E S S E T H :
WHEREAS, MLA and Odyssey have entered into that certain Management
Stockholders' and Optionholders' Agreement, dated as of September 19, 1996 (the
"Stockholders' Agreement"), pursuant to which MLA has agreed to grant to
Odyssey registration rights with respect to the shares of common stock, $.01
par value per share, of MLA held by Odyssey (such shares, and any securities
issued or issuable in respect thereof upon any merger or other reorganization
of MLA or upon or pursuant to any subdivision, combination or reclassification
of the common stock of MLA being herein referred to as the "Shares").
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements of the parties, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, intending to be legally bound, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. Capitalized terms defined in the Stockholders
Agreement and not otherwise defined herein shall have the same meanings herein
as are ascribed to them therein. In addition, the following terms shall have
the meanings ascribed to them below:
"Commission" means the U.S. Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Registrable Securities" means all of the Shares held by Odyssey from time
to time, PROVIDED, HOWEVER, that a Share shall cease being a Registrable
Security at such time, if any, as (i) a registration statement under the
Securities Act covering the offering of such Share has been declared effective
by the Commission and such Share has been disposed of pursuant to such
effective registration statement, or (ii) such Share is sold under
circumstances in
<PAGE>
which all of the applicable conditions of Rule 144 (or any similar provision
then in force) under the Securities Act are met.
"Underwriter" means a securities dealer who purchases any Registrable
Securities as principal in an underwritten offering and not as part of such
dealer's market-making activities.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.1. DEMAND REGISTRATION.
(a) REQUEST FOR REGISTRATION. At any time and from time to time, Odyssey
may make a written request to MLA to file with the Commission a registration
statement and such other documents, including a prospectus, as may be necessary
in order to comply with the provisions of the Securities Act so as to permit a
public offering and sale of up to all of the Registrable Securities. The
request described in this paragraph (a) is hereinafter referred to as a "Demand
Registration." Odyssey shall have the right to withdraw its request for a
Demand Registration by giving written notice to MLA of its request to withdraw
at any time prior to effectiveness of the registration statement therefor. Any
request to effect a Demand Registration shall specify the amount of Registrable
Securities proposed to be sold and shall also specify the intended method of
disposition thereof.
(b) LIMITATION ON DEMAND REGISTRATION RIGHTS. Odyssey may make, in the
aggregate, not more than four (4) requests for a Demand Registration hereunder
(including requests withdrawn prior to effectiveness as described in paragraph
(a) above). Odyssey may not make more than one request for a Demand
Registration during any six (6) month period.
(c) EFFECTIVE REGISTRATION. A registration will not be deemed to have
been effected as a Demand Registration unless and until it has been declared
effective by the Commission and MLA has complied in all material respects with
its obligations under this Agreement in connection therewith (and any
underwriting agreement entered into with respect thereto) unless failure to
obtain effectiveness is due to acts or omissions to act by Odyssey; PROVIDED
that if, after it has become effective, the offering of securities pursuant to
such registration is or becomes the subject of any stop order, injunction or
other order or requirement of the Commission or any other governmental or
administrative agency, or if any court prevents or otherwise limits the sale of
such securities pursuant to the registration, such registration will be deemed
not to have been effected as to the Shares subject to such stop order,
injunction, other order, requirement or limitation unless such stop order,
injunction, other order, requirement or limitation is rescinded or the issuance
of such stop
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order, injunction, other order, requirement or limitation is imposed in
response to an act or omission on the part of Odyssey. If (i) a registration
requested pursuant to this Section 2.1 is deemed not to have been effected and
such failure to have been effected is not the result of any act or omission of
Odyssey, or (ii) with respect to an offering of Registrable Securities on a
continuous basis pursuant to Rule 415 under the Securities Act, the
registration requested pursuant to this Section 2.1 does not remain effective
for a period of at least twenty-four (24) months beyond the effective date
thereof or, with respect to an underwritten offering of Registrable
Securities, until ninety (90) days after the commencement of the distribution,
then MLA shall continue to be obligated to effect such registration pursuant
to this Section 2.1 and such registration shall not count toward the four
Demand Registration requests permitted Odyssey pursuant to Section 2.1(b).
(d) SELECTION OF UNDERWRITER. If Odyssey so elects, the offering of
Registrable Securities pursuant to a Demand Registration shall be in the form
of an underwritten offering, in which case Odyssey shall select one or more
nationally recognized firms of investment bankers to act as the lead managing
Underwriter or Underwriters in connection with such offering.
SECTION 2.2. PIGGYBACK REGISTRATION. If, at any time, MLA proposes to
file a registration statement with the Commission in connection with a public
offering of any of its securities (other than (i) a registration statement on
Form S-4 or S-8, or any similar form which is a successor to such Forms, or
(ii) a registration statement filed in connection with an exchange offer or an
offering of securities solely to MLA's existing stockholders), that may be used
for the registration of any of the Registrable Securities (a "Piggyback
Registration Statement"), then MLA shall give written notice to Odyssey of such
proposed filing at least thirty (30) days before the anticipated filing date of
such Piggyback Registration Statement, offering Odyssey the opportunity to
include in such Piggyback Registration Statement such amount of Registrable
Securities as Odyssey may request. If Odyssey desires to have Registrable
Securities registered under such Piggyback Registration Statement pursuant to
this Section 2.2, Odyssey shall advise MLA thereof in writing within twenty
(20) days alter the date of its receipt of MLA's notice (which request shall
set forth the amount of Registrable Securities for which registration is
requested). Subject to Section 2.3, MLA shall include in any such Piggyback
Registration Statement all Registrable Securities so requested by Odyssey to be
included. No registration effected pursuant to a request or requests referred
to in this Section 2.2 shall be deemed to have been effected pursuant to
Section 2.1 or to otherwise relieve MLA of its obligations to effect Demand
Registrations pursuant to this Agreement. MLA shall have the right to
discontinue, without liability to Odyssey, any registration under this Section
2.2 at any time prior to the effective date of such registration if the
registration of other securities giving rise to such registration is
discontinued, but no such discontinuation shall preclude an immediate or
subsequent request for registration pursuant to Section 2.1.
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SECTION 2.3. ALLOCATION OF SECURITIES INCLUDED IN REGISTRATION STATEMENTS.
(a) In the case of a Demand Registration pursuant to Section 2.1 that is
underwritten, if the managing Underwriter(s) of such offering shall advise MLA
and Odyssey, in writing, that (i) the total amount of securities requested to
be included therein creates a substantial risk that the proceeds or price per
unit that will be derived from such registration will be reduced or (ii) the
number of securities proposed to be registered exceeds the amount of securities
that can be reasonably sold in such offering, MLA shall include in such
registration: (A) first, all Registrable Securities requested by Odyssey to be
included in such registration pursuant to Section 2.1 (unless such amount
exceeds the maximum amount which such Underwriter advises can be sold, in which
case MLA shall include in such registration such maximum amount), and (B)
second, according to such priorities as MLA may agree with the holders of other
securities seeking to participate in such registration pursuant to provisions
of registration rights permitted by Section 2.4 hereof. In the case of a Demand
Registration pursuant to Section 2.1 that is not underwritten, no Person,
including MLA, shall be permitted to include securities in such registration
unless (and then only to the extent that) Odyssey consents to such inclusion.
(b) In the case of any underwritten registration with respect to which
Odyssey has requested to include Registrable Securities pursuant to Section
2.2, if the managing Underwriter(s) of such offering shall advise MLA and
Odyssey, in writing, that (i) the inclusion in such registration of some or all
of the Registrable Securities sought to be included by Odyssey and the other
securities sought to be registered creates a substantial risk that the proceeds
or price per unit that will be derived from such registration will be reduced
or (ii) the number of securities to be registered exceeds the amount of
securities that can be reasonably sold in such offering, then (A) securities
being offered directly by MLA on a primary basis and any securities being
registered pursuant to any demand registration rights shall first be included
in such registration, and (B) the number of securities sought to be registered
for Odyssey and all other Persons exercising piggy-back registration rights
with respect to such registration shall be reduced PRO RATA (based upon the
percentage of securities requested to be included in such registration by
Odyssey and such other holders of piggyback registration rights) or, as
applicable, in such other proportions as contemplated by the Stockholders'
Agreement, before any securities held by any other Persons are included in such
registration.
SECTION 2.4. REGISTRATION RIGHTS TO OTHERS. If MLA shall at any time
provide to any Person rights with react to the registration of any securities
of MLA under the Securities Act, such rights shall not be in conflict with the
rights provided to Odyssey in this Agreement or the Stockholders' Agreement.
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ARTICLE III
REGISTRATION PROCEDURES
SECTION 3.1 FILINGS; INFORMATION. Whenever MLA is required to effect or
cause the registration of Registrable Securities pursuant to Article II hereof,
MLA will use its reasonable efforts to effect the registration of such
Registrable Securities in accordance with the intended method of disposition
thereof as quickly as practicable, and in connection with any such request:
(a) MLA will as expeditiously as possible (and in no event more than
forty-five (45) days from the date of receipt of written request from Odyssey
pursuant to Section 2.1(a) to register Registrable Securities) prepare and file
with the Commission a registration statement on Form 5-3 (if use of such form
is then available to MLA pursuant to the rules of the Commission and, if not,
on such other form promulgated by the Commission for which MLA then qualifies
and which counsel for MLA shall deem appropriate and which form shall be
available for the sale of the Registrable Securities to be registered
thereunder in accordance with the provisions of this Agreement and in
accordance with the intended method of disposition of such Registrable
Securities), and use commercially reasonable efforts to cause such filed
registration statement to become and remain effective (pursuant to Rule 415
under the Securities Act or otherwise), and MLA will as expeditiously as
possible prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a period
of not less than: (i) twenty four (24) consecutive months, or (ii) with respect
to an underwritten offering of Registrable Securities, ninety (90) days after
the commencement of the distribution of all Registrable Securities covered by
such registration statement (or, in each case, for such shorter period as in
which all Registrable Securities covered by such registration statement have
been sold in accordance with the intended method of distribution thereof or in
which all Registrable Securities covered by such registration statement and
remaining unsold thereunder may be sold in a single transaction or
contemporaneous transactions in compliance with Rule 144 under the Securities
Act, but in no event before the expiration of the period referred to in Section
4(3) of the Securities Act and Rule 174 thereunder, if applicable) and comply
with the provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement during such period in
accordance with the intended methods of disposition by Odyssey set forth in
such registration statement.
(b) MLA will, prior to filing a registration statement or prospectus or
any amendment or supplement thereto, furnish to (i) Odyssey, (ii) one firm of
counsel representing Odyssey, and (iii) each Underwriter, if any, of the
Registrable Securities covered by such registration statement, copies of such
registration statement as proposed to be filed, together with all exhibits
thereto and all documents incorporated by reference
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therein, which documents will be subject to review and approval by the
foregoing, and thereafter furnish to Odyssey, its counsel and each
Underwriter, if any, for theft review and comment, such number of copies of
such registration statement, each amendment and supplement thereto (in each
case, including all exhibits thereto and documents incorporated by reference
therein), the prospectus included in such registration statement (including
each preliminary prospectus) and such other documents or information as
Odyssey, its counsel or each Underwriter may reasonably request in order to
facilitate the disposition of the Registrable Securities.
(c) After the filing of the registration statement, MLA will promptly
notify odyssey of any stop order issued or threatened by the Commission in
connection therewith and take all reasonable actions required to prevent the
entry of such stop order or to remove it if entered.
(d) MLA will use its reasonable efforts to (i) register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions in the United States as Odyssey may reasonably (in light of
Odyssey's intended plan of distribution) request, and (ii) cause such
Registrable Securities to be registered with or approved by such other
governmental agencies or authorities in the United States as may be necessary
by virtue of the business and operations of MLA, and do any and all other acts
and things that may be reasonably necessary or advisable to enable Odyssey to
consummate the disposition of the Registrable Securities; PROVIDED that MLA
will not be required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
paragraph (d), (B) subject itself to taxation in any such jurisdiction or (C)
consent or subject itself to general service of process in any such
jurisdiction.
(e) MLA will immediately notify Odyssey upon the occurrence of any of the
following events in respect of a registration statement or related prospectus
in respect of an offering of Registrable Securities: (i) receipt of any request
for additional information by the Commission or any other federal or state
governmental authority for amendments or supplements to the registration
statement or related prospectus; (ii) the issuance by the Commission or any
other federal or state governmental authority of any stop order suspending the
effectiveness of the registration statement or the initiation of any
proceedings for that purpose; (iii) receipt of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
which makes any statement made in the registration statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or which requires the making of any
changes in the registration statement, related prospectus or such other
documents so that, in the case of the registration statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the related prospectus, it will not
contain any untrue statement of a material fact or omit to
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state any material fact required to be stated therein or necessary to make the
statements therein, in the Light of the circumstances under which they were
made, not misleading; and (vi) MLA's reasonable determination that a
post-effective amendment to the registration statement would be appropriate;
and MLA will promptly make available to Odyssey any such supplement or
amendment to the prospectus.
(f) MLA will enter into customary agreements (including, if applicable,
an underwriting agreement in customary form and which is reasonably
satisfactory to MLA) and take such other actions as are reasonably required in
order to expedite or facilitate the disposition of such Registrable Securities,
and Odyssey may, at its option, require that any or all of the representations,
warranties and covenants of MLA to or for the benefit of such Underwriters
contained in any such underwriting agreement shall also be made to and for the
benefit of Odyssey.
(g) MLA will make available to Odyssey (and will deliver to its counsel)
and each Underwriter, if any, subject to restrictions imposed by the United
States federal government or any agency or instrumentality thereof, copies of
all correspondence between the Commission and MLA, its counsel or auditors, and
will also make available for inspection by Odyssey, any Underwriter
participating in any disposition pursuant to such registration statement and
any attorney, accountant or other professional retained by Odyssey or such
Underwriter (collectively, the "Inspectors") all financial and other records,
pertinent corporate documents and properties of MLA (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their
due diligence responsibility, and cause MLA's officers and employees to supply
all information reasonably requested by any Inspector in connection with such
registration statement. Records which MLA reasonably determines, in good faith,
to be confidential and which it notifies the Inspectors are confidential shall
not be disclosed by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such registration
statement or (ii) the disclosure or release of such Records is requested or
required pursuant to oral questions, interrogatories, requests for information
or documents or a subpoena or other order from a court of competent
jurisdiction or other process; PROVIDED that prior to any disclosure or release
pursuant to clause (ii), the Inspectors shall provide MLA with prompt notice of
any such request or requirement so that MLA may seek an appropriate protective
order or waive such Inspectors' obligation not to disclose such Records; and,
PROVIDED FURTHER, that if failing the entry of a protective order or the waiver
by MLA permitting the disclosure or release of such Records, the Inspectors,
upon advice of counsel, are compelled to disclose such Records, the Inspectors
may disclose that portion of the Records which counsel has advised the
Inspectors that the Inspectors are compelled to disclose.
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(h) MLA will furnish to Odyssey and to each Underwriter, if any, a signed
counterpart, addressed to Odyssey or such Underwriter, of (1) an opinion or
opinions of counsel to MLA, and (2) a comfort letter or comfort letters from
MLA's independent public accountants, each in customary form and covering such
matters of the type customarily covered by opinions or comfort letters, as the
case may be, as Odyssey or the managing Underwriter reasonably requests.
(i) MLA will otherwise comply with all applicable rules and regulations
of the Commission including, without limitation, compliance with applicable
reporting requirements under the Exchange Act, and will make available to its
securityholders, as soon as reasonably practicable, an earnings statement
covering a period of twelve (12) months, beginning within three (3) months
after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act.
(j) MLA will (i) if MLA's common stock shall be listed on the New York
Stock Exchange or the American Stock Exchange (each, an "Exchange"), use
commercially reasonable efforts to cause all such Registrable Securities to be
listed on such Exchange at the time of effectiveness of such registration
statement (if the listing of such Registrable Securities is then permitted
under the rules of such Exchange) and, if not, (ii) use commercially reasonable
efforts to (A) cause all such Registrable Securities covered by such
registration statement to be listed on an Exchange or (13) secure designation
of all such Registrable Securities as a NASDAQ "national market system
security" within the meaning of Rule 11Aa2-1 of the Commission and, in the case
of clause (13), to arrange for at least two market makers to register as such
with respect to such Registrable Securities with the NASD.
(k) MLA will (i) appoint a transfer agent and registrar, (ii) obtain a
CUSIP number and (iii) prepare certificates eligible for (A) trading on the
Exchange or system on which the Registrable Securities will be traded pursuant
to paragraph (j) above and (B) deposit with the Depository Trust Company, for
all Registrable Securities covered by such registration statement not later
than the effective date of such registration statement.
(l) In connection with an underwritten offering, MLA will participate, to
the extent reasonably requested by the managing Underwriter or Odyssey, in
customary efforts to sell the securities under the offering including, without
limitation, participating in "road shows".
MLA may require Odyssey to promptly furnish in writing to MLA such
information regarding the distribution of the Registrable Securities as MLA may
from time to time reasonably request and such other information as may be
legally required in connection with such registration including, without
limitation, all such information as may be requested by
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the Commission or the NASD. If Odyssey fails to provide such information
requested in connection with such registration within twenty (20) Business
Days after receiving such written request, then MLA may cease pursuit of such
registration, and the Demand Registration request in respect of which such
registration was being pursued shall count toward the limit of four Demand
Registration requests permitted pursuant to Section 2.1 hereof.
Odyssey agrees that, upon receipt of any notice from MLA of the happening
of any event of the kind described in Section 3.1(e) hereof, Odyssey will
forthwith discontinue disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until Odyssey's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 3.1(e) hereof and, if so directed by MLA, Odyssey will deliver to MLA
all copies, other than permanent file copies then in Odyssey's possession, of
the most recent prospectus covering such Registrable Securities at the time of
receipt of such notice. In the event MLA shall give such notice, MLA shall
extend the period during which such registration statement shall be maintained
effective pursuant to this Agreement by the number of days during the period
from and including the date of the giving of notice pursuant to Section 3.1(e)
hereof to the date when MLA shall make available to Odyssey a prospectus
supplemented or amended to conform with the requirements of Section 3.1(e)
hereof.
SECTION 3.2. REGISTRATION EXPENSES. In connection with any registration
hereunder, MLA shall pay the following costs and expenses: (i) all registration
and filing fees, (ii) fees and expenses of compliance with securities or blue
sky laws (including reasonable fees and disbursements of counsel in connection
with blue sky qualifications of the Registrable Securities), (iii) word
processing and printing expenses, (iv) MLA's internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), (v) the fees and expenses incurred in
connection with the listing of the Registrable Securities, (vi) transfer agent
fees, (vii) reasonable fees and disbursements of counsel for MLA and customary
fees and expenses for independent certified public accountants retained by MLA
(including the expenses of any comfort letters or costs associated with the
delivery by independent certified public accountants of a comfort letter or
comfort letters requested pursuant to Section 3.1(h) hereof), (viii) the fees
and expenses of any special experts retained by MLA in connection with such
registration, and (ix) the reasonable fees and expenses of one firm of counsel
for Odyssey retained by Odyssey with respect to any Demand Registration. MLA
shall have no obligation to pay any underwriting fees, discounts or commissions
attributable to the sale of Registrable Securities, or the cost of any special
audit required by Odyssey, such costs to be borne by Odyssey.
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ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
SECTION 4.1. INDEMNIFICATION BY MLA. MLA agrees to indemnify and hold
harmless Odyssey, its partners, Affiliates, officers, directors, employees and
duly authorized agents, and each Person, if any, who controls Odyssey within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, together with the partners, Affiliates, officers, directors, employees and
duly authorized agents of such controlling Person or entity (collectively, the
"Odyssey Indemnified Persons"), from and against any loss, claim, damage,
liability, fee, cost or expense (collectively, "Damages"), joint or several,
and any action in respect thereof to which any Odyssey Indemnified Person may
become subject under the Securities Act or otherwise, insofar as such Damages
(or proceedings in respect thereof) arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus relating to the Registrable Securities or
any prospectus, or arises out of, or are based upon, any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same are based upon information furnished in writing to MLA by Odyssey
expressly for use therein, and shall reimburse such Odyssey Indemnified Person
for any legal and other expenses reasonably incurred by such Odyssey
Indemnified Person in investigating or defending or preparing to defend against
any such Damages or proceedings; PROVIDED, HOWEVER, that MLA shall not be
liable to Odyssey to the extent that any such Damages arise out of or are based
upon an untrue statement or omission made in any preliminary prospectus if (i)
Odyssey failed to send or deliver a copy of the final prospectus with or prior
to the delivery of written confirmation of the sale by Odyssey to the Person
asserting the claim from which such Damages arise, and (ii) the final
prospectus would have corrected such untrue statement or alleged untrue
statement or such omission or alleged omission; PROVIDED FURTHER, HOWEVER, that
MLA shall not be liable in any such case to the extent that any such Damages
arise out of or are based upon an untrue statement or alleged untrue statement
or omission or alleged omission in any prospectus if (x) such untrue statement
or omission or alleged omission is corrected in an amendment or supplement to
such prospectus, and (y) having previously been furnished by or on behalf of
MLA with copies of such prospectus as so amended or supplemented, Odyssey
thereafter fails to deliver such prospectus as so amended or supplemented prior
to or concurrently with the sale of a Registrable Security to the Person
asserting the claim from which such Damages arise. MLA also agrees to indemnify
any Underwriters of the Registrable Securities, their officers and directors
and each Person or entity who controls such Underwriters on customary terms.
SECTION 4.2. INDEMNIFICATION BY ODYSSEY. Odyssey agrees to indemnify and
hold harmless MLA, its partners, Affiliates, officers, directors, employees and
duly authorized agents and each Person or entity, if any, who controls MLA
within the meaning of Section
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15 of the Securities Act or Section 20 of the Exchange Act, together with the
partners, Affiliates, officers, directors, employees and duly authorized
agents of such controlling Person, to the same extent as the foregoing
indemnity from MLA to Odyssey, but only with reference to information related
to Odyssey or its plan of distribution furnished in writing by Odyssey or on
Odyssey's behalf expressly for use in any registration statement or prospectus
relating to the Registrable Securities, or any amendment or supplement
thereto, or any prospectus. In case any action or proceeding shall be brought
against MLA or its partners, Affiliates, officers, directors, employees or
duly authorized agents or any such controlling Person in respect of which
indemnity may be sought against Odyssey, Odyssey shall have the rights and
duties given to MLA, and MLA or its partners, Affiliates, officers, directors,
employees or duly authorized agents, or such controlling Person shall have the
comparable rights and duties given to Odyssey by Section 4.1. Odyssey also
agrees to indemnify and hold harmless any Underwriters of the Registrable
Securities, their officers and directors and each Person who controls such
Underwriters, with reference to the same information as to which it agrees to
indemnify MLA referenced above, on customary terms. MLA shall be entitled to
receive indemnities on customary terms from Underwriters, selling brokers,
dealer managers and similar securities industry professionals participating in
the distribution, to the same extent as provided above, with respect to
information so furnished in writing by such Persons specifically for inclusion
in any prospectus or registration statement.
SECTION 4.3. CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after
receipt by any Person or entity in respect of which indemnity may be sought
pursuant to Section 4.1 or 4.2 (an "Indemnified Party") of notice of any claim
or the commencement of any action, the Indemnified Party shall, if a claim in
respect thereof is to be made against the Person against whom such indemnity
may be sought (an "Indemnifying Party"), notify the Indemnifying Party in
writing of the claim or the commencement of such action. In the event an
Indemnified Party shall fail to give such notice as provided in this Section
4.3 and the Indemnifying Party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was materially
prejudiced by the failure to receive such notice, the indemnification provided
for in Section 4.1 or 4.2 shall be reduced to the extent of any actual
prejudice resulting from such failure to so notify the Indemnifying Party;
PROVIDED, that the failure to notify the Indemnifying Party shall not relieve
it from any liability which it may have to an Indemnified Party otherwise than
under Section 4.1 or 4.2. If any such claim or action shall be brought against
an Indemnified Party, and such Indemnified Party shall notify the Indemnifying
Party thereof, the Indemnifying Party shall be entitled to participate in
defending against such claim or action and, to the extent that it wishes,
jointly with any other similarly notified Indemnifying Party, assume the
defense thereof with counsel reasonably satisfactory to the Indemnified Party.
After notice from the Indemnifying Party to the Indemnified Party of its
election to assume the defense of such claim or action, the Indemnifying Party
shall not be liable to the Indemnified Party for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the
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defense thereof other than reasonable costs of investigation; PROVIDED that
the Indemnified Party shall have the right to employ separate counsel to
represent the Indemnified Party and its controlling Persons who may be subject
to liability arising out of any claim in respect of which indemnity may be
sought by the Indemnified Party against the Indemnifying Party, but the fees
and expenses of such counsel shall be for the account of such Indemnified
Party unless (i) the Indemnifying Party and the Indemnified Party shall have
mutually agreed to the retention of such counsel or (ii) in the reasonable
judgment of MLA and Odyssey, representation of both parties by the same
counsel would be inappropriate due to actual or potential conflicts of
interest between them, it being understood, however, that the Indemnifying
Party shall not, in connection with any one such claim or action or separate
but substantially similar or related claims or actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for all Indemnified
Parties, or for fees and expenses that are not reasonable. No Indemnifying
Party shall, without the prior written consent of the Indemnified Party,
effect any settlement of any claim or pending or threatened proceeding in
respect of which the Indemnified Party is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Party
from all liability arising out of such claim or proceeding. Whether or not the
defense of any claim or action is assumed by the Indemnifying Party, such
Indemnifying Party will not be subject to any liability for any settlement
made without its consent, which consent will not be unreasonably withheld.
SECTION 4.4. CONTRIBUTION. If the indemnification provided for in this
Article IV is unavailable to the Indemnified Parties in respect of any Damages
referred to herein, then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Damages (i) as between MLA and Odyssey on
the one hand and the Underwriters on the other, in such proportion as is
appropriate to reflect the relative benefits received by MLA and Odyssey on the
one hand and the Underwriters on the other from the offering of securities
related thereto, or if such allocation is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits but
also the relative fault of MLA and Odyssey on the one hand and of the
Underwriters on the other in connection with the statements or omissions which
resulted in such Damages, as well as any other relevant equitable
considerations, and (ii) as between MLA on the one hand and Odyssey on the
other, in such proportion as is appropriate to reflect the relative fault of
MLA and of Odyssey in connection with such statements or omissions, as well as
any other relevant equitable considerations. The relative fault of MLA and
Odyssey on the one hand and of the Underwriters on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by MLA and Odyssey or by
the
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Underwriters. The relative fault of MLA on the one hand and of Odyssey on
the other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
such party, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
MLA and Odyssey agree that it would not be just and equitable if
contribution pursuant to this Section 4.4 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of
the Damages referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 4.4, Odyssey shall in no event be required to
contribute any amount in excess of the amount by which the total price at which
the Registrable Securities of Odyssey were sold to the public (less
underwriting discounts and commissions) exceeds the amount of any Damages which
Odyssey has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. TERM. The registration rights provided to Odyssey hereunder
shall terminate on the tenth anniversary of the date hereof; PROVIDED, HOWEVER,
that the provisions of Article IV hereof shall survive any termination of this
Agreement.
SECTION 5.2. RULES 144 AND 144A. MLA covenants that, from such time as
it is required to File reports pursuant to Section 13 or 15 of the Exchange
Act, it will file all reports required to be filed by it under the Securities
Act and the Exchange Act and that it will take such further action as Odyssey
may reasonably request, all to the extent required from time to time to enable
Odyssey to sell Registrable Securities without registration under the
Securities Act pursuant to the exemptions provided by Rule 144 or Rule 144A
thereunder, as such Rules may be amended from time to time, or any similar
rules or regulation hereafter adopted by the Commission. Upon the request of
Odyssey, MLA will deliver to Odyssey a written statement as to whether it has
complied with such requirements.
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SECTION 5.3. RESTRICTIONS ON SALE BY MLA AND OTHERS. MLA agrees and it
shall use its best efforts to cause each Person (other than Odyssey and its
designees) that is an officer, director, 10% or greater stockholder or is
otherwise an affiliate (within the meaning of Rule 405 under the Securities
Act) of MLA to agree (i) not to effect any public sale or distribution of any
securities similar to those being registered in accordance with Section 2.1
hereof, or any securities convertible into or exchangeable or exercisable for
such securities, during the thirty (30) day period prior to, and during the 180
day period beginning on, the effective date of any registration statement
(except as part of such registration statement) until all of the Registrable
Securities offered thereby have been sold if, and to the extent, reasonably
requested by the managing Underwriter or Underwriters, and (ii) to use
commercially reasonable efforts to ensure that any agreement entered into after
the date hereof shall contain a provision under which holders of such
securities agree not to effect any sale or distribution of any such securities
during the periods described in (i) above, in each case including a sale
pursuant to Rule 144, Rule 144A or Regulation S under the Securities Act;
PROVIDED, HOWEVER, that the provisions of this Section 5.3 shall not prevent
(x) the conversion or exchange of any securities pursuant to their terms into
or for other securities or (y) the issuance of any securities to employees of
MLA or pursuant to any employee plan.
SECTION 5.4. AMENDMENT; MODIFICATIO; WAIVER. This Agreement may not be
amended, altered or modified except by written instrument executed by all of
the parties hereto. Any provision of this Agreement may be waived, PROVIDED
that such waiver is set forth in a writing executed by the party against whom
the enforcement of such waiver is sought. No failure or delay on the part of
any or all of the parties hereto in exercising any right, power, or privilege
hereunder, and no course of dealing between the parties, shall operate as a
waiver thereof nor shall any single or partial exercise of any right, power, or
privilege hereunder preclude the simultaneous or later exercise of any other
right, power, or privilege. The rights and remedies herein expressly provided
are cumulative and not exclusive of any rights and remedies which any or all of
the parties would otherwise have.
SECTION 5.5. SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT. This Agreement
and all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. Odyssey may
assign its rights under this Agreement without the consent of MLA, provided
that MLA shall have the right to require any such assignee to execute a
counterpart of this Agreement as a condition to recognizing such assignee's
claim to any rights hereunder. This Agreement, together with the Stockholders'
Agreement, sets forth the entire agreement and understanding between the
parties as to the subject matter hereof and merges and supersedes all prior
discussions, agreements and understandings of any and every nature among them.
SECTION 5.6. SEPARABILITY. In the event that any provision of this
Agreement or the application of any provision hereof is declared to be illegal,
invalid or otherwise
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unenforceable by a court of competent jurisdiction, the remainder of this
Agreement shall not be affected except to the extent necessary to delete such
illegal, invalid or unenforceable provision unless that provision held invalid
shall substantially impair the benefits of the remaining portions of this
Agreement.
SECTION 5.7. NOTICES. All notices, demands, requests, consents,
approvals or other communications required or permitted to be given hereunder
or which are given with respect to this Agreement shall be in writing and shall
be personally served or deposited in the mail, registered or certified, return
receipt requested, postage prepaid, or delivered by reputable air courier
service with charges prepaid, or transmitted by hand delivery, telegram, telex
or facsimile, addressed as set forth below, or to such other address as such
party shall have specified most recently by written notice: (i) If to Odyssey,
to: Odyssey Partners, L.P., 31 West 52nd Street, New York, New York 10019;
Telecopier: (212) 708-0750; Attn: Mr. Stephen Berger; with a copy (which shall
not constitute notice) to: Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New
York, New York 10153; Telecopier: (212) 310-8007; Attn: Simeon Gold, Esq.; and
(ii) if to MLA, to: Maple Leaf Aerospace, Inc., 11535 East Pine Street, Tulsa,
Oklahoma 74136; Telecopier: (918) 234-7744; Attn: President/CEO. Notice shall
be deemed given on the date of service or transmission if personally served or
transmitted by telegram, telex or facsimile (with customary confirmation of
receipt). Notice otherwise sent as provided herein shall be deemed given on the
third Business Day following the date mailed or on the second Business Day
following delivery of such notice by a reputable air courier service.
SECTION 5.8. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
DELAWARE, WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES.
SECTION 5.9. HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not constitute a part of this
Agreement, nor shall they affect their meaning, construction or effect.
SECTION 5.10. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original instrument and
all of which together shall constitute one and the same instrument.
SECTION 5.11. FURTHER ASSURANCES. Each party shall cooperate and take
such action as may be reasonably requested by another party in order to carry
out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
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SECTION 5.12. REMEDIES. In the event of a breach or a threatened breach
by any party to this Agreement of its obligations under this Agreement, any
party injured or to be injured by such breach will be entitled to specific
performance of its rights under this Agreement or to injunctive relief, in
addition to being entitled to exercise all rights provided in this Agreement
and granted by law. The parties agree that the provisions of this Agreement
shall be specifically enforceable, it being agreed by the parties that the
remedy at law, including monetary damages, for breach of any such provision
will be inadequate compensation for any loss and that any defense or objection
in any action for specific performance or injunctive relief that a remedy at
law would be adequate is waived.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized representatives as of the date
first written above.
MAPLE LEAF AEROSPACE, INC
By: /s/ Quentin P. Bourjeaurd
-----------------------------
Quentin P. Bourjeaurd
President
ODYSSEY
By: /s/ Stephen Berger
-----------------------------
Stephen Berger,
a general partner
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MAPLE LEAF AEROSPACE, INC.
11535 East Pine Street
Tulsa, Oklahoma 74136
November 7, 1996
Mr. Richard P. Small Mr. Stephen Berger
R.P. Small Corp. Odyssey Partners, L.P.
7434 South Gary 31 West 52nd Street
Tulsa, Oklahoma 74136 New York, New York 10019
Gentlemen:
Reference is made to that certain Registration Rights Agreement dated as
of November 7, 1996 (the "Agreement") between Maple Leaf Aerospace, Inc.
("MLA") and Odyssey Partners, L.P. ("Odyssey"), a copy of which is attached
hereto. Except as otherwise stated, capitalized terms shall have the meaning
provided in the Agreement
This letter will confirm our agreement that shares of common stock of MLA
owned by R.P. Small Corp., an Illinois corporation ("RPS"), shall have the same
piggyback registration rights and shall receive the same notices from MLA with
respect to such piggyback registration rights as granted to Odyssey pursuant to
Section 2.2 of the Agreement (as qualified by Section 2.3(b) thereof); provided
that RPS shall comply with all agreements, covenants and obligations of, be
subject to the same costs, liabilities and indemnities as, and have the same
rights and privileges as, Odyssey with respect to such registrations as set
forth in Sections 2.2, 2.3, and 2.4 and Articles III, IV and V of the
Agreement.
In addition, this letter will confirm Odyssey's agreement pursuant to
Article VI(c) of the Stockholders' Agreement to allow Registrable Securities
owned by RPS to be included, on a PRO RATA basis with Odyssey, in Demand
Registrations initiated by Odyssey, subject to the agreements, qualifications
and limitations relating thereto set forth in such Article VI(c).
This letter (i) may be executed in multiple counterparts, (ii) may only be
amended pursuant to a writing executed by each of the undersigned, and (iii)
shall be governed by and construed in accordance with the laws of the state of
Delaware.
<PAGE>
If you are in agreement with the foregoing, kindly execute this letter in
the space provided below and return a copy to us.
MAPLE LEAF AEROSPACE, INC.
By: /s/ QUENTIN P. BOURJEAURD
-------------------------------------
Quentin P. Bourjeaurd, President
Accepted and Agreed Accepted and Agreed
as of November 7, 1996 as of November 7, 1996
R. P. SMALL CORP. ODYSSEY PARTNERS, L.P.
By: /s/ RICHARD P. SMALL By: /s/ STEPHEN BERGER
----------------------------- --------------------------------------
Richard P. Small, President Stephen Berger, Partner
GGR/ghs
Enclosure
<PAGE>
EXHIBIT 10.15
AMENDED AND RESTATED
MANAGEMENT STOCKHOLDERS'
AND OPTIONHOLDERS' AGREEMENT
AGREEMENT, dated as of September 19, 1996, as amended and restated as of
May 15, 1997, by and among Maple Leaf Aerospace, Inc., a Delaware corporation
(the "Company"), Odyssey Partners, L.P., a Delaware limited partnership
("Odyssey"), any Affiliate (as defined herein) of Odyssey which is or becomes a
stockholder of the Company (an "Odyssey Affiliate" and together with Odyssey,
the "Odyssey Holders"), BT Investment Partners, Inc. ("BT"), and the parties
identified as the Management Stockholders on the signature pages of this
Agreement, each of whom or which (as the case may be), at the time it, he or she
becomes a party hereto is (or, in the case of a Corporate Management
Stockholder, is wholly-owned by an individual who is) an officer and/or key
employee of the Company or one or more of its subsidiaries (individually, a
"Management Stockholder" and collectively, the "Management Stockholders" and,
together with the Odyssey Holders, BT and any Permitted Transferee, the
"Stockholders").
W I T N E S S E T H:
WHEREAS, as of September 19, 1996, the Company acquired, through its
wholly-owned subsidiaries, (i) all of the outstanding capital stock of Tri-Star
Aerospace, Inc., a Florida corporation ("Tri-Star"), pursuant to an Agreement
and Plan of Merger, dated as of August 28, 1996, by and among the Company,
Aerospace Acquisition Corp., Aerospace Merger Sub I, Inc. and Tri-Star (the
"Merger Agreement"), and (ii) certain assets of the Aviall aerospace business
unit (the "Aviall Assets") pursuant to an Asset Purchase Agreement, dated as of
September 5, 1996, by and among the Company, Aviall Services, Inc. and Aviall
(Canada) Ltd. (the "Purchase Agreement");
WHEREAS, the Stockholders have acquired, or have entered into subscription
agreements with the Company providing for the Stockholders to acquire, all of
the issued and outstanding common stock, par value $.01 per share, of the
Company (the "Shares");
WHEREAS, it is a condition to such subscription agreements that the
Stockholders execute this Agreement;
<PAGE>
WHEREAS, the Company has adopted a Stock Option Plan (the "Plan") providing
for the granting of options ("Options") which may be exercised to purchase
Shares, upon the condition that prior to the grant of any Option such
optionholder shall have executed and delivered this Agreement; and
WHEREAS, the parties hereto deem it in their best interests to enter into
this Agreement to set forth their respective obligations in connection with
their investments in the Shares of the Company.
NOW, THEREFORE, in consideration of the agreements and mutual covenants
contained herein, the parties, intending to be legally bound hereby, agree as
follows:
ARTICLE I
LIMITATIONS ON TRANSFER
SECTION 1.1 GENERAL RESTRICTIONS ON TRANSFER.
(a) LOCK-UP. BT and each Management Stockholder agrees that, without
the prior written consent of Odyssey, he, she or it (as appropriate) shall not,
during the Lock-Up Period, either directly or indirectly offer, sell, transfer,
assign, mortgage, hypothecate, pledge, create a security interest in or lien
upon, encumber, donate, contribute, place in trust, or otherwise dispose of
(collectively, "Transfer") any Shares, or any interest therein, except in a
transaction which (i) is specifically permitted by this Agreement and (ii)
complies with the Securities Act (as defined in Article VII hereof).
Notwithstanding the foregoing, Quentin P. Bourjeaurd shall be permitted to grant
a nontransferable pledge on Shares owned by him to RPS as security for
borrowings by Mr. Bourjeaurd from RPS to finance Mr. Bourjeaurd's purchase of
such Shares; PROVIDED that RPS irrevocably agrees (in form and substance
acceptable to Odyssey) to release any such pledge, lien, security interest or
other encumbrance on such Shares upon the exercise of the take-along rights set
forth in Article II hereof or the repurchase or put rights set forth in Article
IV hereof.
(b) RIGHT OF FIRST REFUSAL. If, at any time after the termination of
the Lock-Up Period with respect to the Sale Securities (as defined below), BT or
any Management
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Stockholder desires to Transfer any or all of its, his or her Shares (the
Shares to be so Transferred being referred to herein as the "Sale
Securities") to a Third Party, such selling Stockholder shall first offer to
sell such Sale Securities to the Company (the "Offer"), pursuant to a written
notice (the "Notice") delivered to the Company (with a copy to Odyssey)
setting forth the number of Sale Securities such selling Stockholder proposes
to Transfer, the proposed transferee, the bona fide purchase price offered by
such transferee for, and the other terms and conditions of, such proposed
sale of the Sale Securities. The purchase price per share payable by Odyssey
or the Company (as the case may be) for such Sale Securities shall be equal
to the purchase price offered therefor by such Third Party as set forth in
the Offer. Upon its receipt of the Notice, the Company shall have thirty
(30) Business Days (the "Offer Period") within which to accept the Offer to
purchase all, but not less than all, of the Sale Securities at the purchase
price and upon the terms and conditions offered by the Third Party as
specified in the Offer.
If the Company elects to accept the Offer, it shall notify the
selling Stockholder thereof in writing prior to 11:59 p.m., New York City time,
on the last day of the Offer Period, and the Company and the selling Stockholder
shall close the sale of the Sale Securities on the tenth Business Day following
delivery of such written acceptance of the Offer, at which closing (i) the
Company shall pay to the selling Stockholder in cash an amount equal to the
aggregate purchase price for the Sale Securities as provided above and (ii) the
selling Stockholder shall deliver to the Company a certificate or certificates
representing the Sale Securities, duly endorsed for transfer with executed stock
powers attached.
If, however, (A) the Company does not notify the selling
Stockholder within the Offer Period of its election to purchase all of the Sale
Securities pursuant to the Offer or if the Company notifies such selling
Stockholder in writing that it declines to accept the Offer or (B) if the
Company fails to consummate the closing of the sale of the Sale Securities as
aforesaid while the Selling Stockholder was prepared and willing to do so, then
the selling Stockholder shall have the right to Transfer (subject to such
selling Stockholder's prior delivery to the Company of such certifications and
opinions of counsel addressed to the Company as the Company may reasonably
request to confirm that such Transfer is made in compliance with the Securities
Act and applicable state securities laws) all, but not less than all, of the
Sale Securities
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only to the Third Party transferee identified in the Offer and only for the
price and upon the terms and conditions set forth in the Offer, within the
180 day period immediately following the later of (1) the date of the
Company's failure to close the purchase of the Sale Securities as described
in clause (B) above and (2) the earlier of (x) the date of the Company's
delivery of written notice to the selling Stockholder pursuant to which the
Company expressly declines to accept the Offer and (y) the expiration of the
Offer Period. If, however, all of the Sale Securities are not so Transferred
within such 180-day period, such Sale Securities shall once again be subject
to the rights of first refusal set forth in this Section 1.1(b).
The rights of the Company set forth in this Section 1.1(b) shall
be in addition to, and not exclusive of, the Company's repurchase rights set
forth in Article IV hereof. The Company may from time to time assign its rights
under this Section 1.1(b), in whole or in part, to Odyssey.
(c) CERTAIN PERMITTED TRANSFERS. (i) Subject to paragraph (ii) of
this Section 1.1(c), each Management Stockholder may Transfer its, his or her
Shares (but not Options) to a Permitted Transferee at any time more than
eighteen (18) months after the date of acquisition of such Shares.
(ii) Not less than 15 Business Days prior to any proposed
Transfer of any Shares or any interest therein by a Management Stockholder to
any Permitted Transferee (other than a transfer upon death of a Management
Stockholder or the individual stockholder of a Corporate Management
Stockholder), the holder of such Shares shall give written notice to the Company
of such holder's intention to effect such Transfer, setting forth the manner and
circumstances of the proposed transfer in reasonable detail. Any Transfer to a
Permitted Transferee may be effected only if the Company shall have received,
together with the notice referred to above, if any: (A) if requested by the
Company, an opinion of counsel addressed to, and reasonably satisfactory to, the
Company to the effect that the proposed Transfer of Shares or such interest
therein may be effected without registration under the Securities Act and
applicable state securities laws, (B) if requested by the Company, certificates
and representation letters from such Stockholder and Permitted Transferee that
contain representations in form and substance reasonably satisfactory to the
Company to ensure compliance with the provisions of the Securities Act and
applicable state securities laws, and (C) such letters and other
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documentation in form and substance reasonably satisfactory to the Company
from each such Permitted Transferee stating such Permitted Transferee's
agreement to be bound by the terms of this Agreement (including, without
limitation, the Company's and Odyssey's rights with respect to the Shares
transferred to such Permitted Transferee). Each certificate evidencing
Shares or interests therein transferred as provided in this Section 1.1(c)
shall bear the legend set forth in Section 9.1 of this Agreement.
(d) NON-COMPLYING TRANSFERS VOID. Any attempt to Transfer any Shares
or any interest therein which is not in compliance with this Agreement shall be
null and void, and neither the Company nor any transfer agent shall give any
effect in the Company's stock records to such attempted Transfer.
ARTICLE II
TAKE-ALONG SALE
SECTION 2.1 TAKE-ALONG RIGHT. If the Odyssey Holders intend to
privately Transfer to any Third Party (the "Purchaser") 79% or more of the
Shares held by them, then each other Stockholder shall be required, at the
election of Odyssey, to Transfer to such Purchaser (a "Take-Along Sale") such
number of Shares then held by such other Stockholder ("Take-Along Shares") as
bears the same relation to the total number of Shares then held by such
Stockholder as the number of Shares the Odyssey Holders propose to Transfer
to such Purchaser bears to the total number of Shares then held by the
Odyssey Holders, for the same consideration, and on the same terms and
conditions, if any, upon which the Odyssey Holders propose to dispose of
their Shares. In the event of a Take-Along Sale, Options which are not
theretofore exercisable shall become exercisable by reason of such
transaction only to the extent provided in the instrument evidencing the
grant of such Options. Notwithstanding the foregoing, to the extent, if any,
the Purchaser with respect to any Take-Along Sale consents thereto, Shares
held by any Management Stockholder shall not be subject to the take-along
rights provided in this Article II.
SECTION 2.2 NOTICE. The Odyssey Holders shall deliver to each other
Stockholder written notice (the "Take-Along Notice") of any sale to be made
pursuant to Section 2.1 above, which notice shall set forth the consideration
to be paid by the Purchaser for each Share and the other terms and
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conditions, if any, of such transaction. Within 15 Business Days after the
date of the Take-Along Notice, each such other Stockholder shall promptly
deliver to Odyssey certificates representing its, his or her (as appropriate)
Take-Along Shares, duly endorsed, in proper form for transfer. Pending
consummation of the Take-Along Sale, Odyssey shall promptly notify the other
Stockholders of any changes in the proposed timing for the Take-Along Sale
and any other material developments in connection therewith.
SECTION 2.3 TRANSFER. (a) If, within 120 Business Days after the date of
the Take-Along Notice, no transfer of the Take-Along Shares in accordance with
the provisions of Section 2.1 shall have been completed, Odyssey shall promptly
return to the other Stockholders, in proper form, all certificates representing
the Take-Along Shares previously delivered to Odyssey.
(b) Promptly after the consummation of the Transfer of Take-Along
Shares pursuant to Section 2.1, Odyssey shall remit or cause to be remitted
to the other Stockholders their respective consideration with respect to the
Take-Along Shares and shall furnish such other evidence of the completion and
time of completion of such Transfer and the terms and conditions, if any,
thereof as may reasonably be requested by such Stockholders.
(c) The provisions of this Article II shall remain in effect,
notwithstanding any return to a Take-Along Holder of any Take-Along Shares as
provided in Section 2.3(a).
ARTICLE III
TAG-ALONG PARTICIPATION
SECTION 3.1 TAG-ALONG RIGHTS. (a) If the Odyssey Holders intend to
privately Transfer to any Third Party that is not an Affiliate of Odyssey (the
"Tag-Along Purchaser"), in one transaction or a series of transactions, Shares
constituting in the aggregate more than 50% of the total number of Original
Odyssey Shares (including any transaction subject to Article II hereof if the
Odyssey Holders do not exercise their take-along rights set forth therein in
connection with such transaction), then Odyssey shall permit each other
Stockholder, at its, his or her (as appropriate) option, to Transfer, for the
same consideration, and on the same terms and conditions, if any, upon which the
Odyssey
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Holders intend to Transfer such Shares, a number of Shares then owned by such
Stockholder determined in accordance with Section 3.1(b) (the "Tag-Along
Shares").
(b) Each such other Stockholder shall have the right, pursuant to
Section 3.1(a), to sell pursuant to the offer by the Tag-Along Purchaser, a
number of Shares equal to the product of (A) the number of Shares to be
purchased by the Tag-Along Purchaser from the Odyssey Holders, and (B) a
fraction, the numerator of which shall be the total number of Shares owned by
such other Stockholder and the denominator of which shall be the total number of
Shares owned by the Odyssey Holders and all the Stockholders in the aggregate;
PROVIDED, HOWEVER, that, notwithstanding the foregoing limitation, RPS shall be
entitled to sell all of the Shares owned by it (or such lesser amount as is
proportionate to the amount the Odyssey Holders are selling) to the Tag-Along
Purchaser pursuant to the offer described in Section 3.1 hereof.
SECTION 3.2 NOTICE. Not less than 15 Business Days prior to any
proposed Transfer pursuant to Section 3.1, Odyssey, on behalf of the Odyssey
Holders, shall deliver to each Stockholder written notice thereof (the
"Tag-Along Notice"), which notice shall set forth the consideration to be
paid by the Tag-Along Purchaser and the other terms and conditions, if any,
of such transaction. If any Stockholder elects to Transfer some or all of the
Tag-Along Shares pursuant to Section 3.1, then such Stockholder shall so
notify Odyssey within 10 Business Days after the date of the Tag-Along
Notice, and, at Odyssey's request not less than two Business Days prior to
the proposed Transfer, such Stockholder shall deliver to Odyssey certificates
representing such Tag-Along Shares, duly endorsed, in proper form for
Transfer, together with a limited power-of-attorney authorizing Odyssey to
transfer the Tag-Along Shares to the Tag-Along Purchaser and to execute all
other documents required to be executed in connection with such transaction.
SECTION 3.3 TRANSFER. (a) If, within 120 Business Days after delivery
by such Stockholder to Odyssey of the certificates and related documents
described in Section 3.2, no transfer of the Shares held by the Odyssey
Holders and Tag-Along Shares in accordance with the provisions of this
Article III shall have been completed, then Odyssey shall promptly return to
such Stockholder, in proper form, all certificates representing the Tag-Along
Shares and the limited power-of-attorney previously delivered by such
Stockholder to Odyssey.
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(b) Promptly after the consummation of the transfer of the Tag-Along
Shares pursuant to Section 3.1, Odyssey shall remit or cause to be remitted to
each Stockholder the consideration with respect to the Tag-Along Shares so
transferred and shall furnish such other evidence of the completion of such
transfer and the terms and conditions (if any) thereof as may reasonably be
requested by such Stockholder.
(c) The provisions of this Article III shall remain in effect,
notwithstanding any return to any Stockholder of Tag-Along Shares as provided in
Section 3.3(a).
ARTICLE IV
CERTAIN SALES UPON TERMINATION OF EMPLOYMENT
SECTION 4.1 SURRENDER OF SHARES AND OPTIONS TO THE COMPANY.
(a) Upon the occurrence during the term of this Agreement of any of
the events set forth in clause (i), (ii), (iii) or (iv) below (each, a
"Termination Event"), the Company may elect, by delivering the notice required
under Section 4.1(e), to require each Management Stockholder to sell to the
Company all of the Shares owned by such Management Stockholder, in accordance
with Section 4.2:
(i) the termination of such Management Stockholder's
employment with the Company (or any subsidiary or affiliate of the Company)
due to the death or Disability of such Management Stockholder;
(ii) the voluntary termination by such Management Stockholder
of his or her employment with the Company (and any subsidiary or affiliate of
the Company);
(iii) the termination by the Company of such Management
Stockholder's employment with the Company (and any subsidiary or affiliate of
the Company) for Cause; or
(iv) the termination by the Company of such Management
Stockholder's employment with the Company (and any subsidiary or affiliate of
the Company) without Cause.
The Termination Events specified in clauses (i) through (iv) of
this Section 4.1(a) shall be deemed to
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have occurred with respect to a Corporate Management Stockholder upon the
occurrence of such respective events with respect to the individual
stockholder of such Corporate Management Stockholder.
(b) The Repurchase Price for each Share purchased in connection with
the occurrence of an event specified in Sections 4.1(a)(i) or (iv) shall be
equal to Fair Market Value of such Share as of the date of the Termination
Event, unless otherwise provided in Section 4.1(d) hereof.
(c) Unless otherwise agreed to by Odyssey, the Repurchase Price for
each Share purchased in connection with the occurrence of an event specified in
Sections 4.1(a)(ii) or (iii) shall be equal to the lower of (x) the price per
Share paid by the Management Stockholder for such Share or (y) Fair Market Value
of such Share as of the date of the Termination Event, unless otherwise provided
in Section 4.1(d) hereof; PROVIDED, HOWEVER, that from and after the fifth
anniversary of the date of purchase of such Share by the Management Stockholder,
such Repurchase Price shall be equal to Fair Market Value of such Share as of
the date of the Termination Event, unless otherwise provided in Section 4.1(d)
hereof.
(d) In the case of Shares acquired pursuant to the exercise of an
Option that are to be repurchased pursuant to Article IV hereof by reason of the
occurrence of a Termination Event, the Fair Market Value per Share shall be
determined for purposes of Section 4.1(b) and clause (y) and the proviso of
4.1(c) as of the later of (i) the date of such Termination Event or (ii) the
date which occurs immediately after the expiration of 6 months after the date of
exercise of such Option (the later of (i) and (ii) referred to herein as the
"Option Share Measurement Date").
(e) Upon the occurrence of any Termination Event with respect to any
Management Stockholder, the Company shall deliver written notice (the
"Repurchase Notice") to such Management Stockholder within 60 days after such
occurrence (or, in the case of Shares acquired pursuant to the exercise of an
Option, within 60 days after the Option Share Measurement Date), specifying
whether the Company elects to exercise its right to require such Management
Stockholder to sell all of its, his or her Shares to the Company pursuant to
this Section 4.1. If the Company elects to exercise its right to require such
sale, the Company shall specify the Repurchase Price for each such Share in the
Repurchase Notice and consummate such transactions in accordance with Section
4.2.
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(f) For purposes of this Agreement, the Fair Market Value of a Share
shall be determined in accordance with Section 4.3.
SECTION 4.2 METHOD OF REPURCHASE. (a) If the Company elects to exercise
its right to require any Management Stockholder to sell Shares pursuant to
Section 4.1, the Shares subject to repurchase (collectively, the "Surrendered
Shares") shall be repurchased on a date (the "Repurchase Date") no later than 60
days after the date of the Repurchase Notice. On the Repurchase Date, the
Management Stockholders selling such Surrendered Shares (collectively, the
"Sellers") shall deliver to the Company the certificate or certificates
representing the Shares owned by such Sellers on such date, against delivery by
the Company to such Sellers of the Repurchase Price in cash; PROVIDED, HOWEVER,
that if the Company in good faith determines that its ability to pay all or any
portion of the Repurchase Price in cash may be restricted or limited under debt
or other agreements to which the Company or any of its subsidiaries is a party,
the Company shall issue and deliver a promissory note (a "Payment Note") with
the terms set forth in Section 4.2(b). All certificates for Surrendered Shares
shall be duly endorsed in favor of the Company by the Seller in whose name such
certificate or certificates is registered or accompanied by a duly executed
stock or security assignment in favor of the Company with the signature(s)
thereon guaranteed by a commercial bank or trust company or a member of a
national securities exchange or the NASD. If any Seller shall fail to deliver
such certificate or certificates to the Company within the time required, the
Company shall cause its books and records to show that the Surrendered Shares
are bound by the provisions of this Section 4.2 and that the Surrendered Shares,
until transferred to the Company, shall not be entitled to any proxy, dividend
or other rights from the date by which such certificate or certificates should
have been delivered to the Company.
(b) Each Payment Note shall:
(i) be payable to the order of the Seller,
(ii) be issued and dated as of the Repurchase Date applicable to
the transfer of the Surrendered Shares by such Seller,
(iii) be in a principal amount equal to that portion of the
Repurchase Price of such Surrendered Shares that the Company has
determined
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it is unable to pay in cash pursuant to Section 4.2(a),
(iv) mature on the earliest to occur of: (A) the first
anniversary of the latest date of final maturity of any Indebtedness
of the Company, (B) the tenth anniversary of the Repurchase Date
applicable thereto, and (C) a sale of all or substantially all of the
assets of the Company, a merger, consolidation, exchange or similar
combination of the Company with another entity (unless the Company is
the surviving entity) or the dissolution, liquidation, bankruptcy or
insolvency of the Company,
(v) be secured by a pledge of the repurchased Shares, and
(vi) provide for the acceleration of payment thereof, to the
extent permitted by applicable debt and other agreements, so as to
provide level amortization over a five year period.
Each Payment Note shall bear interest in respect of the unpaid
principal amount of such Payment Note from the Repurchase Date to the maturity
date thereof at the rate of interest publicly announced by Bankers Trust (or the
bank which is then acting as the agent bank for the Company) in New York City
from time to time as its Prime Rate, compounded semi-annually. Interest shall
be payable semi-annually in cash, to the extent permitted under debt or other
agreements to which the Company or any of its Affiliates is a party, but
otherwise shall accrue and be payable at maturity or shall be payable
semi-annually in additional Payment Notes. Each Payment Note shall be
expressly subordinated to all debt of the Company. Payments on the Payment
Notes shall be made in equal proportion among all the holders of Payment Notes.
(c) In the event (i) the Odyssey Holders have disposed of Shares
constituting more than 33 1/3% of the total number of Original Odyssey Shares
and (ii) the Company consummates a public offering of its common stock that is
registered under the Securities Act, the Company shall in good faith attempt to
repay (out of funds, if any, available for such purpose as determined by the
Board in its sole discretion, after taking into consideration the Company's then
current and anticipated future financial liquidity needs and such other factors
as it deems appropriate) such outstanding principal amount of Payment Notes held
by each
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former Management Stockholder as represents the Repurchase Price of the
number of Shares covered by such Payment Notes that such Management
Stockholder would have been entitled to include pursuant to Article VI hereof
in the registration statement filed by the Company in connection with such
public offering had such former Management Stockholder been a Stockholder at
the time of the filing thereof.
SECTION 4.3 DETERMINATION OF FAIR MARKET VALUE.
(a) After the Closing Date and prior to the first anniversary
thereof, the Fair Market Value per Share shall be the lesser of (i) the fair
market value thereof as determined by the Board on the basis of such factors as
the Board shall deem appropriate or (ii) the price per Share paid by Odyssey for
its Shares at the Closing, as such price shall be adjusted to reflect any
subsequent subdivision, combination or reclassification of the Shares.
(b) From and after the first anniversary of the Closing Date, the
Fair Market Value per Share shall be determined as follows: (i) if the Shares
are not listed on a national securities exchange in the United States on the
date on which the Fair Market Value per Share is to be determined, and a public
market does not otherwise exist for the Shares on such date, the Fair Market
Value per Share shall be determined by an appraisal by an independent appraiser
selected by the Company, such appraisal to be based upon such factors as such
independent appraiser shall deem appropriate, (ii) if the Shares are listed on a
national securities exchange in the United States on any date on which the Fair
Market Value per Share is to be determined, the Fair Market Value per Share
shall be deemed to be the average of the last sales price for Shares for the
five (5) trading days immediately preceding the date of determination, and (iii)
if a public market exists for the Shares on any date on which the Fair Market
Value per Share is to be determined, but the Shares are not listed on a national
securities exchange in the United States on such date, the Fair Market Value per
Share shall be deemed to be the average of the mean between the closing bid and
asked quotations in the over-the-counter market for the five (5) trading days
immediately preceding the date of determination.
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SECTION 4.4 "PUT" RIGHTS. Within the 60-day period specified in Section
4.1(e), any Management Stockholder with respect to which or whom (as the case
may be) a Termination Event has occurred shall have the right to deliver a
written notice to the Company (the "Put Notice") requiring that the Company
repurchase all of its, his or her Shares at the Repurchase Price set forth in
Section 4.1. The closing of such repurchase shall occur within 60 days of the
Company's receipt of the Put Notice, at which closing the Management Stockholder
selling such Shares shall deliver to the Company the certificate or certificates
representing all such Shares, against delivery by the Company to such Management
Stockholder of the Repurchase Price in respect thereof, in cash or, as provided
in Section 4.2, in Payment Notes.
SECTION 4.5 RPS. Shares held by RPS or any Affiliate thereof shall not be
subject to the repurchase and put rights set forth in this Article IV.
ARTICLE V
PROXY; POWER OF ATTORNEY
SECTION 5.1 PROXY. Each Management Stockholder hereby irrevocably
constitutes and appoints Odyssey as its, his or her (as the case may be) proxy
coupled with an interest to attend all the meetings of the stockholders of the
Company or any continuation or adjournment thereof to be held during the term of
this Agreement and to execute written consents of stockholders, with full power
to vote and act in his or her name, place and stead, in the same manner, to the
same extent and with the same effect that such Management Stockholder might if
personally present thereat, giving Odyssey full power of substitution.
SECTION 5.2 POWER OF ATTORNEY. Each Stockholder hereby constitutes and
appoints Odyssey as its, his or her (as appropriate) true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, to sign and deliver on such Stockholder's behalf all
documents and instruments (including, without limitation, stock powers and
assignments and other instruments of transfer) with respect to all of such
Stockholder's Shares and Options as such attorney-in-fact shall deem
necessary or appropriate in connection with the exercise of Odyssey's
take-along rights pursuant to Article II hereof (on a basis proportionate to
the Odyssey Holders as set forth therein) and the Company's repurchase rights
pursuant to Article IV hereof, hereby
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granting unto said attorney-in-fact full power and authority to do, perform
and cause to be done each and every act which such attorney-in-fact may deem
necessary or appropriate in connection with the premises as fully in all
intents as such Stockholder may have done, hereby ratifying and confirming
all that said attorney-in-fact and agent may do or cause to be done by virtue
hereof.
ARTICLE VI
PIGGYBACK REGISTRATION RIGHTS
(a) Once the Odyssey Holders shall have disposed of Shares constituting
more than 33 1/3% of the total number of Original Odyssey Shares, if the Company
at any time proposes to register for Transfer under the Securities Act any
shares of common stock of the Company, the Company shall give written notice
each such time to each Management Stockholder who is then employed by the
Company or whose employment theretofore shall have been terminated for any
reason, other than termination by the Company for Cause or voluntary termination
by such Management Stockholder, of its intention to do so. Upon the written
request of any such Management Stockholder (a "Participating Management
Stockholder") given within 15 Business Days after receipt of any such notice by
such Management Stockholder (stating the amount of Shares to be disposed of by
the Participating Management Stockholder), the Company shall include the Shares
intended to be disposed of in a registration statement under the Securities Act
so as to permit the disposition by the Participating Management Stockholder of
the Shares so registered; PROVIDED that the managing underwriter or underwriters
(if any) in connection with the offering contemplated by such registration
statement shall have advised the Company and Odyssey that the inclusion of the
Shares proposed to be disposed of by the Participating Management Stockholders
pursuant to such registration statement will not adversely affect the offering
price per share or otherwise adversely affect the success of such offering; and
PROVIDED, FURTHER, that:
(i) if the Odyssey Holders intend to include Shares owned by them in
such registration statement, then the number of Shares which may be sold by
a Participating Management Stockholder pursuant to such registration
statement may not exceed the product of (A) the total number of Shares then
owned by such Participating Management Stockholder and (B) a fraction, the
numerator of which shall be the total
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number of Shares intended to be disposed of by the Odyssey Holders pursuant
to such registration statement and the denominator of which shall be the
total number of Shares then owned by the Odyssey Holders; and
(ii) if such registration statement is for a primary offering by the
Company of shares of its common stock and the Odyssey Holders do not intend
to include any Shares owned by them in such registration statement, then
the number of Shares which may be sold by a Participating Management
Stockholder pursuant to such registration statement may not exceed 10% of
the total number of Shares then owned by such Participating Management
Stockholder.
(b) Notwithstanding any provision of this Article VI to the contrary, if
the registration of which the Company gives notice pursuant to Article VI(a) is
for an underwritten offering and the managing underwriter or underwriters
determine in good faith that the total amount of Shares proposed to be included
in such offering is such as to adversely affect the offering price per share or
otherwise adversely affect the success of such offering, then the Company shall
include in such registration only the amount of Shares which the Company is so
advised can be sold in such offering at the highest offer price proposed by such
underwriters as follows: (i) if such registration includes a primary
registration, (A) first, shares the Company proposed to be included in such
registration, and (B) second, Shares requested to be included in such
registration, pro rata among the holders of such Shares in proportion to the
number of Shares sought to be registered by each holder (which, in the case of a
Participating Management Stockholder, shall have been limited to the amount
permitted by paragraph (a) of this Article VI), or (ii) if such registration is
exclusively a secondary registration, then the number of Shares shall be reduced
or limited pro rata among the Participating Management Stockholder and the other
holders of Shares in proportion to the number of Shares sought to be registered
by each holder (which, in the case of a Participating Management Stockholder,
shall have been limited to the amount permitted by paragraph (a) of this Article
VI), to the extent necessary to reduce the total amount of Shares to be included
in such offering to the amount recommended by such managing underwriter or
underwriters.
(c) Notwithstanding Article VI(a) hereof, Odyssey hereby agrees that it
will allow Shares owned by RPS to be included, on a pro rata basis with the
Odyssey Holders, in
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all registration statements covering Shares owned by the Odyssey Holders,
subject to such limitations as the underwriter(s), if any, acting on behalf
of the Company or the Odyssey Holders in connection with any such
registration statement may advise; PROVIDED, that if the managing underwriter
or underwriters (if any) in connection with the offering contemplated by such
registration statement shall have advised Odyssey that the inclusion of the
Shares proposed to be disposed of by RPS pursuant to such registration
statement will adversely affect the offering price per share or otherwise
adversely affect the success of such offering, Odyssey and RPS shall in good
faith consider such underwriter's advice and RPS shall in good faith consider
waiving its rights under this Article VI(c) such as not to jeopardize or
obstruct the contemplated offering.
(d) All customary, reasonable and necessary expenses in connection with
the preparation of any registration statement and related prospectus with
respect to which the Management Stockholders have been granted registration
rights pursuant to this Article VI, including, without limitation, (i) any
accounting fees incurred by the Company (including the expenses of any audit
and/or "comfort" letter) and filing fees (including expenses associated with
filings required to be made with the Securities and Exchange Commission and the
NASD), (ii) "blue sky" fees and expenses, (iii) printing, engraving and
duplicating expenses of the Company, (iv) transfer agent and listing fees and
(v) the reasonable fees and expenses of not more than one firm of counsel
representing all Stockholders (but not including fees and disbursements of
accountants or financial experts retained by any Management Stockholder,
underwriting discounts and commissions attributable to the Shares of
Participating Management Stockholders, or the fees of any "qualified independent
underwriter" required pursuant to the rules of the NASD as a result of the
Company's relationship with any Stockholder) shall be borne by the Company.
(e) The Company hereby covenants and agrees to grant (i) to the Odyssey
Holders customary demand and piggy-back registration rights and (ii) to RPS the
same piggy-back registration rights, on a pro rata basis, as are granted to
Odyssey, and to enter into registration rights agreements with Odyssey and RPS,
respectively, with respect thereto within 90 days following the Closing Date.
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ARTICLE VII
CORPORATE MANAGEMENT STOCKHOLDERS
SECTION 7.1 REPRESENTATIONS AND WARRANTIES. The individual stockholder of
each Corporate Management Stockholder hereby represents and warrants to Odyssey
with respect to his or her Corporate Management Stockholder that:
(a) such Corporate Management Stockholder is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation as set forth on its signature page hereto, with
full power and authority to enter into this Agreement and to perform its
obligations hereunder;
(b) the individual stockholder of such Corporate Management
Stockholder executing this Agreement on such Corporate Management Stockholder's
signature page hereto owns, beneficially and of record, all of the issued and
outstanding shares of the capital stock of such Corporate Management
Stockholder, and there are no rights, options, convertible or exchangeable
securities or agreements or understandings of any kind which would entitle any
person to subscribe for, purchase or otherwise acquire any other shares of
capital stock of such Corporate Management Stockholder;
(c) the execution, delivery and performance of this Agreement by such
Corporate Management Stockholder has been authorized by all requisite corporate
action; and
(d) this Agreement has been duly executed and delivered by such
Corporate Management Stockholder and constitutes the legal, valid and binding
obligations of such Corporate Management Stockholder, enforceable against such
Corporate Management Stockholder in accordance with its terms (subject to
applicable bankruptcy, reorganization, insolvency, and other similar laws
relating to or affecting the enforcement of creditors' rights generally and to
the availability of equitable remedies).
SECTION 7.2 ADDITIONAL COVENANTS. The individual stockholder of each
Corporate Management Stockholder hereby agrees:
(a) to cause his or her Corporate Management Stockholder to perform
its obligations hereunder, and each such individual stockholder hereby
personally guarantees to
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Odyssey his or her Corporate Management Stockholder's timely performance of
its agreements and obligations under this Agreement; and
(b) that, for so long as any of his or her Corporate Management
Stockholder's Shares or Options are subject to this Agreement, he or she will
not Transfer any of his or her shares in such Corporate Management Stockholder
(except to a Permitted Transferee who shall agree to be bound by the terms of
this Agreement) or allow such Corporate Management Stockholder to issue or agree
to issue (pursuant to options, rights, convertible or exchangeable securities or
otherwise) any additional shares of its capital stock without the prior written
consent of Odyssey.
ARTICLE VIII
DEFINITIONS
Capitalized terms used herein and not otherwise defined herein shall have
the following meanings:
"AFFILIATE" means, with respect to any Person, any other person which,
directly or indirectly, controls, is controlled by or is under common control
with such person. For purposes of the preceding sentence, "control" shall
include the power to vote or direct the voting of more than fifty percent (50%)
of the voting shares, general partnership interests or other voting equity
interests of a person. Any partnership in which Odyssey or an Odyssey Affiliate
is a general partner shall be an Affiliate of Odyssey.
"BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized by law to close.
"CAUSE", when used in connection with any Management Stockholder, shall
mean (i) with respect to a Management Stockholder who is a party to a written
employment agreement with the Company, which agreement contains a definition of
"for cause" or "cause" (or words of like import) for purposes of termination of
employment thereunder by the Company, "for cause" or "cause" as defined in the
most recent of such agreements, or (ii) in all other cases, that
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one or more of the following has occurred: (A) any intentional or willful
failure by such Management Stockholder 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 Management Stockholder has
failed to substantially perform, (B) any engaging by such Management
Stockholder in misconduct which is significantly injurious to the Company or
any of its subsidiaries or affiliates, (C) any breach by such Management
Stockholder of any representation, warranty or covenant contained in this
Agreement, the subscription agreement executed by such Management Stockholder
or the representations, warranties or covenants contained in the instrument
pursuant to which an Option is granted to such Management Stockholder under
the Plan, or (D) such Management Stockholder's conviction of 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. As used in this definition,
"Management Stockholder" shall also mean and refer to the individual
stockholder of each Corporate Management Stockholder.
"CLOSING" has the meaning ascribed to it in the Merger Agreement and the
Purchase Agreement.
"CLOSING DATE" shall mean the date on which the acquisition by subsidiaries
of the Company of both the Aviall Assets and Tri-Star pursuant to the Purchase
Agreement and the Merger Agreement are consummated, or, if both such
transactions are not consummated on the same date, the Closing of the later to
occur of such transactions.
"CONVERTIBLE SECURITY" shall mean any security that is convertible into the
common stock of the Company and any security that represents an option, warrant
or other right to purchase shares of common stock of the Company.
"CORPORATE MANAGEMENT STOCKHOLDER" shall mean any Management Stockholder
that is not a natural person.
"DISABILITY," when used in connection with any Management Stockholder,
means the inability (as determined by the Board in its sole discretion) of such
Management Stockholder, 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. As used in this definition, "Management Stockholder" shall also
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<PAGE>
mean and refer to the individual stockholder of each Corporate Management
Stockholder.
"FAIR MARKET VALUE" means, at any time, the fair market value of a Share as
determined in accordance with the provisions set forth in Section 4.3.
"INDEBTEDNESS" means any indebtedness of the Company or its subsidiaries,
whether or not contingent, in respect of borrowed money or evidenced by bonds,
notes, debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or representing the balance deferred and unpaid
of the purchase price of any property (including capital lease obligations) or
representing any obligations of the Company or its subsidiaries under interest
rate swap agreements, interest rate cap agreements and interest rate collar
agreements and other agreements or arrangements designed to protect the Company
or its subsidiaries against fluctuations in interest rates, except any such
balance that constitutes an accrued expense or trade payable, and also includes,
to the extent not otherwise included, the guarantee of items which would be
included within this definition and any reserves for extraordinary items or
liabilities.
"LOCK-UP PERIOD" shall mean, with respect to any Share, a period of five
(5) years from the date a Management Stockholder first acquired such Shares.
"NASD" means the National Association of Securities Dealers, Inc.
"ORIGINAL ODYSSEY SHARES" means the maximum aggregate number of Shares
owned by Odyssey and its Affiliates during the 90-day period commencing on the
Closing Date (or the corresponding number of Shares resulting from any anti-
dilutive adjustment thereto).
"PERMITTED TRANSFEREE" means, with respect to any Management Stockholder, a
Person to whom any of the following transfers are made: (i) a transfer upon the
death of such Management Stockholder to such Management Stockholder's spouse or
descendants, or to his executor, administrator or testamentary or INTER VIVOS
trustee; (ii) a transfer in compliance with applicable federal and state
securities laws to a Management Stockholder's spouse or descendants as part of
such Management Stockholder's estate planning program, or to a trust, the sole
income beneficiaries of which, or a corporation or a partnership, the sole
stockholders or limited and general partners of which, include only such
20
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Management Stockholder, such Management Stockholder's spouse and/or such
Management Stockholder's descendants; or (iii) a transfer not covered by clause
(i) or (ii) above that the Board of Directors, in its sole discretion, approves
in writing prior to the consummation thereof; PROVIDED that such transfer is in
compliance with applicable federal and state securities laws. In the event of
death or disability of any Person to whom a transfer is made pursuant to clause
(i), (ii) or (iii) above, the term "Permitted Transferee" shall include: (x) in
the case of such Person's death, such Person's spouse or descendants, or such
Person's executor, administrator or testamentary or INTER VIVOS trustee; or (y)
in the case of such Person's disability, such Person's legal guardian. As used
in this definition, "Management Stockholder" shall also mean and refer to the
individual stockholder of each Corporate Management Stockholder.
"PERSON" means any individual, corporation, partnership, limited liability
company, trust, unincorporated organization or government or political
department or agency thereof or other entity.
"REPURCHASE PRICE" means, with respect to any Surrendered Shares, the
applicable price at which such Shares are to be repurchased pursuant to Section
4.1.
"RPS" means R.P. Small Corp., an Illinois corporation wholly-owned by
Richard P. Small.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"THIRD PARTY" means a prospective purchaser of Shares in an arm's-length
transaction from a Stockholder where such purchaser is not an Affiliate of such
Stockholder, provided that for purposes of Article II and III of this Agreement,
the Company shall not be deemed to be an Affiliate of any Stockholder.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 SHARE CERTIFICATES. The Stockholders agree that each
certificate representing the Shares now or hereafter held by a Management
Stockholder shall be endorsed with a legend in substantially the following form
(which
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legend shall be in addition to any legend reasonably required by the Company
in connection with compliance with the Securities Act):
"The securities represented by this certificate are subject to a
certain Agreement, dated as of September 19, 1996, which
provides, among other things, for certain restrictions on the (i)
voting and (ii) sale, transfer, pledge, hypothecation, or other
disposition of the securities represented by this certificate. A
copy of such Agreement is on file at the principal offices of the
Company and will be furnished upon request to the purchaser or
prospective purchaser of the securities represented by this
certificate."
Certificates for Shares issued to BT shall be endorsed with a legend
referencing the restrictions on such Shares set forth in this Agreement.
SECTION 9.2 AFTER-ACQUIRED SHARES. The provisions of this Agreement shall
apply to all Shares and Options now owned or hereafter issued or transferred to,
or acquired by, a Management Stockholder or any of its Affiliates in any
fashion, including but not limited to any Shares received by way of a dividend,
additional issuance, purchase, exchange, split-up, recapitalization,
reclassification, or conversion of Shares, any corporate reorganization, or any
other transaction, including the exercise of an Option granted under the Plan.
SECTION 9.3 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 such remedies shall be in addition to, and
not in lieu of, any other rights and remedies available at law or in equity.
22
<PAGE>
SECTION 9.4 NOTICES. Any and all notices, designations, consents, offers,
acceptances, 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 (with confirmation of receipt), or overnight air
courier guaranteeing next day delivery, to the address of the party appearing
under its name below (or to such other address as may be designated in writing
by such party):
IF TO ODYSSEY:
Odyssey Partners, L.P.
31 West 52nd Street
New York, New York 10019
Telecopier: (212) 708-0750
Attn: Mr. Stephen Berger
WITH A COPY TO:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telecopier: (212) 310-8007
Attn: Simeon Gold, Esq.
IF TO THE COMPANY:
Maple Leaf Aerospace, Inc.
11535 East Pine Street
Tulsa, Oklahoma 74136
Telecopier: (918) 234-7744
Attn: President/CEO
WITH COPIES TO:
Odyssey and Weil, Gotshal & Manges LLP at their addresses set forth
above.
IF TO BT:
_____________________
_____________________
_____________________
_____________________
IF TO A MANAGEMENT STOCKHOLDER:
To the address set forth next to the
Management Stockholder's name on the
signature pages hereof, with a copy
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<PAGE>
to such counsel as such Management
Stockholder may designate in writing
to the other parties hereto.
SECTION 9.5 AMENDMENT. Any provision of this Agreement may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed by
the Company, Odyssey, and any two or more Management Stockholders holding
collectively at the time of such amendment or waiver at least 51% of the
aggregate Shares held by all Management Stockholders.
SECTION 9.6 TERMINATION. (a) All rights, and the performance of all
obligations, under this Agreement, are conditioned upon the occurrence of the
Closing, and this Agreement shall be automatically terminated in its entirety,
without further action on the part of any person, if the Merger Agreement and
the Purchase Agreement are, by their terms or otherwise, terminated.
(b) This Agreement may be terminated at any time by an instrument in
writing signed by the parties hereto. Notwithstanding the previous sentence,
this Agreement (other than the registration rights granted to the Management
Stockholders pursuant to Article VI hereof) shall terminate on the first to
occur of (i) the tenth anniversary of the date of this Agreement, or (ii) such
time as the Odyssey Holders shall cease to own, in the aggregate, at least 25%
of the issued and outstanding shares of capital stock of the Company.
SECTION 9.7 WAIVER. No failure or delay on the part of any or all of the
parties hereto in exercising any right, power, or privilege hereunder, and no
course of dealing between the parties, shall operate as a waiver thereof nor
shall any single or partial exercise of any right, power, or privilege hereunder
preclude the simultaneous or later exercise of any other right, power, or
privilege. The rights and remedies herein expressly provided are cumulative and
not exclusive of any rights and remedies which any or all of the parties would
otherwise have.
SECTION 9.8 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.
SECTION 9.9 GOVERNING LAW. This Agreement and the rights and obligations
of the parties hereunder shall be governed and construed in accordance with the
law of the
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<PAGE>
State of Delaware without giving effect to the conflict of laws provisions
thereof.
SECTION 9.10 BENEFIT AND BINDING EFFECT. This Agreement shall be binding
upon and shall inure to the benefit of each of the parties and their respective
successors and permitted assigns.
SECTION 9.11 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. The Management Stockholders hereby agree that, to the extent
that any court of competent jurisdiction finds that any provision of this
Agreement shall be unenforceable in light of the scope or length of time of its
coverage, then such scope and/or time period shall be reduced to the minimum
extent such that this Agreement be enforceable as nearly as possible in
accordance with its stated terms.
Section 9.12 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.
SECTION 9.13 CONFIDENTIALITY. BT and the Management Stockholders hereby
agree to hold the terms and conditions of this Agreement in strict confidence
and not to make any disclosure with respect thereto, publicly or privately,
without the prior written consent of Odyssey. If a party is required to make
any such disclosure pursuant to applicable law, he, she or it (as appropriate)
shall notify Odyssey as early as possible in advance of the proposed disclosure,
which notice shall include the content of the proposed disclosure, the reasons
that such disclosure is required by law, and the time, place and media wherein
the disclosure is proposed to be made, and Odyssey shall have the right to
review and comment on such proposed disclosure prior to its release and to seek
a protective order with respect thereto.
[signature pages follow]
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed and delivered this
Agreement as of the date first above written.
ODYSSEY PARTNERS, L.P.
By: /s/ Stephen Berger
----------------------------------
Stephen Berger,
a general partner
MAPLE LEAF AEROSPACE, INC.
By: /s/ Quentin P. Bourjeaurd
----------------------------------
Name: Quentin P. Bourjeaurd
Title: President
BT INVESTMENT PARTNERS, INC.
By: /s/ Joseph T. Wood
----------------------------------
Name: Joseph T. Wood
Title: Managing Director
[MANAGEMENT STOCKHOLDERS'
SIGNATURES PAGES FOLLOW]
26
<PAGE>
SIGNATURE PAGE TO MANAGEMENT STOCKHOLDERS' AND
OPTIONHOLDERS' AGREEMENT
The undersigned has read this Amended and Restated Management Stockholders'
and Optionholders' Agreement, dated as of September 19, 1996, as amended and
restated as of May 15, 1997, and hereby agrees to be bound by the terms
thereof applicable to a Management Stockholder (as defined therein).
IN WITNESS WHEREOF, the undersigned has signed and delivered this Agreement
as of May 15, 1997.
By: /s/ Richard P. Small
----------------------------------
Name: R. P. Small Corp.
Title: President
The undersigned has read this Amended and Restated Management Stockholders'
and Optionholders' Agreement, dated as of September 19, 1996, as amended and
restated as of May 15, 1997, and hereby agrees to be bound by the terms
thereof applicable to a Management Stockholder (as defined therein).
IN WITNESS WHEREOF, the undersigned has signed and delivered this Agreement
as of May 15, 1997.
By: /s/ Quentin Bourjeaurd
----------------------------------
Name: Quentin Bourjeaurd
27
<PAGE>
MAPLE LEAF AEROSPACE, INC.
1996 STOCK OPTION PLAN
1. PURPOSES
MAPLE LEAF AEROSPACE, INC. (the "Company") desires to afford certain of
its key employees and the key employees of any subsidiary corporation or parent
corporation of the Company now existing or hereafter formed or acquired, and to
non-employee directors of or consultants to the Company and any subsidiary
corporation of the Company, who are responsible for the continued growth of the
Company, an opportunity to acquire a proprietary interest in the Company, and
thus to create in such key employees an increased interest in and a greater
concern for the welfare of the Company and its subsidiaries.
The Company, by means of this 1996 Stock Option Plan (the "Plan"), seeks
to retain the services of persons now holding key positions and to secure the
services of persons capable of filling such positions.
The stock options ("Options") offered pursuant to the Plan are a matter of
separate inducement and are not in lieu of any salary or other compensation for
the services of any key employee or non-employee director or consultant.
The Options granted under the Plan are intended to be options that do not
meet the requirements for "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code of 1986 as amended (the "Code").
2. NUMBER OF SHARES SUBJECT TO THE PLAN
The total number of shares of common stock of the Company which may be
purchased or acquired pursuant to the exercise of Options granted under the Plan
shall not exceed, in the aggregate, 25,000 shares of the authorized common
stock, $.01 par value per share, of the Company (the "Shares"), and no
individual shall he granted Options to purchase more than 12,500 Shares during
the term of the Plan, such numbers in each case subject to adjustment as
provided in Article II hereof.
<PAGE>
Shares available for issuance acquire under the Plan may be either
authorized but unissued Shares or Shares of issued stock held in the Company's
treasury, or both, at the discretion of the Company. If and to the extent
that Options granted under the Plan expire or terminate without having been
exercised, the Shares covered by such expired or terminated Options may again
be subject to an Option under the Plan.
Except as provided in Article 18 and subject to Article 3, the Company
may, from time to time during the period beginning as of September 19, 1996
(the "Effective Date") and ending on September 18, 2006 (the "Termination
Date"), grant to certain key employees of any subsidiary corporation or parent
corporation of the Company, and to non-employee directors of or consultants to
the Company and any subsidiary corporation or parent corporation of the
Company, Options under the terms hereinafter set forth.
As used in the Plan, the term "subsidiary corporation" and "parent
corporation" shall mean, respectively, a corporation coming within the
definition of such terms contained in Sections 424(f) and 424(e) of the Code.
3. ADMINISTRATION
The board of directors of the Company (the "Board of Directors") shall
designate from any of its members a Compensation Committee, which shall be the
Compensation Committee of the Board of Directors (the "Committee"), to
administer the Plan. The Committee shall consist of no fewer than two (2)
members, each of whom shall be "non-employee directors" within the meaning of
Rule 16b-3 (or any successor rule or regulation) promulgated under the
Securities Exchange Act of 1934, as amended. A majority of the members of the
Committee shall constitute a quorum, and the act of a majority of the members
of the Committee shall be the act of the Committee. Any member of the
Committee may he removed at any time either with or without cause by resolution
adopted by the Board of Directors, and any vacancy on the Committee at any time
may be filled by resolution adopted by the Board of Directors.
Subject to the express provisions of the Plan, the Committee shall have
authority, in its discretion, to determine the employees and non-employee
directors and consultants to whom Options shall be granted (the
"Optionholders"), the time when such Options shall be granted, the number of
Shares which shall be subject to each Option, the purchase price or exercise
price of each Option, the period(s) during
2
<PAGE>
which such Options shall be exercisable (whether in whole or in part) and the
other terms and provisions thereof (which need not be identical).
Subject to the express provisions of the Plan, the Committee also shall
have authority to construe the Plan and the Options granted thereunder, to
amend the Plan and the Options granted thereunder, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the terms and
provisions of the Options (which need not be identical) granted thereunder and
to make all other determinations necessary or advisable for administering the
Plan.
The Committee may establish performance standards for determining the
periods during which Options shall be exercisable, including without limitation
standards based on the earnings of the Company and its subsidiaries for various
fiscal periods. The Committee shall define such performance criteria and, from
time to time, the Committee in its sole discretion and in administering the
Plan may make adjustments to such performance criteria for any fiscal period so
that extraordinary or unusual charges or credits, acquisitions, mergers,
consolidations, and other corporate transactions and other elements of or
factors influencing the calculations of earnings or any other performance
standard do not distort or affect the operation of the Plan in a manner
inconsistent with the achievement of its purpose.
The determination of the Committee on matters referred to in this Article
3 shall be conclusive.
The Committee may employ such legal counsel, consultants and agents as it
may deem desirable for the administration of the Plan and may rely upon any
opinion or computation received from any such legal counsel, consultant or
agent. Expenses incurred by the Committee in the engagement of such counsel,
consultant or agent shall be paid by the Company. No member or former member of
the Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any award of Options granted hereunder.
4. ELIGIBILITY
Options may be granted only to key employees of any subsidiary corporation
or parent corporation of the Company, and to non-employee directors of or
consultants to the Company and any subsidiary corporation or parent corporation
of the Company.
3
<PAGE>
The Plan does not create a right in any employee or non-employee director
or consultant to participate in the Plan, nor does it create a right in any
employee or non-employee director or consultant to have any Options granted to
him or her.
5. OPTION PRICE AND PAYMENT
The price for each Share purchasable under any Option granted hereunder
shall be such amount as the Committee shall determine in good faith in the
manner described below to be the fair market value per Share at the date the
Option is granted (the "Fair Market Value"); PROVIDED, HOWEVER, that the
exercise price shall not be less than $231.59 per share.
If the Shares are not listed on a national securities exchange in the
United States on any date on which the Fair Market Value per Share is to be
determined, and a public market does not otherwise exist for the Shares on such
date, the Fair Market Value Per Share shall be equal to the amount determined
by dividing (i) the excess of (A) 4.8 times the consolidated net income of the
Company and its subsidiaries, determined in accordance with generally accepted
accounting principles, consistently applied, and determined before reduction
for interest, amortization of goodwill and intangibles, depreciation, taxes and
reserves for slow-moving and obsolete inventory, for the last four fiscal
quarters of the Company immediately preceding the date as of which the Fair
Market Value per Share is to be determined, over (B) the amount of all
outstanding Indebtedness (less cash) of the Company and its subsidiaries at the
end of the fiscal quarter of the Company immediately preceding such date, by
(ii) the total number of Shares outstanding at the date of such determination,
on a fully diluted basis after giving effect to (A) the exercise of (1) all
outstanding Options, to the extent of the number of Shares which, as of the
date of determination, are Available Shares pursuant to the terms of such
Options and (2) all outstanding options to purchase common stock of the Company
granted by the Company other than pursuant to the Plan, to the extent of the
number of Shares for which such Options are exercisable at the date of
determination, and (B) the conversion or exercise of all Convertible
Securities; PROVIDED, HOWEVER, that the determination of the Fair Market Value
per Share shall be subject to adjustment by the Committee in its sole
discretion so that extraordinary or unusual changes or credits, acquisitions,
mergers, consolidations and other corporate transactions and other elements or
factors affecting the calculation of earnings do not distort the determination
of the Fair Market Value per Share, and PROVIDED, FURTHER, that, the Fair
Market Value per Share shall be determined without taking into account the lack
of liquidity of the Shares and without applying a minority discount. For
purposes of this determination, (x) "Indebtedness"
4
<PAGE>
shall mean any indebtedness of the Company or its subsidiaries, whether or
not contingent, in respect of borrowed money or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or representing the balance deferred and
unpaid of the purchase price of any property including capital lease
obligations) or representing any obligations of the Company or its
subsidiaries under interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and other agreements or
arrangements designed to protect the Company or its subsidiaries against
fluctuations in interest rates, except any such balance that constitutes an
accrued expense or trade payable, and also includes, to the extent not
otherwise included, the guarantee of items which would be included within
this definition and any reserves for extraordinary items or liabilities, (y)
"Convertible Security" shall mean any security that is convertible into the
common stock of the Company and any option, warrant or other right to
purchase shares of common stock, other than Options granted under the Plan,
and (z) "Available Shares" shall mean Shares subject to outstanding Options
under the Plan which shall have been certified by the Committee to be
Available Shares as of the date of determination.
If the Shares are listed on a national securities exchange in the United
States on any date on which the Fair Market Value per Share is to be
determined, the Fair Market Value per Share shall be deemed to be the average
of the last sales price for Shares for the thirty (30) trading days immediately
preceding the date as of the which the Fair Market Value per Share is to be
determined.
If a public market exists for the Shares on any date on which the Fair
Market Value per Share is to be determined, but the Shares are not listed on a
national securities exchange in the United States on such date, the Fair Market
Value per Share shall be deemed to be the average of the mean between the
closing bid and asked quotations in the over-the-counter market for the thirty
(30) trading days immediately preceding the date as of the which the Fair
Market Value per Share is to be determined.
For purposes of this Plan, the determination by the Committee of the
Fair Market Value of a Share shall be conclusive.
Upon the exercise of an Option granted hereunder, the Company shall cause
the purchased Shares to be issued only when it shall have received the full
purchase price for the Shares in cash or by certified check; PROVIDED, HOWEVER,
that in lieu of cash, the holder of an Option may, if and to the extent the
terms of such Option so
5
<PAGE>
provide and to the extent permitted by applicable law, exercise an Option in
whole or in part, by delivering to the Company (a) shares of common stock of
the Company (in proper form for transfer and accompanied by all requisite
stock transfer tax stamps or cash in lieu thereof) owned by such holder
having a Fair Market Value equal to the exercise price applicable to that
portion of the Option being exercised by the delivery of such Shares or (b)
such other form of payment as the Committee shall permit in its sole
discretion at the time of exercise.
6. USE OF PROCEEDS
The cash proceeds of the sale of Shares pursuant to the Plan are to
be added to the general funds of the Company and used for its general corporate
purposes as the Board of Directors shall determine.
7. TERM OF OPTIONS AND LIMITATIONS ON THE RIGHT OF EXERCISE
An Option shall be exercisable at such times, in such amounts and during
such period or periods as the Committee shall determine at the date of the
grant of such Option; PROVIDED, HOWEVER, that an Option shall not be
exercisable after the expiration of ten (10) years from the date such Option is
granted.
The Committee shall have the right to accelerate, in whole or in part,
from time to time, conditionally or unconditionally, rights to exercise any
Option granted hereunder.
To the extent that an Option is not exercised within the period of
exercisability specified therein, it shall expire as to the then unexercised
part.
In no event shall an Option granted hereunder be exercised for a fraction
of a Share.
8. EXERCISE OF OPTIONS
Options granted under the Plan shall be exercised by the optionee as to
all or part of the Shares covered thereby by the giving of written notice of
the exercise thereof to the Corporate Secretary of the Company at the principal
business office of the Company, specifying the number of Shares to be purchased
and specifying a business day not more than fifteen (15) days from the date
such notice is given for the
6
<PAGE>
payment of the purchase price against delivery of the Shares being purchased.
Subject to the terms of Articles 13, 14, 15 and 16, the Company shall cause
certificates for the Shares so purchased to be delivered to the optionee at
the principal business office of the Company, against payment of the full
purchase price, on the date specified in the notice of exercise.
9. NON-TRANSFERABILITY OF OPTIONS
No Option granted hereunder shall be transferable, whether by operation of
law or otherwise, other than by will or the laws of descent and distribution,
and any Option granted hereunder shall be exercisable during the lifetime of
the holder only by such holder. Except to the extent provided above, Options
may not be assigned, transferred, pledged, hypothecated or disposed of in any
way (whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process, and any purported assignment in
contravention hereof shall be void and of no effect.
10. TERMINATION OF EMPLOYMENT
Upon termination of employment of any Optionholder with the Company and
all parent and subsidiary corporations, an Option previously granted to the
Optionholder, unless otherwise specified by the Committee in the Option, shall,
to the extent not theretofore exercised, terminate and become null and void,
provided that:
(a) if the employee shall die while in the employ of such
corporation or during either the three (3) month or one (1) year period,
whichever is applicable, specified in clause (b) below and at a time when
such employee was entitled to exercise an Option as herein provided, the
legal representative of such employee, or such person who acquired such
Option by bequest or inheritance or by reason of the death of the
employee, shall have the right to exercise such Option so granted, to the
extent not theretofore exercised, in respect of any or all of such number
of Shares that such employee is entitled to purchase pursuant to such
Option at the time of such employee's death, at any time up to and
including one (1) year after the date of death; and
(b) if the employment of any employee to whom such Option shall have
been granted shall terminate by reason of the employee's disability (as
defined below) or dismissal by the employer other than for cause (as
defined below), and while such employee is entitled to exercise such
Option as herein provided, such employee shall have the right to exercise
such Option so
7
<PAGE>
granted, to the extent not theretofore exercised, in respect of any or all
of such number of Shares that such employee is entitled to purchase
pursuant to such Option at the time of such termination, at any time up to
and including (i) three (3) months after the date of such termination of
employment in the case termination by reason of dismissal other than for
cause and (ii) one (1) year after the date of termination of employment in
the case of termination by reason of disability.
If an employee voluntarily terminates his or her employment, or is
discharged for cause, any Option granted hereunder shall, unless otherwise
specified by the Committee in the Option, forthwith terminate with respect to
any unexercised portion thereof.
The terms of an Option granted to a non-employee director of, or
consultant to, the Company or any subsidiary Corporation or parent corporation
of the Company shall set forth the circumstances relating to the cessation of
the performance of services by such non-employee director or consultant under
which such Option shall terminate prior to the expiration of the period of
exercisability set forth in such Option.
If an Option granted hereunder shall be exercised by the legal
representative of a deceased or disabled Optionholder, or by a person who
acquired an Option granted hereunder by bequest or inheritance or by reason of
death of any Optionholder, written notice of such exercise shall be accompanied
by a certified copy of letters testamentary or equivalent proof of the right of
such legal representative or other person to exercise such Option.
For all purposes of the Plan, the term "for cause" shall mean, (i) with
respect to an Optionholder who is a party to a written employment agreement
with the Company, which agreement contains a definition of "for cause" or
"cause" (or words of like import) for purposes of termination of employment
thereunder by the Company, "for cause" or "cause" as defined in the most recent
of such agreements, or (ii) in all other cases, as determined by the Committee,
in its sole discretion, that one or more of the following has occurred: (A) any
intentional or willful failure by such Optionholder to substantially perform
his or her employment duties which shall not have been corrected within thirty
(30) days following written notice of the duties which such Optionholder has
failed to substantially perform, (B) any engaging by such Optionholder in
misconduct which is significantly injurious to the Company or any of its
subsidiaries or affiliates, (C) any breach by such Optionholder of any
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<PAGE>
covenant contained in the Management Stockholders' and Optionholders'
Agreement, dated as of September 19, 1996, by and among the Company and the
stockholders who are signatories thereto, as the same may be amended from
time to time, or the instrument pursuant to which an Option is granted, or
(D) such Optionholder's conviction of 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.
For all purposes of the Plan, the term "disability" means the inability
(as determined by the Board of Directors in its sole discretion) of such
Optionholder, as a result of incapacity due to physical or mental illness or
disability, to perform his or her duties with the Company or any subsidiary or
parent corporation of the Company by which the Optionholder is employed for six
consecutive months or shorter periods aggregating six months during any twelve-
month period.
A termination of employment shall not be deemed to occur by reason of (i)
the transfer of an Optionholder from employment by the Company to employment by
a subsidiary corporation or a parent corporation of the Company or (ii) the
transfer of an Optionholder from employment by a subsidiary corporation or a
parent corporation of the Company to employment by the Company or by another
subsidiary corporation or parent corporation of the Company.
Notwithstanding anything to the contrary contained in this Article 10, in
no event shall any person be entitled to exercise any Option after the
expiration of the period of exercisability of such Option as specified therein.
11. ADJUSTMENT OF SHARES; EFFECT OF CERTAIN TRANSACTIONS
For purposes of this Plan, a "change in control" of the Company occurs if:
(a) any "Person" (as such term is used in Sections 13(d) and 14(d)(2) of the
Exchange Act), other than Odyssey Partners, L.P., a Delaware limited
partnership or any of its affiliates or any combination thereof (collectively,
the "Odyssey Holders"), is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of all of the
outstanding capital stock of the Company; or (b) the Board of Directors shall
approve a sale of all or substantially all of the assets of the Company other
than to an entity owned or controlled by the Odyssey Holders; or
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(c) the Board of Directors shall approve any merger, consolidation, issuance
of securities or purchase of assets, the result of which would be the
occurrence of any event described in clause (a) or (b) above.
Upon the occurrence of a transaction described in the preceding paragraph,
each Option will terminate within a specific number of days after notice to the
holder of such Option, and each such holder will receive, in respect of each
Share for which such Option then is exercisable, an amount equal to the excess
of the then Fair Market Value of such Share over the exercise price per Share,
payable in the same consideration received by the shareholders of the Company
upon the closing of such transaction.
In the event of any change in the outstanding Shares through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
reverse split, split-up, split-off, spin-off, combination of shares, exchange
of shares, or other like change in capital structure of the Company, the
Committee shall make such adjustments to each outstanding Option that it, in
its sole discretion, deems appropriate. The term "Shares" after any such change
shall refer to the securities, cash and/or property then receivable upon
exercise of an Option. In addition, in the event of any such change, the
Committee shall make any further adjustment as may be appropriate to the
maximum number of Shares which may be acquired under the Plan pursuant to the
exercise of Options, the maximum number of Shares for which Options may be
granted to any individual under the Plan, the minimum exercise price per
Share for Options to be granted under the Plan, and the number of Shares and
prices per Share subject to outstanding Options as shall be equitable to
prevent dilution or enlargement of rights under such Options, and the
determination of the Committee as to these matters shall be conclusive.
12. RIGHT TO TERMINATE EMPLOYMENT
The Plan shall not impose any obligation on the Company or on any
subsidiary corporation or parent corporation thereof to continue the employment
of any Optionholder and it shall not impose any obligation on the part of any
Optionholder to remain in the employ of the Company or of any subsidiary
corporation or parent corporation thereof.
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13. SECURITIES LAW MATTERS
Except as hereinafter provided, the Committee may require an Optionholder,
as a condition upon exercise of any Option granted hereunder, to execute and
deliver to the Company a written statement, in form satisfactory to the
Committee, in which Optionholder represents and warrants that Shares are being
acquired for such Optionholder's own account for investment only and not with a
view to the resale or distribution thereof. The Optionholder shall, at the
request of the Committee, be required to represent and warrant in writing that
any subsequent resale or distribution of Shares by the Optionholder shall be
made only pursuant to either (i) a Registration Statement on an appropriate
form under the Securities Act of 1933, as amended (the "Securities Act"), which
Registration Statement has become effective and is current with regard to the
Shares being sold, or (ii) a specific exemption from the registration
requirements of the Securities Act, but in claiming such exemption the
Optionholder shall, prior to any offer of sale or sale of such Shares, obtain a
prior favorable written opinion of counsel, in form and substance satisfactory
to counsel for the Company, as to the application of such exemption thereto.
The foregoing restriction shall not apply to (i) issuances by the Company so
long as the Shares being issued are registered under the Securities Act and a
prospectus in respect thereof is current or (ii) re-offerings of Shares by
affiliates of the Company (as defined in Rule 405 or any successor rule or
regulation promulgated under the Securities Act) if the Shares being re-offered
are registered under the Securities Act and a prospectus in respect thereof is
current.
14. ISSUE OF CERTIFICATES, LEGENDS, PAYMENT OF EXPENSES
Subject to Articles 13, 15 and 16, upon any exercise of an Option which
may be granted hereunder and payment of the purchase price, a certificate or
certificates for the Shares shall be issued by the Company in the name of the
person exercising the Option and shall be delivered to or upon the order of
such person.
The Company may endorse such legend or legends upon the certificates for
Shares issued pursuant to the Plan and, if a transfer agent has been engaged by
the Company, may issue such "stop transfer" instructions to its transfer agent
in respect of such Shares as, in its discretion, it determines to be necessary
or appropriate to (i) prevent a violation of, or to perfect an exemption from,
the registration requirements of the Securities Act, or (ii) implement the
provisions of the Plan and any agreement between the Company and the
Optionholder with respect to such Shares.
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The Company shall pay all issue or transfer taxes with respect to the
issuance or transfer of Shares, as well as all fees and expenses necessarily
incurred by the Company in connection with such issuance or transfer.
All Shares issued as provided herein shall be fully paid and non-
assessable to the extent permitted by law.
15. WITHHOLDING TAXES
The Company will require, as a condition to an Optionholder exercising a
Option granted hereunder, that the Optionholder reimburse the corporation that
employs such Optionholder for any taxes required by any government to be
withheld or otherwise deducted and paid by such corporation in respect of the
issuance or disposition of such Shares. In lieu thereof, the corporation that
employs such Optionholder shall have the right to withhold the amount of such
taxes from any other sums due or to become due from such corporation to the
Optionholder upon such terms and conditions as the Committee shall prescribe.
The corporation that employs such Optionholder may, in its discretion, hold the
stock certificate to which such Optionholder is entitled upon the exercise of
an Option as security for the payment of such withholding tax liability, until
cash sufficient to pay that liability has been accumulated.
16. LISTING OF SHARES AND RELATED MATTERS
The Committee may delay the issuance or delivery of Shares pursuant to any
Option granted hereunder if it determines that listing, registration or
qualification of Shares or the consent or approval of any governmental
regulatory body is necessary or desirable as a condition of, or in connection
with, the grant of an Option under the Plan or the issuance of Shares
thereunder, until such listing, registration, qualification, consent or
approval shall have been effected or obtained, or otherwise provided for, free
of any conditions not acceptable to the Committee.
17. AMENDMENT OF THE PLAN
The Committee may, from time to time, amend the Plan, provided that no
amendment shall be made, without the approval of the stockholders of the
Company, that will (i) increase the total number of Shares reserved for Options
under the Plan (other than an increase resulting from an adjustment provided
for in Article 11), (ii) reduce the exercise price of any Option granted
hereunder below the price required by
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Article 5, (iii) modify the provisions of the Plan relating to eligibility,
or (iv) materially increase the benefits accruing to participants under the
Plan. The rights and obligations under any Option granted before amendment of
the Plan or any unexercised portion of such Option shall not be adversely
affected by amendment of the Plan or such Option without the consent of the
holder of such Option.
18. TERMINATION OR SUSPENSION OF THE PLAN
The Board of Directors may at any time suspend or terminate the Plan.
The Plan, unless sooner terminated by action of the Board of Directors, shall
terminate at the close of business on the Termination Date. Options may not be
granted while the Plan is suspended or after it is terminated. Rights and
obligations under any Option granted while the Plan is in effect shall not be
altered or impaired by suspension or termination of the Plan, except upon the
consent of the person to whom the Option was granted. The power of the
Committee to construe and administer any Options granted prior to the
termination or suspension of the Plan under Article 3 nevertheless shall
continue after such termination or during such suspension.
19. GOVERNING LAW
The Plan and such Options as may be granted thereunder and all related
matters shall be governed by, and construed and enforced in accordance with,
the laws of the State of Delaware from time to time obtaining.
20. PARTIAL INVALIDITY
The invalidity or illegibility of any provision hereof shall not be deemed
to affect the validity of any other provision.
21. EFFECTIVE DATE
The Plan shall become effective at 9:00 a.m., New York City Time, on the
Effective Date.
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MAPLE LEAF AEROSPACE, INC.
EMPLOYEE STOCK PURCHASE PLAN
There is hereby established the Maple Leaf Aerospace, Inc. Employee
Stock Purchase Plan (the "Plan") on the terms and conditions set forth herein.
1. PURPOSE. This Plan is intended to advance the interests of Maple
Leaf Aerospace, Inc. (the "Company") and its subsidiaries by providing for
the acquisition and ownership of a proprietary interest in the Company by
employees of the Company's subsidiaries in order to encourage their interest
in the success of the Company and its subsidiaries and their continuance as
employees, officers and directors of the Company's subsidiaries, and as
compensation for their services.
2. ADMINISTRATION. This Plan shall be administered by the Board of
Directors of the Company (the "Board").
3. ELIGIBILITY. Any employee, officer, or director (each, an
"Employee") of the Company's subsidiaries shall be eligible to participate in
this Plan. The Board, in its sole discretion, shall determine which of such
eligible individuals shall be entitled to participate in this Plan.
4. SHARES RESERVED; TERMS OF ISSUANCE. The total number shares of the
Company's Common Stock, $.01
<PAGE>
par value per share, reserved for issuance pursuant to the Plan shall be
5,000 shares. The Board shall determine the number of shares issuable to
eligible purchasers, the purchase price thereof, vesting requirements and any
other additional terms as the Board may deem appropriate or desirable. The
purchase price for shares issued pursuant to this Plan shall be payable in
cash, or by delivery to the Company of a promissory note, or in any other
manner as the Board may deem appropriate or desirable.
5. DOCUMENTATION. The agreements pursuant to which shares shall be
subscribed for pursuant to this Plan shall be in such form as the Board
shall, from time to time, approve and shall be in accordance with Rule 701 of
the Securities Act of 1933, as amended. Additionally, unless otherwise
determined by the Board, each Employee who purchases shares under this Plan
shall, in connection therewith, become a party to that certain Amended and
Restated Management Stockholders' and Optionholders' Agreement, dated as of
April __, 1997, amending and restating the Management Stockholders' and
Optionholders' Agreement dated as of September 19, 1996, by and among the
Company and the other parties thereto, as the same may be amended from time
to time.
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EXHIBIT 10.18
EXECUTIVE EMPLOYMENT AGREEMENT
AGREEMENT, dated as of September 19, 1996, by and between Tri-Star
Aerospace Co., a Delaware corporation (the "Company"), and Quentin P.
Bourjeaurd (the "Executive").
WHEREAS, the Company desires to retain the Executive as its President,
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
September 19, 1996, as its President, and the Executive hereby accepts such
employment. The term of employment contemplated hereby shall commence on
September 19, 1996 (the "Commencement Date") and shall end on the fifth
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 appurtentant to his position as President, as defined in
the By-Laws of the Company in effect from time to time (PROVIDED that the
Executive shall not serve as the chief operating officer of the Company) and
as reasonably directed by the Board of Directors of the Company.
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 subject to review on an annual basis.
(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
<PAGE>
Executive promptly and properly accounts therefor in accordance with the
Company's expense policy.
5. TERMINATION.
(a) 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 continue to receive his salary
set forth in Section 4(a) hereof (and such medical and life other benefits as
are regularly offered to senior executives of the Company) until the earlier
to occur of (i) the fifth anniversary of the Commencement Date and (ii) a
period of two years from the Date of Termination (as defined herein);
PROVIDED, HOWEVER, that if the Executive commences new full-time employment
during such period, such salary payments shall cease immediately upon the
commencement of such employment.
(b) OTHER TERMINATION. In the event 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
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<PAGE>
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.
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)(ii) 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 two years after the Date of Termination, he shall not,
directly or indirectly, for his own account or jointly with another, or for or
on
3
<PAGE>
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.
(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 the relationships contemplated hereby.
7. BOARD OF DIRECTORS. During the Term, the Executive shall be a
member of the Board of Directors of the Company and its indirect parent
company, Maple Leaf Aerospace, Inc., a Delaware corporation ("Parent").
8. LOAN. The Company will, upon such terms as shall be mutually
agreed, lend to the Executive up to $200,000 to enable Executive to pay
personal taxes attributable to the issuance of certain shares of the Parent's
common stock to the Executive as of the date hereof.
9. 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 as may be designated in writing by such party):
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<PAGE>
IF TO THE EXECUTIVE
-------------------
Mr. Quentin P. Bourjeaurd
1408 Northridge
South Lake, Texas 76052
IF TO THE COMPANY
-----------------
Tri-Star Aerospace Co.
11535 East Pine Street
Tulsa, Oklahoma 74116
Attention: Mr. Richard P. Small
With a copy to:
Odyssey 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.
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<PAGE>
(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 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.
[Signature page follows]
6
<PAGE>
IN WITNESS WHEREOF, the parties have signed and delivered this
Agreement as of the date first above written.
TRI-STAR AEROSPACE CO.
By: /s/ Richard P. Small
-----------------------------------
Name: Richard P. Small
Title: CEO
/s/ Quentin P. Bourjeaurd
-----------------------------------
Quentin P. Bourjeaurd
7
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
AGREEMENT, dated as of February 1, 1997, by and between Tri-Star
Aerospace, Co., a Delaware corporation (the "Company"), and Charles Balchunas
(the "Executive").
WHEREAS, the Company desires to retain the Executive as its Chief
Operating 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
February ___, 1997, as its Chief Operating Officer, and the Executive hereby
accepts such employment.
2. TERM. Unless earlier terminated pursuant to the provisions hereof,
the term of the Executive's employment (the "Term") shall have commenced on
February ___, 1997 and shall end on December 31, 1999.
3. DUTIES.
(a) During the Term, the Executive shall perform all duties and functions
reasonably appurtenant to his position as Chief Operating Officer, and as
reasonably directed by the Board of Directors of the Company.
(b) The Executive agrees to devote substantially all of his business time
to his duties as set forth above.
4. COMPENSATION.
(a) SALARY. During the term of the Executive's employment hereunder, 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, in its sole and absolute discretion, may provide.
(b) BENEFITS. The Executive shall receive such medical and other
benefits as are regularly offered to other senior executives of the Company.
<PAGE>
5. EXPENSES. During the term of the Executive's employment hereunder,
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.
6. TERMINATION.
(a) TERMINATION WITHOUT CAUSE. If 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):
(i) the Executive shall be entitled to receive (A) his salary and
personal time (I.E., vacation and sick time) accrued through the Date of
Termination (as defined herein) and (B) 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 normally scheduled
payroll for active employees, until the expiration of a period of two years
from the Date of Termination; and
(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 two years 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
payments and benefits described in Sections 6(a)(i) and (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 6(a), the Executive shall have no right to receive any
unaccrued compensation or unaccrued personal time hereunder after the Date of
Termination (as defined herein).
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(c) DEFINITIONS. For purposes of this Agreement:
(i) "Disability" shall mean the inability (as reasonably 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 substantially
perform his material 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 (other than a failure
resulting from the executive's physical illness or injury) by the Executive to
substantially perform his employment duties which shall not have been corrected
within 30 days following written notice from the Chairman of the Board of
Directors of the Company 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 Stockholders 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 significant economic or
reputation 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")
which shall set forth in reasonable detail the basis for such termination of
employment under this agreement and shall be given in accordance with the
notice provisions herein. In the event that the Company terminates the
Executive's employment hereunder and does not provide a Notice of Termination
within 7 days thereafter, such termination shall be conclusively deemed to be
termination without Cause.
(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
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terminated due to Disability, ten days after delivery to the Executive of the
Notice of Termination, (iii) in the case of non-renewal of the Term, at the
expiration of the Term, and (iv) in any other case, the date specified in the
Notice of Termination.
The performance by the Company of its obligations under this Section 6 shall
constitute full settlement and release of any claim or cause of action, of
whatsoever nature, which the Executive might otherwise assert against the
Company or any of its directors, stockholders, officers or employees pursuant
to this Agreement on account of the termination of the Executive's employment.
7. EXECUTIVE COVENANTS.
(a) NON-COMPETITION. During the Term and for a period of two years after
the Date of Termination, 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 or 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 two years 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 any of its subsidiaries or
affiliates to leave such position or (ii) interfere with, disrupt or attempt to
disrupt any relationship, contractual
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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. Notwithstanding the foregoing, the Executive shall
be permitted to disclose confidential information solely to the extent required
by court or administrative order, provided that the Executive immediately
provides notice to the Company that he is required by court or administrative
order to disclose such confidential information and the Company has had an
opportunity to protest and contest any assertion that the Executive is required
to make such disclosure and to seek a protective order or other remedy which
may narrow the scope of required disclosure or otherwise protect the
confidentiality of such information to the maximum extent possible. The
Executive agrees to cooperate and assist the Company, at the Company's expense,
in preparing any protest or contest of any such assertion and seeking any such
remedy. 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.
(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.
8. INDEMNIFICATION. The Company agrees to indemnify and hold harmless
the Executive from and against any and all liabilities incurred or sustained by
him in connection with any claim, action, investigation, suit or proceeding to
which he may be made a party by reason of his acts or omissions in connection
with his being or having been an officer, director or employee of the Company
or
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Parent, to the maximum extent permitted by law. This Section a is not
intended to limit any rights which the Executive may have under the Company's
By-laws or under applicable law.
9. PURCHASE OF COMMON STOCK. Effective immediately and for a period of
30 days, the Executive shall have the right to purchase from Maple Leaf
Aerospace, Inc. ("Parent") 864 shares of the common stock of Parent, at a price
of $231.59 per share, subject to the terms and conditions of the Management
Stockholders' and Optionholders' Agreement, dated as of September 19, 1996,
among the Parent and the stockholders named therein, as the same may be amended
from time to time.
10. 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 as
may be designated in writing by such party):
IF TO THE EXECUTIVE:
Mr. Charles Balchunas
[Address]
with a copy to:
IF TO THE COMPANY:
Tri-Star Aerospace, Co.
11535 East Pine Street
Tulsa, Oklahoma 74116
Attention: Chairman of the Board
With a copy to:
Odyssey Partners, L.P.
31 West 52nd Street
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New York, New York 10019
Attention: Mr. Stephen Berger
11. 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; ASSIGNMENT. 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.
This Agreement shall not be assignable by either party without the prior
written consent of the other party; PROVIDED, HOWEVER, that nothing contained
herein shall prohibit the Company from assigning this Agreement pursuant to a
merger, consolidation or sale of all or substantially all of the business or
assets of the Company. In addition, the Company shall require any such success
or to expressly assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform if no such
succession had taken place.
(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.
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(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.
[signature page follows]
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IN WITNESS WHEREOF, the parties have signed and delivered this Agreement
as of the date first above written.
TRI-STAR AEROSPACE, CO.
By: /s/ Stephen Berger
------------------------------
Name: Stephen Berger
Title:
/s/ Charles Balchunas
---------------------------------
Charles Balchunas
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AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT, dated as of
January 15, 1998 (this "Agreement"), by and between Tri-Star Aerospace, Co.,
a Delaware corporation (the "Company"), Maple Leaf Aerospace, Inc., a
Delaware corporation ("Parent") and G. Bruce McInnis (the "Executive").
WHEREAS, the Company and the Executive are parties to that certain
Executive Employment Agreement, dated as of January 14, 1997;
WHEREAS, the parties hereto wish to amend and restate such
agreement.
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. Effective January 15, 1998, the Company and
Executive agree that Executive shall be employed as Assistant to the Chairman
of the Board of Directors of the Company and that as of such date Executive
hereby resigns from all positions with the Company, Parent or any their
affiliates then held by Executive, whether as a director, officer, employee
or agent of the Company, Parent or any their affiliates, including, without
limitation, Executive's positions as Chief Financial Officer and Executive
Vice President-Administration. Without limiting the generality of the
foregoing, Executive shall not, from and after January 15, 1998, hold any
position (including but not limited to any officer positions, memberships on
Boards of Directors, and positions on committees pertaining to management
matters or employee benefit plans) with either the Company, Parent, or any of
their affiliates, other than Assistant to the Chairman of the Board of the
Company.
2. TERM. Unless earlier terminated pursuant to the provisions
hereof, the term of Executive's employment (the "Term") shall have commenced
on January 14, 1997 and shall end on January 15, 2000.
3. DUTIES. Commencing on January 15, 1998 and during the
remainder of the Term, Executive shall perform such duties as Assistant to
the Chairman of the Board as may be reasonably agreed to by the Executive and
the Chairman of the Board of Directors of the Company. Such duties shall be
such as can be performed from locations designated by the Executive, without
interfering with Executive's performance of his duties pursuant to any full
time employment which Executive may obtain elsewhere, provided that such
employment does not violate the covenants set forth in Section 8 hereof.
<PAGE>
4. COMPENSATION.
(a) SALARY. During the term of the Executive's employment
hereunder, 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, in its sole and absolute discretion, may
provide.
(b) BENEFITS. The Executive shall receive such medical and other
benefits as are regularly offered to other senior executives of the Company.
For purposes of the Company's personal time (I.E., vacation and sick time)
policies, the Executive shall be deemed to have been employed by the Company
for a five year period.
5. EXPENSES. During the term of the Executive's employment
hereunder, 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.
6. RELOCATION EXPENSES. (a) Upon presentation by the Executive
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 Executive, subject to Section 6(c)
hereof, for the following expenses relating to the sale of the Executive's
residence in Houston, Texas (the "Current Residence") and the relocation of
his family and its personal effects to a new location designated by the
Company (the "New Location"): (i) expenses incurred in the packing, moving
and unpacking of the Executive's family's personal effects from Houston,
Texas to the New Location, (ii) customary real estate brokerage commissions
and closing costs (including but not limited to reasonable legal fees not to
exceed $2000 and title insurance costs) incurred in connection with the sale
of the Current Residence, (iii) the lesser of (A) expenses incurred in
connection with temporary housing for the Executive and, if applicable, his
family at the New Location for a period not to exceed six months, and (B)
expenses incurred by the Executive in obtaining a release from leased housing
commitments for the period commencing on February 1, 1997 and ending on
August 1, 1997 in Houston Texas, not to exceed $15,000, plus Dallas hotel and
car rental expenses incurred by the Executive and his family from January 14,
1997 through February 3, 1997 (the "Transition Period"), (iv) coach air fare
and related transportation expenses incurred for four visits from the U.S.
site of the Executive's employment responsibilities to Houston, Texas for the
Executive during the Transition Period, and (v) coach air fare and related
expenses for three trips during the Transition Period between Houston, Texas
and the New Location for the Executive's spouse and child
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for purposes of the sale of the Current Residence, the location of a new
residence at the New Location, and orientation at the New Location
(collectively, "Moving Expenses").
(b) To the extent that a deduction is not allowable for federal
income tax purposes for a Moving Expense (as reasonably determined by the
Company), the Company shall pay to the Executive, subject to Section 6(c)
hereof, concurrently with the reimbursement of such Moving Expense, an
additional amount (the "Gross-up Payment"), such that the net amount that
would be retained by the Executive, after the imposition of federal income
tax and applicable withholding and employment taxes in respect of the portion
of such Moving Expense for which a deduction is not allowable, would be equal
to the amount of the Moving Expense to be reimbursed. For purposes of this
calculation, the Executive shall be deemed to be subject to federal income
taxation at the highest marginal rates applicable to individuals for the
calendar year in which such additional payment is made.
(c) Notwithstanding anything herein to the contrary, the aggregate
amount to be reimbursed to the Executive by the Company for Moving Expenses
described in Section 6(a)(ii) hereof and Gross-up Payments made in respect
thereof shall not exceed $70,000.
7. TERMINATION.
(a) TERMINATION WITHOUT CAUSE. If 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:
(i) the Executive shall be entitled to receive (A) his salary and
personal time (I.E., vacation and sick time) accrued through the Date of
Termination (as defined herein) and (B) 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 normally
scheduled payroll for active employees, until the expiration of a period of
two years from the Date of Termination, without mitigation or offset except
as otherwise provided below. Notwithstanding the foregoing, the payments
required under clause 7(a)(i)(B) shall (y) be reduced by an amount equal to
the compensation actually paid by the Company prior to the Date of
Termination to Executive with respect to the period commencing January 15,
1998 and ending on the Date of Termination, such reduction to be effected by
decreasing the number of installments otherwise payable to Executive under
clause 7(a)(i)(B) such that Executive shall in no event be entitled to
receive any such payments subsequent to January 15, 2000, and (z) not be
payable from and after the date ("the Liquidity Date") on which either of the
following events occurs: (A) all shares of the common stock of Parent
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("Common Stock") owned by Executive and all shares of Common Stock which
Executive has purchased or is entitled to purchase pursuant to exercisable
stock options shall be freely transferable without restriction (1) under the
Securities Act of 1933, as amended (the "Securities Act"), or otherwise
(except for any limitation on resale under Rule 144 (e), (f) or (g) under the
Securities Act), (2) with respect to any lock-up period imposed by the
underwriters and (3) under the Stockholders Agreement (as defined herein),
(B) the Company or Parent shall have purchased for cash consideration all
shares of Common Stock owned by Executive and all shares of Common Stock
which Executive has purchased or is entitled to purchase pursuant to
exercisable stock options for the "Fair Market Value" of such shares as
determined pursuant to Section 4.3 of the Stockholders Agreement (as
hereinafter defined), or (C) the Executive shall have sold in the Proposed
Public Offering (as defined herein) all shares of Common Stock owned by
Executive and all shares of Common Stock which Executive has purchased or is
entitled to purchase pursuant to exercisable stock options;
(ii) the Executive shall be entitled to (A) such medical and other
benefits on substantially the same terms as are regularly offered to senior
executives of the Company until the Liquidity Date, and (B) the reimbursement
of Moving Expenses to the extent provided in (A) Section 6(a)(i), (ii) and
(iii) hereof, whether or not incurred prior to the Date of Termination, and
(B) Section 6(a)(iv) and (v) hereof, if incurred prior to the Date of
Termination;
(iii) [left intentionally blank]
(iv) in the event that (A) prior to, or within 4 months after, the
Date of Termination, an agreement or letter of intent is executed involving
(1) the sale of all the outstanding capital stock of the Maple Leaf
Aerospace, Inc. (the "Parent") or the Company, (2) the sale by the Parent or
the Company of all or substantially all of its business operations or assets
(which sale may exclude substantial inventories), or (3) a merger,
consolidation, reorganization, dissolution or liquidation of the Parent or
the Company that would result in the occurrence of an event described in
clauses (1) or (2) of this Section 7(a)(iv), and (B) such transaction is
consummated by the parties specified in such agreement or letter of intent or
an Affiliate (as defined herein) of any such party no later than 6 months
after the execution of such agreement or letter of intent (a
"Post-Termination Sale"):
(x) in the event that the Parent previously shall have exercised
its right to repurchase Common Stock owned by the Executive pursuant
to the Management Stockholders and Optionholders Agreement, dated as
of September 19, 1996, among the Parent and the Stockholders (as
defined therein) (the "Stockholders Agreement"), the Company shall pay
to the Executive, upon consummation of the Post-Termination Sale, an
amount equal to the excess, if any, of (1) the amount the Executive
would have received
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upon the consummation of the Post-Termination Sale in respect of his
shares of Common Stock so repurchased by Parent or the Company, had
he held such shares at the time of the Post-Termination Sale, over
(2) the Repurchase Price (as defined in the Stockholders Agreement)
received by the Executive in respect of such shares of Common Stock;
and
(y) the Company shall pay to the Executive an amount equal to the
amount that the Executive would have received upon the consummation of
the Post-Termination Sale in respect of options granted to the
Executive under the Parent's 1996 Stock Option Plan (the "Plan"),
which options shall have expired unexercised by reason of such
termination of employment, to the extent that such options would have
become exercisable had the Executive's employment continued until the
date of consummation of such Post-Termination Sale.
The Company may provide the payments described in Section 7(a)(iv) in the
same consideration received in the Post-Termination Sale.
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)(ii) shall cease
immediately upon the commencement of such employment to the extent that such
employment provides comparable benefits and such benefits commence.
(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 7(a), the Executive shall have no right
to receive any unaccrued compensation or unaccrued personal time hereunder
after the Date of Termination (as defined herein).
(c) DEFINITIONS. For purposes of this Agreement (and for purposes
of applying the Stockholders Agreement to the shares of Parent common stock
owned by the Executive):
(i) "Disability" shall mean the inability (as reasonably
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 substantially
perform his material duties with the Company for six consecutive months or
shorter periods aggregating six months during any twelve-month period;
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(ii) "Cause" shall mean the occurrence of one or more of the
following events: (A) any intentional or willful failure (other than a
failure resulting from the Executive's physical illness or injury) by the
Executive to substantially perform his or her employment duties (as agreed to
in writing by the Executive and the Company) which shall not have been
corrected within 30 days following written notice from the Chairman of the
Board of the Directors of the Company 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 this Agreement (provided that, except as may be agreed
to by the Company and Executive in writing, the Executive will be entitled to
the 30 day cure period with respect to any such alleged breach), the
Stockholders 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 significant 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 Executive shall have given written notice thereof to the Board of
Directors of the Company, (B) the Company having directed Executive to report
to an individual other than the Chairman of the Board of Directors of the
Company, unless the Company, within 14 days following written notice by
Executive to the Board of Directors of the Company setting forth a
description thereof, shall have cured such occurrence or event, or (C) the
Company having directed Executive to take or condone a material illegal
action, which action is not taken or condoned by Executive and which
direction is not reversed within 5 business days of receipt of written notice
to the Board of Directors of the Company setting forth such occurrence.
(iv) "Affiliate" shall mean, when used with reference to a
specific person: (A) any person directly or indirectly owning, controlling
or holding the power to vote twenty percent (20%) or more of any class of the
voting securities of the specified person; (B) any person that directly or
indirectly through one or more intermediaries controls or is controlled by or
is under common control with the specified person; or (C) any person that is
an officer or director of, general partner in, or trustee of, or serves in a
similar capacity with respect to, the specified person or of which the
specified person is an officer or director, general partner or trustee, or
with respect to which the specified person serves in a similar capacity.
(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") which shall set forth in reasonable detail the basis for such
termination of employment under this
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agreement and shall be given in accordance with the notice provisions herein.
In the event that the Company terminates the Executive's employment
hereunder and does not provide a Notice of Termination within 7 days
thereafter, such termination shall be conclusively deemed to be termination
without Cause. In the event that the Executive terminates his employment
hereunder and does not provide a Notice of Termination within 7 days
thereafter, such termination shall be conclusively deemed to be termination
without Good Reason.
(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, (iii) in the case of non-renewal of
the Term (or any extension thereof), at the expiration of the then current
Term, and (iv) in any other case, the date specified in the Notice of
Termination, which shall not be retroactive to a date prior to the date such
Notice of Termination is given.
(f) REPURCHASE OF COMMON STOCK. In the event that, prior to
September 30, 1997, the employment of the Executive is terminated (i) by the
Company (A) other than for Cause or (B) by reason of the Executive's
Disability, or (ii) by the Executive for Good Reason, or (iii) by reason of
the Executive's death, then, notwithstanding anything to the contrary in the
Stockholders Agreement, the determination of Fair Market Value (as defined
therein) of the Parent's common stock shall be determined as if the Executive
had remained employed by the Company through and including September 30, 1997.
(g) LIMITATION ON COMPANY'S TERMINATION RIGHTS. The Company
agrees that the Company will not terminate Executive except for Cause, or due
to the death or Disability of Executive, during the period beginning on the
date of consummation of the Proposed Public Offering (as hereinafter defined)
and until the Liquidity Date.
The performance by the Company of its obligations under this Section 7 shall
constitute full settlement and release of any claim or cause of action, of
whatsoever nature, which the Executive might otherwise assert against the
Company or any of its directors, stockholders, officers or employees pursuant
to this Agreement on account of the termination of the Executive's employment.
8. 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 7(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,
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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 two years 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 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.
(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. Notwithstanding the foregoing, the Executive
shall be permitted to disclose confidential information solely to the extent
required by court or administrative order, provided that the Executive
immediately provides notice to the Company that he is required by court or
administrative order to disclose such confidential information and the
Company has had an opportunity to protest and contest any assertion that the
Executive is required to make such disclosure and to seek a protective order
or other remedy which may narrow the scope of required disclosure or
otherwise protect the confidentiality of such information to the maximum
extent possible. The Executive agrees to cooperate and assist the Company,
at the Company's expense, in preparing any protest or contest of any such
assertion and seeking any such remedy. 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.
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(d) COVENANTS NON-EXCLUSIVE. The Executive acknowledges and
agrees that the covenants contained in this Section 8 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.
9. COVENANTS OF PARENT. Parent covenants that it shall perform
its obligations under this Agreement and shall cause the Company to perform
the Company's obligations under this Agreement.
10. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the
Executive from and against any and all liabilities incurred or sustained by
him in connection with any claim, action, investigation, suit or proceeding
to which he may be made a party by reason of his acts or omissions in
connection with his being or having been an officer, director or employee of
the Company or Parent, to the maximum extent permitted by law. This Section
10 is not intended to limit any rights which the Executive may have under the
Company's or the Parent's By-laws or under applicable law.
(b) Parent agrees that, in the event that Executive shall be
permitted to include shares of Common Stock owned by Executive (including any
shares of Common Stock which Executive has purchased or is entitled to
purchase pursuant to exercisable stock options) in any registration statement
covering shares of the Common Stock, Parent shall provide indemnification to
Executive on the same terms as provided to other stockholders of the Company
whose shares are included in such registration statement, provided that
Parent shall have no such obligation if Executive shall have declined, or
otherwise failed, to provide (following its presentation to Executive on
reasonable notice) to Parent and any underwriter participating in the
offering relating to such registration statement indemnification on the same
terms as provided to the Company and any such underwriter by the other
stockholders of the Company whose shares are included in such registration
statement.
(c) Parent further agrees that, from and after the Date of
Termination, it shall maintain directors and officers liability insurance and
fiduciary insurance covering Executive for a period of no lesser duration
than, and on terms no less favorable than, those provided by the Company to
any director of Parent on December 31, 1997; provided, however, that the
foregoing obligation shall not require Parent to maintain any particular
level of coverage for Executive or any other present or former director or
officer of Parent, the Company, or any of their affiliates.
9
<PAGE>
(d) In the event that Parent (i) consolidates with or merges into
any other person and Parent is not the continuing or surviving corporation or
entity of such consolidation or merger, or (ii) transfers all or
substantially all of its business operations or assets to any other person,
proper provision shall be made so that the successors and assigns of Parent
assume the obligations set forth in this Section.
(e) Executive agrees to indemnify and hold harmless Parent, the
Company and their affiliates from and against any and all losses, costs,
damages or other liabilities incurred or sustained by any of them in
connection with any breach by Executive of any covenant of Executive
contained in this Agreement, the Stockholders Agreement or any subscription
agreement entered into by the Executive with the Company.
11. OPTION PLAN.
(a) Until January 15, 1998, the Company shall not provide
less favorable terms in the options granted to the Executive under the Plan
than are provided to all other employees of the Company holding a position of
vice president or higher.
(b) The Executive shall be granted options under the Plan for
such number of shares shown on, and substantially in, the form annexed
hereto.
(c) Effective immediately and for a period of 30 days, the
Executive shall have the right to purchase from Parent 1,296 shares of common
stock of Parent, at a price of $231.59 per share, subject to the terms and
conditions of the Stockholders Agreement.
(d) In the event that Executive wishes to exercise some or
all of his exercisable options to purchase Common Stock, Parent shall,
promptly upon Executive's request, use its best efforts, following the
expiration of any "lock-up" period imposed by the underwriters in connection
with the Proposed Public Offering, to arrange a "broker assisted" cashless
exercise arrangement with respect to those options which Executive wishes to
exercise. However, Parent shall not have any obligation under this Section
11(d) if Executive shall have previously realized, in cash on an after tax
basis, an amount from the sale, or series of sales, of Executive's Common
Stock (including Common Stock purchased upon the exercise of options)
exceeding, in the aggregate, the sum of the exercise price and any applicable
withholding tax on all remaining exercisable options held by Executive.
12. STOCKHOLDERS AGREEMENT. The Company shall notify the
Executive of any proposed amendments to the Stockholders Agreement or Plan no
less than 10 business days prior to the proposed effective date of any such
amendment. Such amendments shall not apply to any options or stock held by
the Executive without his written consent, which
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shall not be unreasonably withheld or delayed, and which may be withheld only
in the event that such amendment materially and adversely affects the
Executive's interest therein with respect to material matters, including but
not limited to the vesting schedule, exercise price, performance targets,
duration, forfeiture provisions and exercise conditions pertaining to
options, or the duration, repurchase prices and conditions permitting
exercise of the Parent's repurchase rights or the Executive's put rights
under the Stockholders Agreement. The failure of the Executive to object to
any such amendment within 10 days after being given notice thereof shall be
deemed to constitute his consent thereto. Shares of common stock of Parent
acquired by the Executive through purchases in the public markets shall not
be treated as "after acquired shares" for purposes of Section 9.2 of the
Stockholders Agreement. The term "requesting" in Section 4.4 of the
Stockholders Agreement shall be deemed to mean "requiring."
13. CONFLICT WITH OTHER AGREEMENTS. To the extent that a conflict
exists between the provisions of the Agreement and the current or future
provisions of the Plan (or the current or future provisions of the
Stockholders Agreement), the provisions of this Agreement shall control.
Neither the Stockholders Agreement nor the Plan may supersede provisions of
this Agreement without the written consent of the Executive.
14. 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 as may be designated in writing by such party):
IF TO THE EXECUTIVE:
Mr. G. Bruce McInnis
3805 Miramar Ave.
Dallas, Texas 75205
with a copy to:
Mayor, Day, Caldwell & Keeton LLP
1900 Nations Bank Center
700 Louisiana Ave.
Houston, Texas 77002
Attention: Jeff Dodd, Esq.
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IF TO THE COMPANY:
TriStar Aerospace, Inc.
2527 Willowbrook Road
Dallas, Texas 75220-4420
Attention: Mr. Quentin Bourjeaurd
With a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Simeon Gold, Esq.
15. REGISTRATION OF COMMON STOCK.
(a) In connection with the proposed underwritten public offering
of the shares of Common Stock owned by the Odyssey Holders (the "Proposed
Public Offering"), Parent shall use its best efforts to include in the
registration statement relating to the Proposed Public Offering all of the
shares of Common Stock owned by Executive and the shares of Common Stock
which Executive has purchased or is entitled to purchase pursuant to
exercisable stock options prior to or concurrently with the sales proposed to
be made in the Proposed Public Offering, subject to the right of the
underwriters participating in such offering to determine that none of
Executive's shares may be included in such offering, that only some of
Executive's shares may be included in such offering, that Executive's shares
may be included only disproportionately to the other selling stockholders in
such offering, that Executive's shares of Common Stock and the shares of
Common Stock which Executive has purchased or is entitled to purchase
pursuant to exercisable options may be disproportionately included in such
offering and/or the overallotment option and/or that Executive's
participation in such offering is limited to the underwriters' "overallotment
option" rather than the basic offering itself. Parent shall use its best
efforts to induce the underwriters to permit Executive to exercise options in
respect of shares to be sold in such offering in a "cashless exercise"
arrangement with respect to those options to be exercised by Executive (ie.
to permit Executive to pay the exercise price and withholding tax arising
from the exercise of options from the proceeds of the simultaneous sale of
Executive's shares in the offering). Subject to the rights of the
underwriters as specified in this Section 15(a), in the event that any of
Executive's shares of Common Stock, or Common Stock which may be purchased
pursuant to exercisable stock options (prior to or concurrently with such
offering), are eligible to be included in the Proposed Public Offering,
Executive, in his sole discretion, may determine which of such Common Stock
to include, or stock options to exercise for the
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<PAGE>
purpose of including the underlying shares of Common Stock, in the Proposed
Public Offering.
(b) Parent shall use its best efforts to file a Form S-8
registration statement within 30 days following the expiration of any
"lock-up" period imposed by the underwriters in connection with the Proposed
Public Offering, and shall include in such registration statement all of the
exercisable options then held by Executive."
16. MUTUAL RELEASE OF CLAIMS.
(a) Except for the rights of Executive under this Agreement, the
Stockholders Agreement, the Option Plan and Executive's stock option grant
letters and rights with respect to any of Executive's options to acquire
shares of Common Stock, Executive (and his heirs and successors) hereby
generally RELEASE, REMISE, ACQUIT, AND FOREVER DISCHARGE each of Parent and
the Company, and their respective agents, affiliates, parents, stockholders,
attorneys, partners, directors, associates, employees, officers,
subsidiaries, divisions, successors, and assigns (the "Released Parties") of
and from all claims, demands, and causes of action of any kind whatsoever at
common law, statutory, contractual or otherwise, past or present, known or
unknown, fixed or contingent, now existing that Executive has or may have
against the Released Parties.
(b) Except for the rights of the Company and Parent under this
Agreement, the Stockholders Agreement, the Option Plan and Executive's stock
option grant letters and rights with respect to any of Executive's options to
acquire shares of Common Stock, each of the Company and Parent hereby
generally RELEASE, REMISE, ACQUIT, AND FOREVER DISCHARGE Executive (and his
heirs and successors) of and from all claims, demands, and causes of action
of any kind whatsoever at common law, statutory, contractual or otherwise,
past or present, known or unknown, fixed or contingent, now existing that the
Company or Parent have or may have against Executive.
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<PAGE>
17. 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; ASSIGNMENT. 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. This Agreement shall not be assignable by either party
without the prior written consent of the other party; PROVIDED, HOWEVER, that
nothing contained herein shall prohibit the Company from assigning this
Agreement pursuant to a merger, consolidation or sale of all or substantially
all of the business or assets of the Company. In addition, the Company shall
require any such successor to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place.
(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 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
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<PAGE>
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.
(h) RESTRICTIONS IN STOCKHOLDERS AGREEMENT. From and after the
consummation of the Proposed Public Offering, all restrictions and all rights
to repurchase any of Executive's shares of Common Stock (including shares
that Executive has purchased or is entitled to purchase pursuant to
exercisable options) under Articles I-V of the Stockholders Agreement shall
cease, and the Company, Parent and their respective affiliates shall cause
all such restrictions to be waived. The Company, Parent and their respective
affiliates shall use their best efforts to obtain similar waivers from
Odyssey (as defined in the Stockholders Agreement) if the Stockholders
Agreement does not terminate upon the consummation of the Proposed Public
Offering.
[The Remainder of this Page is intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have signed and delivered this
Agreement as of the date first above written.
TRI-STAR AEROSPACE, CO.
By: /s/ Stephen Berger
-----------------------------------------
Name: Stephen Berger
Title: Chairman of the Board
MAPLE LEAF AEROSPACE, INC.
By: /s/ Stephen Berger
-----------------------------------------
Name: Stephen Berger
Title: Chairman of the Board
/s/ G. Bruce McInnis
--------------------------------------------
G. Bruce McInnis
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of March 17, 1997, by and between Tri-Star Aerospace,
Co., a Delaware corporation (the "Company", and Louis Partenza (the
"Executive")
WHEREAS, the Company desires to retain the Executive as its Senior Vice
President, Sales and Marketing, 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
March 17, 1997, as its Senior Vice President, Sales and Marketing, and the
Executive hereby accepts such employment.
2. TERM. Unless earlier terminated pursuant to the provisions hereof,
the term of the Executive's employment (the "Term") shall have commenced on
March 17, 1997 and shall end on December 31, 1999.
3. DUTIES.
(a) During the Term, the Executive shall perform all duties and
functions reasonably appurtenant to his position as Vice President, Sales and
Marketing, and as reasonably directed by the Chief Executive Officer and Board
of Directors of the Company.
(b) The Executive agrees to devote substantially all of his business
time to his duties as set forth above.
4. COMPENSATION.
(a) SALARY. During the term of the Executive's employment
hereunder, the Executive shall receive an annual salary of $140,000 (the "Base
Salary"), payable in accordance with the customary payroll practices of the
Company, and 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 his Base salary, the Executive shall
be entitled to participate in a bonus plan to be administered by the
Compensation Committee whereby the
<PAGE>
Executive may earn a bonus equal to up to 50% of his Base Salary, based upon
and subject to the Company's achievement of such performance targets as are
determined by the Compensation Committee and the Chief Executive Officer of
the Company in their sole and absolute discretion. Such bonus, if and when
earned, shall payable at the end of the fiscal year in respect of which such
bonus was earned.
(c) BENEFITS. The Executive shall receive such medical and other
benefits as are regularly offered to other senior executives of the Company.
5. EXPENSES.
(a) RELOCATION EXPENSES. Upon presentation by the Executive 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 Executive for such expenses as the Board of
Directors of the Company, in its sole and absolute discretion, determines to be
necessary and reasonable in connection with the relocation of Executive, his
family and their personal effects to a new location designated by the Company.
(b) BUSINESS EXPENSES. During the term of the Executive's
employment hereunder, 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.
6. TERMINATION.
(a) TERMINATION WITHOUT CAUSE. If 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):
(i) the Executive shall be entitled to receive (A) his salary
and personal time (I.E., vacation and sick time) accrued through the Date of
Termination (as defined herein), and (B) an amount equal to two times his Base
Salary 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 normally
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scheduled payroll for active employees, until the expiration of a period of
two years from the Date of Termination; and
(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 two years 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 payments and benefits described in Sections 6(a)(i) and (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 6(a), the Executive shall have no right to receive any
unaccrued compensation or unaccrued personal time from and after the Date of
Termination.
(c) DEFINITIONS. For purposes of this Agreement:
(i) "Disability" shall mean the inability (as reasonably
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 substantially
perform his material 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 (other than a failure
resulting from the Executive's physical illness or injury) by the Executive to
substantially perform his employment duties which shall not have been corrected
within 30 days following written notice from the Chairman of the Board of
Directors of the Company 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 Stockholders 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
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in or is reasonably expected to result in significant 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") which shall set forth in reasonable detail the basis for such
termination of employment under this agreement and shall be given in accordance
with the notice provisions herein. In the event that the Company terminates
the Executive's employment hereunder and does not provide a Notice of
Termination within 7 days thereafter, such termination shall be conclusively
deemed to be termination without Cause.
(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, (iii) in the case of non-renewal of the Term, at the
expiration of the Term, and (iv) in any other case, the date specified in the
Notice of Termination.
(f) SETTLEMENT AND RELEASE. The performance by the Company of its
obligations under this Section 6 shall constitute full settlement and release
of any claim or cause of action, of whatsoever nature, which the Executive
might otherwise assert against the Company or any of its directors,
stockholders, officers or employees pursuant to this Agreement on account of
the termination of the Executive's employment.
7. EXECUTIVE COVENANTS.
(a) NON-COMPETITION. During the Term so long as severance benefit
is in force and for period of two years after the Date of Termination, 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 or affiliates) which
is in competition with any business in which the Company or any of its
subsidiaries
4
<PAGE>
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 two years 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 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.
(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. Notwithstanding the foregoing, the Executive shall
be permitted to disclose confidential information solely to the extent required
by court or administrative order, provided that the Executive immediately
provides notice to the Company that he is required by court or administrative
order to disclose such confidential information and the Company has had an
opportunity to protest and contest any assertion that the Executive is required
to make such disclosure and to seek a protective order or other remedy which
may narrow the scope of required disclosure or otherwise protect the
confidentiality of such information to the maximum extent possible. The
Executive agrees to cooperate and assist the Company, at the Company's expense,
in preparing any protest or contest of any such assertion and seeking any such
remedy. 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
5
<PAGE>
domain or becomes generally known in the industry through no fault of the
Executive.
(d) COVENANTS NON-EXCLUSIVE. The Executive acknowledges and
agrees that his covenants contained in this Section 7 shall (i) survive any
termination of this Agreement and (ii) 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.
8. INDEMNIFICATION. The Company agrees to indemnify and hold harmless
the Executive from and against any and all liabilities incurred or sustained by
him in connection with any claim, action, investigation, suit or proceeding to
which he may be made a party by reason of his acts or omissions in connection
with his being or having been an officer, director or employee of the Company
or Parent, to the maximum extent permitted by law. This Section 8 is not
intended to limit any rights which the Executive may have under the Company's
By-laws or under applicable law.
9. PURCHASE OF COMMON STOCK. Effective immediately and for a period of
60 days, the Executive shall have the right to purchase from Maple Leaf
Aerospace, Inc. ("Parent") 432 shares of the common stock of Parent, at a price
of $231.59 per share, subject to the terms and conditions of the Management
Stockholders' and Optionholders' Agreement, dated as of September 19, 1996,
among Parent and stockholders of Parent party thereto, as such agreement may be
amended from time to time.
10. 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 as
may be designated in writing by such party):
(i) IF TO THE EXECUTIVE:
Mr. Louis F. Partenza
4103 Paddington Lane
Colleyville, TX 76034
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(ii) IF TO THE COMPANY:
Tri-Star Aerospace, Co.
11535 East Pine Street
Tulsa, Oklahoma 74116
Attention: Chairman of the Board
With a copy to:
Odyssey Partners, L.P.
31 West 52nd Street
New York, New York 10019
Attention: Mr. Stephen Berger
11. 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; ASSIGNMENT. 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.
This Agreement shall not be assignable by either party without the prior
written consent of the other party; PROVIDED, HOWEVER, that nothing contained
herein shall prohibit the Company from assigning this Agreement pursuant to a
merger, consolidation or sale of all or substantially all of the business or
assets of the Company. In addition, the Company shall require any such
successor to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession had taken place.
(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.
7
<PAGE>
(e) SEVERABILITY. The provisions of this Agreement are severable,
and the invalidity of any provision shall not affect the validity of any other
provision. In the event that any provision of this Agreement or the
application thereof is held to be unenforceable because of the duration or
scope thereof, the parties hereto agree that the panel of arbitrators or court
making such determination shall have the power to reduce the duration and scope
of such provision to the extent necessary to make it enforceable, and that the
Agreement in its reduced form shall be valid and enforceable to the full extent
permitted by law.
(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.
[signature page follows]
8
<PAGE>
IN WITNESS WHEREOF, the parties have signed and delivered this Agreement
as of the date first above written.
TRI-STAR AEROSPACE, CO.
By: /s/ Stephen Berger
-----------------------------------
Name: Stephen Berger
Title:
/s/ LOUIS F. PARTENZA
-----------------------------------
Louis F. Partenza
9
<PAGE>
TriStar Aerospace Co.
Computation of Earnings per Share
(Dollars in Thousands, Except per Share Amounts)
<TABLE>
Three-months Year
Ended Ended Inception to
December 31, September 30, September 30,
1997 1996 1997 1996
------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Basic earnings per share:
Net income $ 3,735 $ 2,444 $11,603 $ 289
------- ------- ------- -------
------- ------- ------- -------
Weighted average common shares 16,583 15,118 15,897 15,118
------- ------- ------- -------
------- ------- ------- -------
Net income per common share $ 0.23 $ 0.16 $ 0.73 $ 0.02
------- ------- ------- -------
------- ------- ------- -------
Diluted earnings per share:
Net income $ 3,735 $ 2,444 $11,603 $ 289
------- ------- ------- -------
------- ------- ------- -------
Weighted average common shares 16,583 15,118 15,897 15,118
Shares issued upon assumed
exercise of dilutive stock
options 2,987 -- 2,715 --
Shares assumed repurchased (1,955) -- (2,103) --
------- ------- ------- -------
Weighted average common and
common equivalent shares 17,615 15,118 16,509 15,118
------- ------- ------- -------
------- ------- ------- -------
Net income per common and
common equivalent share $ 0.21 $ 0.16 $ 0.70 $ 0.02
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of
this Form S-1 registration statement filed by TriStar Aerospace Co. on
February 13, 1998.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
February 13, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
TRISTAR AEROSPACE CO. AND SUBSIDIARIES AS OF SEPTEMBER 30, 1997 AND
THE YEAR THEN ENDED AND AS OF DECEMBER 31, 1997 AND THE THREE
MONTH PERIOD THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> SEP-30-1997 SEP-30-1998
<PERIOD-START> OCT-01-1996 OCT-01-1997
<PERIOD-END> SEP-30-1997 DEC-31-1997
<CASH> 4,764 3,201
<SECURITIES> 0 0
<RECEIVABLES> 24,854 29,387
<ALLOWANCES> 549 563
<INVENTORY> 69,085 76,214
<CURRENT-ASSETS> 99,680 110,010
<PP&E> 2,106 2,453
<DEPRECIATION> 483 693
<TOTAL-ASSETS> 110,235 120,527
<CURRENT-LIABILITIES> 28,076 31,633
<BONDS> 49,000 52,000
0 0
0 0
<COMMON> 166 166
<OTHER-SE> 32,993 36,728
<TOTAL-LIABILITY-AND-EQUITY> 110,235 120,527
<SALES> 140,719 42,635
<TOTAL-REVENUES> 140,719 42,635
<CGS> 96,393 29,416
<TOTAL-COSTS> 21,048 6,040
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 549 15
<INTEREST-EXPENSE> 5,263 1,204
<INCOME-PRETAX> 18,162 6,026
<INCOME-TAX> 6,559 2,291
<INCOME-CONTINUING> 11,603 3,735
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 11,603 3,735
<EPS-PRIMARY> .73 .23
<EPS-DILUTED> .70 .21
</TABLE>
