<PAGE> 1
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
--------- --------
COMMISSION FILE NUMBER 1-12380
------------------------------
AVIALL, INC.
(Exact name of Registrant as specified in its Charter)
DELAWARE 65-0433083
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2075 DIPLOMAT DRIVE
DALLAS, TEXAS 75234-8999
(Address of principal executive offices) (Zip Code)
(972) 406-2000
(Registrant's telephone number, including area code)
Indicate by check [X] whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
The number of shares of Common Stock, par value $.01 per share,
outstanding at May 5, 1999 was 18,241,421.
===============================================================================
1
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
AVIALL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------------
1999 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 87,408 98,030
Cost of sales 63,322 72,990
- ----------------------------------------------------------------------------------------------------------------------
Gross profit 24,086 25,040
Operating and other expenses:
Selling and administrative expenses 18,210 17,187
Interest expense 720 507
- ----------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 5,156 7,346
Provision for income taxes 2,070 367
- ----------------------------------------------------------------------------------------------------------------------
Net earnings $ 3,086 6,979
======================================================================================================================
Basic net earnings per share $ 0.17 0.35
Weighted average common shares 18,190,455 19,968,503
======================================================================================================================
Diluted net earnings per share $ 0.17 0.34
Weighted average common and potentially
dilutive common shares 18,470,381 20,388,350
======================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
AVIALL, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
- ----------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,983 3,136
Receivables 63,479 59,357
Inventories 92,351 84,078
Prepaid expenses and other current assets 2,199 1,849
Deferred income taxes 18,174 7,674
- ----------------------------------------------------------------------------------------------------------------------
Total current assets 181,186 156,094
- ----------------------------------------------------------------------------------------------------------------------
Property, plant and equipment 10,451 10,331
Intangible assets 58,055 58,709
Deferred income taxes 63,993 76,222
Other assets 3,212 3,290
- ----------------------------------------------------------------------------------------------------------------------
Total assets $ 316,897 304,646
======================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 13,245 13,628
Accounts payable 37,471 31,615
Accrued expenses 32,251 34,934
- ----------------------------------------------------------------------------------------------------------------------
Total current liabilities 82,967 80,177
- ----------------------------------------------------------------------------------------------------------------------
Long-term debt 36,750 32,000
Other liabilities 25,171 23,880
Shareholders' equity (includes common stock of $.01 par value per share with
80,000,000 shares authorized; 20,241,421 shares and 20,180,267 shares issued
at March 31, 1999 and at December 31, 1998, respectively; 18,241,421 shares
and 18,180,267 shares outstanding at March 31, 1999 and at December 31, 1998,
respectively; preferred stock of $.01 par value per share with 10,000,000
shares authorized and no shares issued and outstanding) 172,009 168,589
- -------------------------------------------------------------------------------------- --------------- ---------------
Total liabilities and shareholders' equity $ 316,897 304,646
======================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
AVIALL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
------------------------------
1999 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 3,086 6,979
Depreciation and amortization 1,540 1,376
Deferred income taxes 1,728 4
Compensation expense on restricted stock awards 50 57
Changes in:
Receivables (4,122) (2,934)
Inventories (8,273) (3,930)
Accounts payable 5,856 5,737
Accrued expenses (2,683) (1,132)
Other, net 897 (1,067)
- ----------------------------------------------------------------------------------------------------------------------
(1,921) 5,090
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (933) (1,033)
Sales of property, plant and equipment 50 (81)
- ----------------------------------------------------------------------------------------------------------------------
(883) (1,114)
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt repaid (3,003) (2,272)
Net change in revolving credit facility 7,370 1,783
Issuance of common stock 284 2,767
Purchase of treasury stock -- (195)
- ----------------------------------------------------------------------------------------------------------------------
4,651 2,083
- ----------------------------------------------------------------------------------------------------------------------
Change in cash 1,847 6,059
Cash, beginning of period 3,136 7,556
- ----------------------------------------------------------------------------------------------------------------------
Cash, end of period $ 4,983 13,615
======================================================================================================================
CASH PAID FOR INTEREST AND INCOME TAXES:
Interest $ 694 621
Income taxes $ 111 78
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
AVIALL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, these financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for the
three-month period ended March 31, 1999 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999. For further
information, refer to the financial statements and footnotes thereto included
in Aviall, Inc.'s Form 10-K for the year ended December 31, 1998.
NOTE 2 - SEGMENT INFORMATION
The following tables present information by operating segment (in
thousands):
<TABLE>
<CAPTION>
Three months
ended
March 31,
---------------------
Revenues 1999 1998
-------------------------------------------------------------------------------------------
<S> <C> <C>
(Unaudited)
Parts Distribution $ 80,026 91,002
ILS 7,382 7,028
-------------------------------------------------------------------------------------------
Total revenue $ 87,408 98,030
===========================================================================================
Profit
-------------------------------------------------------------------------------------------
Parts Distribution $ 3,342 5,372
ILS 4,264 3,939
-------------------------------------------------------------------------------------------
Reportable segment profit 7,606 9,311
Corporate (1,730) (1,458)
Interest expense (720) (507)
-------------------------------------------------------------------------------------------
Earnings before income taxes $ 5,156 7,346
===========================================================================================
</TABLE>
5
<PAGE> 6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW. The following discussion and analysis should be read in conjunction
with the information set forth under Item 7: Management's Discussion and
Analysis of Financial Condition and Results of Operations on pages 11 through
19 of Aviall, Inc.'s (the "Company") Form 10-K for the year ended December 31,
1998.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE
MONTHS ENDED MARCH 31, 1998. Parts Distribution sales were impacted by the
February 1, 1999 implementation of the new Lawson enterprise system. These
issues stemmed from problems in the newly-released software as well as the
employees' lack of familiarity with the system. Parts Distribution converted
its operations to the Lawson system on February 1 and immediately experienced a
30% decline in sales in the first weeks of February compared to the same period
in January. As the Company addressed these issues, sales began to recover in
the second half of February and continued to improve throughout March. Net
sales for Parts Distribution for the first quarter of 1999 were $80.0 million,
a decline of $11.0 million, or 12.1%, from the $91.0 million recorded in the
same 1998 quarter. Parts Distribution sales were lower in all major business
segments and geographic regions except the European and Australian segments
which posted slight increases. ILS revenue increased $0.4 million, or 5.0%,
from $7.0 million to $7.4 million year over year.
Gross profit of $24.1 million was $0.9 million lower than the $25.0
million in the 1998 first quarter. Gross profit as a percentage of sales
increased to 27.6% from 25.5%. This increase in gross profit percentage was
primarily the result of increased margins in the Parts Distribution business
and the higher percentage of ILS sales to total sales for the quarter.
Selling and administrative expenses increased $1.0 million, or 6.0%, to
$18.2 million in the first quarter of 1999. The increase primarily resulted
from start-up expenses related to the first phase of the AviallOne project and
costs associated with the strategic review process announced in February 1999.
Interest expense was higher than in the first quarter 1998 reflecting the
higher debt levels in the first quarter of 1999.
Tax expense for the first quarter of 1999 increased $1.7 million to $2.1
million from the $0.4 million in the first quarter of 1998. The effective tax
rate increased to 40.1% from 5.0% due to the year-end 1998 release of a U.S.
federal valuation allowance on deferred tax assets. This increase in the
provision for taxes reduces the Company's deferred tax asset, but does not
result in increased cash tax payments.
First quarter 1999 net earnings were $3.1 million, or $0.17 per share
(diluted), compared to $7.0 million, or $0.34 per share (diluted), last year in
the first quarter. Using an effective tax rate comparable to 1999, prior year
results would have been $4.4 million, or $0.22 per share (diluted).
FINANCIAL CONDITION. Cash flows from operations were negative $1.9 million in
the first three months of 1999 and $5.1 million in the comparable 1998 period.
The reduced operating cash flow resulted from lower sales and gross profit due
to the implementation of the new computer system and increased inventory
purchases for anticipated sales volume partially offset by increased payables
for these purchases.
The Company's cash income tax expense continues to be substantially lower
than the U.S. federal statutory rate due to the utilization of the large U.S.
federal net operating loss ("NOL"). The Company's cash tax expense is primarily
related to foreign taxes on foreign operations and U.S. federal alternative
minimum tax. For U.S. federal tax purposes as of December 31, 1998, the Company
had an estimated net operating loss carryforward of approximately $180 million
expiring in 2009-2011. Based on current and expected future earnings levels,
the NOLs may not be fully utilized for several years. If certain substantial
changes in the Company's ownership should occur, there would be an annual
limitation on the amount of the U.S. federal NOL carryforward that can be
utilized. The amount of the annual limitation can vary significantly based on
certain factors existing at the date of the change.
The Company believes that its expected cash flow from operations and
availability under its revolving lines of credit are sufficient to meet its
current working capital and operating needs.
6
<PAGE> 7
YEAR 2000 COMPUTER SYSTEM COMPLIANCE. Many existing computer software and
hardware programs refer to the year by only using the last two digits of the
year. These computer programs will not properly interpret the year 2000. These
programs, unless upgraded, could fail or create erroneous results causing a
disruption in the operations of a company.
STATE OF READINESS. During 1998, hardware and system software reviews for
Year 2000 compliance, including information technology ("IT") and non-IT
systems, were conducted by the Company with the assistance of outside
consultants. In addition, the Company is assessing its exposure from external
sources to Year 2000 failures, including major suppliers, customers and
third-party providers. The Company has replaced its financial and Parts
Distribution applications software with Year 2000 compliant systems. The
replacement of the financial software was implemented in the second quarter of
1998. The Parts Distribution applications software replacement was implemented
on schedule in the first quarter of 1999. ILS utilizes internally developed
applications software. The program modifications to make this proprietary
software Year 2000 compliant have been completed. Testing and validation of
these modifications will continue to be conducted during 1999. The following is
a table showing the Company's critical systems state of readiness for Year 2000
based on management's assessment:
STATE OF READINESS AS OF MARCH 31, 1999
INTERNAL IT AND NON-IT SYSTEMS AND EQUIPMENT
<TABLE>
<CAPTION>
ESTIMATED
PERCENT ESTIMATED
PHASE COMPLETE COMPLETION DATE
----- --------- ----------------
<S> <C> <C>
Awareness 100% Complete
Assessment of changes required 95% 2nd Quarter 1999
Remediation or replacement 98% 2nd Quarter 1999
Testing 90% 3rd Quarter 1999
Contingency planning as applicable 5% 3rd Quarter 1999
</TABLE>
SUPPLIERS, CUSTOMERS AND THIRD-PARTY PROVIDERS
<TABLE>
<CAPTION>
ESTIMATED
PERCENT ESTIMATED
PHASE COMPLETE COMPLETION DATE
----- --------- ----------------
<S> <C> <C>
Awareness - identify companies 100% Complete
Assessment questionnaires completed by major suppliers 100% Complete
Detailed assessment review with key third-party providers 20% 2nd Quarter 1999
Review contractual commitments 0% 3rd Quarter 1999
Risk assessment 10% 2nd Quarter 1999
Contingency planning as applicable 5% 2nd Quarter 1999
Testing as applicable 0% 3rd Quarter 1999
</TABLE>
7
<PAGE> 8
COSTS. The Company has replaced its Parts Distribution applications and
financial software with an integrated enterprise system at a cost of
approximately $5 million which is being capitalized. The replacement resulted
from both the need to enhance the efficiencies and effectiveness of the Parts
Distribution operating system by replacing several old legacy systems and to
address the Year 2000 issue. Approximately $200,000 has been expensed to date
related to Parts Distribution for Year 2000 issues. An estimated additional
$200,000 will be expensed. The cost expensed to date to modify the ILS
operating software was $125,000. An additional $100,000 is expected to be
required to complete this project, including testing.
RISKS AND CONTINGENCY PLANS. In management's assessment, the most likely
worst case scenario for Year 2000 non-compliance for Parts Distribution would
result if suppliers were unable to ship inventory. The Company has distributed
questionnaires to its major suppliers to assess their Year 2000 readiness.
Management may adjust inventory purchasing prior to January 1, 2000 for any
suppliers with suspected Year 2000 issues. In addition, Parts Distribution does
limited electronic data interchange ("EDI") with both suppliers and customers.
Purchase and sale orders from EDI suppliers or customers could be processed
manually if EDI failed from either side. Management's assessment of the most
likely worst case scenario for ILS would result if either the listing companies
were unable to update their data or clients were unable to access ILS' database
due to their own systems not being Year 2000 compliant. The Company has
distributed information through the mail and the ILS website on corrective
actions that clients can take to address Year 2000 compliance of their own
systems. The Company depends on third-party providers for key services such as
telecommunications, utilities and transportation. Interruption of these
services could, in management's view, have a material impact on the operations
of the Company. The Company has begun to evaluate the readiness of these
critical suppliers. The Company will assess and develop contingency plans
throughout 1999 depending on circumstances encountered during the year.
Although Aviall's management presently believes the Company is taking
appropriate steps to assess and correct its Year 2000 issues, due to the
general uncertainty inherent in the Year 2000 issue and the readiness of third
parties, Aviall is unable to determine whether Year 2000 will have a material
adverse effect on the Company's results of operations or financial condition.
OUTLOOK. Aviall primarily participates in the global aviation aftermarket
through its core aviation Parts Distribution and ILS businesses. The Company is
affected by the general economic cycle, particularly as it influences flight
activity in commercial, business and general aviation. Aviall serves a
significant number of customers in the Asia-Pacific and Latin American regions.
In 1998, countries in these regions experienced financial market volatility and
the currencies of certain countries fell in value relative to the U.S. dollar.
These factors reduced demand for air travel in the Asia-Pacific region in 1998
and as a result reduced customers' need for aircraft parts and their ability to
pay in a timely manner. Continued volatility in Latin America could produce
similar results in that region in 1999. Recent improvements in the Asia-Pacific
region may lead to a slow business recovery in the region in 1999, which could
result in greater demand for aircraft parts in this region.
Commercial airlines in North America and Europe continue to effectively
manage their capacity by retiring older aircraft as new aircraft are delivered,
limiting growth in demand for replacement parts. Management is actively seeking
new sources of supply for airline products to expand the Company's growth in
that segment.
The operations modules of the Lawson Insight(TM) system were implemented by
the Parts Distribution business in February 1999. Typical systems
implementation issues and the learning curve associated with a large scale
implementation significantly affected sales in February and into March. The
Company and Lawson have addressed the major issues with the system, and Parts
Distribution employees are increasing their proficiency with the system.
Information and communication technology is evolving rapidly, and
developments such as the Internet could affect proprietary database service
companies such as ILS and traditional distribution companies. Management
believes that the active employment by the Company of these new technologies,
such as the Internet, will enable it to maintain its technological leadership
and minimize the risk of obsolescence. A new version of the aviall.com website
currently in development will offer significant improvements to the
functionality of the on-line Parts Distribution ordering system, drawing on
advanced Internet capabilities of the new Lawson Insight(TM) enterprise system.
Similarly, ILS is preparing new content for its website that will be available
on the Internet at ILSmart.com, during the second quarter of 1999. ILS is also
continuing its transition into electronic commerce, and is working with a
number of firms to offer new services in this area.
8
<PAGE> 9
AviallOne, a new program to improve sales processes and enhance customer
service, is a key internal focus for Parts Distribution for 1999. It will
establish one high standard of proficiency using the Lawson Insight(TM) system
to better meet specific customer requirements. In addition to improving the
efficiency and increasing call capacity in the Dallas Sales Center, AviallOne
will enable Parts Distribution to measure, document and implement best practices
in the Company's sales organization and to provide an excellent experience for
all customers.
In late February 1999, the Company announced that its Board of Directors
had authorized the Company to retain an investment banking firm to assist the
Company in exploring alternatives to improve shareholder value. In that regard,
the Company's Board authorized management to examine a range of possible
transactions which may include a sale, joint venture or other transaction
involving the Company or either of its two operating businesses, Parts
Distribution and ILS. This strategic review process is ongoing. There can be no
assurance that any such transaction will be completed or of the terms or timing
of any such transaction.
CERTAIN FORWARD-LOOKING STATEMENTS. This report contains certain
forward-looking statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995) relating to the Company that are based on the
beliefs of the management of the Company, as well as assumptions and estimates
made by and information currently available to the Company's management. When
used in this report, the words "anticipate," "believe," "estimate," "expect,"
"intend" and similar expressions, as they relate to the Company or the
Company's management, identify forward-looking statements. Such statements
reflect the current views of the Company with respect to future events and are
subject to certain risks, uncertainties and assumptions relating to the
operations and results of operations of the Company as well as its customers
and suppliers, including as a result of competitive factors and pricing
pressures, shifts in market demand, Year 2000 issues, general economic
conditions and other factors including among others, those that effect flight
activity in commercial, business and general aviation, the business activities
of the Company's customers and suppliers and developments in information and
communication technology. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions or estimates prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated, expected or intended.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has market risk exposure arising from changes in interest
rates and foreign exchange rates. The Company from time to time has used
financial instruments to offset such risks. Financial instruments are not used
for trading or speculative purposes. The Company has experienced no significant
changes in market risk during the first quarter of 1999. The Company's market
risk is described in more detail in the Company's Annual Report on Form 10-K
for the year ended December 31, 1998.
9
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Amended and Restated By-Laws of Aviall, Inc.
10.1* Form of Amended and Restated Severance Agreement between
Aviall, Inc. and each of its executive officers
10.2* Addendum to Amended and Restated Severance Agreement between
Aviall, Inc. and Bruce Langsen
10.3* Amendment to Aviall, Inc. Stock Incentive Plan
10.4* Amendment to Aviall, Inc. 1998 Stock Incentive Plan
10.5* Aviall, Inc. Benefit Restoration Plan
10.6* Amendment No. One to the Aviall, Inc. Benefit Restoration Plan
10.7* Amended and Restated Severance Pay Plan
27.1 Financial Data Schedule
--------------
* Each document marked with an asterisk constitutes a management
contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
10
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AVIALL, INC.
May 12, 1999 By /s/ Jacqueline K. Collier
------------------------------
Jacqueline K. Collier
Vice President and Controller
May 12, 1999 /s/ Cornelius Van Den Handel
------------------------------
Cornelius Van Den Handel
Vice President and Treasurer
(Principal Financial Officer)
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- --------------------------------------------------------------------------------
<S> <C>
3.1 Amended and Restated By-Laws of Aviall, Inc.
10.1* Form of Amended and Restated Severance Agreement between
Aviall, Inc. and each of its executive officers
10.2* Addendum to Amended and Restated Severance Agreement between
Aviall, Inc. and Bruce Langsen
10.3* Amendment to Aviall, Inc. Stock Incentive Plan
10.4* Amendment to Aviall, Inc. 1998 Stock Incentive Plan
10.5* Aviall, Inc. Benefit Restoration Plan
10.6* Amendment No. One to the Aviall, Inc. Benefit Restoration Plan
10.7* Amended and Restated Severance Pay Plan
27.1 Financial Data Schedule
--------------
</TABLE>
* Each document marked with an asterisk constitutes a management contract
or compensatory plan or arrangement.
<PAGE> 1
EXHIBIT 3.1
------------------------------------
AMENDED AND RESTATED
BY-LAWS
OF
AVIALL, INC.
------------------------------
AS ADOPTED BY THE
BOARD OF DIRECTORS OF AVIALL, INC.
ON
APRIL 16, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
PREAMBLE .........................................................................................................1
ARTICLE I. OFFICES AND RECORDS...................................................................................1
SECTION 1.1. Delaware Office............................................................................1
SECTION 1.2. Other Offices..............................................................................1
SECTION 1.3. Books and Records..........................................................................1
ARTICLE II. STOCKHOLDERS.........................................................................................1
SECTION 2.1. Annual Meeting.............................................................................1
SECTION 2.2. Special Meeting............................................................................1
SECTION 2.3. Place of Meeting...........................................................................1
SECTION 2.4. Notice of Meeting..........................................................................2
SECTION 2.5. Quorum and Adjournment.....................................................................2
SECTION 2.6. Proxies....................................................................................2
SECTION 2.7. Notice of Stockholder Business and Nominations.............................................2
SECTION 2.8. Procedure for Election of Directors........................................................4
SECTION 2.9. Inspectors of Elections; Opening and Closing the Polls.....................................4
SECTION 2.10. No Stockholder Action by Written Consent..................................................4
ARTICLE III. BOARD OF DIRECTORS..................................................................................5
SECTION 3.1. General Powers.............................................................................5
SECTION 3.2. Number, Tenure and Qualifications..........................................................5
SECTION 3.3. Regular Meetings...........................................................................5
SECTION 3.4. Special Meetings...........................................................................5
SECTION 3.5. Notice.....................................................................................5
SECTION 3.6. Quorum.....................................................................................6
SECTION 3.7. Written Action.............................................................................6
SECTION 3.8. Participation in Meetings by Conference Telephone..........................................6
SECTION 3.9. Vacancies..................................................................................6
SECTION 3.10. Removal...................................................................................6
SECTION 3.11. Appointment of Committees.................................................................6
SECTION 3.12. Majority of Independent Directors.........................................................6
ARTICLE IV. OFFICERS.............................................................................................7
SECTION 4.1. Elected Officers...........................................................................7
SECTION 4.2. Election and Term of Office................................................................7
SECTION 4.3. Chairman of the Board......................................................................7
SECTION 4.4. President..................................................................................7
SECTION 4.5. Vice Presidents............................................................................8
SECTION 4.6. Secretary..................................................................................8
SECTION 4.7. Treasurer..................................................................................8
SECTION 4.8. Removal....................................................................................8
SECTION 4.9. Vacancies..................................................................................8
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V. STOCK CERTIFICATES AND TRANSFERS......................................................................9
SECTION 5.1. Stock Certificates and Transfers...........................................................9
ARTICLE VI. MISCELLANEOUS PROVISIONS.............................................................................9
SECTION 6.1. Fiscal Year................................................................................9
SECTION 6.2. Dividends..................................................................................9
SECTION 6.3. Seal.......................................................................................9
SECTION 6.4. Waiver of Notice...........................................................................9
SECTION 6.5. Audits.....................................................................................9
SECTION 6.6. Resignations...............................................................................9
SECTION 6.7. Indemnification and Insurance.............................................................10
ARTICLE VII. AMENDMENTS.........................................................................................11
SECTION 7.1. Amendments................................................................................11
</TABLE>
- ii -
<PAGE> 4
AMENDED AND RESTATED
BY-LAWS OF AVIALL, INC.
Incorporated under the Laws of the State of Delaware
PREAMBLE
These By-Laws are subject to, and governed by, the General Corporation
Law of the State of Delaware (the "DGCL") and the Restated Certificate of
Incorporation of Aviall, Inc. (the "Corporation"). In the event of a direct
conflict between the provisions of these By-Laws and the mandatory provisions of
the DGCL or the provisions of the Restated Certificate of Incorporation of the
Corporation (the "Restated Certificate of Incorporation"), such provisions of
the DGCL or the Restated Certificate of Incorporation, as the case may be, will
be controlling.
ARTICLE I
OFFICES AND RECORDS
SECTION 1.1. Delaware Office. The principal office of the Corporation
in the State of Delaware shall be located in the City of Wilmington, County of
New Castle, and the name and address of its registered agent is The Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware.
SECTION 1.2. Other Offices. The Corporation may have such other
offices, either within or without the State of Delaware, as the Board of
Directors may designate or as the business of the Corporation may from time to
time require.
SECTION 1.3. Books and Records. The books and records of the
Corporation may be kept outside the State of Delaware at such place or places as
may from time to time be designated by the Board of Directors.
ARTICLE II
STOCKHOLDERS
SECTION 2.1. Annual Meeting. The annual meeting of the stockholders of
the Corporation shall be held on such date as shall be fixed by resolution of
the Board of Directors at 10:00 a.m., local time, at the principal executive
offices of the Corporation, or at such other place and/or time as may be fixed
by resolution of the Board of Directors.
SECTION 2.2. Special Meeting. Subject to the rights of the holders of
any series of preferred stock, par value $.01 per share, of the Corporation (the
"Preferred Stock") to elect additional directors under specified circumstances,
special meetings of the stockholders may be called only by the Board of
Directors pursuant to a resolution adopted by a majority of the total number of
directors which the Corporation would have if there were no vacancies (the
"Whole Board").
SECTION 2.3. Place of Meeting. The Board of Directors may designate the
place of meeting for any meeting of the stockholders. If no designation is made
by the Board of Directors, the place of meeting shall be the principal office of
the Corporation.
<PAGE> 5
SECTION 2.4. Notice of Meeting. Written or printed notice, stating the
place, day and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be prepared and delivered by the Corporation not less
than ten days nor more than sixty days before the date of the meeting, either
personally or by mail, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail with postage thereon prepaid, addressed to the
stockholder at his or her address as it appears on the stock transfer books of
the Corporation. Such further notice shall be given as may be required by law.
Meetings may be held without notice if all stockholders entitled to vote are
present, or if notice is waived by those not present. Any previously scheduled
meeting of the stockholders may be postponed by resolution of the Board of
Directors upon public notice given prior to the date previously scheduled for
such meeting of stockholders.
SECTION 2.5. Quorum and Adjournment. Except as otherwise provided by
law or by the Restated Certificate of Incorporation, the holders of a majority
of the outstanding shares of the Corporation entitled to vote generally in the
election of directors (the "Voting Stock"), represented in person or by proxy
shall constitute a quorum at a meeting of stockholders, except that when
specified business is to be voted on by a class or series voting as a class, the
holders of a majority of the shares of' such class or series shall constitute a
quorum for the transaction of such business. The chairman of the meeting or a
majority of the shares so represented may adjourn the meeting from time to time
whether or not there is such a quorum. No notice of the time and place of
adjourned meetings need be given except as required by law. The stockholders
present at a duly organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum.
SECTION 2.6. Proxies. Each stockholder entitled to vote at a meeting of
stockholders may vote either in person or by a proxy. A stockholder may
authorize another person or persons to act for him or her as proxy by (i)
executing a writing authorizing another person or persons to act for him or her
as proxy (such execution may be accomplished by the stockholder or his or her
authorized officer, director, employee or agent signing such writing or causing
his or her signature to be affixed to such writing by any reasonable means
including, but not limited to, by facsimile signature), or (ii) transmitting or
authorizing the transmission of a telegram, cablegram, or other means of
electronic transmission (including by telephone) to the person who will be the
holder of the proxy or to a proxy solicitation firm, proxy support service
organization or like agent duly authorized by the person who will be the holder
of the proxy to receive such transmission, provided that any such telegram,
cablegram or other means of electronic transmission must either set forth or be
submitted with information from which it can be determined that the telegram,
cablegram or other electronic transmission was authorized by the stockholder. No
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period. If no date is stated in a proxy, such proxy
shall be presumed to have been executed on the date of the meeting at which it
is to be voted. Each proxy shall be revocable unless expressly provided therein
to be irrevocable and coupled with an interest sufficient in law to support an
irrevocable power or unless otherwise made irrevocable by law.
SECTION 2.7. Notice of Stockholder Business and Nominations.
(A) Annual Meetings of Stockholders. (1) Nominations of persons for
election to the Board of Directors of the Corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders (a) pursuant to the Corporation's notice of meeting delivered
pursuant to Section 2.4 of these By-Laws, (b) by or at the direction of the
Board of Directors, or (c) by any stockholder of the Corporation who is entitled
to vote at the meeting, who complied with the notice procedures set forth in
clauses (2) and (3) of this paragraph (A) and this By-Law and who was a
stockholder of record at the time such notice is delivered to the Secretary of
the Corporation.
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(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of
this By-Law, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely a stockholder's notice shall be
delivered to the Secretary at the principal executive offices of the Corporation
not less than seventy days nor more than ninety days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced by more than twenty
days or delayed by more than seventy days from such anniversary date, notice by
the stockholder to be timely must be so delivered not earlier than the ninetieth
day prior to such annual meeting and not later than the close of business on the
later of the seventieth day prior to such annual meeting or the tenth day
following the day on which public announcement of the date of such meeting is
first made. Such stockholder's notice shall set forth: (a) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (b) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (c) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Corporation's books, and of such beneficial
owner and (ii) the class and number of shares of the Corporation which are owned
beneficially and of record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (A)(2)
of this By-Law to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Corporation at least eighty
days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this By-Law shall also be considered timely but
only with respect to nominees for any new positions created by such increase, if
it shall be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the tenth day following the
day on which such public announcement is first made by the Corporation.
(B) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting pursuant to Section
2.4 of these By-Laws. Nominations of persons for election to the Board of
Directors may be made at a special meeting of stockholders at which directors
are to be elected pursuant to the Corporation's notice of meeting (a) by or at
the direction of the Board of Directors or (b) by any stockholder of the
Corporation who is entitled to vote at the meeting, who complies with the notice
procedures set forth in this By-Law and who is a stockholder of record at the
time such notice is delivered to the Secretary of the Corporation. Nominations
by stockholders of persons for election to the Board of Directors may be made at
such a special meeting of stockholders if the stockholder's notice required by
paragraph (A)(2) of this By-Law shall be delivered to the Secretary at the
principal executive offices of the Corporation not earlier than the ninetieth
day prior to such special meeting and not later than the close of business on
the later of the seventieth day prior to such special meeting or the tenth day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
(C) General. (1) Only persons who are nominated in accordance with the
procedures set forth in this By-Law shall be eligible to serve as directors and
only such business shall be conducted at a meeting
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of stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this By-Law. Except as otherwise provided by law,
the Restated Certificate of Incorporation or these By-Laws, the chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made in accordance with
the procedures set forth in this By-Law and, if any proposed nomination or
business is not in compliance with this By-Law, to declare that such defective
proposal or nomination shall be disregarded.
(2) For purposes of this By-Law, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this By-Law, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this By-Law. Nothing in this By-Law shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.
SECTION 2.8. Procedure for Election of Directors. Election of directors
at all meetings of the stockholders at which directors are to be elected shall
be by written ballot, and, except as otherwise set forth in any Preferred Stock
Designation (as defined in Article IV of the Restated Certificate of
Incorporation) with respect to the right of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances, a
majority of the votes cast thereat shall elect. Except as otherwise provided by
law, the Restated Certificate of Incorporation, any Preferred Stock Designation,
these By-Laws or any resolution adopted by a majority of the Whole Board, all
matters other than the election of directors submitted to the stockholders at
any meeting shall be decided by a majority of the votes cast with respect
thereto.
SECTION 2.9. Inspectors of Elections; Opening and Closing the Polls.
(A) The Board of Directors by resolution may appoint one or more
inspectors, which inspector or inspectors may include individuals who serve the
Corporation in other capacities, including, without limitation, as officers,
employees, agents or representatives of the Corporation, to act at the meeting
and make a written report thereof. One or more persons may be designated as
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate has been appointed to act, or if all inspectors or alternates who
have been appointed are unable to act, at a meeting of stockholders, the
chairman of the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before discharging his or her duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability.
The inspectors shall have the duties prescribed by the DGCL.
(B) The chairman of the meeting shall fix and announce at the meeting
the date and time of the opening and the closing of the polls for each matter
upon which the stockholders will vote at a meeting.
SECTION 2.10. No Stockholder Action by Written Consent. Subject to the
rights of the holders of any series of Preferred Stock to elect additional
directors under specified circumstances, any action required or permitted to be
taken by the stockholders of the Corporation must be effected at an annual or
special meeting of stockholders of the Corporation and may not be effected by
any consent in writing by such stockholders.
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ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. General Powers. The business and affairs of the
Corporation shall be managed by or under the direction of its Board of
Directors. In addition to the powers and authorities by these By-Laws expressly
conferred upon them, the Board of Directors may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by law or by the
Restated Certificate of Incorporation or by these ByLaws required to be
exercised or done by the stockholders.
SECTION 3.2. Number, Tenure and Qualifications. Subject to the rights
of the holders of any series of Preferred Stock to elect directors under
specified circumstances, the number of directors shall be fixed from time to
time exclusively pursuant to a resolution adopted by the Whole Board, but shall
consist of not more than nineteen nor less than three directors. The directors,
other than those who may be elected by the holders of any series of Preferred
Stock, shall be divided, with respect to the time for which they severally hold
office, into three classes, as nearly equal in number as possible, with the term
of office of the first class to expire at the 1994 annual meeting of
stockholders, the term of office of the second class to expire at the 1995
annual meeting of stockholders and the term of office of the third class to
expire at the 1996 annual meeting of stockholders. Each director shall hold
office until his or her successor shall have been duly elected and qualified. At
each annual meeting of stockholders, commencing with the 1994 annual meeting,
(i) directors elected to succeed those directors whose terms then expire shall
be elected for a term of office to expire at the third succeeding annual meeting
of stockholders after their election, with each director to hold office until
his or her successor shall have been duly elected and qualified, and (ii) if
authorized by a resolution of the Board of Directors, directors may be elected
to fill any vacancy on the Board of Directors, regardless of how such vacancy
shall have been created.
SECTION 3.3. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this By-Law immediately after,
and at the same place as, each annual meeting of stockholders. The Board of
Directors may, by resolution, provide the time and place for the holding of
additional regular meetings without other notice than such resolution.
SECTION 3.4. Special Meetings. Special meetings of the Board of
Directors shall be called at the request of the Chairman of the Board, the
President or a majority of the Board of Directors. The person or persons
authorized to call special meetings of the Board of Directors may fix the place
and time of the meetings.
SECTION 3.5. Notice. Notice of any special meeting shall be given to
each director at his business or residence in writing or by telegram or by
telephone communication. If mailed, such notice shall be deemed adequately
delivered when deposited in the United States mail so addressed, with postage
thereon prepaid, at least five days before such meeting. If by telegram, such
notice shall be deemed adequately delivered when the telegram is delivered to
the telegraph company at least twenty-four hours before such meeting. If by
telephone, the notice shall be given at least twelve hours prior to the time set
for the meeting. Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the Board of Directors need be specified in
the notice of such meeting, except for amendments to these By-Laws, as provided
under Section 7.1 of Article VII hereof. A meeting may be held at any time
without notice if all the directors are present or if those not present waive
notice of the meeting in writing, either before or after such meeting.
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SECTION 3.6. Quorum. A whole number of directors equal to at least a
majority of the Whole Board shall constitute a quorum for the transaction of
business, but if at any meeting of the Board of Directors there shall be less
than a quorum present, a majority of the directors present may adjourn the
meeting from time to time without further notice. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors. The directors present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough directors to leave less than a quorum.
SECTION 3.7. Written Action. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if all members of the Board of Directors or any such
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes or proceedings of the Board of Directors or
any such committee.
SECTION 3.8. Participation in Meetings by Conference Telephone. Members
of the Board of Directors, or any committee designated by the Board of
Directors, may participate in a meeting of the Board of Directors, or any such
committee, by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting will constitute presence in person at the
meeting.
SECTION 3.9. Vacancies. Subject to the rights of the holders of any
series of Preferred Stock, and unless the Board of Directors otherwise
determines, vacancies resulting from death, resignation, retirement,
disqualification, removal from office or other cause, and newly created
directorships resulting from any increase in the authorized number of directors,
may be filled only by the affirmative vote of a majority of the remaining
directors, though less than a quorum of the Board of Directors, and directors so
chosen shall hold office for a term expiring at the annual meeting of
stockholders at which the term of office of the class to which they have been
elected expires and until such director's successor shall have been duly elected
and qualified. No decrease in the number of authorized directors constituting
the Whole Board shall shorten the term of any incumbent director.
SECTION 3.10. Removal. Subject to the rights of the holders of any
series of Preferred Stock to elect additional directors under specified
circumstances, any director, or the entire Board of Directors, may be removed
from office at any time, but only for cause and only by the affirmative vote of
the holders of at least 75 percent of the then outstanding Voting Stock, voting
together as a single class.
SECTION 3.11. Appointment of Committees. The Board of Directors may
designate one or more committees, consisting of at least two directors each, to
perform such duties as may be determined by the Board of Directors. The number
of directors composing each such committee and the powers conferred upon each
such committee shall be determined by resolution of the Board of Directors.
In the event that the Board of Directors shall designate a committee
that shall have the power to recommend or approve changes in the compensation of
executives of the Corporation or any subsidiary of the Corporation and/or a
committee that shall have the power to recommend nominees for election as
directors of the Corporation, the membership of each such committee shall
consist solely of directors who are "independent directors" as defined in
Section 3.10 of this Article III.
SECTION 3.12. Majority of Independent Directors. Except as otherwise
provided for or fixed by or pursuant to the provisions of the Restated
Certificate of Incorporation relating to the rights of holders of any series of
Preferred Stock, the majority of persons elected to the Board of Directors shall
consist of persons who are independent directors. For purposes of this Article
III, an "independent director" shall mean a director who: (i) has not been
employed by the Corporation or any subsidiary of the Corporation in an
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executive capacity within the past five years; (ii) does not have, and is not
affiliated with a company, firm or institution that has a significant economic
relationship to the Corporation (other than through stock ownership or customary
directors' fees); (iii) does not have a personal services contract with the
Corporation or any subsidiary of the Corporation; and (iv) is not a familial
relative of any person described in (i) through (iii). Should the death,
resignation, disqualification or removal of any director result in the failure
of the requirement set forth in the preceding sentence to be met, such
requirement shall not apply during the term of the vacancy caused by such death,
resignation, disqualification or removal, and the remaining directors shall
cause any such vacancy to be filled in accordance with Section 3.7 of this
Article III within a reasonable period of time.
The Board of Directors shall have the exclusive right and power to
interpret and apply the provisions of this Article III relating to independent
directors and shall be entitled to rely upon the completeness and accuracy of
directors' responses to written questionnaires circulated for the purpose of
enabling the Board of Directors to make the determinations of independence
required by this Article III.
Information regarding a nominee for director provided by a stockholder
shall include such information as may be necessary to enable the Board of
Directors to make an informed determination as to whether such nominee, if
elected, would be an "independent director" as defined in this Section.
ARTICLE IV
OFFICERS
SECTION 4.1. Elected Officers. The elected officers of the Corporation
shall be a Chairman of the Board, a President, one or more Vice Presidents, a
Secretary, a Treasurer, and such other officers as the Board of Directors from
time to time may deem proper. The Chairman of the Board shall be chosen from the
directors. All officers chosen by the Board of Directors shall each have such
powers and duties as generally pertain to their respective offices, subject to
the specific provisions of this Article IV. Such officers shall also have such
powers and duties as from time to time may be conferred by the Board of
Directors or by any committee thereof.
SECTION 4.2. Election and Term of Office. The elected officers of the
Corporation shall be elected annually by the Board of Directors at the regular
meeting of the Board of Directors held after each annual meeting of the
stockholders. If the election of officers shall not be held at such meeting such
election shall be held as soon thereafter as convenient. Subject to Section 4.8
of these By-Laws, each officer shall hold office until his successor shall have
been duly elected and shall have qualified or until his death or until he shall
resign.
SECTION 4.3. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the stockholders and of the Board of Directors. The
Chairman of the Board shall make reports to the Board of Directors and the
stockholders, and shall perform all such other duties as are properly required
of him by the Board of Directors. The Chairman of the Board shall see that all
orders and resolutions of the Board of Directors and of any committee thereof
are carried into effect.
SECTION 4.4. President. The President shall be responsible for the
general management of the affairs of the Corporation and shall perform all
duties (i) incident to such office, (ii) which may be required by law and (iii)
all such other duties as are properly required of the President by the Board of
Directors. The President shall, in the absence of or because of the inability to
act of the Chairman of the Board, perform all duties of the Chairman of the
Board and preside at all meetings of stockholders and of the Board of Directors.
The President may sign, alone or with the Secretary, or an Assistant Secretary,
or any other proper
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officer of the Corporation authorized by the Board of Directors, certificates,
contracts, and other instruments of the Corporation as authorized by the Board
of Directors.
SECTION 4.5. Vice Presidents. Each Vice President shall have such
powers and perform such duties as from time to time may be assigned to him or
her by the Board of Directors or be delegated to him or her by the President.
The Board of Directors may assign to any Vice President general supervision and
charge over any territorial or functional division of the business and affairs
of the Corporation. In the absence or incapacity of the President, the powers,
duties, and functions of the President shall be temporarily performed and
exercised by such one of the Vice Presidents as shall be designated by the Board
of Directors.
SECTION 4.6. Secretary. The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and of the Board of Directors and all
other notices required by law or by these By-Laws, and in case of his or her
absence or refusal or neglect so to do, any such notice may be given by any
person thereunto directed by the Chairman of the Board or the President, or by
the Board of Directors, upon whose request the meeting is called as provided in
these By-Laws. The Secretary shall record all the proceedings of the meetings of
the Board of Directors, any committees thereof and the stockholders of the
Corporation in a book to be kept for that purpose, and shall perform such other
duties as may be assigned to him or her by the Board of Directors or the
President. The Secretary shall have the custody of the seal of the Corporation
and shall affix the same to all instruments requiring it, when authorized by the
Board of Directors or the President, and attest to the same.
SECTION 4.7. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the Corporation. The Treasurer
shall deposit all moneys and other valuables in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, the Chairman of the Board, or the President,
taking proper vouchers for such disbursements. The Treasurer shall render to the
Chairman of the Board, the President and the Board of Directors, whenever
requested, an account of all his transactions as Treasurer and of the financial
condition of the Corporation. If required by the Board of Directors, the
Treasurer shall give the Corporation a bond for the faithful discharge of his
duties in such amount and with such surety as the Board of Directors shall
prescribe.
SECTION 4.8. Removal. Any officer elected by the Board of Directors may
be removed by a majority of the members of the Whole Board whenever, in their
judgment, the best interests of the Corporation would be served thereby. No
elected officer shall have any contractual rights against the Corporation for
compensation by virtue of such election beyond the date of the election of his
successor, his death, his resignation or his removal, whichever event shall
first occur, except as otherwise provided in an employment contract or under an
employee deferred compensation plan.
SECTION 4.9. Vacancies. A newly created office or a vacancy in any
office because of death, resignation or removal, may be filled by the Board of
Directors for the unexpired portion of the term at any meeting of the Board of
Directors.
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ARTICLE V
STOCK CERTIFICATES AND TRANSFERS
SECTION 5.1. Stock Certificates and Transfers.
(A) The interest of each stockholder of the Corporation shall be
evidenced in such form, consistent with law, as the appropriate officers of the
Corporation may from time to time prescribe. The shares of the stock of the
Corporation which are evidenced by certificates shall be transferred on the
books of the Corporation by the holder thereof in person or by his or her
attorney, upon surrender for cancellation of certificates for the same number of
shares, with an assignment and power of transfer endorsed thereon or attached
thereto, duly executed, with such proof of the authenticity of the signature as
the Corporation or its agents may reasonably require.
(B) The certificates of stock shall be signed, countersigned and
registered in such manner as the Board of Directors may by resolution prescribe,
which resolution may permit all or any of the signatures on such certificates to
be in facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the date of issue.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1. Fiscal Year. The fiscal year of the Corporation shall
begin on the first day of January and end on the thirty-first day of December of
each year.
SECTION 6.2. Dividends. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law and the Restated
Certificate of Incorporation.
SECTION 6.3. Seal. The corporate seal may bear in the center the emblem
of some object, and shall have inscribed thereunder the words "Corporate Seal"
and around the margin thereof the words "Aviall, Inc. - Delaware 1993".
SECTION 6.4. Waiver of Notice. Whenever any notice is required to be
given to any stockholder or director of the Corporation under the provisions of
the DGCL, a waiver thereof in writing, signed by the person or persons entitled
to such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Neither the business to be transacted
at, nor the purpose of, any annual or special meeting of the stockholders or the
Board of Directors need be specified in any waiver of notice of such meeting.
SECTION 6.5. Audits. The accounts, books and records of the Corporation
shall be audited upon the conclusion of each fiscal year by an independent
certified public accountant selected by the Board of Directors, and it shall be
the duty of the Board of Directors to cause such audit to be made annually.
SECTION 6.6. Resignations. Any director or any officer, whether elected
or appointed, may resign at any time by serving written notice of such
resignation on the President or the Secretary, and such resignation shall be
deemed to be effective as of the close of business on the date said notice is
received by
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the President, or the Secretary. No formal action shall be required of the Board
of Directors or the stockholders to make any such resignation effective.
SECTION 6.7. Indemnification and Insurance. (A) Each person who was or
is made a party or is threatened to be made a party to or is involved in any
action, suit, or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
or a person of whom he or she is the legal representative is or was a director,
officer or employee of the Corporation or is or was serving at the request of
the Corporation as a director, officer or employee of another corporation or of
a partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer or employee or in
any other capacity while serving as a director, officer or employee, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the DGCL as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), against all
expense, liability and loss (including, without limitation, attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has ceased
to be a director, officer or employee and shall inure to the benefit of his or
her heirs, executors and administrators; provided, however, that except as
provided in paragraph (B) of this By-Law with respect to proceedings seeking to
enforce rights to indemnification, the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation.
(B) If a claim under paragraph (A) of this By-Law is not paid in full
by the Corporation within thirty days after a written claim has been received by
the Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the DGCL for
the Corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel or
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
DGCL, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel or stockholders) that the claimant has not
met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
(C) Following any "change in control" of the Corporation of the type
required to be reported under Item 1 of Form 8-K promulgated under the Exchange
Act, any determination as to entitlement to indemnification shall be made by
independent legal counsel selected by the claimant, which such independent legal
counsel shall be retained by the Board of Directors on behalf of the
Corporation.
(D) The right to indemnification and the payment of expenses incurred
in defending a proceeding in advance of its final disposition conferred in this
By-Law shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Restated Certificate of
Incorporation, By-Laws, agreement, vote of stockholders or disinterested
directors or otherwise.
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<PAGE> 14
(E) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the DGCL.
(F) The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification, and rights to be paid
by the Corporation the expenses incurred in defending any proceeding in advance
of its final disposition, to any agent of the Corporation to the fullest extent
of the provisions of this By-Law with respect to the indemnification and
advancement of expenses of directors, officers and employees of the Corporation.
(G) The right to indemnification conferred in this By-Law shall be a
contract right and shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that if the DGCL requires, the payment of such
expenses incurred by a director or officer in his or her capacity as a director
or officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation of an
undertaking by or on behalf of such director or officer, to repay all amounts so
advanced if it shall ultimately be determined that such director or officer is
not entitled to be indemnified under this By-Law or otherwise.
ARTICLE VII
AMENDMENTS
SECTION 7.1. Amendments. These By-Laws may be amended, added to,
rescinded or repealed at any meeting of the Board of Directors or of the
stockholders, provided notice of the proposed change was given in the notice of
the meeting and, in the case of a meeting of the Board of Directors, in a notice
given not less than two days prior to the meeting; provided, however, that, in
the case of amendments by stockholders, notwithstanding any other provisions of
these By-Laws or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, the Restated
Certificate of Incorporation, any Preferred Stock Designation or these By-Laws,
the affirmative vote of the holders of at least 75 percent of the then
outstanding Voting Stock, voting together as a single class, shall be required
to alter, amend or repeal any provision of these By-Laws.
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<PAGE> 1
EXHIBIT 10.1
AMENDED AND RESTATED SEVERANCE AGREEMENT
This AMENDED AND RESTATED SEVERANCE AGREEMENT (the "Agreement"), by and
between Aviall, Inc., a Delaware corporation (the "Company"), and
________________ (the "Executive"), originally entered into on March 12, 1998
and amended and restated as of this 16th day of April, 1999.
WHEREAS, the Company considers it to be in the best interests of its
stockholders to foster the continuous employment of key management personnel,
and believes that the possibility of a reorganization event of the Company and
the uncertainty and questions which it may raise among management may result in
the departure or distraction of management personnel to the detriment of the
Company and its stockholders;
WHEREAS, the Board of Directors has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a reorganization event of the
Company;
NOW, THEREFORE, in consideration of the mutual premises set forth below
and for other good and valuable consideration, in order to induce the Executive
to remain in the employ of the Company, the Company agrees that the Executive
shall receive the severance benefits set forth in this Agreement in the event
his employment with the Company terminates either prior or subsequent to a
"Change of Control" of the Company under the circumstances described below.
SECTION 1. DEFINITIONS
(a) "Annual Base Salary" shall mean the Executive's gross annual salary
before any deductions, exclusions or any deferrals or contributions under any
Company plan or program, but excluding bonuses, incentive compensation, employee
benefits or any other non-salary form of compensation (determined without regard
to any reduction in Annual Base Salary that occurs after a Change of Control).
(b) "Annual Incentive Payment" shall mean the greater of (i) the dollar
amount of the annual incentive payment that would be payable to the Executive if
the Company reaches its target performance for the year in which a Change of
Control occurs under the Company's short-term incentive program applicable to
the Executive, as if all requirements for full payment of such incentive had
been met (determined without regard to any reduction in incentive payments that
results in "Good Reason" termination) or (ii) the dollar amount of the annual
incentive actually paid or payable to the Executive for the most recently
completed fiscal year prior to a Change of Control. The Annual Incentive Payment
shall include, in addition to cash incentive payments, the cash value of any
restricted stock awards, which shall be equal to the lesser of (A) the value of
any restricted stock when awarded or (B) the current market value of such
restricted
<PAGE> 2
SEVERANCE AGREEMENT
___________, page 2
stock as of the date of the Executive's termination of employment with the
Company.
(c) "Cause" shall mean (i) the willful breach or habitual neglect of
assigned duties related to the Company, including compliance with Company
policies; (ii) conviction (including any plea of nolo contendere) of Executive
of any felony or crime involving dishonesty; (iii) any act of personal
dishonesty knowingly taken by Executive in connection with his responsibilities
as an employee and intended to result in personal enrichment of Executive or any
other person; (iv) bad faith conduct that is materially detrimental to the
Company; (v) inability of Executive to perform Employee's duties due to alcohol
or illegal drug use; (vi) the Executive's failure to comply with any legal
written directive of the Board of Directors of the Company (the "Board"); or
(vii) any act or omission of the Executive which is of substantial detriment to
the Company because of the Executive's intentional failure to comply with any
statute, rule or regulation, except any act or omission believed by Executive in
good faith to have been in or not opposed to the best interest of the Company
(without intent of Executive to gain, directly or indirectly, a profit to which
Executive was not legally entitled) and except that Cause shall not mean bad
judgment or negligence other than habitual neglect of duty. Notwithstanding the
foregoing, the Executive shall not have be deemed to have been terminated for
"Cause" unless and until there shall have been delivered to the Executive a copy
of a resolution duly adopted by the affirmative vote of not less than three
quarters of the Board then in office at a meeting of the Board called and held
for such purpose, after reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive's counsel (if the Executive
chooses to have counsel present at such meeting), to be heard before the Board,
finding that, in the good faith opinion of the Board, the Executive had
committed an act constituting "Cause" as herein defined and specifying the
particulars thereof in detail. Nothing herein will limit the right of the
Executive or his or her beneficiaries to contest the validity or propriety of
any such determination.
(d) "Change of Control" shall mean:
(i) The Company is merged or consolidated or reorganized into or
with another corporation or other legal person, and as a result of such merger,
consolidation or reorganization less than a majority of the combined voting
power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of
Voting Stock of the Company immediately prior to such transaction;
(ii) The Company sells or otherwise transfers all or substantially
all of its assets to any other corporation or other legal person, and less than
a majority of the combined voting power of the then-outstanding securities of
such corporation or person immediately after such sale or transfer is held in
the aggregate by the holders of Voting Stock of the Company immediately prior to
such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule 14D-l (or
any successor schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934, as
<PAGE> 3
SEVERANCE AGREEMENT
___________, page 3
amended (the "Exchange Act"), disclosing that any person (as the term "person"
is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become
the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3
or any successor rule or regulation promulgated under the Exchange Act) of
securities representing 20% or more of the then outstanding Voting Stock of the
Company;
(iv) If during any period of two consecutive years, individuals who
at the beginning of any such period constitute the Directors of the Company
cease for any reason to constitute at least a majority thereof, unless the
election, or the nomination for election by the Company's shareholders of each
Director first elected during such period was approved by a vote of at least
two-thirds of the Directors of the Company then still in office who were
Directors of the Company at the beginning of any such period.
Notwithstanding the foregoing provisions of Subsections (ii) and (iii)
above, a "Change of Control" shall not be deemed to have occurred for purposes
of this Agreement (i) solely because (A) the Company; (B) a Subsidiary; or (C) a
Company-sponsored employee stock ownership plan or other employee benefit plan
of the Company either files or becomes obligated to file a report under or in
response to Schedule 13D, Schedule 14D-1 or Form 8-K (or any successor schedule,
form or report or item therein) under the Exchange Act, disclosing beneficial
ownership by it of shares of Voting Stock, whether in excess of 20% or
otherwise, or because the Company reports that a change of control of the
Company has or may have occurred or will or may occur in the future by reason of
such beneficial ownership or (ii) solely because of a change of control of any
Subsidiary.
(e) "Disability" shall mean the absence of the Executive from the
full-time performance of his duties with the Company for six consecutive months
as a result of incapacity due to physical or mental illness.
(f) "Good Reason" shall mean (i) failure to elect or reelect or
otherwise to maintain the Executive in the office or the position, or a
substantially equivalent office or position, of or with the Company and/or a
Subsidiary (or any successor thereto by operation of law of or otherwise), as
the case may be, which the Executive held immediately prior to a Change of
Control; (ii) (A) a significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached to the
position with the Company and any Subsidiary which the Executive held
immediately prior to the Change of Control, (B) a reduction in the aggregate of
the Executive's Annual Base Salary and Annual Incentive Payment received from
the Company and any Subsidiary, or (C) the termination or denial of the
Executive's rights to employee benefits or a reduction in the scope or value
thereof, to which the Executive, his dependents and beneficiaries are entitled
to receive immediately prior to the Change of Control, any of which is not
remedied by the Company within 10 calendar days after receipt by the Company of
written notice from the Executive of such change, reduction or termination, as
the case may be; (iii) the Company relocates its principal executive offices (if
such offices are the principal location of Executive's work), or requires the
Executive to have his principal location of work changed, to any location that,
in either case, is in excess of 25 miles from the location thereof immediately
prior to the Change of Control, or
<PAGE> 4
SEVERANCE AGREEMENT
___________, page 4
requires the Executive to travel away from his office in the course of
discharging his responsibilities or duties hereunder at least 20% or more (in
terms of aggregate days in any calendar year or in any calendar quarter when
annualized for purposes of comparison to any prior year) than was required of
Executive in any of the three full years immediately prior to the Change of
Control without, in either case, his prior written consent; or (iv) without
limiting the generality or effect of the foregoing, any material breach of this
Agreement by the Company or any successor thereto which is not remedied by the
Company within 10 calendar days after receipt by the Company of written notice
from the Executive of such breach.
(g) "Subsidiary" shall mean an entity in which the Company directly or
indirectly beneficially owns 50% or more of the outstanding Voting Stock.
(h) "Voluntary Resignation" shall mean any termination of the
Executive's employment with the Company upon such Executive's own initiative,
including Executive's retirement other than termination of the Executive's
employment for Good Reason which shall not be deemed a "Voluntary Resignation"
for purposes of this Agreement.
(i) "Voting Stock" shall mean securities entitled to vote generally in
the election of directors.
SECTION 2. SEVERANCE PRIOR TO CHANGE OF CONTROL
If, during the term of this Agreement, no Change of Control has
occurred and the Executive's employment with the Company is terminated for any
reason, this Agreement shall not apply and Executive shall be entitled to
receive severance if such payments are appropriate under the Company's then
applicable severance policy. The Company shall not discharge the Executive, or
materially reduce the Executive's salary, title, duties or benefits, in
anticipation of a Change of Control to avoid the Company's or its successor's
obligations under this Agreement.
SECTION 3. SEVERANCE AFTER CHANGE OF CONTROL
(a) If during the two-year period following a Change of Control,
Executive's employment with the Company is terminated for any reason other than
(i) death, (ii) Cause, (iii) Disability, or (iv) Voluntary Resignation, or if
Executive terminates employment with the Company for Good Reason (such
termination of employment collectively referred to herein as "Change of Control
Termination"), Executive shall be entitled to receive, subject to applicable
Federal, state and/or local taxes and other amounts required by governmental
authorities to be withheld or deducted, the payment by the Company of an amount
equal to _____ times the sum of (x) the Executive's Annual Base Salary as of the
date of the Change of Control Termination (or, if higher, the rate in effect
immediately prior to the Change of Control) and (y) the Executive's Annual
Incentive Payment (the "Change of Control Severance Payment"). The Company shall
distribute such Change of Control Severance Payment to the Executive in a lump
sum no later than fifteen (15) business days after such Change of Control
Termination. In addition, the Executive shall be entitled to receive, for one
year
<PAGE> 5
SEVERANCE AGREEMENT
___________, page 5
after the date of the Change of Control Termination, health and life insurance
benefits substantially identical to those benefits to which the Executive, his
dependents and beneficiaries were receiving immediately prior to the Change of
Control Termination (or, if greater in the aggregate, the benefits to which the
Executive, his dependents and beneficiaries were receiving immediately prior to
the Change of Control).
(b) Without limiting the rights of the Executive at law or in equity,
if the Company fails to make any payment or provide any benefit required to be
made or provided hereunder on a timely basis, the Company will pay interest on
the amount or value thereof at an annualized rate of interest equal to the
so-called composite "prime rate" as quoted from time to time during the relevant
period in the Southwest Edition of The Wall Street Journal, plus 2%. Such
interest will be payable as it accrues on demand. Any change in such prime rate
will be effective on and as of the date of such change.
(c) A termination of the Executive's employment with the Company will
not affect the rights that the Executive may have pursuant to any agreement,
policy, plan, program or arrangement of the Company or any Subsidiary providing
employee benefits, which rights shall be governed by the terms thereof, except
if the Executive is entitled to and is receiving the severance benefits
contemplated by this Agreement, the Executive shall not be entitled to also
receive severance compensation under the Company's Amended and Restated
Severance Pay Plan (or any successor plan).
SECTION 4. GROSS-UP PAYMENT
(a) Anything in this Agreement to the contrary notwithstanding, in the
event that this Agreement shall become operative and it shall be determined (as
hereafter provided) that any payment (other than the Gross-Up Payments (as
hereinafter defined) provided for in this Section 4) or distribution by the
Company or any of its affiliates to or for the benefit of the Executive, whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise pursuant to or by reason of any other agreement, policy,
plan, program or arrangement, including without limitation any stock option,
restricted stock, restricted stock right, performance share, performance unit,
stock appreciation right or similar right, or the lapse or termination of any
restriction on or the vesting or exercisability of any of the foregoing (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") (or any successor
provision thereto) by reason of being considered "contingent on a change in
ownership or control" of the Company, within the meaning of Section 280G of the
Code (or any successor provision thereto) or to any similar tax imposed by state
or local law, or any interest or penalties with respect to such tax (such tax or
taxes, together with any such interest and penalties, being hereafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment or payments (collectively, a "Gross-Up
Payment"). The Gross-Up Payment shall be in an amount such that, after payment
by the Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax imposed upon
<PAGE> 6
SEVERANCE AGREEMENT
___________, page 6
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payment.
(b) Subject to the provisions of Section 4(f), all determinations
required to be made under this Section 4, including whether an Excise Tax is
payable by the Executive and the amount of such Excise Tax and whether a
Gross-Up Payment is required to be paid by the Company to the Executive and the
amount of such Gross-Up Payment, if any, shall be made by a nationally
recognized accounting firm (the "Accounting Firm") selected by the Executive in
his sole discretion. The Executive shall direct the Accounting Firm to submit
its determination and detailed supporting calculations to both the Company and
the Executive within 30 calendar days after the Termination Date, if applicable,
and any such other time or times as may be requested by the Company or the
Executive. If the Accounting Firm determines that any Excise Tax is payable by
the Executive, the Company shall pay the required Gross-Up Payment to the
Executive within five business days after receipt of such determination and
calculations with respect to any Payment to the Executive. If the Accounting
Firm determines that no Excise Tax is payable by the Executive, it shall, at the
same time as it makes such determination, furnish the Company and the Executive
an opinion that the Executive has substantial authority not to report any Excise
Tax on his federal, state or local income or other tax return. As a result of
the uncertainty in the application of Section 4999 of the Code (or any successor
provision thereto) and the possibility of similar uncertainty regarding
applicable state or local tax law at the time of any determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made (an "Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts or fails to pursue its remedies pursuant to Section
4(f) and the Executive thereafter is required to make a payment of any Excise
Tax, the Executive shall direct the Accounting Firm to determine the amount of
the Underpayment that has occurred and to submit its determination and detailed
supporting calculations to both the Company and the Executive as promptly as
possible. Any such Underpayment shall be promptly paid by the Company to, or for
the benefit of the Executive within five business days after receipt of such
determination and calculations.
(c) The Company and the Executive shall each provide the Accounting
Firm access to and copies of any books, records and documents in the possession
of the Company or the Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting Firm in connection
with the preparation and issuance of the determinations and calculations
contemplated by Section 4(b). Any determination by the Accounting Firm as to the
amount of the Gross-Up Payment shall be binding upon the Company and the
Executive.
(d) The federal, state and local income or other tax returns filed by
the Executive shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
the Executive. The Executive shall make proper payment of the amount of any
Excise Payment, and at the request of the Company, provide to the Company true
and correct copies (with any amendments) of his federal income tax return as
filed with the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the
<PAGE> 7
SEVERANCE AGREEMENT
___________, page 7
applicable taxing authority, and such other documents reasonably requested by
the Company, evidencing such payment. If prior to the filing of the Executive's
federal income tax return, or corresponding state or local tax return, if
relevant, the Accounting Firm determines that the amount of the Gross-Up Payment
should be reduced, the Executive shall within five business days pay to the
Company the amount of such reduction.
(e) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by Section 4(b)
shall be borne by the Company. If such fees and expenses are initially paid by
the Executive, the Company shall reimburse the Executive the full amount of such
fees and expenses within five business days after receipt from the Executive of
a statement therefor and reasonable evidence of his payment thereof.
(f) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service or any other taxing authority that, if successful,
would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as promptly as practicable but no later than 10
business days after the Executive actually receives notice of such claim and the
Executive shall further apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid (in each case, to the extent
known by the Executive). The Executive shall not pay such claim prior to the
earlier of (i) the expiration of the 30-calendar-day period following the date
on which he gives such notice to the Company and (ii) the date that any payment
of amount with respect to such claim is due. If the Company notifies the
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) provide the Company with any written records or documents in
his possession relating to such claim reasonably requested by the
Company;
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including without limitation accepting legal representation with
respect to such claim by an attorney competent in respect of the
subject matter and reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively
to contest such claim; and
(iv) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and shall indemnify and hold harmless the Executive, on an after-tax
basis, for and against any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of this
Section 4(f), the Company shall control all proceedings taken in connection with
the contest of any claim
<PAGE> 8
SEVERANCE AGREEMENT
___________, page 8
contemplated by this Section 4(f) and, at its sole option, may pursue or forego
any and all administrative appeals, proceedings, hearings and conferences with
the taxing authority in respect of such claim (provided, however, that the
Executive may participate therein at his own cost and expense) and may, at its
option, either direct the Executive to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Executive to pay the tax claimed and sue for a refund, the Company shall advance
the amount of such payment to the Executive on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income or other tax, including interest or penalties with respect
thereto, imposed with respect to such advance; and provided further, however,
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which the contested amount
is claimed to be due is limited solely to such contested amount. Furthermore,
the Company's control of any such contested claim shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(g) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 4(f), the Executive receives any refund with respect
to such claim, the Executive shall (subject to the Company's complying with the
requirements of Section 4(f)) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after any taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 4(f), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial or refund prior to the expiration of 30 calendar days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of any such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid by the Company to
the Executive pursuant to this Section 4.
SECTION 5. VESTING OF STOCK OPTIONS
Vesting of any long-term incentive grants and awards resulting from
employment terminations, regardless of the reason for or date of such
termination, shall be governed by the long-term incentive plan document and any
grant or award agreements and shall not be affected by the terms of this
Agreement.
SECTION 6. AT-WILL EMPLOYMENT
The Company and the Executive acknowledge that the Executive's
employment with the Company is and shall continue to be at-will, as defined
under applicable law. If the Executive's employment terminates for any reason,
whether prior to or after a Change of Control, the Executive shall not be
entitled to any payments or benefits, other than as provided by this Agreement
or as may
<PAGE> 9
SEVERANCE AGREEMENT
___________, page 9
otherwise be available in accordance with the terms of the Company's then
existing employee plans and written policies in effect at the time of
termination.
SECTION 7. EXPIRATION OF AGREEMENT
This Agreement shall terminate, except for any unpaid obligation of the
Company hereunder, two (2) years following the date of a Change of Control of
the Company; provided, however, that notwithstanding any provision of this
Agreement to the contrary, the parties' respective rights and obligations under
Sections 3, 4, 8, 9, 10, 12 and 13 will survive any termination or expiration of
this Agreement or the termination of Executive's employment following a Change
of Control for any reason whatsoever.
SECTION 8. NO OBLIGATION TO MITIGATE
(a) The Executive is under no obligation to mitigate damages in the
amount of any payment provided herein by seeking other employment or otherwise.
(b) The amount of any payment provided herein shall not be reduced,
offset or subject to recovery by the Company by reason of any compensation
earned by the Executive as the result of the Executive's employment by another
employer after the termination date of the Executive's employment with the
Company.
SECTION 9. LEGAL FEES AND EXPENSES
It is the intent of the Company that the Executive not be required to
incur legal fees and the related expenses associated with the interpretation,
enforcement or defense of Executive's rights under this Agreement by litigation
or otherwise because the cost and expense thereof would substantially detract
from the benefits intended to be extended to the Executive hereunder.
Accordingly, if it should appear to the Executive that the Company has failed to
comply with any of its obligations under this Agreement or in the event that the
Company or any other person takes or threatens to take any action to declare
this Agreement void or unenforceable, or institutes any litigation or other
action or proceeding designed to deny, or to recover from, the Executive the
benefits provided or intended to be provided to the Executive hereunder, the
Company irrevocably authorizes the Executive from time to time to retain counsel
of Executive's choice, at the expense of the Company as hereafter provided, to
advise and represent the Executive in connection with any such interpretation,
enforcement or defense, including without limitation the initiation or defense
of any litigation or other legal action, whether by or against the Company or
any Director, officer, stockholder or other person affiliated with the Company,
in any jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company irrevocably
consents to the Executive's entering into an attorney-client relationship with
such counsel, and in that connection the Company and the Executive agree that a
confidential relationship shall exist between the Executive and such counsel.
Without respect to whether the Executive prevails, in whole or in part, in
connection with any of the foregoing, the Company will pay and be
<PAGE> 10
SEVERANCE AGREEMENT
__________, page 10
solely financially responsible for any and all attorneys' and related fees and
expenses incurred by the Executive in connection with any of the foregoing;
provided that, in regard to such matters, the Executive has not acted in bad
faith or with no colorable claim of success.
SECTION 10. ASSIGNMENT, SUCCESSORS
(a) Without limiting the rights of the Executive as provided in Section
3 hereof, the Company shall require any successor to or assign (whether direct
or indirect, by purchase, merger, consolidation or otherwise) of all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to the Executive, to expressly and
unconditionally assume and agree to perform this Agreement.
(b) This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devises and legatees. If the Executive dies
while any amounts are payable hereunder, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the Executive's devisee, legatee, or other designee or, if there is no such
designee, to the Executive's estate.
(c) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive except
by will or the laws of descent and distribution.
SECTION 11. PRIOR AGREEMENT
This Agreement amends and restates the agreement, dated as of March 12,
1998 (the "Prior Agreement"), between the Company and the Executive, which Prior
Agreement shall, without further action, be superseded as of the date first
written above.
SECTION 12. NOTICE
For purposes of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States registered mail,
return receipt requested, postage prepaid, to the addresses set forth below or
to such other address as any party may have furnished to the other in writing
and in accordance herewith, except that notices of changes of address shall be
effective only upon receipt.
If to the Company:
Aviall, Inc.
2055 Diplomat Drive
Dallas, Texas 75234-8989
Attn: General Counsel
<PAGE> 11
SEVERANCE AGREEMENT
__________, page 11
If to the Executive:
SECTION 13. MISCELLANEOUS
(a) No provisions of this Agreement may be modified, waived or
discharged except in a writing signed and dated by both parties. No waiver by
either party at any time of any breach by the other party of, or compliance
with, any condition or provision of this Agreement shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or any prior or
subsequent time.
(b) This Agreement reflects the entire agreement of the parties with
respect to its subject matter, and supersedes all previous agreements. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement.
(c) This Agreement shall be governed and construed in all respects in
accordance with the internal laws of the State of Texas (without giving effect
to principles of conflicts of laws). All references to sections of the Exchange
Act or the Code shall be deemed also to refer to any successor provisions to
such sections.
(d) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
(e) This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
<PAGE> 12
SEVERANCE AGREEMENT
__________, page 12
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all on the day
and year first written above.
AVIALL, INC.
By:
------------------------------------------
Eric E. Anderson, Chairman, President
and Chief Executive Officer
The Executive
----------------------------------------------
<PAGE> 1
EXHIBIT 10.2
ADDENDUM TO THE AMENDED AND
RESTATED SEVERANCE AGREEMENT
This Addendum to the Amended and Restated Severance Agreement (this
"Addendum") is made and entered into effective as of this 16th day of April,
1999, by and among Aviall, Inc., a Delaware corporation (the "Company"),
Inventory Locator Service, LP, a Delaware limited partnership ("ILS"), and Bruce
Langsen (the "Executive"). Terms used in this Addendum with initial capital
letters that are defined in the Amended and Restated Severance Agreement, dated
as of April 16, 1999, between the Company and the Executive (the "Severance
Agreement") are used in this Addendum as so defined.
WHEREAS, the Board of Directors of the Company has authorized
management to examine a range of possible transactions, which may include a
sale, joint venture or other transaction involving the Company or either of its
two operating businesses; and
WHEREAS, the Severance Agreement provides for certain severance
benefits in the event of a termination of the Executive's employment following a
Change of Control of the Company; and
WHEREAS, a sale of ILS would not constitute a Change of Control of the
Company for the purposes of the Severance Agreement; and
WHEREAS, the Company desires to provide the Executive with the benefits
intended to be provided to the Executive under the Severance Agreement in
circumstances which both the Company and ILS are sold in a series of
transactions;
NOW, THEREFORE, in order to induce the Executive to remain in the
employ of ILS and other good and valuable consideration, the Company, ILS and
the Executive agree as follows:
1. In the event that a sale of ILS is completed and, on or prior to the
closing date of such sale, the Company has entered into a definitive agreement
the consummation of which would result in a Change of Control of the Company, a
Change of Control shall be deemed to have occurred for the purposes of the
Severance Agreement effective as of the closing date of the sale of ILS, without
regard to whether a Change of Control with respect to the Company ultimately
occurs. For the purposes of this Addendum, a "sale of ILS" shall mean the sale
or other transfer (whether direct or indirect, by sale, merger, consolidation or
otherwise) of (i) the general and limited partnership interests of ILS, (ii) the
capital stock of Inventory Locator Service GP, Inc. and ILS Investor, Inc. or
(iii) the sale of all or substantially all of the assets of ILS. Except as
otherwise provided in this Section 1, the definition of Change of Control shall
otherwise remain as set forth in the Severance Agreement.
<PAGE> 2
2. Effective as of the sale of ILS, ILS shall automatically and without
further action, assume all of the rights and obligations of the Company under
the Severance Agreement and the Company shall be released from all such
obligations and ILS shall be deemed to be the "Company" for the purpose of the
Severance Agreement. The Company and ILS shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of ILS, to expressly assume and
agree to perform the Severance Agreement, as modified by this Addendum, in the
same manner and to the same extent the Company would be required to perform if
no such succession had taken place.
3. The Severance Agreement, as modified by this Addendum, remains in
full force and effect.
IN WITNESS WHEREOF, the Company, ILS and the Executive have executed,
or caused to be executed, this Addendum effective as of the day and year first
written above.
AVIALL, INC.
By: /s/ Eric E. Anderson
------------------------------------------
Eric E. Anderson, Chairman, President
and Chief Executive officer
INVENTORY LOCATOR SERVICE, LP
By: Inventory Locator Service GP, Inc.,
its General Partner
By: /s/ Jeffrey J. Murphy
------------------------------------------
Jeffrey J. Murphy,
Vice President
/s/ Bruce Langsen
----------------------------------------------
Bruce Langsen
2
<PAGE> 1
EXHIBIT 10.3
AMENDMENT TO AVIALL, INC.
STOCK INCENTIVE PLAN
THIS AMENDMENT TO AVIALL, INC. STOCK INCENTIVE PLAN (this
"Amendment"), dated as of April 16, 1999 is made and entered into by Aviall,
Inc., a Delaware corporation (the "Company"). Terms used in this Amendment with
initial capital letters that are not otherwise defined herein shall have the
meanings ascribed to such terms in the Aviall, Inc.
Stock Incentive Plan (the "Plan").
RECITALS
WHEREAS, Section 17 of the Plan provides that the Board of Directors of
the Company (the "Board") may amend the Plan at any time; and
WHEREAS, the Board desires to amend the definition of Change of Control
set forth in Section 2(d) of the Plan;
NOW, THEREFORE, in accordance with Section 17 of the Plan, the Company
hereby amends the Plan as follows:
1. Section 2(d) of the Plan is hereby amended and restated in
its entirety to read as follows:
(d) A "Change of Control" shall be deemed to have occurred
if:
(i) The Company is merged or consolidated or
reorganized into or with another corporation or other legal
person, and as a result of such merger, consolidation or
reorganization less than a majority of the combined voting
power of the then-outstanding securities of such
corporation or person immediately after such transaction
are held in the aggregate by the holders of securities
entitled to vote generally in the election of directors
("Voting Stock") of the Company immediately prior to such
transaction;
(ii) The Company sells or otherwise transfers all or
substantially all of its assets to any other corporation or
other legal person, and less than a majority of the
combined voting power of the then-outstanding securities of
such corporation or person immediately after such sale or
transfer is held in the aggregate by the holders of Voting
Stock of the Company immediately prior to such sale or
transfer;
(iii) There is a report filed on Schedule 13D or
Schedule 14D-l (or any successor schedule, form or report),
each as promulgated pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), disclosing that
any person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act) has
become
<PAGE> 2
the beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of
securities representing 20% or more of the then outstanding
Voting Stock of the Company;
(iv) If during any period of two consecutive years,
individuals who at the beginning of any such period
constitute the Directors of the Company cease for any
reason to constitute at least a majority thereof, unless
the election, or the nomination for election by the
Company's shareholders of each Director first elected
during such period was approved by a vote of at least
two-thirds of the Directors of the Company then still in
office who were Directors of the Company at the beginning
of any such period.
Notwithstanding the foregoing provisions of Subsections
(ii) and (iii) above, a "Change of Control" shall not be deemed to have
occurred for purposes of this Agreement (i) solely because (A) the
Company; (B) a Subsidiary; or (C) a Company-sponsored employee stock
ownership plan or other employee benefit plan of the Company either
files or becomes obligated to file a report under or in response to
Schedule 13D, Schedule 14D-1 or Form 8-K (or any successor schedule,
form or report or item therein) under the Exchange Act, disclosing
beneficial ownership by it of shares of Voting Stock, whether in excess
of 20% or otherwise, or because the Company reports that a change of
control of the Company has or may have occurred or will or may occur in
the future by reason of such beneficial ownership or (ii) solely
because of a change of control of any Subsidiary.
2. This Amendment shall be effective immediately.
3. Except as expressly amended by this Amendment, the Plan
shall continue in full force and effect in accordance with the provisions
thereof.
IN WITNESS WHEREOF, the Company has caused this Amendment to be duly
executed as of the date first above written.
AVIALL, INC.
By: /s/ Eric E. Anderson
-------------------------------------
Eric E. Anderson, President and
Chief Executive Officer
2
<PAGE> 1
EXHIBIT 10.4
AMENDMENT TO AVIALL, INC.
1998 STOCK INCENTIVE PLAN
THIS AMENDMENT TO AVIALL, INC. 1998 STOCK INCENTIVE PLAN (this
"Amendment"), dated as of April 16, 1999 is made and entered into by Aviall,
Inc., a Delaware corporation (the "Company"). Terms used in this Amendment with
initial capital letters that are not otherwise defined herein shall have the
meanings ascribed to such terms in the Aviall, Inc.
1998 Stock Incentive Plan (the "Plan").
RECITALS
WHEREAS, Section 16 of the Plan provides that the Board of Directors of
the Company (the "Board") may at any time and from time to time amend the Plan
in whole or in part; and
WHEREAS, the Board desires to amend the definition of Change in Control
set forth in Section 11 of the Plan;
NOW, THEREFORE, in accordance with Section 16 of the Plan, the Company
hereby amends the Plan as follows:
1. Section 11 of the Plan is hereby amended and restated to
read in its entirety as follows:
"11. CHANGE IN CONTROL. For purposes of this Plan, except
as may be otherwise prescribed by the Board in an agreement
evidencing a grant or award made under the Plan, a "Change in
Control" shall mean if at any time any of the following events
shall have occurred:
(a) The Company is merged or consolidated or
reorganized into or with another corporation or other legal
person, and as a result of such merger, consolidation or
reorganization less than a majority of the combined voting
power of the then-outstanding securities of such
corporation or person immediately after such transaction
are held in the aggregate by the holders of securities
entitled to vote generally in the election of Directors
immediately prior to such transaction;
(b) The Company sells or otherwise transfers all or
substantially all of its assets to any other corporation or
other legal person, and less than a majority of the
combined voting power of the then-outstanding securities of
such corporation or person immediately after such sale or
transfer is held in the aggregate by the holders of Common
Shares immediately prior to such sale or transfer;
<PAGE> 2
(c) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report),
each as promulgated pursuant to the Exchange Act,
disclosing that any person (as the term "person" is used in
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act)
has become the beneficial owner (as the term "beneficial
owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of
securities representing 20% or more of the Voting Power;
(d) If during any period of two consecutive years,
individuals who at the beginning of any such period
constitute the Directors cease for any reason to constitute
at least a majority thereof, unless the election, or the
nomination for election by the Company's stockholders, of
each Director first elected during such period was approved
by a vote of at least two-thirds of the Directors then
still in office who were Directors at the beginning of any
such period.
Notwithstanding the foregoing provisions of Section 11(b)
and (c) above, a "Change in Control" shall not be deemed to
have occurred for purposes of this Plan (i) solely because (A)
the Company; (B) a Subsidiary; or (C) any Company-sponsored
employee stock ownership plan or other employee benefit plan
of the Company either files or becomes obligated to file a
report under or in response to Schedule 13D, Schedule 14D-1 or
Form 8-K (or any successor schedule, form or report or item
therein) under the Exchange Act, disclosing beneficial
ownership by it of shares, whether in excess of 20% of the
Voting Power or otherwise, or because the Company reports that
a change of control of the Company has or may have occurred or
will or may occur in the future by reason of such beneficial
ownership or (ii) solely because of a change in control of any
Subsidiary."
2. This Amendment shall be effective immediately.
3. Except as expressly amended by this Amendment, the Plan
shall continue in full force and effect in accordance with the provisions
thereof.
IN WITNESS WHEREOF, the Company has caused this Amendment to be duly
executed as of the date first above written.
AVIALL, INC.
By: /s/ Eric E. Anderson
-------------------------------------
Eric E. Anderson, President and
Chief Executive Officer
2
<PAGE> 1
EXHIBIT 10.5
AVIALL, INC.
BENEFIT RESTORATION PLAN
THIS AVIALL, INC. BENEFIT RESTORATION PLAN ("Plan") was adopted
pursuant to a resolution approved by the Board of Directors of Aviall, Inc. and
its subsidiaries (the "Company") on October 15, 1993 and was effective as of
January 1, 1994. Subsequently, the Plan was amended and restated in accordance
with the terms and conditions hereinafter set forth.
WITNESSETH:
WHEREAS, the Company desires to establish a benefit restoration income
plan for the exclusive benefit of certain employees as designated herein so as
to reward them for their loyal and faithful service and to aid them in
increasing their economic security by providing additional funds at retirement
with respect to those benefits that may have been reduced because of certain
limitations under the Retirement Plan, under the Internal Revenue Code, as
amended, and as imposed by the Employee Retirement Income Security Act of 1974
(ERISA); and
WHEREAS, the Company has been authorized by its Board of Directors to
enter into this Agreement in order to provide for the proper administration of
the Plan;
NOW, THEREFORE, in consideration of the premises herein contained, it
is hereby agreed as follows:
ARTICLE I
DEFINITIONS
The following words, when used herein, shall have the meaning indicated
unless the context indicates otherwise:
<PAGE> 2
1.01 "Agreement" or "Plan" - The plan set forth in this document, as it
may be amended from time to time. This Agreement shall be known as the Aviall,
Inc. Benefit Restoration Plan.
1.02 "Beneficiary" - The person or persons last designated by a
Participant, by written notice filed with the Committee, to receive a Plan
benefit upon the death of the Participant. In the event a Participant fails to
designate a person or persons as provided above, or if no beneficiary so
designated survives the Participant, then for all purposes of this Plan, the
beneficiary shall be the spouse of the Participant. If the spouse is not living,
then payment shall be made to the Participant's then living children in equal
shares. If no spouse or child of the Participant is living, then payment shall
be made to the Participant's estate.
1.03 "Code" - The Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
1.04 "Committee" - The Retirement Committee appointed under the Aviall,
Inc. Retirement Plan.
1.05 "Company" - Aviall, Inc. and each of its affiliates or
subsidiaries which have adopted the Retirement Plan or any corporation or
business organization which shall assume or succeed to the company's obligations
under the Plan.
1.06 "Effective Date" - January 1, 1994.
1.07 "Participant" - A participant in the Retirement Plan whose benefit
entitlement under such plan is restricted by Section 401(a)(17) and/or Section
415 of the Code or any successor provision thereto, or as a result of receiving
shares of Restricted Stock Rights under the Aviall, Inc. Bonus Plan for certain
executives.
2
<PAGE> 3
1.08 "Restricted Shares" - shall mean shares of the common stock of
Aviall, Inc. granted as Restricted Shares, Deferred Shares or Performance Shares
under the Aviall, Inc. 1998 Stock Incentive Plan which are subject to vesting
provisions relating to future employment with the Company, or Management
Objectives, or both.
1.09 "Restricted Stock Rights" shall mean shares of the common stock of
Aviall, Inc. which are subject to vesting provisions related to future
employment with the Company.
1.10 "Retirement Plan" - The Aviall, Inc. Retirement Plan.
1.11 "Ryder Retirement Plan" - The Ryder System, Inc. Retirement Plan.
ARTICLE II
ELIGIBILITY
Any Participant who qualifies for a benefit under the Retirement Plan
and whose amount of benefit entitlement under the Retirement Plan, or the Ryder
Retirement Plan, or both, is reduced or restricted by reason of the application
of the limitations set forth in Sections 401(a)(17) and/or 415 of the Code or
any successor provision thereto, or by reason of the receipt of Restricted Stock
Rights under the Aviall, Inc. Bonus Plan for certain executives, shall be
entitled to participate and receive a benefit hereunder.
ARTICLE III
BENEFITS, FORM OF PAYMENT
3.01 Benefits - The benefits under this Plan to which an eligible
Participant or Beneficiary shall be entitled shall be an amount equal to the
difference, if any, between (a) and (b) below:
(a) The amount of benefits to which a Participant would be
entitled under the Retirement Plan, or the Ryder Retirement Plan, or
both, if such benefits
3
<PAGE> 4
were computed (i) without giving any effect to the limitations imposed
by Sections 401(a)(17) and 415 of the Code, or any successor provision
thereto, as now or hereafter in effect and, if applicable, (ii) by
considering as "Basic Compensation" under the Retirement Plan the value
of Restricted Stock Rights awarded to the Participant under the Aviall,
Inc. Bonus Plan;
less
(b) The amounts of benefits to which he is entitled under the
Retirement Plan, or the Ryder Retirement Plan, or both.
For purposes of determining the benefits payable pursuant to clause (a)(ii)
above, the value of the Restricted Stock Rights or Restricted Shares, shall be
based on the price for shares of Aviall, Inc. common stock fixed by the Board of
Directors of Aviall, Inc. for purposes of calculating the number of shares of
Restricted Stock Rights or Restricted Shares to be awarded to the Participant,
and such value shall be included in "Basic Compensation" for the year in which
such Restricted Stock Rights or Restricted Shares, was awarded, but only to the
extent such Restricted Stock Rights or Restricted Shares, vests (that is, the
restrictions on such Restricted Stock Rights or Restricted Shares lapse) in
accordance with the terms of the Aviall, Inc. Bonus Plan. For purposes of
determining the benefits to be payable under the foregoing provisions of this
Section 3.01, only benefits accrued under the Ryder Retirement Plan on or prior
to December 31, 1993 shall be taken into account.
The amount of benefit so determined shall be subject to such
adjustments as the Committee, from time to time, deems appropriate to reflect
any changes in the application of the limitations imposed by said Sections
401(a)(17) and/or 415 of the Code or any successor provision thereto with
respect to the computations of benefits under the Retirement Plan, or the
4
<PAGE> 5
Ryder Retirement Plan, or both, including, where applicable, a decrease, in a
like amount, in the benefit payable under this Plan whenever an increase in the
limits under the Retirement Plan, or the Ryder Retirement Plan, or both, imposed
by said Code Sections occurs as a result of cost of living adjustments or
otherwise. Benefits under this section of the Plan will be paid only to the
extent that the Participant meets the vesting requirements of the Retirement
Plan, or the Ryder Retirement Plan, or both. Once the initial amount of benefit
payable under this Plan has been determined, such amount will represent a fixed
amount, not subject to future increases or decreases for any reason.
3.02 Payment of Benefits - Except as hereinafter specifically provided,
the payment of benefits to which a Participant or Beneficiary shall be entitled
under this Plan shall be paid in the same manner, the same form, as of the same
date, and subject to the same conditions as the benefits under the Retirement
Plan; provided, however, that for employees who terminated employment prior to
January 1, 1997 and who were eligible for early, normal or delayed retirement
benefits under the Retirement Plan, a lump sum cash distribution option shall be
available under this Plan as of the date benefit payments under the Retirement
Plan are to begin. In those cases in which lump sum options are available, the
amount of such lump sum cash distribution will be the actuarial present value of
the benefit payable under this Plan, based on the same interest and mortality
assumptions used under the Retirement Plan for determining the $3,500 mandatory
single cash distribution. Benefits shall be paid from the Company's general
funds or as otherwise determined by the Compensation Committee of the Board of
Directors.
Any benefit payable under the Retirement Plan, or the Ryder Retirement
Plan, or both, shall be paid solely in accordance with the terms and provisions
thereof, and nothing in this
5
<PAGE> 6
Agreement shall operate or be construed in any way to modify, amend or affect
the terms and provisions of the Retirement Plan, or the Ryder Retirement Plan,
or both.
ARTICLE IV
ADMINISTRATION; AMENDMENTS AND TERMINATION;
RIGHTS AGAINST THE COMPANY
4.01 Administration - The Committee shall administer this Plan. The
Committee shall have, and shall exercise and perform, all the powers, rights,
authorities and duties set forth in the Retirement Plan which are applicable to
the Retirement Committee under the Retirement Plan. The Retirement Plan
provisions regarding said powers, rights, authorities and duties are
incorporated herein by reference and shall have the same effect with respect to
this Plan as if set forth in full herein. Any determination or decision by the
Committee shall be conclusive and binding on all persons who at any time have or
claim to have any interest whatever under this Plan. The Committee may appoint a
plan administrator who will be responsible for and will perform all duties and
obligations delegated to him by the Committee. The Committee shall have the
power to delegate those duties it deems necessary and appropriate for the plan
administrator to perform.
4.02 Amendment - The Compensation Committee of the Board of Directors
of the Company, solely, and without the approval of the Committee or any
Participant, shall have the right to amend this Plan at any time and from time
to time, by resolution adopted by it. Any such amendment shall become effective
upon the date stated therein. No such amendment shall diminish the benefits of
those who are already receiving benefits under the Plan or those who are within
3 years of retirement age or early retirement age as defined by the Retirement
Plan and have otherwise met the retirement or early retirement provisions of the
Retirement Plan.
6
<PAGE> 7
4.03 Termination - The Company has established this Plan with the bona
fide intention and expectation that from year to year it will deem it advisable
to continue it in effect. However, circumstances not now foreseen or
circumstances beyond the Company's control may make it impossible or inadvisable
to continue the Plan; therefore, the Compensation Committee of the Board of
Directors of the Company, in its sole discretion, reserves the right to
terminate the Plan in its entirety at any time. In the event of Plan
termination, the only Participants that shall be entitled to a benefit under
this Plan are those who are already receiving benefits under the Plan and those
who are within 3 years of retirement age or early retirement age as defined
under the Retirement Plan and have otherwise met the retirement or early
retirement provisions of the Retirement Plan. The benefit paid to these
Participants shall equal the lump sum present value of the Participant benefit
under the Plan as of the termination date, calculated in the same manner as lump
sum distributions are calculated under the Retirement Plan.
4.04 Rights Against the Company - The establishment of this Plan shall
not be construed as giving to any Participant, employee or any person
whomsoever, any legal, equitable or other rights against the Company, or its
officers, directors, agents or shareholders, or giving to any Participant any
equity or other interest in the assets, business or shares of the Company, or
giving any employee the right to be retained in the employment of the Company.
All employees and Participants shall be subject to discharge to the same extent
that they would have been if this Plan had never been adopted. Subject to the
rights of the Company to terminate this Plan or any benefit hereunder, the
rights of a Participant hereunder shall be solely those of an unsecured creditor
of the Company.
7
<PAGE> 8
ARTICLE V
GENERAL AND MISCELLANEOUS
5.01 Spend Thrift Clause - No right, title or interest of any kind in
the Plan shall be transferable or assignable by any Participant or Beneficiary
or any other person or be subject to alienation, anticipation, encumbrance,
garnishment, attachment, execution or levy of any kind, whether voluntary or
involuntary. Any attempt to alienate, sell, transfer, assign, pledge, garnish,
attach or otherwise encumber or dispose of any interest in the Plan shall be
void.
5.02 Severability - In the event any provision of this Plan shall be
declared illegal or invalid for any reason, said illegality or invalidity shall
not affect the remaining provisions of this Plan but shall be fully severable
and this Plan shall be construed and enforced as if said illegal or invalid
provision had never been inserted herein.
5.03 Construction of Agreement - The article and section headings and
numbers are included only for convenience of reference and are not to be taken
as limiting or extending the meaning of any of the terms and provisions of this
Plan. Whenever appropriate, words used in the singular shall include the plural
or the plural may be read as the singular. It is the Company's Intention that
this Plan be an unfunded plan providing deferred compensation for a select group
of management or highly compensated employees as referred to in Section 401 of
the Employee Retirement Income Security Act of 1974, as amended from time to
time, and the Plan shall at all times be construed and interpreted so as to
comply with the requirements thereof.
5.04 Governing Law - The validity and effect of this Agreement and the
rights and obligations of all persons affected hereby shall be construed and
determined in accordance with the laws of the State of Texas.
8
<PAGE> 9
5.05 No Requirement to Fund - This Plan is not funded, escrowed or
trusteed in any way or form and the establishment of any bookkeeping account or
entry or private investment by the Company to assist it in providing the
benefits contemplated hereunder shall not give any Participant, Beneficiary or
other party whomsoever any interest in or right to such account, entry or
investment.
ARTICLE VI
CHANGE OF CONTROL PROVISIONS
6.01 Vesting - In the event of a Change of Control as defined in
Section 9.2(E)(l) of the Retirement Plan, as the same may hereafter be amended
from time to time, any Participant who would be eligible for benefits under the
Plan if his employment had terminated as of the date of the Change of Control,
except for the fact that the Participant was not yet vested in such benefits
under the terms of the vesting schedule applicable to the Retirement Plan, shall
be deemed to be immediately 100% vested in such benefits for purposes of
eligibility for benefits hereunder.
6.02 Benefits Payable in the Event of Change of Control - In the event
of such Change of Control, the eligible Participant shall be entitled to receive
an immediate cash payment equal to the actuarial value of monthly benefits
otherwise payable from this Plan computed under the assumption that the
Participant's employment terminated as of the date of Change of Control. The
amount of such cash payment shall be determined in accordance with the following
provisions:
(a) The monthly benefit to which the Participant would have been
entitled at his normal retirement date and at each early
retirement date will be computed in accordance with the terms of
the Retirement Plan, where such amount shall be computed without
regard to limitations under Sections
9
<PAGE> 10
401(a)(17) and/or 415 of the Code and assuming any Restricted
Stock Rights awarded to such Participant which was not otherwise
vested became vested on the date of the Change of Control. For
this purpose, each Participant will be deemed to have met the
applicable requirements to be eligible for the maximum early
retirement benefit that could be payable under the terms of the
Retirement Plan.
(b) The amount of benefit payable under the Retirement Plan will be
computed at each applicable early and normal retirement age.
(c) After subtracting the amount in (b) above from the amount
determined in (a) above at each applicable early or normal
retirement age, a lump sum cash payment amount shall be determined
in the same manner as lump sum distributions are determined under
the Retirement Plan. The result which produces the largest lump
sum amount shall be the cash amount payable under this Plan.
6.03 Adjustment to Payment to Cover Participant's Tax Liability - In
addition to the cash payment determined under 6.02 above, an additional amount
shall be payable to the Participant such that the total cash payment amount to
the Participant shall be equal to the amount that would (after adjusting for the
assumed amount of federal income tax applicable to the total cash payment)
result in a net cash after-tax amount to the Participant equal to the cash
payment amount determined in 6.02 above.
6.04 No Duplication of Benefits - In the event these Change of Control
provisions become applicable, any future benefits payable under this Plan to the
Participant shall be actuarially adjusted to reflect the benefits paid under the
provisions of this Article VI. The
10
<PAGE> 11
purpose of this Section 6.04 is to avoid the duplication of benefit payments on
behalf of a Participant.
IN WITNESS WHEREOF, the Company has caused this Plan to be signed by
its duly appointed officers and its corporate seal to be hereunto affixed as of
the day and year above written.
By:
--------------------------------------
ATTEST:
By:
--------------------------------
11
<PAGE> 1
EXHIBIT 10.6
AMENDMENT NO. ONE
TO THE
AVIALL, INC. BENEFIT RESTORATION PLAN
Aviall, Inc., a Delaware corporation, pursuant to authorization of the
Compensation Committee of its Board of Directors, and pursuant to Section 4.02
of the Aviall, Inc. Benefit Restoration Plan (the "Restoration Plan"), hereby
adopts the following amendments to the Restoration Plan, effective as of April
16, 1999. Except as provided herein, the provisions of the Restoration Plan
shall remain in full force and effect.
1. Section 3.01 of the Restoration Plan ("Benefits") is hereby amended
by deleting the last two sentences thereof and substituting the following:
Except as provided in Section 6.01, benefits under this section of
the Plan will be paid only to the extent that the Participant meets
the vesting requirements of the Retirement Plan, or the Ryder
Retirement Plan, or both. Except as provided in Sections 6.02 and
6.04, once the initial amount of benefit payable under this Plan has
been determined, such amount will represent a fixed amount, not
subject to future increases or decreases for any reason.
2. Section 6.01 of the Restoration Plan is hereby amended in its
entirety to read as follows:
6.01 Vesting - In the event of a Change of Control as defined
in Section 9.2(E)(1) of the Retirement Plan, as the same may
hereafter be amended from time to time, each individual who is a
Participant on the date of the Change of Control or who is a
participant in the Retirement Plan on the date of the Change of
Control and who becomes a Participant within two years following the
date of the Change of Control, shall be 100% vested in his benefits
under this Plan, including, without limitation, any benefits which
accrue after the date of the Change of Control.
3. Section 6.02 of the Restoration Plan is hereby amended by adding the
following new paragraph at the end thereof:
In the event a Participant terminates employment with the
Company within two years following a Change of Control, the
Participant shall be entitled to receive an additional immediate
cash payment equal to (i) the actuarial value of the monthly
benefits determined in accordance with the provisions of paragraphs
<PAGE> 2
(a), (b) and (c) of this Section 6.02 as of the Participant's actual
date of termination of employment before taking into account any
benefits previously paid upon the Change of Control and reduced by
(ii) the actuarial value of any benefits previously paid to the
Participant. This additional lump sum payment will be adjusted in
accordance with Section 6.03 to cover the Participant's tax
liability. In the event a Participant terminates employment with the
Company more than two years following a Change of Control, the
Participant's benefit under the Plan shall be determined and paid in
accordance with Article III as of the Participant's actual date of
termination of employment before taking into account the benefits
previously paid upon the Change of Control, and shall then be
actuarially adjusted in accordance with Section 6.04 to reflect any
benefits previously paid to the Participant upon the Change of
Control.
4. Section 6.04 of the Restoration Plan is hereby amended in its
entirety to read as follows:
6.04 No Duplication of Benefits - In the event these Change of
Control provisions become applicable, any future benefits payable
under this Plan to the Participant shall be actuarially adjusted to
reflect the benefits paid under the provisions of this Article VI
(without regard to tax adjustment payments made under Section 6.03).
The purpose of this Section 6.04 is to avoid the duplication of
benefit payments on behalf of a Participant.
5. Article VI of the Restoration Plan is hereby amended by adding a new
Section 6.05 as follows:
6.05 Termination or Amendment Following Change of Control -
Notwithstanding any provision of the Plan to the contrary, including
without limitation Sections 4.02 and 4.03, for a period of two years
following a Change of Control as defined in Section 9.2(E)(1) of the
Retirement Plan, as the same may hereafter be amended from time to
time, (i) the Plan may not be terminated, (ii) the provisions of
Article VI may not be amended, and (iii) the Plan may not otherwise
be amended in any manner that would adversely affect a Participant's
existing or future benefit under the Plan without such Participant's
written consent.
EXECUTED this 16th day of April, 1999.
AVIALL, INC.
By /s/ Eric E. Anderson
--------------------------------------
2
<PAGE> 1
EXHIBIT 10.7
AVIALL, INC.
AMENDED AND RESTATED
SEVERANCE PAY PLAN
(EFFECTIVE AS OF APRIL 16, 1999)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
ONE PURPOSE OF PLAN.................................................................................1
TWO PRIOR SEVERANCE ARRANGEMENTS....................................................................1
THREE DEFINITIONS.....................................................................................1
FOUR ELIGIBILITY AND BENEFITS........................................................................6
FIVE FUNDING.........................................................................................7
SIX BENEFIT CLAIMS PROCEDURE........................................................................7
6.1 Claims for Benefits....................................................................7
6.2 Request for Review of Denial...........................................................7
6.3 Decision on Review of Denial...........................................................7
SEVEN ADMINISTRATION OF THE PLAN......................................................................8
7.1 Plan Administrator.....................................................................8
7.2 Responsibilities.......................................................................8
7.3 Allocation and Delegation of Plan Administrator Responsibilities.......................8
7.4 Actions of Fiduciaries.................................................................8
7.5 General Administrative Powers..........................................................8
7.6 Appointment of Professional Assistance.................................................9
7.7 Discretionary Acts.....................................................................9
7.8 Responsibility of Fiduciaries..........................................................9
7.9 Indemnity by Employer.................................................................10
EIGHT ADOPTION OF PLAN BY SUBSIDIARY.................................................................10
NINE AMENDMENT OF THE PLAN..........................................................................10
TEN TERMINATION OF THE PLAN........................................................................11
ELEVEN VESTING........................................................................................11
TWELVE STATUS OF EMPLOYMENT RELATIONS.................................................................11
THIRTEEN RESTRICTIONS ON ASSIGNMENT.....................................................................11
FOURTEEN APPLICABLE LAW.................................................................................12
</TABLE>
i
<PAGE> 3
AVIALL, INC.
SEVERANCE PAY PLAN
AVIALL, INC., a Delaware corporation (the "Company"), adopted for its
Eligible Employees a severance pay plan effective as of March 11, 1998 (the
"Effective Date"), which plan was amended and restated as of April 16, 1999, in
accordance with the terms and conditions contained herein.
SECTION ONE
PURPOSE OF PLAN
The purpose of the Plan is to provide financial support to Eligible
Employees who incur a Termination of Employment from the Employer.
SECTION TWO
PRIOR SEVERANCE ARRANGEMENTS
As of the Effective Date, the Plan replaces any and all severance pay
plans, policies, practices, arrangements or programs, written or unwritten, that
the Employer may have had in effect for its Eligible Employees from time to time
prior to the Effective Date. Any Eligible Employee of the Employer whose
employment is terminated on or after the Effective Date shall not be entitled to
any severance benefits other than those set forth herein. Notwithstanding the
foregoing provisions of this Section Two, nothing in this Plan shall adversely
affect the rights an individual Eligible Employee may have to severance payments
under any written agreement executed by and between the Employer and that
Eligible Employee (a "Severance Agreement"); provided however, that in the event
any Eligible Employee that is a party to a Severance Agreement suffers a
Termination of Employment and is entitled to and is receiving the severance
benefits intended to be provided under his or her Severance Agreement, such
Eligible Employee shall not be entitled to receive severance benefits pursuant
to this Plan.
SECTION THREE
DEFINITIONS
As used in the Plan:
3.1 "Base Pay" shall mean the Eligible Employee's gross salary or
hourly wages for a normal workweek before any deductions, exclusions or any
deferrals or contributions under any Company plan or program, but excluding
bonuses, incentive compensation, employee benefits or any other non-salary form
of compensation being received by an Eligible Employee immediately prior to
Termination of Employment (determined without regard to any reduction in Base
Pay that occurs after a Change of Control).
<PAGE> 4
3.2 "Cause" shall mean (i) the willful breach or habitual neglect of
assigned duties related to the Company, including compliance with Company
policies; (ii) conviction (including any plea of nolo contendere) of the
Eligible Employee of any felony or crime involving dishonesty or moral
turpitude; (iii) any act of personal dishonesty knowingly taken by the Eligible
Employee in connection with his responsibilities as an employee and intended to
result in personal enrichment of the Eligible Employee or any other person; (iv)
bad faith conduct that is materially detrimental to the Company; (v) inability
of the Eligible Employee to perform the Employee's duties due to alcohol or
illegal drug use; (vi) the Eligible Employee's failure to comply with any legal
written directive of the Board of Directors of the Company; (vii) any act or
omission of the Eligible Employee which is of substantial detriment to the
Company because of the Eligible Employee's intentional failure to comply with
any statute, rule or regulation, except any act or omission believed by the
Eligible Employee in good faith to have been in or not opposed to the best
interest of the Company (without intent of the Eligible Employee to gain,
directly or indirectly, a profit to which the Eligible Employee was not legally
entitled) and except that Cause shall not mean bad judgment or negligence other
than habitual neglect of duty; or (viii) any other act or failure to act or
other conduct which is determined by the Plan Administrator, in its sole
discretion, to be demonstrably and materially injurious to the Employer,
monetarily or otherwise.
3.3 "Change of Control" shall mean:
(i) The Company is merged or consolidated or reorganized into or
with another corporation or other legal person, and as a result of such merger,
consolidation or reorganization less than a majority of the combined voting
power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of
Voting Stock of the Company immediately prior to such transaction;
(ii) The Company sells or otherwise transfers all or substantially
all of its assets to any other corporation or other legal person, and less than
a majority of the combined voting power of the then-outstanding securities of
such corporation or person immediately after such sale or transfer is held in
the aggregate by the holders of Voting Stock of the Company immediately prior to
such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule 14D-l (or
any successor schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing
that any person (as the term "person" is used in Section 13(d)(3) or Section
14(d)(2) of the Exchange Act) has become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of securities representing 20% or
more of the Voting Stock of the Company; or
(iv) If during any period of two consecutive years, individuals who
at the beginning of any such period constitute the Directors of the Company
cease for any reason to constitute at least a majority thereof, unless the
election, or the nomination for election by the Company's shareholders of each
Director first elected during such period was approved by a vote
2
<PAGE> 5
of at least two-thirds of the Directors of the Company then still in office who
were Directors of the Company at the beginning of any such period.
Notwithstanding the foregoing provisions of Subsections (ii) and (iii)
above, a "Change of Control" shall not be deemed to have occurred for purposes
of this Agreement (i) solely because (A) the Company; (B) a Subsidiary; or (C) a
Company-sponsored employee stock ownership plan or other employee benefit plan
of the Company either files or becomes obligated to file a report under or in
response to Schedule 13D, Schedule 14D-1 or Form 8-K (or any successor schedule,
form or report or item therein) under the Exchange Act, disclosing beneficial
ownership by it of shares of Voting Stock of the Company, whether in excess of
20% or otherwise, or because the Company reports that a change of control of the
Company has or may have occurred or will or may occur in the future by reason of
such beneficial ownership or (ii) solely because of a change of control of any
Subsidiary.
3.4 "Company" shall mean Aviall, Inc.
3.5 "Eligible Employee" shall mean the Employer's regular, full-time
salaried or hourly employees who are residents of the United States and who are
not covered by a collective bargaining agreement between the Employer and a
collective bargaining representative.
3.6 "Employer" shall mean the Company and any direct or indirect
Subsidiary of the Company which adopts the Plan.
3.7 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time. References to any Section of ERISA shall
include any successor provision thereto.
3.8 "Incentive Pay" shall mean one fifty-second (1/52) of the greater
of (i) the dollar amount of the annual incentive payment that would be payable
to the Eligible Employee if the Company reaches its target performance for that
year under the Company's short-term incentive program applicable to the Eligible
Employee, as if all requirements for full payment of such incentive had been
met, or (ii) the dollar amount of the annual incentive actually paid or payable
to the Eligible Employee for the most recently completed fiscal year. The
Incentive Pay shall include, in addition to cash incentive payments, the cash
value of any restricted stock awards, which shall be equal to the lesser of (A)
the value of any restricted stock when awarded or (B) the current market value
of such restricted stock as of the date of Termination of Employment.
3.9 "Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended from time to time. References to any Section of the Internal
Revenue Code shall include any successor provision thereto.
3.10 "Officer" shall mean any officer of the Company with the title of
Vice President or higher, other than those Officers that have been designated as
Senior Officers.
3
<PAGE> 6
3.11 "Participant" shall mean an Eligible Employee who is or becomes a
Participant in the Plan as provided in Section Four.
3.12 "Plan" shall mean the Aviall, Inc. Amended and Restated Severance
Pay Plan as set forth in this document, and as hereafter amended.
3.13 "Plan Year" shall mean the twelve (12)-month period ending on
December 31.
3.14 "Plan Administrator" shall mean the person, persons or entity
administering the Plan in accordance with the provisions of Section Seven
hereof. The Plan Administrator shall be the "named fiduciary", as referred to in
Section 402(a) of ERISA, with respect to the management, operation and
administration of the Plan.
3.15 "Release Form" shall mean the Severance Plan Agreement and Release
Form in substantially the form attached as Appendices A-1 or A-2, in the case of
Eligible Employees who are age 40 and over at the time of Termination of
Employment, and Appendix B, in the case of Eligible Employees who are under age
40 at the time of Termination of Employment.
3.16 "Senior Officer" shall mean an Officer of the Company or a
Subsidiary who has received a letter, signed by the Company's President and
Chief Executive Officer or the Company's Senior Vice President, Law and Human
Resources, stating that such Officer has been classified as a "Senior Officer."
3.17 "Severance Pay" shall mean, except as provided below, an amount
equal to the Eligible Employee's Base Pay (plus, in the case of Eligible
Employees who are Officers of the Company, Incentive Pay) multiplied by the
number of weeks set forth in the following schedule, based on the Eligible
Employee's job classification at his Termination of Employment:
<TABLE>
<CAPTION>
Severance Pay for
Severance Pay for Termination of
Termination of Employment on or
Employment Prior Within One Year After
Eligible Employee Classification to a Change of Control a Change of Control
- -------------------------------- ---------------------- -------------------
<S> <C> <C> <C>
(i) Senior Officers 104 weeks 104 weeks
(ii) Officers other than 52 weeks 52 weeks
Senior Officers
(Grade 13)
(iii) Directors 24 weeks, plus one (1) 24 weeks, plus two (2)
(Grades 11-12) additional week for each additional weeks for
Year of Service, with a each Year of Service,
minimum of 26 weeks with a minimum of 26
weeks
</TABLE>
4
<PAGE> 7
<TABLE>
<S> <C> <C> <C>
(iv) Senior Managers Twelve (12) weeks, plus Twelve (12) weeks, plus
(Grades 9-10) one (1) additional week two (2) additional
for each Year of Service weeks for each Year of
Service
(v) Managers Nine (9) weeks, plus Nine (9) weeks, plus
(Grades 7-8) one (1) additional week two (2) additional week
for each Year of Service for each Year of Service
(vi) Supervisors/Professionals Six (6) weeks, plus one Six (6) weeks, plus two
(Grades 1-7) (1) additional week for (2) additional week for
each Year of Service each Year of Service
(vii) Non-Exempt Employees Four (4) weeks, plus Four (4) weeks, plus
(Non-Exempt Grades 2-9) one (1) additional week two (2) additional week
for each Year of Service for each Year of Service
</TABLE>
3.18 "Subsidiary" shall mean an entity in which the Company directly or
indirectly beneficially owns 50% or more of the outstanding Voting Stock.
3.19 "Termination of Employment" shall mean a termination of employment
from the Employer which results from an affirmative discharge from employment by
the Employer, other than discharge for Cause. An Eligible Employee shall not be
deemed to have incurred a Termination of Employment by reason of the transfer of
the Eligible Employee's employment between the Company and any Subsidiary or
among Subsidiaries. Notwithstanding the foregoing provisions of this Section
3.19, an Eligible Employee who, in connection with the merger, acquisition, sale
or other disposition of the Employer or all or any part of a business unit of
the Employer, is offered, on, prior to or within two weeks of closing on such
merger, acquisition, sale or other disposition, continued employment with the
successor company (including, without limitation, a purchaser of all or any
substantial part of a business unit) shall not be deemed to have incurred a
Termination of Employment and shall not be eligible for Severance Pay under this
Plan. The Plan Administrator shall determine, in its sole discretion, whether an
Eligible Employee's termination of employment from the Employer constitutes a
"Termination of Employment."
3.20 "Voting Stock" shall mean securities entitled to vote generally in
the election of directors.
3.21 "Years of Service" shall mean the period of continuous employment
with one or more Employers commencing on the Eligible Employee's original hire
date or most recent adjusted hire date, and ending on the Eligible Employee's
date of Termination of Employment. A period of continuous employment shall
include any leave of absence with or without pay. An Eligible Employee shall not
be deemed to have ceased to be an employee of an Employer by reason of the
transfer of the Eligible Employee's employment between the Company and any
Subsidiary or among Subsidiaries. An Eligible Employee shall receive one (1)
Year of Service credit for each full year of employment measured from the
appropriate hire date or anniversary of
5
<PAGE> 8
the hire date. Any partial year of employment shall not count as a Year of
Service. An Eligible Employee's period of employment with Ryder System, Inc.
will be included in the determination of his or her Years of Service, provided
he or she became employed by an Employer before January 1, 1994 in connection
with the spinoff of the aviation services businesses of Ryder System, Inc. In
addition, an Eligible Employee's period of employment with a company or business
acquired by an Employer will be included in the determination of his or her
Years of Service, provided he or she was an employee of such acquired company or
business on the date of its acquisition by the Employer and became employed by
the Employer in connection with the acquisition.
3.22 Wherever appropriate, words used in the Plan in the singular may
mean the plural, the plural may mean the singular, and the masculine may mean
the feminine.
SECTION FOUR
ELIGIBILITY AND BENEFITS
An Eligible Employee who suffers a Termination of Employment shall become
a Participant as of the date of his or her Termination of Employment and shall
be entitled to receive the Severance Pay applicable to such Participant provided
he or she executes a Release Form as provided for herein.
A Participant's Severance Pay shall be paid to the Participant within an
administratively reasonable time following Termination of Employment, or where
applicable, following the expiration of the revocation period provided on the
Release Form. In the event the Termination of Employment occurs prior to a
Change of Control or more than one year following a Change of Control, Severance
Pay shall be paid in cash in bi-weekly installments so that each installment
payment will equal that portion of his Severance Pay attributable to two (2)
weeks. Such bi-weekly payments will continue until such Severance Pay is paid in
full. In the event the Termination of Employment occurs on or within one year
following a Change of Control, Severance Pay shall be paid in cash in a lump
sum.
If a Participant dies following execution of the Release Form, but before
receiving all or part of the Severance Pay to which he or she is entitled, the
Plan Administrator shall pay such Participant's Severance Pay to the
Participant's surviving spouse (if any) and if none to the Participant's estate.
An Eligible Employee otherwise entitled to Severance Pay under this Plan
shall be paid (or his estate shall be paid) such Severance Pay only if that
Eligible Employee executes and files with the Plan Administrator, on or before
the date specified on the Release Form, a fully completed Release Form, and in
the case of Eligible Employees age 40 and over, does not revoke the Release Form
within seven (7) days of executing the Release Form.
6
<PAGE> 9
SECTION FIVE
FUNDING
Funding for this Plan shall come solely from the general assets of the
Employer. All payments of Severance Pay with respect to a particular Participant
shall be paid from the general assets of that Participant's Employer. Neither
the Employer nor the Plan Administrator shall have any obligation to establish a
trust or fund for the payment of benefits under the Plan or to insure any of the
benefits under the Plan. None of the officers, members of the Board of
Directors, or agents of the Employer or the Plan Administrator guarantees in any
manner the payment of benefits hereunder.
SECTION SIX
BENEFIT CLAIMS PROCEDURE
6.1 Claims for Benefits. Any claim for benefits under the Plan shall be
made in writing to the Plan Administrator. If such claim for benefits is wholly
or partially denied, the Plan Administrator shall, within ninety (90) days after
receipt of the claim, notify the claimant of the denial of the claim. Such
notice of denial (i) shall be in writing, (ii) shall be written in a manner
calculated to be understood by the claimant, and (iii) shall contain (a) the
specific reason or reasons for denial of the claim, (b) a specific reference to
the pertinent Plan provisions upon which the denial is based, (c) a description
of any additional material or information necessary to perfect the claim, along
with an explanation of why such material or information is necessary, and (d) an
explanation of the claim review procedure, in accordance with the provisions of
this Section Six.
6.2 Request for Review of Denial. Within sixty (60) days after the
receipt by the claimant of a written notice of denial of the claim, or such
later time as shall be deemed reasonable taking into account the nature of the
benefit subject to the claim and any other attendant circumstances, if the
claimant does not agree with the denial of the claim, the claimant or his
authorized representative must file a written request with the Plan
Administrator that it conduct a full and fair review of the denial of the claim
for benefits. In connection with any request for a review of the denial of a
claim for benefits, the claimant, or his authorized representative, may review
pertinent documents relating thereto and may submit issues and comments in
writing to the Plan Administrator.
6.3 Decision on Review of Denial. The Plan Administrator shall deliver to
the claimant a written decision on the claim within sixty (60) days after the
receipt of the aforesaid request for review, except that if there are special
circumstances (such as the need to hold a hearing, if necessary) which require
an extension of time for processing, the aforesaid sixty (60)-day period shall
be extended to one hundred twenty (120) days. Such decision shall (i) be written
in a manner calculated to be understood by the claimant, (ii) include the
specific reason or reasons for the decision, and (iii) contain a specific
reference to the pertinent Plan provisions upon which the decision is based.
7
<PAGE> 10
SECTION SEVEN
ADMINISTRATION OF THE PLAN
7.1 Plan Administrator. The Plan Administrator hereunder shall be the
Senior Vice-President, Law and Human Resources, or other appropriate Human
Resources Officer of the Company.
7.2 Responsibilities. The Plan Administrator shall be the "administrator"
(as defined in Section 3(16)(A) of ERISA) of the Plan, and shall be responsible
for the performance of all reporting and disclosure obligations under the
Internal Revenue Code and ERISA and all other obligations required or permitted
to be performed by the Plan Administrator under the Internal Revenue Code and
ERISA and not otherwise delegated pursuant to the Plan. The Plan Administrator
shall be the designated agent for service of legal process.
7.3 Allocation and Delegation of Plan Administrator Responsibilities. The
Plan Administrator may appoint such assistants or representatives as it deems
necessary for the effective exercise of its duties in administering the Plan and
may delegate to such assistants and representatives any powers and duties, both
ministerial and discretionary, as it deems expedient or appropriate. The Plan
Administrator also may designate any person, firm or corporation to carry out
any of the other responsibilities of the Plan Administrator under the Plan. Any
such allocation or designation shall be made pursuant to a written instrument
executed by the Plan Administrator.
7.4 Actions of Fiduciaries. The Plan Administrator may authorize or
approve any action by written instrument signed by a person duly authorized to
act on behalf of the Plan Administrator. Any written memorandum signed by any
such duly authorized person or by any other person duly authorized by the Plan
Administrator to act in respect of the subject matter of the memorandum, shall
have the same force and effect as a formal resolution adopted by the Plan
Administrator.
All acts and determinations with respect to the administration of the
Plan made by the Plan Administrator and any assistants or representatives
appointed by it shall be duly recorded by the Plan Administrator or by the
assistant or representative appointed by it to keep such records. All records,
together with such other documents as may be necessary for the administration of
the Plan, shall be preserved in the custody of the Plan Administrator or the
assistants or representatives appointed by it.
7.5 General Administrative Powers. Except as otherwise provided herein,
the Plan Administrator is authorized to take such actions as may be necessary to
carry out the provisions and purposes of the Plan and shall have the authority
to control and manage the operation and administration of the Plan. In order to
effectuate the purposes of the Plan, the Plan Administrator shall have the
discretionary authority and power to construe and interpret the Plan, to supply
any omissions therein, to reconcile and correct any errors or inconsistencies,
to decide any questions in the administration and application of the Plan, and
to make equitable adjustments for any mistakes or errors made in the
administration of the Plan. All such actions or determinations
8
<PAGE> 11
made in good faith by the Plan Administrator, and the application of rules and
regulations to a particular case or issue by the Plan Administrator shall,
subject to the claims procedures set forth in Section Six hereof, not be subject
to review by anyone, but shall be final, binding and conclusive on all persons
ever interested hereunder. In construing the Plan and in exercising its power
under provisions requiring the Plan Administrator's approval, the Plan
Administrator shall attempt to ascertain the purpose of the provisions in
question and when such purpose is known or reasonably ascertainable, such
purpose shall be given effect to the extent feasible. In the discharge of this
discretionary authority the Plan Administrator shall have all necessary powers
and duties, including but not limited to the following:
(a) to require any person to furnish such information as is
reasonably necessary or appropriate for administration of the
Plan as a condition to receiving benefits under the Plan;
(b) to make such rules and regulations and prescribe the use of
such forms as he shall deem necessary for the efficient
administration of the Plan;
(c) to establish or cause to be established such procedures,
protocols and guidelines as he shall deem necessary to
interpret the terms and conditions of the Plan;
(d) to decide on questions concerning Plan eligibility, Years of
Service and Termination of Employment in accordance with the
terms of the Plan;
(e) to determine the amount of benefits payable to a Participant,
in accordance with the Plan, and to provide a full and fair
review to any Participant whose claim for benefits has been
denied in whole or in part;
(f) to designate other persons to carry out any duty or power
which would otherwise be a fiduciary responsibility of the
Plan Administrator, under the terms of the Plan.
7.6 Appointment of Professional Assistance. The Plan Administrator may
engage accountants, attorneys and such other personnel as it deems necessary or
advisable. The functions of any such persons engaged by the Plan Administrator
shall be limited to the specific services and duties for which they are engaged,
and such persons shall have no other duties, obligations or responsibilities
under the Plan. Unless otherwise specifically so delegated, such persons shall
exercise no discretionary authority or discretionary control respecting the
management of the Plan.
7.7 Discretionary Acts. Any discretionary actions of the Plan
Administrator with respect to the administration of the Plan shall be made in a
manner which does not discriminate in favor of stockholders, officers and highly
compensated employees.
7.8 Responsibility of Fiduciaries. The Plan Administrator and its
assistants and representatives shall be free from all liability for their acts
and conduct in the administration of the Plan except for acts of gross
negligence, fraud or willful misconduct; provided, however, that
9
<PAGE> 12
the foregoing shall not relieve any of them from any responsibility or liability
for any responsibility, obligation or duty that they may have pursuant to ERISA.
7.9 Indemnity by Employer. In the event and to the extent not insured
against by any insurance company pursuant to provisions of any applicable
insurance policy, the Employer shall indemnify and hold harmless the Plan
Administrator and its assistants and representatives from any and all claims,
demands, suits or proceedings in connection with the Plan that may be brought by
the Employer's employees, Participants or their legal representatives, or by any
other person, corporation, entity, government or agency thereof, including any
amounts paid in settlement, with the approval of the Plan Administrator, and any
and all other losses, damages, interest, expenses, including counsel fees
approved by the Plan Administrator, and penalties, including any penalties
imposed by the Secretary of Labor pursuant to Section 502(1) of ERISA relating
to any breaches of fiduciary responsibility under Part 4 of Title I of ERISA,
arising from any action or failure to act, except where the same is judicially
determined to be due to gross negligence, fraud, or willful misconduct of such
individual in connection with the Plan. The indemnification contained in this
Section shall apply regardless of whether the event causing the liability arises
in whole or in part from the negligence (other than judicially determined gross
negligence) or other fault on the part of the individual, specifically including
breaches of fiduciary responsibility under ERISA.
SECTION EIGHT
ADOPTION OF PLAN BY SUBSIDIARY
Any Subsidiary, whether or not presently existing, may, with the approval
of the Chief Executive Officer of the Company, adopt this Plan. Any Subsidiary
that adopts the Plan is thereafter an Employer with respect to its employees for
purposes of the Plan, and any event that causes any Employer to cease to be a
Subsidiary shall not affect such Subsidiary's adoption of this Plan or its
obligations under the Plan.
SECTION NINE
AMENDMENT OF THE PLAN
The Board of Directors of the Company may amend the Plan at any time and
in any manner with respect to all of the Employers. Any amendment to this Plan
shall be effectuated by a written instrument signed by a duly authorized officer
of the Company and shall be incorporated into the Plan document. Any amendment
or restatement may be made retroactive if, in the judgment of the Board of
Directors of the Company, such retroactivity is necessary or advisable for any
reason. Notwithstanding the foregoing, for a period of one year following a
Change of Control, this Plan may not be amended in any manner adverse to any
Eligible Employee.
10
<PAGE> 13
SECTION TEN
TERMINATION OF THE PLAN
Continuance of the Plan is not assumed as a contractual obligation of the
Employer, and the Board of Directors of the Company reserves the right to
terminate the Plan at any time. Such termination may occur without consent being
obtained from the Plan Administrator, Eligible Employees or any other interested
person; provided however, that any termination of this Plan shall not affect the
benefits payable under the Plan to any Eligible Employee who suffers a
Termination of Employment prior to the termination of the Plan. The Plan shall
automatically terminate upon dissolution of the Company, unless provision is
specifically made by its successors, if any, for the continuation of the Plan;
provided however, a merger or consolidation of the Company with or into any
corporation or other legal entity shall not be deemed to be a dissolution of the
Company for purposes of this Plan. Notwithstanding the foregoing, following a
Change of Control, this Plan may not be terminated prior to the first
anniversary of the Change of Control.
SECTION ELEVEN
VESTING
No Eligible Employee shall have a vested right to any benefit under this
Plan prior to the time a determination is made by the Plan Administrator that
the particular Eligible Employee is a Participant.
SECTION TWELVE
STATUS OF EMPLOYMENT RELATIONS
The adoption and maintenance of the Plan shall not be deemed to
constitute a contract between any Employer and its Eligible Employees or to be
consideration for, or an inducement or condition of, the employment of any
person. Nothing herein contained shall be deemed (i) to give to any Eligible
Employee the right to be retained in the employ of the Employer; (ii) to affect
the right of the Employer to discipline or discharge any Eligible Employee at
any time; (iii) to give the Employer the right to require any Eligible Employee
to remain in its employ; or (iv) to affect any Eligible Employee's right to
terminate his employment at any time.
SECTION THIRTEEN
RESTRICTIONS ON ASSIGNMENT
The benefits provided hereunder are not subject in any manner to the
debts or other obligations of the persons to whom they are payable. The interest
of an Eligible Employee may not be sold, transferred, assigned or encumbered in
any manner, either voluntarily or involuntarily, and any attempt so to
anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the
same shall be null and void.
11
<PAGE> 14
SECTION FOURTEEN
APPLICABLE LAW
To the extent not preempted by ERISA, the Plan shall be construed,
regulated, interpreted and administered under and in accordance with the laws of
the State of Texas.
IN WITNESS WHEREOF, Aviall, Inc. has caused the Plan to be signed by its
duly authorized officer on this 16th day of April, 1999.
AVIALL, INC.
By: /s/ Eric E. Anderson
-------------------------------------
Eric E. Anderson, Chairman,
President and Chief Executive Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AVIALL,
INC.'s FIRST QUARTER 1999 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FIRST QUARTER 1999 FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 4,983
<SECURITIES> 0
<RECEIVABLES> 66,785
<ALLOWANCES> 3,306
<INVENTORY> 92,351
<CURRENT-ASSETS> 181,186
<PP&E> 41,312
<DEPRECIATION> 30,861
<TOTAL-ASSETS> 316,897
<CURRENT-LIABILITIES> 82,967
<BONDS> 36,750
0
0
<COMMON> 202
<OTHER-SE> 171,807
<TOTAL-LIABILITY-AND-EQUITY> 172,009
<SALES> 87,408
<TOTAL-REVENUES> 87,408
<CGS> 63,322
<TOTAL-COSTS> 63,322
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 720
<INCOME-PRETAX> 5,156
<INCOME-TAX> 2,070
<INCOME-CONTINUING> 3,086
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,086
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
